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Saturday, October 24, 2020

FinCEN Files — Agusta, Maxis, Essar: probed at home, Indian firms on US radar as well

Three SARs were raised by DBTCA and one by Standard Chartered Bank New York (SCB NY) between 2013 and 2016 against AgustaWestland, Finmeccanica (now Leonardo SpA) and other subsidiaries over 1,417 transactions ($889.6 million) during 2010-2015.

Written by Shyamlal Yadav | New Delhi | Updated: September 25, 2020 10:17:57 pm
FinCEN Files, FinCEN Files expose, India firms, Offshore Leaks, money laundering FinCEN Files, India firms on US radar, Indian express investigation110 media organisations in 88 countries teamed up with ICIJ and BuzzFeed News to trace the Indian entities and banks named in these SARs filed with FinCEN between 1999 and 2017.

FROM PUBLIC sector giants Hindustan Aeronautics Limited and State Trading Corporation to private majors Bharti Airtel and Essar, several entities, because they are under scrutiny by Indian investigative agencies, have been red-flagged in Suspicious Activity Reports (SARs) filed by banks with the US Financial Crimes Enforcement Network (FinCEN), records investigated by The Indian Express show.

* Hindustan Aeronautics Limited (HAL): As many as 607 transactions ($14.9 million) in 2014 of HAL were red-flagged by Deutsche Bank Trust Company Americas (DBTCA) —38 of these ($4.07 million) with US-based Honeywell International and 13 ($2.1 million) with Israel-based Elbit Systems, both in the aviation and defence sectors. The SAR alleged that although details indicated payments for “agency commission,” “training”, “tender”, and “customer support program’”, no “information regarding the commercial purpose…was found”.

Another reason was that HAL was “being investigated on alleged bribery during a jet engine contract with Rolls Royce”. After registering a Preliminary Enquiry in 2014, the CBI filed an FIR last year while another case has been registered by the ED. Both the cases are under investigation.

HAL did not respond to an emailed questionnaire from The Indian Express.

* AgustaWestland: Three SARs were raised by DBTCA and one by Standard Chartered Bank New York (SCB NY) between 2013 and 2016 against AgustaWestland, Finmeccanica (now Leonardo SpA) and other subsidiaries over 1,417 transactions ($889.6 million) during 2010-2015. They refer to the Rs 3,600-crore deal signed with India in 2010 for 12 helicopters to carry VVIPs.

In 2013, Giuseppe Orsi, Finmeccanica CEO, was arrested by Italian authorities on corruption and bribery charges related to the deal. The CBI and ED have filed chargesheets in the case, and two alleged middlemen, Christian Michel and Rajiv Saxena, were extradited from Dubai last year. The case is under investigation.

Leonardo SpA said: “Leonardo strives to…prevent, detect and respond to corruption, applying a zero-tolerance approach. (The India deal) charges on the company were dropped in Italy in 2014 and… executives were acquitted by Italy’s Supreme Court of Justice in 2019.”

Read | FinCEN Files: Before bankruptcy and probe, Bhushan Steel hit US radar for flows from Latvia, Dubai

* State Trading Corporation (STC): DBTCA filed a SAR in November 2012 flagging 24 transactions ($29.61 million) during June-October 2012, saying the bank was “unable to confirm” their “commercial purpose”. It states the transactions were red-flagged after Mumbai-based Rajat Pharmachem, now under liquidation following loan defaults, was booked by the Directorate of Revenue Intelligence in 2008 for alleged duty evasion of Rs 1,000 crore linked to an export agreement in 2004 with STC.

When contacted, STC said that it “has dealt with Rajat Pharmachem from 2004 to 2008” but did not provide any details.

* Airtel: Before the 2G scam case, in which the company was named, fell through in court in December 2017 — a CBI appeal is pending before Delhi High Court — seven SARs were filed by DBTCA and two by SCBNY during 2013-2016 red-flagging 8,343 transactions (over $1.416 billion). The company was also referred to as a “counterparty suspect” in DBTCA’s SARs in 2014 on Kuwait’s Zain Group and in 2013 on Qatar’s Three Pillars Pte Ltd.

Said a Bharti Airtel spokesperson: “As a company, we have not received any communication whatsoever on the issue by law/ enforcement authorities from any jurisdictions…All transactions that would have happened from time to time, were undertaken in accordance with the applicable laws and regulations…regarding Kuwait’s Zain Group and Qatar’s Three Pillars Pte Ltd, these transactions were regular business transactions between two parties.”

Read | FinCEN Files: Wanted at home, Mumbai luxury car king flagged to US watchdog too

* Tata Communications: A SAR filed by SCB NY in July 2014 referred to a CBI case in 2013, accusing Tata Communications and Bharti Airtel of “allegedly causing a loss of nearly Rs 48 crore to the government since 2004 by illegally providing International Long Distance (ILD) services”.

Seven other transactions of the company worth $5,45,000 were flagged for payments during 2013-14 from FM Global Trading FZE.

