Barak missile kicks back

Documents with Hardnews show clear evidence of  kickbacks from the Israeli anti-missile defence system manufacturer during  George Fernandes'  defence ministership

Sanjay Kapoor Delhi

Long before the National Democratic Alliance (NDA) government fell, there was a belief —strengthened by the Tehelka expose — that the ministry of defence (MoD) was a cesspool of corruption and that all the expensive arms purchases in the wake of the Kargil face-off with Pakistan in 1999 were riddled with payoffs.

A sheaf of documents in Hardnews' possession suggests the presence of arms agents and clear evidence of kickbacks in some of the expensive arms deals during the defence ministership of George Fernandes in the erstwhile NDA government.

For more than seven months, the new United Progressive Alliance (UPA) Central government combed through the evidence to search out the wheres and hows of alleged malfeasance in the MoD — any shred of evidence that could help nail the crafty George Fernandes, defence minister at the time of the Tehelka sting who had resigned, and then was reinstated. The Central government was facilitated by a recent public interest litigation (PIL) in the Supreme Court that sought details of all purchases made during and after Kargil. The PIL was meant to ferret out what happened when Fernandes was in power, a period of personal and political dissembling.

But Fernandes was extra-careful about all the shopping, even managing a clean chit from Justice S N Phukan, who had probed 15 arms deals during his incumbency.

One of the major contracts was the Barak antimissile defence (AMD) system that India purchased from Israel after Kargil. During the Tehelka sting, Samata Party treasurer R K Jain was caught on videotape saying that he had received Rs one crore from arms dealer Suresh Nanda. Jain claimed that Fernandes, after clearing a single AMD system (US$ 100 million) for the aircraft carrier INS Viraat, had told him that he (Fernandes) would get the Barak AMD system import approved for six more ships (an additional US$ 260 million). Nanda, said Jain, had managed to push the file to Fernandes on the grounds that ships needed AMD protection. What raised eyebrows was the charge that the MoD had acquired the Barak system on a "single-vendor basis", even though 10 other competing vendors were available. Later, Israelis got another order to install six systems without having to go through the tedium of another tender.

According to Fernandes-baiters, a copious amount of kickbacks was paid in the AMD purchase. Worse was the manner in which the government went about the procurement. Barak, defence insiders say, was not tested against the SM (39) Exocet missile or the AGM 84 (Harpoon), which are available with Pakistan, or against Chinese C 802 missiles. Barak also failed to hit the target when it was tested. The first missile plonked into the sea. The second, managed to find its target.

What gives away the Barak payoffs, say sources while showing bank documents, is the manner in which the MoD paid 30 per cent advance to the supplier, in contravention of the Chief Vigilance Commissioner's instructions — the advance for any overseas supplier is 5 per cent. The bulkier advance to the Barak manufacturer, Israel Aircraft Industries (IAI), was allegedly undersigned by Fernandes. Documents also show that a fraction of the payoffs was ploughed back into India through Eureka Sales Corporation, a Delhi-based company, and that a larger part of the payoffs wound its way to some US-based companies allegedly owned by people close to the erstwhile NDA regime. The document shows pay offs from 1998 to 2001 for the first purchase of AMDs.

Bank documents show that the advance was paid by the MoD to the manufacturer into an account in Lumilittlv Bank Leumi Le Israel, Tel Aviv. And the same company had remitted money to the Indian middleman, Eureka, from the same bank. About US$ 1 million was remitted between the clinching of

the deal and the paying of the advance to the Israeli manufacturer. In some cases, the money was deposited in Chase Manhattan Bank, from where the money was routed to the Indian agent.

MoD officials scoff at suggestions of kickbacks. The Indian government had no option but to plump for the Israeli company since the Russian AMD systems had bombed and were not up to par, they claim. MoD officials allege that rival manufacturers are trying to throw mud on a system that worked. They also said that the delay in installing the AMD system on six other ships lowers India's credibility and is a damper on its desire to have a blue water navy to police the sealanes from the Strait of Malacca to the Arabian Sea.

Whatever their claims, simmering issues surrounding the Barak missile deal are likely to flare up come the Budget Session of Parliament.