Death of a scandal


After two decades and Rs 250 crore of taxpayer’s money spent on the Bofors probe, it heads for a quiet burial. Shantanu Guha Ray retraces India’s watergate

Gung ho? An Indian soldier alongside a Bofors gun in Drass, J&K
Photo: AFP

IF YOU travel an hour west of Stockholm, the capital of Sweden, the well-paved roads that crisscross the picture postcard countryside will eventually lead you to Karlskoga, a sleepy town with barely 1,500 inhabitants. For years, these residents made a living from a huge armaments factory owned by AB Bofors, a company that started in 1873 and got its name from Boofors, a 17th century hammer mill nearby.

On the night of March 25, 1986, Karlskoga came alive with the deafening noise of firecrackers that lit up the sky and turned the sleepy town into a Hans Christian Andersen fairyland. Men dressed in black suits and neckties uncorked champagne in the company of their womenfolk who had, earlier in the day, travelled to Stockholm to buy samosas and rasgullas from the few Indian restaurants dotting the capital. It was a night of joy. The cashand work-starved AB Bofors had at last found a lifeline: A $1.4 billion contract (then valued at Rs 1,437 crore) signed a day earlier to supply over 400 howitzer guns (155mm) to the Indian Army.

“They danced and drank the night through,” said an internal bulletin of AB Bofors. The celebrations, organised by the ruling Labour Union party, ended with the entire town jointly signing a thanksgiving note to Olof Palme, the Swedish prime minister who had initiated the deal but was assassinated just a month before the actual contract was signed. Little did the townspeople know that night that the historic arms deal would quickly turn into India’s most infamous corruption scandal ever, as allegations would emerge that bribes of Rs 64 crore were paid to secure the deal. A scandal that would dominate the politics of the world’s largest democracy for the next two decades like no other event until then or since.

Political deathknell Two years after the scandal, Rajiv suffered a crushing poll defeat
Photo: AP

In time, the scandal would bring down India’s most powerful government ever, directly implicating a prime minister – Rajiv Gandhi – in a corruption case for the first time; while creating a political star – VP Singh – who would rise to become prime minister on the back of his nationwide campaign on this issue; ensnare well-heeled billionaire industrialists – the Hinduja brothers – and force them to appear in India’s lower courts like petty criminals; and see a key player pushed to his death in front of a speeding train. A middleman – Italian businessman Ottavio Quattrocchi – wanted in the bribery case would dramatically escape arrest by the Interpol; another Bofors agent – Wisheshwar Nath ‘Win’ Chadha – would be exiled for years before returning to Delhi and subsequently dying of a heart attack.

Then, of course, there is the mysterious assassination of Olof Palme as he stepped out of a Stockholm theatre in February 1986, after watching a movie with his wife. To this day, his killing, which came a month before the Bofors deal was signed and 13 months before the scandal came to light, remains unsolved. Indeed, the Bofors saga would be full of several more twists and turns, like a long-running television serial that never loses steam or the plot.

In fact, the Bofors scandal swept the public imagination in such unprecedented ways that slogans about it would be found painted on walls in villages, towns and cities around the country. How utterly the scandal destroyed Rajiv Gandhi’s reputation can be gauged from an incident in the All India Radio station, Patna, where a 10- year-old, when asked to recite a poem, happily intoned in a live broadcast: “Gali gali mein shor hai, Rajiv Gandhi chor hai”. The very same day, the hapless AIR director was suspended.

So massive was the Bofors scandal that, like a hit television serial, it spawned its own mini scandals, not the least of which were attempts by the Rajiv Gandhi administration to cook up false corruption cases against VP Singh’s son and the repeated attempts by the CBI to drag its feet on investigations and make misrepresentations before the courts.

Of course, not a single conviction has been wrought in this case through two decades of tortuous legal wrangling in India as well as across the world, from Malaysia to Argentina to the UK, despite the countless Letters Rogatory (LRs) sent to Panama, Liechtenstein and Luxembourg for tracking the movement of monies linked to the payoffs. But the ghost of Bofors continues to haunt the Congress Party, especially its president, Rajiv Gandhi’s widow Sonia, as became evident last fortnight when the Centre’s bid to withdraw the criminal case against Quattrocchi immediately raised the hackles of many who have fought every bid by the government to prematurely end the case.