Tata Communications said: “Compliance with laws in the jurisdictions in which we operate is of utmost importance to Tata Communications. We follow stringent standards of corporate governance in every jurisdiction in which we operate, across all regions.” Bharti Airtel said: “This complaint was reviewed by the CBI. The CBI after satisfying themselves filed a closure report before the CBI Court.”

Read | FinCEN Files: 44 Indian banks, transactions of $1 billion, flagged to US regulator

* Maxis Communications: An SCB NY SAR red-flagged over 502 transactions ($138.3 million) of Maxis Communications during 2012-2013. A SAR in June 2013 states that Maxis was “accused of bribing (Dayanidhi) Maran”, who was then the Telecom Minister. A CBI special court discharged all accused, including Maran, except two Malaysian nationals Ralph Marshall and T Ananda Krishnan who is the ultimate beneficial owner of Kuala Lumpur-based Astro Overseas Ltd. A review petition is pending before Delhi High Court.

Two DBTCA SARs in November 2014 and June 2016 red-flagged 102 transactions ($4.34 million) during 2014-2016 related to Astro Overseas Ltd.

Maxis and Astro did not respond to questionnaires from The Indian Express.

* Reliance Communications, Videocon & Idea: Reliance Communications figures in an SCB NY SAR in July 2014 flagging 204 transactions ($13.1 million) by Dubai-based FM Global Trading FZE. It refers to transactions by alleged 2G-scam tainted companies with the Dubai firm.

The SAR, which refers to 14 transactions related to Reliance Communications ($1.68 million), also flags 21 transactions ($1.56 million) during 2013-14 by Videocon Telecommunications, and 13 ($1.37 million) by Idea Cellular.

A 2013 SAR cites the CBI action against “Vodafone Group Plc for alleged corruption in the allocation of bandwidth in 2002.”

Reliance Communications and Videocon did not respond to questionnaires from The Indian Express. Vodafone India merged with Idea Cellular in August 2018.

Said Ben Padovan, Group Head (Corporate Communications), Vodafone: “In 2012, the CBI filed charges in relation to the 2002 spectrum allocation against a number of companies, including Vodafone India Limited (VIL) and Vodafone Mobile Services Limited (VMSL). In October 2015, the special court reviewing the matter dismissed the charges against all accused, including VIL and VMSL… This was the end of the matter.”

Editorial | Transactions red-flagged to US financial watchdog point to important gaps in India’s regulatory architecture

* Essar: A DBTCA SAR in February 2017 flagged 1,448 transactions ($15.51 billion) during 2011-2016. Among them, 564 transactions ($7.14 billion) “were transferred between companies in the Essar Group of companies. These transactions are the primary focus of this case, although all transactions identified are being reported”, stated the SAR that listed 13 such companies.

Three DBTCA SARs in 2015-2016 refer to “allegations of fraudulent trade deals” probed in China and “allegations of bribery” investigated in Malta related to Singapore-based Trafigura Pte Ltd and lists Essar Oil and Essar Energy Overseas among beneficiaries in two instances.

Manish Kedia, Senior Vice President (Corporate Affairs), said: “All financial transactions made are executed after conducting necessary diligence and obtaining all required approvals, including regulatory approvals wherever applicable.”

Read | FinCEN Files — Cyprus to Isle of Man: Over 100 transactions linked to Max chairman

* Aurobindo Pharma: Records show that 1,328 transactions ($370.9 million) were flagged in seven DBTCA SARs. One states the company is the subject of “an investigation involving bribery and laundering”.

In 2012, the CBI filed a chargesheet against Jagan Mohan Reddy and directors of Aurobindo Pharma, along with another company. In 2016, the ED filed a prosecution complaint. Both these agencies told the court that their investigation centred around 75 acres each allotted to Aurobindo and another company when Jagan’s father, the late Y S Rajasekhara Reddy, was Chief Minister of Andhra Pradesh before the state was split. The chargesheet alleges that the two companies later invested in Jagan’s firms. The cases are now pending for trial.

An Aurobindo spokesperson said: “Some of our entities have been under scrutiny, which can happen to any business, but we have not faced any adverse action or order from any government authority. We have never been subjected to any anti-money laundering or bribery investigation ever so far.” Y S Jagan Mohan Reddy’s office did not respond.

Read the full response of companies here:

AgustaWestland

Leonardo SpA: Leonardo is committed to conducting all aspects of its business ethically and recognises that this is a prerequisite to fair competition in the markets in which it operates, therefore acting in full compliance with national and international rules. Through active monitoring of and engagement with industry best practice, Leonardo strives to continuously strengthen its risk management and internal control systems in order to prevent, detect and respond to corruption, applying a zero-tolerance approach.

A continued review of the company’s organisation and corporate governance practices is carried out with the objectives of enhancing ethical business culture and promoting a culture of integrity throughout the Leonardo workforce and its supply chain. On the mentioned investigation regarding India, it is worth remembering that charges on the Company were dropped in Italy in 2014 and that the formerly investigated Company’s executives were finally and definitively acquitted from all accusations by Italy’s Supreme Court of Justice in 2019. Leonardo hopes for a renewal of its relationship with India.

