Bofors’ ghost


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Thirteen years after it broke, the Bofors scandal shows no signs of going away. In 1987, Rajiv Gandhi’s advisors had assured him that Bofors was a middle class preoccupation which would have no impact on the country at large. In 1989, these advisors were proved wrong when the Congress lost the election largely because of Bofors. In 1990 and 1991, the new government headed by V.P. Singh was obsessed by Bofors. Letter Rogatories were sent to Switzerland, assorted investigators made several trips between Delhi and Geneva and much noise was generated. But nothing came of the investigations.

In 1991, when the Narasimha Rao government took over and asked the CBI to go slow on Bofors, most people assumed that we had heard the last of the scandal. But no, within a year, Bofors claimed another victim. Foreign Minister Madhavsinh Solanki handed over a note to the Swiss authorities calling for a halt to the investigation. The details of the note leaked and Solanki was forced into political oblivion from which he has never recovered.

Over the years, Bofors has continued to flare up from time to time. An investigative story in The Indian Express in the mid-1990s forced Ottavio Quatrocchi to flee the country, one step ahead of the CBI. When H.D. Deve Gowda took over as prime minister, his hand-picked CBI chief, ‘Tiger’ Joginder Singh acted as though he would solve the Bofors case single-handed and made the, by now statutory, pilgrimage to Zurich and Geneva. Two years later, Bofors hit the headlines again, this time, not because of the scandal but because the guns themselves proved to be such a success during the Kargil conflict. Most recently, the Vajpayee government has filed a Bofors chargesheet which has generated its own share of controversy because it names Rajiv Gandhi among the accused. Congressmen stopped the Lok Sabha from functioning for several days and even now the issue threatens cooperation between the government and the Opposition.

When you consider the total amount involved in the Bofors kickbacks, you begin to realise how much we have upped the ante when it comes to corruption. By today’s standards, Rs 64 crore is peanuts. Every single scam that has come to light over the last five years has concerned hundreds of crores: Rs 64 crore is probably equal to the kind of profit that any of the accused in the securities scam made in an average week.

So why is it that Bofors exercises this hold over the national imagination? Why is it the scandal that won’t go away?

The exact sequence of events that led to the Bofors scandal is probably worth repeating if only because most people have forgotten what really happened.

The Indian Army decided during Indira Gandhi’s reign that it needed a howitzer. Various arms manufacturers approached India and the army began a long and exhaustive process of weapons testing. This process was still continuing when Indira Gandhi died and Rajiv took over. By then, there were two clear favourites among the weapons: the French gun Sofma and the Swedish Bofors howitzer. Both guns had their champions and their detractors. Within the army it was widely believed – though never substantiated – that competing manufacturers had paid off assorted generals and this accounted for the different opinions.

The Rajiv government attempted to speed up the process of selection, but also, took the unusual step of declaring that it would not deal with the agents of arms manufacturers. Signs were put up in the defence ministry to the effect that agents would not be allowed to meet any officials. As an agent is an integral part of any buying and selling process, it was never explained why this decision had been taken.



However, it was generally held in Delhi that this was part of a new election funding scheme evolved by Rajiv Gandhi and his two principal advisors, Arun Singh and Arun Nehru. Apparently, Rajiv and the two Aruns had tired of the traditional method of raising electoral financing: selling licenses in the marketplace or accepting contributions from dodgy businessmen who wanted to be forgiven their income tax or foreign exchange violations. Their solution was to zero in on the vast purchases made by the public sector, including the armed forces.

They calculated that hundreds of crores were paid to agents as commissions on these purchases every year. Supposing the Government of India asked sellers to sack their agents and to pass their commissions to the Congress party under the table? Such an arrangement had several advantages. One: the commissions would be paid by whoever got the contracts, they would not be paid to influence the award of the contract. So, India would continue to get the best goods. And two, if you sold licenses in the marketplace, you compromised on industrial development and had to cope with assorted industrialists who felt that you owed them favours. This way, you would never need to see the foreign buyers again and there would be no sense of having accepted a bribe.



