UK government helped negotiate ‘corrupt’ contract with India

Revealed: UKTI pushed India to agree AgustaWestland deal at centre of bribery claims

By David Pallister | 5 March 2014

“The conclusion of these contracts reflected the long-standing, defence-equipment relationship between the UK and India” – UKTI annual report, 2010-11

UK officials helped an Anglo-Italian contractor clinch a huge helicopter deal with India that has become embroiled in bribery allegations, Exaro can reveal.

The civil servants who played a key role in promoting the deal were from UK Trade & Investment Defence & Security Organisation (UKTI DSO), the government agency that champions British exports.

The disclosure undermines efforts by David Cameron, prime minister, to distance the UK from the corruption allegations. Exaro revealed last May that the UK was failing to help India with its investigation, despite promises by Cameron.

AgustaWestland, the British subsidiary of Finmeccanica, the Italian defence group, faces claims that it corruptly secured a contract in 2010 to supply 12 AW101 helicopters to the Indian Air Force for €556 million.

Giuseppe Orsi, former chief executive of AgustaWestland, who went on to become chief executive and chairman of Finmeccanica, and Bruno Spagnolini, who succeeded Orsi as AgustaWestland’s chief executive, are on trial in Italy over the claims.

The Indian government alleged that AgustaWestland had broken its “integrity pact”, and in January cancelled the contract for the helicopters, which included eight for transporting VIPs. The helicopters were being made at the site in Yeovil, Somerset, of Westland Helicopters, a predecessor company.

Asked about the bribery allegations last February, Cameron said: “This is really a question between the Italian authorities – because it is Finmeccanica, an Italian company, which owns AgustaWestland – and the Indian authorities.” He went on to praise AgustaWestland, and said that the UK had tough anti-bribery laws.

Exaro has established that officials from the UK government played a crucial part during four months of intense negotiations over the contract.

The UKTI celebrated the successful negotiations for the AW101 contract – which was signed with AgustaWestland, not Finmeccanica – in its annual report for 2010-11, under the heading: “Defence export case study: contracts of over £1 billion placed by India.”

The report said: “In 2010, two major contracts, valued at over £1 billion, were placed by India. These were the sales of Hawk trainer aircraft by BAE Systems and AW101 VVIP helicopters by AgustaWestland. The conclusion of these contracts reflected the long- standing, defence-equipment relationship between the UK and India, and the involvement of the UKTI DSO in facilitating the necessary government-to-government understandings that underpin the sale, and in supporting the final discussions between the companies and the Indian government.”

The alleged middlemen on the deal include a British businessman, Christian Michel. He is named in Orsi’s arrest warrant as “receiving €30 million, partly destined to support the corrupt activity meant to win the order and partly to implement the contract.”

Prosecutors in the Italian trial last month produced a faxed letter from Michel to Peter Hulett, then head of AgustaWestland’s government sales in India. Dated March 15, 2008, it mentions Sonia Gandhi, president of the Congress party.

The letter said: “Dear Peter, as Mrs Gandhi is the driving force behind the VIP, she will not fly any more in the Mi-8.” This was a reference to the ageing Russian helicopters that the AW101s were to replace.

The note continued: “Mrs Gandhi and her closest advisers are the people the high commissioner should target. Regards, Christian.”

It listed the names of seven advisers, including India’s present president and prime minister, two other ministers and Gandhi’s political secretary.

Asked to comment on the letter, Hulett, an independent defence consultant, told Exaro: “Please be advised that I was made redundant by AgustaWestland in December 2008 as they were moving offices to Farnborough, and I did not wish to move.

“I believe that any questions that you might have with respect to this letter should be addressed to the company.”

AgustaWestland and Finmeccanica deny any wrongdoing.

A spokesman for the Foreign Office said: “We understand the need for Indian authorities to investigate the allegations thoroughly against AgustaWestland, and we remain committed to co-operating with them.

“However, the UK government is disappointed with the decision by the Indian government to terminate the AW101 helicopter contract before the judicial process had run its course.”

Michel has declined to comment.

Last month, Exaro uncovered documents that showed how Margaret Thatcher’s government pressed India to buy a fleet of Westland helicopters despite knowing that the model had “mechanical problems”.

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