State Trading Corporation

Spokesperson: STC has dealt with Rajat Pharmachem from 2004 to 2008. Hence you may please provide the details of the said transaction made during June-October 2012 enabling us to look into the matter….

Bharati Airtel

We would categorically like to state that as a company we have not received any communication whatsoever on the issue by law / enforcement authorities from any jurisdictions regarding any such transactions or the basis thereof. All transactions that would have happened from time to time, were undertaken in accordance with the applicable laws and regulations. In the absence of specific information regarding ‘8,343 transactions’, it is very difficult for us to be able to respond on the same.

Additionally, we are not clear on the linkage to the 2G investigation resulting in the US regulator red flagging the company’s past transaction.

On your query regarding Kuwait’s Zain Group and Qatar’s Three Pillars Pte Ltd, please note these transactions were regular business transactions between two parties. On the transaction with Zain Group, we refer to our past announcement (on) the acquisition of Zain Group’s mobile operations in 15 countries across Africa for an enterprise valuation of USD10.7 billion. We continue to run our Africa operations through our subsidiary.

Further, as regards Three Pillars Pte Ltd., we submit that Three Pillars Ltd. is part of Qatar Foundation Endowment of HH Sheikha Moza bint Nasser, w/o Sheikh Hamad bin Khalifa Al Thani, former Emir of the State of Qatar. The said entity had invested and acquired a 5% stake in Bharti Airtel Limited in 2013 and sold the same in 2017. We are providing links to the public announcements made to this effect by both parties in May 2013 and 2017.

We understand that your query relates to flagging of transactions to FinCEN of companies under investigation by a government authority whether under any defined procedure of FinCEN or under any international protocols. It could be possible that during the period our excess spectrum matter was under process at the special court, the banks may have routinely flagged some transactions; however, we were not made aware of any such activity as our operations continued in the ordinary course of business. As you would be aware, the charges in the said matter were dismissed at the framing stage itself by the special court in 2015-16.

Two specific transactions that have been pointed out in your query are regarding Bharti Airtel’s acquisition of Zain in Africa in 2010 and investment by Three Pillars Pte. Ltd. into Bharti Airtel in 2014. The details of both of these transactions are in the public domain.

We follow the highest standards of compliance and all transactions that happen from time to time, are undertaken in compliance with the applicable laws and regulations. We have not received any communication whatsoever on the issue by any bank or authority from any jurisdiction regarding any such transactions….

The CBI matter relates to a complaint filed by DoT in 2013 against TCL (TATA Communications Limited), Airtel and Singtel, mentioning that Singtel, not being a licensed operator in India, had provided IPLC services to customers in India. The complaint had stated that Airtel and TCL had unauthorizedly enabled Singtel to provide services in India. This complaint was reviewed by the CBI. The CBI after satisfying themselves filed a closure report before the CBI Court.

Vodafone

Ben Padovan, Group Head (Corporate Communications): In 2012, the CBI filed charges in relation to the 2002 spectrum allocation against a number of companies, including Vodafone India Limited (VIL) and Vodafone Mobile Services Limited (VMSL). In October 2015, the special court reviewing the matter dismissed the charges against all accused, including VIL and VMSL. In his order, the Judge O.P. Saini reprimanded the CBI for preparing distorted and fabricated charges. This was the end of the matter.

Incidentally, and just so you are aware, Vodafone was not a shareholder of VIL at the time of the allotment in 2002. Vodafone acquired Hutchison’s stake in VIL and VMSL in May 2007.

Aurobindo Pharma

Aurobindo Pharma is a knowledge driven company manufacturing active pharmaceutical ingredients and formulation products. We are R&D focused and have a multi-product portfolio with manufacturing facilities in several countries. Our multiple facilities are approved by leading regulatory agencies such as USFDA, EU GMP, UK MHRA, South Africa-MCC, Health Canada, WHO and Brazil ANVISA, Aurobindo makes use of in-house R&D for rapid filing of patents, Drug Master Files (DMFs), Abbreviated New Drug Applications (ANDAs) and formulation dossiers across the world. Aurobindo Pharma is among the largest filers of DMFs and ANDAs in India. We are also one of the top 2 companies in India in terms of consolidated revenues. We export to over 155 countries and over 90% of our revenues are from international operations. We have been listed on the Indian stock exchange since 1995.

As mentioned above, a substantial part of our business involves exports, often through local subsidiaries due to local drug registration compliances. Also, we have 11 units for APIs / intermediates and 18 units for formulations (of which 4 are situated in the USA, 1 in Brazil, 1 in Netherlands and 1 in Portugal). We cater to the market requirements of both advanced as well as emerging market opportunities. Our domestic and international transactions and accounting standards are in compliance with the laws of all the relevant countries. Some of our entities have been under scrutiny, which can happen to any business, but we have not faced any adverse action or order from any government authority. We have never been subjected to any anti-money laundering or bribery investigation ever so far.

The allegations made are ambiguous, vague and unsubstantiated. All these are allegations and are not facts. These allegations should not be construed that we have violated any law of the land or ethics in any way. We are confident of successfully defending any allegations, inquiries or investigations, since all of these are utter false allegations.

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