The morality of this arrangement was always dubious. But its defenders claimed that it was a matter of choosing between lesser evils. Elections had to be fought. Money was always required. Wasn’t it better to raise the funds this way than to accept bribes from the Indian industrial class?

When arms manufacturers were asked to fire their agents, most made a show of complying with this directive, though many merely reorganised the relationship. In the case of Bofors, for instance, its agent was a company called Anatronics run by a bluff Punjabi arms dealer named Win N. Chaddha. Once Bofors was asked to sack Chaddha, it reworked the arrangement so that he was no longer working on a commission basis. Instead, Anatronics was hired for a fixed amount to function as Bofors consultant in India. Nobody was sure whether the directive banning agents from the defence ministry applied to consultants as well. And there is evidence that Chaddha continued to function – for all practical purposes – as Bofors’ agent in India.

By the time the army had to make its final selection, there were two clear lobbies among the generals. General Sundarji, apparently with the backing of Arun Singh, chose Bofors, which he said had a ‘shoot-and-scoot’ capability (it could be moved after it had fired) which Sofma lacked. The Sofma supporters questioned Sundarji’s judgement and dropped dark hints as to his motives. What is certain is that the selection process moved rapidly through the final lap and that the army headquarters chose Bofors. The Rajiv Gandhi government took just 24 hours to endorse that recommendation and the contract went to Bofors.

While the Sofma lobby was unhappy with the decision, it caused no great stir in India. Bofors, on the other hand, was in serious financial difficulty and the award of the contract was regarded as the deal that saved the company. The Indian flag flew over Bofors’ headquarters and Win Chaddha threw a party to celebrate at Delhi’s Maurya hotel. The entire banquet hall was festooned with banners which read: ‘Win wins again.’ Chaddha, no shrinking violet at the best of times, assured guests that ‘My family is now set up for generations.’



Nothing happened till the spring of 1987, when Swedish Radio, which was investigating the Bofors company, revealed that Bofors had paid bribes to secure the Indian deal. This announcement created a mild stir in India, largely because there was already a controversy over another defence deal (the HDW submarine deal). But the Opposition scented blood when the Rajiv Gandhi government suddenly began to overreact. Instead of simply denying the charge of corruption, it made the wholly unnecessary claim that there could be no question of bribes because there had been no agents in the deal. When the charges persisted, the government fell back on a destablisation theory; the allegations, it said, were part of a foreign conspiracy to destabilise India. Inevitably, this hysterical overreaction convinced the Opposition that something was amiss.

With the government on the defensive, it became open season. All kinds of irresponsible theories, completely unsupported by any evidence, featured in the press. One version had it that Rajiv’s friend, Amitabh Bachchan, had taken the bribe. This was extended by The Indian Express to argue that the bribe had been routed through the non-resident Inlaks group, on the tenuous grounds that Amitabh’s sister-in-law had a sister whose husband worked for Inlaks.

Even while these charges were being flung around, The Hindu managed to procure documents suggesting that contrary to Bofors’ claims, commissions had been paid. One recipient of these commissions was a company called Pitco.

According to the Bofors files secured by The Hindu, the mailing address for Pitco cheques was ‘care of G.P. Hinduja, New Zealand House, Haymarket, London.’



The Hinduja connection gave the saga a new life. The Hindujas were a controversial, non-resident, Sindhi business family who had already been in the public eye because former defence minister, V.P. Singh, had alleged that they were agents in the HDW submarine deal. Moreover, it had been believed that the Rajiv Gandhi government had banned the Hindujas from entering into the centres of power. One foreign minister, Baliram Bhagat, had been sacked because he had visited the Hindujas in London while in office. So how had the Hindujas swung the Bofors deal?

