#PanamaPapers: Hidden in files, a trail of ‘payoffs’ by Italian firm via offshore companies for defence supplies to Indiahttps://indianexpress.com/article/india/india-news-india/panama-papers-mossack-fonseca-files-iaf-navy-italian-firms/

#PanamaPapers: Hidden in files, a trail of ‘payoffs’ by Italian firm via offshore companies for defence supplies to India

Italian firm Elettronica SpA has been dealing with the Ministry of Defence for decades.

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A screenshot of Italian firm Elettronica SpA’s website.

Hidden in hundreds of pages of agreements and contracts in the Mossack Fonseca files are details of alleged commissions, since 1996, for electronic warfare equipment and other supplies to the Indian Air Force and Indian Navy by Italian major Elettronica SpA through two offshore entities.

The agreements date back to 2000 and there is mention of commissions, between 5% to 17%, being paid by the supplier firm to two companies, one owned by an Indian and the other located in the BVI, via offshore entities registered by Mossack Fonseca.

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The two offshore companies are called Intertrade Enterprises Limited (IEL), registered in the Bahamas in 1993, and the second, Intertrade Projects Consultants Limited (IPCL), set up in 1997 and located in Dublin, Ireland but listed in records as a Panamanian company. The former is described as the “principal” and the latter as the “agent” for the first. Mostly Panamanian nationals are directors of these two companies.

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The Memorandum and Articles of Association and incorporation data of IPCL show that the company works as an “agent for manufacturing and services”  and, over the years, has signed agency/marketing agreements for defence/infrastructure supplies, besides India, in countries like the Philippines and Algeria. Incidentally, the IPCL has a low profit margin and their annual account statements show a profit of only around GBP1,000-2,000.

For Philippines, Intertrade signed an agreement with Elima, a subsidiary of Finmeccanica SpA. In the case of India, MF documents show that IPCL entered into an agreement  with Elettronica SpA with commissions for India supplies going at 17% of the contract price. One communication from Elettronica SpA to Intertrade Projects mentions an earlier contract dated 1996 and extends the contract till 2001.

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There is another communication, dated January 14, 2002, from IPCL to Elettronica SpA, informing that they “intend to sign” an agreement with Thunderbird Industries, USA. There are subsequent tripartite agreements between the three parties — the agreement with Thunderbird being signed by its proprietor, Nanak Kohli.

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There are also invoices raised by IPCL in the name of the Italian company. For instance, one invoice raised in April 2000 mentions an agreement of 1996 and pegs the 17% commission at Euro 112, 399 with the reference number of three contracts given. Similarly, for 2004, IPCL raised an invoice of Euro 11,362 against Elettronica SpA for two defence contracts.

A third invoice is for 2003 in which IPCL has calculated a commission of Euro 43,780. The commissions have all been remitted to the National Bank of Greece in Athens, referring to a 2001 agreement. Also, there are copies of fax messages sent by Elettronica SpA with the subject listed as “India” and commissions listed for IPCL against them. There are several other invoices in the voluminous documents.

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While the precise quantum of contracts signed by Elettronica SpA with the Indian armed forces and the commissions being paid is not known, there are documents annexed with marketing agreements which list the nature of the contracts.

One list attached to a marketing agreement between Elettronica SpA and Intertrade Projects has six “products” in it:

After-sales support for maintenance of systems previously provided by Elettronica to the Indian Navy and Indian Air Force including spare parts, repair facilities to be carried out in Rome; technical assistance services; technical documentation and training associated with maintenance of the equipment and systems.

ELINT (electronic intelligence) systems for the Indian armed forces and the relevant after-sales support.

RWR (radar warning receiver) and MAW (missile approach warning system) for upgradation of Mi-17 helicopters (with Hindustan Aeronautics Ltd).

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RWR/LWR (laser warning receiver)/MWS (missile warning system) and CDS (coaxial drive system) for AL (advanced light) helicopters with Hindustan Aeronautics Limited.