“The decision to withdraw the case against Quattrocchi comes in the wake of prolonged efforts to scuttle the case. With this latest act, the cover-up of the Bofors bribery case is now complete,” was the sharp reaction of the CPI(M) after Solicitor General Gopal Subramaniam told the Supreme Court on September 29 that the Centre had decided to withdraw the case against the Italian businessman.

Former diplomat BM Oza, who was India’s ambassador to Sweden when the deal was signed, told a wire agency: “Even if Quattrocchi is brought to India, he is not going to disclose the political payoffs as he has already stated that Rajiv Gandhi was a good family friend. So, honestly, this is the end of the tunnel.” Oza was right.

Lethal weapon A solider sits atop a Bofors Howitzer during a military exercise
Photo: AP

“No one in India moved on Bofors. Everyone watched the show and blamed another. You will actually have to set the clock back to get the truth out of the bag,” quips D Raja of the Communist Party of India (CPI). The opposition BJP, on its part, blames the Congress for what it calls its “casual approach” to the case. “All answers to the Bofors deal end at the Congress office. We got Quattrocchi’s accounts frozen and got the Interpol to issue a red corner notice but he escaped with the help of the Congress,” says BJP spokesman Mukhtar Abbas Naqvi.

Ironically, the Bofors deal would never have turned into a bribery scandal but for a step taken by Rajiv Gandhi himself. Soon after he was sworn in prime minister on the last day of 1984 after registering the biggest victory in a Lok Sabha poll, he decided that henceforth all military purchases would be contracted directly between suppliers and the government and without the services of middlemen. This was a radical departure from existing practice. Until then, it was routine – and legal – to pay commissions to middlemen who brokered arms deals .

INDEED, THOSE who closely followed the deliberations that preceded the signing of the Bofors deal say the agreement was cemented much before its formal announcement in March 1986 — during a private meeting between Palme and Gandhi when the former visited India two months earlier to attend a summit of six world leaders. At this meeting, held in Delhi’s Maurya Sheraton hotel, Palme pleaded with Gandhi, even saying that if the deal was not clinched his Labour Union party could face a rout in the Swedish general election that were due.

Rajiv Gandhi, who considered Palme a close friend, agreed to give the contract to AB Bofors. The meeting ended and an elated Palme was off to the airport to catch his flight. In his excitement, he forgot to take his overcoat and it had to be rushed to the aircraft by two officials of the External Affairs Ministry.

Moving Target Ottavio Quattrocchi in Malaysia dodging extradition to India
Photo: Reuters

In just over a year, however, the Bofors deal began to unravel. Two Swedish Radio reporters claimed in a morning bulletin of April 16, 1987, that Bofors had paid kickbacks to top Indian politicians and key defence officials to secure the deal. The words used were: “kroners to cronies”. The Indian government promptly denied the allegations of the explosive report as “false, baseless and mischievous”. But the denial could not stop the alarm bells ringing in the establishment and the flurry of meetings between the prime minister and top officials.

On April 20, 1987, just four days after the scandal broke out, Rajiv Gandhi told the Lok Sabha that no middleman or kickbacks were involved in the deal. But tensions remained high. As the scandal snowballed and the opposition quickly latched on to it, the Centre was forced to announce a probe by a Joint Parliamentary Committee (JPC) in August 1987.

Led by B Shankaranand, then a minister in Rajiv’s government, the JPC submitted its report to Parliament in July 1989, almost a year and a half after Indian investigators visited Sweden to probe the scandal. Boycotted by the main opposition parties, the JPC predictably gave a clean chit to the Rajiv government.

But the relentless public campaign by the opposition and journalistic investigations by two leading newspapers, The Hindu and the Indian Express, had brought out enough evidence to suggest that a criminal case should be filed to unearth who was paid the bribes. The damage was done. The Congress Party lost power in the 1989 General Election, leaving it with fewer than 200 of the 543 seats.

Wheeler-dealer Win Chadha, a key accused in the case, is produced in Tiz Hazari courts
Photo: PTI

Two decades later, the CBI probe into the Bofors case has become India’s most expensive federal investigation, having cost the taxpayer upwards of Rs 250 crore. Former CBI director Joginder Singh once told a family gathering: “No other scandal in India took so much time to investigate and no other case had so many angles to it,” adding, characteristically, “A lot of time and money has been spent to bury it.”

INDEED, EVERY accused in the case has either been acquitted – such as the Hinduja brothers – or has passed away: from Rajiv Gandhi (who, too, was posthumously found not guilty by the Delhi High Court), to Win Chadha and former defence secretary SK Bhatnagar. The sole surviving accused is Quattrocchi, 70, who in 1985 had been the India representative of Italian firm Snamprogetti and was accused of acting as a front for Rajiv to receive the Rs 64-crore kickback. He is still in Argentina and New Delhi has failed to extradite him because India and Argentina do not have an extradition treaty.