As the controversy swirled, the Rajiv Gandhi government appointed a joint parliamentary committee (JPC), ostensibly to investigate the matter. Because the Opposition boycotted the JPC, its report quickly turned into a whitewash. Nevertheless, the JPC did make some interesting revelations. One: Bofors had two agents in India. They were called Pitco (so The Hindu was right all along) and Svenska. According to Bofors, they had terminated the agreements with Pitco and Svenska after the government asked it to sack its agents. Why then did Pitco and Svenska continue to receive money from Bofors? Well, said Bofors, those were winding-up charges for terminating the contract.



If this explanation was unconvincing, then Bofors faced even more difficulty in explaining why it had hired a third agent called AE Services after it had terminated the arrangements with Pitco and Svenska. Finally, the Bofors executives examined by the JPC offered this explanation: we forgot that we weren’t supposed to hire agents.

The more anybody with an open mind (excluding the JPC) examined the arrangements with the agents, the more suspicious the hiring of AE Services became. Not only had it been hired while the deal was in its final lap, but it was also supposed to get a commission only if the contract was signed within a particular time frame. By some fortuitous coincidence, the deal was pushed through just before the deadline expired.

By now, The Hindu had printed more documents. These confirmed the original suspicion that Pitco was connected to the Hindujas. Further, Win Chaddha was the signatory for Svenska. As Svenska received a large chunk of the commission, this caused some eyebrows to be raised. Was Chaddha really worth that much money? (Perhaps this explained why he said that he was set up for generations.) Or was Svenska a slush fund through which Chaddha accessed the money that Bofors used to pay off generals?

But AE Services remained a mystery. The JPC accepted the Bofors explanation that it was a British firm headquartered in Guildford, Surrey, owned and promoted by a Major Bob Wilson. This was hardly the whole story. I went to Guildford and discovered that AE Services had no office. The address was of a post-box in a solicitor’s firm. The total capital of the company was £100 divided into a hundred shares of one pound each. Major Wilson owned one share. The rest were owned by a shadowy Leichtenstein corporation.

For most people in Delhi, the implication was obvious. When the Congress government decided that the army was going to recommend the purchase of Bofors, it asked the company to route its commissions to the party. AE Services was simply a vehicle employed to accept the funds.

But this was supposition. How did one prove it?



The Bofors company appears to have abandoned the traditional arms dealer’s dictum that discretion is the better part of commerce. On the one hand, Win Chaddha was garrulous beyond belief. And on the other, the company’s president, Martin Ardbo, actually kept a diary in which he noted the details of all his conversations. Worse still, Ardbo persisted with this diary even after the scandal had broken and dutifully noted down the details of the cover-up that Bofors had planned. Inevitably, Swedish Police raided him and confiscated the diary. Just as inevitably, it was then leaked to The Hindu.

To Ardbo’s credit, he tried writing the diary in code. Sadly, he employed a code that even a moderately intelligent schoolboy would take three minutes to crack. For instance, he referred to his partners in managing the cover-up as ‘Hansens’. One might have believed that the Hansens were fellow Swedes, except that the diary made it clear that they lived in London and India and that one of them, when he was not described as Hansen, was called GPH. You did not have to be a genius to work out that the Hansens were the Hindujas and that GPH was G.P. Hinduja.

The same applied to the other entries in the diary. Where Ardbo did not use code, he employed bad spelling. Thus, one entry read: ‘GPH’s enemies are Serge Paul and Nero.’ As the Hindujas battle with Arun Nehru and Swaraj Paul was well-known, the implications were obvious. When you got past the code and the bad spelling, the diary made chilling reading. He was meeting, Ardbo wrote, with a ‘Gandhi trustee lawyer’ to finalise details of the cover-up. Moreover, he no longer cared about ‘the consequences for N’ (obviously a reference to Arun Nehru) but ‘Q’s involvement could be a problem because of closeness to R.’