ESM (electronic support measures) for Naval Cougar helicopters. This programme is being promoted by a partner of Elettronica.

SPJs (self protection jammer) for the Indian Air Force’s Sukhoi-30MKI. This programme, the documents state, is also promoted by an Elettronica partner.

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The agreement ends with the sentence “as the situation evolves, other programs may be added”.

There is one document of a direct communication between the Ministry of Defence and Elettronica SpA. It pertains to a penalty for late delivery in a particular contract which has been levied at the rate of 1% for each of the seven months of delay. The letter, dated December 8, 1998, was sent from the Directorate of Procurement and mentions an amendment to one contract. A copy of this communication, in turn, was sent by Elettronica SpA to IPCL in April 2000 to show that the penalty imposed on them by the Ministry of Defence should be calculated in the value of contracts and, therefore, in the commissions to be paid to the agent.

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Elettronica SpA has been dealing with the Ministry of Defence for decades. In 2007, during the visit of Italian Prime Minister Romano Prodi, it signed a joint venture partnership for manufacture, design and development of electronic warfare systems along with an Indian firm, Alpha Design Technology. The company also has a Joint Venture in which Finmeccanica has a 31 % stake.

As they did with Thunderbird Industries, IPCL also entered into a sub contract with another entity, the Sisur Business Corporation, a company registered in the BVI. There is correspondence of 2001, indicating that the India contract could end shortly.

The agreement with Sisur states that “Sisur will assist Intertrade to carry out and fulfil its obligations concerning the territory of India according to the terms and conditions of the agency agreement…” Then there are tripartite agreements between Elettronica SpA, Sisur and Intertrade Projects, describing how Intertrade has been appointed as the agent of Elettronica since June 1993 and that Elettronica designs, develops and sells equipment, systems and electronic components in the field of electronic warfare and intends to promote the sales of Elettronica other than “elint type products in the territory (that is India).”

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The agreement states that Sisur would get a 14% commission from Intertrade Projects for any single contract of less than $10 million and if the total business volume is less than $10 million during the first 24 months. Should the value for any single contract exceed $10 million or if the total business volume exceeds $10 million within the first 24 months, then the commission for Sisur would be 13% on the volume exceeding $10 million.

In the case of Thunderbird Industries, there is a two-year agreement signed between them and Intertrade Projects (Dubai branch) which mentions that commissions to them for “sales of products in the territory of India” would range between 14% and 4%.

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Internal MF correspondence and e-mails show that between 2013 and 2014, there are exchanges that IPCL may close down. One e-mail of December 2013 states that the effective closing down date would be January 2014. After showing a low margin of profit throughout its existence, the company shows a loss of GBP17,007 in the balance sheet for 2013. Emails of February 2015 mention that the company is “going to be closed down within a few short months…”

Responding to queries from The Indian Express, Elettronica SpA, in a statement, said: “The company rejects any wrong or illegal practice and can adhere to facts. The only contracts with Indian Government are relevant to the supply of spare parts related to systems developed and delivered to the Indian Government by a business unit of a different company (acquired by Elettronica in 1992) and were executed up to the year 2000-2003.

“Over time we have had relationship with a company named Intertrade Projects Consultants Ltd based in London and subsequently in Dublin. However, we have no knowledge of all the other events, circumstances, companies and individuals you mentioned in your email. We have no direct contracts with the Indian Government since more than 10 years.”

A family member of Nanak Kohli, responding to queries from The Indian Express, said: “Mr Nanak Kohli passed away almost three years ago and the family has not much idea of his business dealings. Also, the company in London in question closed down several years ago and now there is a separate India-based entity, also called Thunderbird Industries.”

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“We have looked at some of Mr Nanak Kohli’s old files and seen that there is some correspondence and some contracts signed with Elettronica SpA and this was around the years 2001-2002. There are some communications fixing up some meetings with officials of Elettronica SpA, including one Carlos Herrera. Since this date back to several years, the filing is not good and only this could be found.”