“It is because no one in the government seems to be keen on solving the case,” says Delhi-based lawyer Ajay Agrawal on the latest move to withdraw the prosecution of Quattrocchi. In January 2006, Agrawal had petitioned the Supreme Court seeking that the government move a court abroad to freeze Quattrocchi’s bank accounts. The court had accepted his plea and ordered the government to do so. Agrawal has now filed an application before New Delhi’s Chief Metropolitan Magistrate Kaveri Baweja, opposing the CBI’s latest move. He says the CBI cannot be allowed to take the judiciary for a ride.

Ironically, VP Singh – who set the national mood against Rajiv Gandhi on the Bofors scandal and won a historic byelection from Allahabad in June 1988 – failed to move the levers of investigation quick enough in his 11 months as prime minister. And once Rajiv agreed to prop up the breakway Chandrashekhar, who replaced Singh as prime minister, the Bofors probe virtually ground to a halt.

Below the law The Hinduja brothers were cleared of corruption charges in the Bofors case
Photo: Reuters

In June 1991, PV Narasimha Rao became prime minister following Rajiv Gandhi’s assassination in the middle of the 1991 General Election. It was widely believed that the wily Rao used the Bofors probe as a carrot and a stick to rein in Sonia Gandhi from nursing any political ambitions. After Rao lost in the 1996 General Election, little was anyway expected from the next two short-term prime ministers, HD Deve Gowda and IK Gujral, because both were propped up by the Congress.

But what continues to befuddle analysts is how the BJP-led National Democratic Alliance (NDA) failed to put the Bofors investigation in overdrive during its 1998-2004 tenure under Atal Bihari Vajpayee. Certainly, it was during the NDA’s rule that the first chargesheet in the case was filed in the lower courts. The CBI had subsequently also included Rajiv’s name in the list of the accused, as also the Hinduja brothers for playing a key role in securing the deal for Bofors.

BUT IT was also under the NDA that the CBI case suffered its worst setbacks in the courts. This included the rejection by the Delhi High Court of its case against Rajiv and the Hindujas, who, the courts ruled, could be freed because the CBI not only messed up its probe against the London-based industrialists, but actually “went on a witch hunt, spending the exchequer’s money”. Most shocking was the CBI’s failure to produce “authenticated” documents from Switzerland to support its case, leading to the their acquittal.

There is a flip side, too. With two decades having gone by, there are many in the Indian defence establishment who now think the burial of the case might be good news for New Delhi’s $30 billion weapons acquisition programme. Interestingly, as the Bofors case enters a new phase of litigation, it also raises a fresh point for adjudication – as to whether the CBI or, for that matter, any investigating agency, can actually withdraw charges and suggest closure of cases or whether the trial court has a say in it.

Under the law, the trial court is not bound to accept the CBI’s plea to quash its chargesheet. Indeed, the court could well ask the CBI to take a fresh look at the grounds for withdrawing the charges and order it to suggest what more can be done to extradite Quattrocchi from Argentina to face trial here. No one knows whether that will happen.

‘You will have to set the clock back to get the truth out of the bag,’ quips D Raja

Law minister M Veerappa Moily has already said that the Bofors case does not fall under the purview of the Prevention of Corruption Act and no one, including Quattrocchi, can be tried. Not surprisingly, the Congress would like to see the scandal buried forever. Party leaders argue that after all the bribe involved was a paltry Rs 64 crore.

Of course, if the CBI had wanted, there was a long list of dramatis personae that could have well aided the investigation and nailed the culprits. SK Agnihotri, as joint secretary in the Defence Ministry, had opposed the Bofors deal. A member of the Price Negotiating Committee (PNC) for the acquisition of the 155 mm guns, Agnihotri had put on record that AB Bofors did not fulfill the General Staff Qualitative Requirement, a clutch of standards that must be met. Agnihotri was shifted to the Textiles Ministry three months before Bofors bagged the contract.

Political observers say the Bofors scandal was as much a defining moment for the Congress Party as the Babri Masjid demolition in 1992 was for the BJP. “Bofors is like a force of nature chasing the course of Indian political debate. Its image haunts India’s defence preparedness even today,” says Delhi-based journalist-turned-image guru Dilip Cherian. But then, why did this scandal have such a long-lasting impact? For a start, to many people of that generation, the scam confirmed the Congress Party’s reputation as a cynical and corrupt organisation that had lost the halo of leading the nation’s freedom struggle.