So, who was Q? If R was Rajiv, then Q had to be somebody who was close to him. The Opposition decided that Q was Ottavio Quatrocchi, the Delhi representative of Snamprogetti, the Italian multinational, whose friendship with Rajiv had been a subject of controversy. There were two theories. The first was that Quatrocchi had accepted the money on Rajiv’s behalf. The second was that Quatrocchi had acted on his own but had inveigled himself into Bofors’ graces by trading on his friendship with Rajiv.

Even as the speculation continued, the Rajiv government fell. The V.P. Singh regime made tall promises but proved unable to make any headway with the Swiss who actually rejected its Letter Rogatory on grounds that it was badly drafted. Fortunately for Bofors buffs, The Hindu and then The Indian Express (to which The Hindu’s Chitra Subramaniam had shifted) kept up the disclosures. But even as these mounted, Rajiv Gandhi was assassinated.


Logically, the Bofors scandal should have ended with Rajiv’s assassination. There is a tradition in India that we do not speak ill of the dead. Even if Rajiv had taken money from Bofors, this was now in the past and of no interest to anybody. But such was the power of the Bofors scandal that nothing, not even the assassination, could diminish its lure.

During the Narasimha Rao government, Chitra Subramaniam produced documents suggesting that some of the money that had been paid by Bofors as commissions had been diverted from a Swiss bank account to another account, the ultimate beneficiary of which was Quatrocchi. Even while the CBI debated whether to interrogate him, Quatrocchi skipped the country. He has not set foot in India since then but continues to issue statements from his new home in Kuala Lumpur declaring his innocence.

The Hindujas have also claimed that the whole thing is a frame-up, but their credibility was damaged by the Swiss government’s actions. Shortly after the Swiss finally accepted a Letter Rogatory from India, they froze the six bank accounts into which Bofors had paid commissions. The Government of India asked the Swiss to transfer papers relating to those accounts to New Delhi. No, said the Swiss, we have to first deal with appeals from the signatories to those accounts. When one appeal was overturned, the Swiss, in an uncharacteristic breach of bank secrecy, informed the Indian government that they had rejected the appeal filed by G.P. Hinduja and Jubilee Finance.

If the Hindujas are not the signatories to the Bofors accounts, then why were they appealing to prevent the documents from being transferred? The Hinduja explanations have been vague and unconvincing. Meanwhile, the Swiss dismissed appeals filed by Chaddha (who was the signatory to Svenska) and Quatrocchi (who it now seems was behind AE Services) and transferred those papers to India. Only the Hinduja papers are still pending because the family has gone to the Swiss Cabinet for a final appeal. If this appeal is rejected, the documents will be here by Spring 2000.

The Vajpayee government has used the two sets of documents that have been transferred to file a charge-sheet in the Bofors case. Controversially, it has named Rajiv Gandhi as an accused, even though he is dead. The government’s defence is that as the case has been filed under the Prevention of Corruption Act, it has to prove that the money was transferred to a public servant to demonstrate corruption. It will probably argue in court that Quatrocchi intended to pass on the AE Services money to Rajiv, though how it can possibly prove this is hard to see.



In retrospect, and with the benefit of hindsight, we can probably make sense of what happened in the Bofors affair. According to the copy of the Pitco contract dug up by The Hindu, the Hindujas were appointed Bofors’ agents in the late 1970s. This suggests that Bofors followed the traditional system employed by all arms companies. There would be two agents. One would be the official agent – in this case, Win Chaddha through Anatronics and Svensksa – who would push Bofors’ case and handle the middle-level pay-offs. The second agent would be secret and high level. His job would be to swing the deal at the top level.

This arrangement worked till the Rajiv government asked Bofors to sack its agents. It needed Chaddha to handle the low-level bribing, so it merely reworked the existing arrangement. But all the evidence suggests that the Pitco contract was, in fact, terminated. The Hindujas were out of favour with Rajiv and had nothing to contribute. Because of their long-standing relationship with Bofors – dating back to the Shah’s Iran – they were paid what Bofors later called ‘termination or winding-up charges.’



