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Feb 13, 2013 at 10:38am IST

Ex-IAF chief, his family in the dock over 'corrupt' Italian chopper deal

New Delhi: A day after the Italian police arrested defence company Finmeccanica's CEO Giuseppe Orsi in an ongoing corruption inquiry, there are more details emerging. Reuters now reports that three cousins of former Indian Air Force Chief SP Tyagi allegedly helped twist rules in a helicopter tender won by AgustaWestland.

However, the retired Air Chief Marshal SP Tyagi has told CNN-IBN there were no changes made in the tender during his tenure and that claim can be confirmed from the defence ministry records.

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"I have been in touch with my cousins, who know nothing about the deal. The deal was finalised three years after I retired. Frankly I have no idea what influence I could have brought about (in the deal). To the best of my knowledge, no requirement was tweaked or changed," Tyagi added.

However, national daily The Indian Express on Wednesday morning reported that SP Tyagi did receive bribes to facilitate the deal. The newspaper wrote, "The 64-page report, filed in the tribunal of Busto Arsizio city for the arrest of Finmeccanica CEO Giuseppe Orsi, gives details of the case being investigated by Italian prosecutors and alleges that the then air chief, SP Tyagi, was instrumental in swinging the deal and was paid a 'certain amount of money, not yet quantified' - through intermediaries."

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Defence Minister AK Antony warned of action against those involved in the deal and said, "Whoever is found guilty in the Italian chopper deal will have to pay the price and nobody will be spared." He added that six companies have been blacklisted and out of those, four are the big players. "We don't how big they are," the minister said during a press conference on Wednesday morning.

He also said he has no information on former Air Chief SP Tyagi's involvement in chopper deal. But added, "If the government paid any money to the vendor, we will procure the entire money from it."

ALSO SEE Finmeccanica's head arrested following corruption probe

The three cousins of SP Tyagi - Juli, Docsa and Sandeep Tyagi - received part payments amounting to 100,000 euros from two AgustaWestland managers. Reuters also adds that the warrant reviewed shows that two managers paid the cousins, among others, to swing the 2010 contract for supplying 12 helicopters to India. Italian prosecutors alleged that Orsi hired US-born Guido Ralph Haschke, who had close ties with the Tyagi brothers, to lead dealings in India to secure the contract.

In February 2010, India had inked the deal to acquire the 12 three-engine AW-101 helicopters from AgustaWestland for IAF's elite Communication Squadron, which ferries around the President, PM and other VVIPs.

Despite initial objections by the finance ministry, the Cabinet Committee on Security had cleared the deal in 2010. Antony had then said, "IAF and SPG repeatedly told us the helicopters were required because of the changing security scenario... the finance ministry also agreed later. The CCS then took a considered decision."

The case, which is still in its preliminary investigation phase, has rocked Italy before parliamentary elections on February 24-25, and also in India, the world's largest weapon importer. Prosecutors in the northern town of Busto Arsizio, near AgustaWestland's headquarters, said Orsi hired US-born Guido Ralph Haschke, who was then a consultant for the Finmeccanica group, to lead dealings in India to secure the contract.

Haschke and his partner Carlo Gerosa, prosecutors said, had close ties with the Tyagi brothers. Prosecutors allege that Orsi, along with the current chief executive of AgustaWestland Bruno Spagnolini, paid 400,000 euros in consultancy fees to Haschke and Gerosa. "Of this, 100,000 euros in cash were given to the Tyagi brothers," they said in the 65-page warrant.

The money went to the brothers to pressure Indian officials and help doctor the tender terms to favour the specification of AgustaWestland's helicopters, the prosecutors alleged. The tender was changed to accommodate AgustaWestland by, among other things, lowering required altitudes where the helicopters could operate to 15,000 feet from 18,000 feet, "thus allowing AgustaWestland, which otherwise would not even have been able to present an offer, to take part in the tender", the warrant said.

The tender terms were also changed to introduce an engine failure flying test. This favoured AgustaWestland as its helicopters were the only ones in the tender operating with three engines.

Orsi's lawyer said his client denied distributing any money or pocketing a single euro, adding that the investigation did not provide any evidence of illicit payments. AgustaWestland said on Tuesday it supported Spagnolini who was placed under house arrest.

The warrant also covered Haschke and Gerosa. Neither has been arrested as they are in Switzerland. A lawyer for Haschke, contacted by reporters, declined to comment on the case while Gerosa could not be reached for comment.

Sashi Tyagi, head of India's air force from 2004-2007, in November had claimed he had no memory of the issue. The warrant did not explain how Tyagi might have been involved in a deal completed after he had left his post.

The arrests over Indian bribery allegations come as Finmeccanica unit Alenia Aermacchi hopes to compete for a contract to supply over 50 military transport aircraft to India in competition with European aerospace group EADS. According to specialist defence publication IHS Jane's, Alenia would build 40 of the 56 C-27J Spartan airlifters in India and use the same assembly line to meet future regional demand for tactical air transport.

The military arm of EADS subsidiary Airbus said last week it would offer its C295 military transport plane as an alternative, adding that manufacturers were waiting for a formal competition document from the Indian government.

Meanwhile, an Indian Defence Ministry spokesman said the contract signed with AgustaWestland includes "specific contractual provisions against bribery and the use of undue influence as well as an integrity pact." Amidst suspicion of bribery, Indian mission in Rome had sought a detailed report from Italian government but Italy had said it could not be shared as it was under judicial process, External Affairs Ministry spokesman Syed Akbaruddin said.

The first three of the 12 AgustaWestland VVIP choppers have already arrived in India and the rest were expected in the coming months. After the arrest, the Italian firm said in a statement that "Finmeccanica expresses support for its Chairman and CEO, with the hope that clarity is established quickly, whilst reaffirming its confidence in the Judges." It added, "With reference to the precautionary measures issued today towards the Chairman and CEO of Finmeccanica and the CEO of the controlled Company AgustaWestland, Finmeccanica confirms that operating activities and ongoing projects of the Company will continue as usual."

Meanwhile, the main Opposition Bharatiya Janata Party said it has been raising the financial irregularities in the VVIP helicopter deal for the past one year and insisted that the Congress-led UPA government give an explanation about the reported anomalies. "Action has been taken in Italy on the VVIP helicopter scam. The CEO of the company has been arrested. But no action has been taken here. The country which would have benefited from the deal has taken action while the country which lost money has not done anything," BJP spokesperson Prakash Javadekar told reporters.

He had raised a question in the Rajya Sabha to which the government gave a reply on December 12, 2012. Antony had acknowledged that it has come to the notice of Ministry of Defence through several reports that Italian prosecutors had begun a probe into alleged unethical dealings by M/s Finmeccanica.

He had then informed the House that the probe into the matter has been widened to include the ibid contract. Antony had further said that upon his ministries request, the External Affairs Ministry has taken up the matter with the Italian and UK governments to get further details. "However, in the absence of any specific information, government has not started any formal probe in this regard by Indian agencies," Antony had said.

Not satisfied with this reply, Javadekar wrote a letter to Antony on December 14, 2012 stating that there are several indicative evidences of payment of kickbacks and the suspected graft should be probed. Javadekar said Italian investigators are probing allegations that AgustaWestland paid a commission of Euro 51 million to Switzerland-based consultant Guido Ralph Haschke to facilitate the deal in India.

The Rs 3,546-crore contract for 12 AgustaWestland helicopters with the company was concluded in February 2010.

(With Additional Inputs From Reuters and PTI)