Olof Palme pleaded with Rajiv to sign the deal as he faced a rout in the Swedish polls

Though nothing has yet been proved in the Bofors case, the mud has stuck on the Congress for the last two decades. Many say it’s because Rajiv Gandhi’s government never appeared serious about unearthing the truth despite repeated promises.

Still others felt that the CBI appeared unwilling to pursue the leads on Quattrocchi, mostly provided by then Bofors president Martin Ardbo’s intriguing diary entries, which referred to “Q”, “Nero” and “Gandhi trustee lawyer” in connection with the scam. Since “Q” was believed to refer to Quattrocchi, and “Nero” to Arun Nehru, then an influential minister in Rajiv’s cabinet, it did not take long for the opposition to jump to unflattering conclusions about political skullduggery.

In the run-up to the 1989 General Election which decisively turned against Rajiv Gandhi, VP Singh would repeatedly take out a small calculator from his pocket and tell the crowds that the small machine had the number of the Swiss Bank that contained the Bofors kickbacks and that he would de-code the account if voted to power. That he did nothing of the sort is another story. George Fernandes, who would later become defence minister under Atal Bihari Vajpayee, made similar claims in various interviews. He told Kolkata-based Telegraph that he had given India’s then President Zail Singh details of a bank account that contained everything one needed to know about the Bofors kickback. More than two decades later, no one has decoded any such bank account.

When the Bofors scandal broke out in the late 1980s, veteran lawyer Ram Jethmalani played a huge role in investigating the trail of corruption. Jethmalani famously put out “10 questions” every day for Rajiv Gandhi to answer. But of course, once Vajpayee came to power, and Jethmalani became the law minister for a while, the Bofors case dragged through at a snail’s pace. Stunningly, in 2003, Jethmalani agreed to represent the Hinduja brothers and succeeded in getting them off the hook from the courts.

Many feel the burial of the case is good for India’s $30 bn weapons acquisition programme

Another stellar role in the Bofors saga was played by Arun Jaitley, more in his capacity as a brilliant young lawyer than as a BJP leader. Jaitley pursued the case aggressively when VP Singh appointed him Additional Solicitor General in 1990. However, Jaitley’s presence in the Vajpayee cabinet as the Union Law Minister, surprisingly did not see him pick up from where he had left off in 1990. Though in April this year Jaitley claimed that if voted to power the BJP would set up a commission to probe the CBI’s failures in the Bofors case.

This was after the CBI dropped Quattrocchi’s name from its list of “most wanted” and the Interpol removed its 12 year old red corner notice on him.

In short, political skullduggery has ruled the case for years. Doubts about the government’s intentions were heightened by its decision to seek the defreezing of Quattrocchi’s bank accounts in London, the inability to extradite him from Malaysia and then Argentina, where he was arrested on an Interpol notice, and finally the latest move to withdraw the cases against him.

So what role did former prime minister Vajpayee play – or did not play – in the bid to uncover the truth in the Bofors case? A curious tale revolves around how Vajpayee sat down with his Malaysian counterpart, Mahathir Mohammad, for a meeting. At that time, Quattrocchi was based in Kuala Lumpur and had appealed in the Malaysian Supreme Court against his extradition. So when Mohammad pressed Vajpayee on India’s seriousness in Quattrocchi’s extradition, the prime minister looked out of the window, according to a senior official present during the meeting.

A similar drama was witnessed at former prime minister Chandrashekhar’s farmhouse near Delhi on the morning after he had resigned as prime minister. As a bitter Chandrashekhar sat in the sylvan surroundings of his farmhouse, members of a business house implicated in the scandal were seen pressing his feet for hours. “They did not want netaji [Chandrashekhar] to put any remarks against them on the Bofors files,” says an attendant who was present there.

For the moment, it does appear as if the decision to withdraw the case against Quattrocchi may finally bury the Bofors case. However, the Supreme Court is yet to rule on the CBI’s plea, and by no means the Italian friend of Sonia Gandhi can breathe easy until the court gives its nod. Surprisingly – or perhaps not – the political parties opposed to the Congress, including the BJP, are not making much hue and cry over the CBI’s decision. Amidst the myriad shady characters, criminal cases and off-the-record anecdotes, lies one of India’s biggest unresolved riddles.



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