It is possible that bribes were paid at the army level to influence the selection of the gun, but there is little doubt that India got the best weapon – the Kargil conflict has proved that. If there is any scope for impropriety, it emerged after the army had decided in principle to go for Bofors and AE Services was hired. Given that Quatrocchi was involved, AE Services was either a front for the Congress party or was a freelance activity of Quatrocchi in his individual capacity.

The worst-case scenario, therefore, is this: the Congress party took a kickback of about Rs 12 crore on an arms transaction in the mid-1980s. Seen in perspective, and with regard to the murky morality of Indian politics, this is not a particularly big deal. Narasimha Rao’s government probably made that much money every week. And while in such Rao-era scams as urea, India was cheated, this was a victimless commission. The army got the best gun, and the AE Services commission was secured by reducing the amount that Bofors would have paid Svenska. If there was a single loser in the whole transaction, it was Win Chaddha who got Rs 12 crore less.

Given all this, why does Bofors continue to exert such a huge hold on the national imagination? Why, when we think of Rajiv Gandhi, do we always think of Bofors? Why do we not think of corruption the moment Narasimha Rao is mentioned? Why is it that Rajiv’s reputation has to live with this taint?

There are no easy answers to these questions. But I think it is safe to say that Bofors would not be such a scandal were it to happen today. The importance of Bofors lies in the fact that it was a scandal that nobody had imagined could happen. For two years before the scandal broke, Rajiv was Mr. Clean, the man who was going to transform the Indian political system. When such a man was accused of corruption, it was the equivalent of a vicar being spotted emerging from a brothel. There was a sense of outrage, a sense in which a national betrayal had occurred.

The manner in which Rajiv reacted also contributed to the sense of betrayal. Throughout her tenure, Indira Gandhi was confronted with corruption scandals. But when she was faced with something like the Kuo oil deal, she either ignored the allegations or consigned them to a committee. When nothing else worked, she blamed the CIA.



If you examine Rajiv’s responses, he began as you would expect Mr. Clean to behave. He was outraged by the allegation; one could argue that he gave it too much importance. Forget about bribes, he said, we didn’t even let them hand out commissions. And then, as time went on, he slowly retreated from that Mr. Clean response and became his mother’s son. The matter was sent to a JPC and the destabilisation theory was trotted out.

I have never been able to work out what it was that made the difference. The Rajiv of early 1987 who banned the Hindujas, was completely different from the Rajiv of 1989 who had welcomed them back to the prime minister’s house. My guess is that Rajiv genuinely believed that he had nothing to hide on Bofors. Within a month or so, he realised that he was wrong; that if the truth came out, he would be severely compromised. That is when his responses began to change, and that is when the Hindujas wormed their way back into his favour by offering to manage Martin Ardbo and to supervise the cover-up from Stockholm and London.



What was it that Rajiv discovered that so compromised him? It is hard to say, but there are two obvious explanations. The first is that the Congress had taken the commission, but that Rajiv, never a details man, had been unaware of this when he had launched his outraged defence. The second is that it took him a month or two to realise that Quatrocchi was involved. Even if Quatrocchi had been operating in an individual capacity, any revelation that suggested an Italian connection would have severely compromised Rajiv. Sonia would have been the subject of the attack and it is unlikely that he would have been able to face that level of personal assault.

Hence, the turnaround from Mr. Outraged Clean to Mr. Cover-up. In the process, he destroyed the illusions of a middle class that had blindly supported him and made Bofors a household name. The real reason why Bofors remains a national obsession is not because we got a bad gun or because hundreds of crores changed hands – in fact, we got a good gun and the sum was relatively small. Bofors will always exert a special hold on the national imagination because it was the one scandal that made us lose our innocence and realise that all politicians, no matter how different they may seem are, at the end of the day, just the same.