A deal hits the choppers
With serious charges of kickbacks being levelled in the Rs 3,500-cr deal to purchase 12 VVIP copters from AgustaWestland, the Italian conglomerate, the UPA government is in the dock again over corruption. Deciphering the intricate maze of the sordid dealings of the shady arms market. 
By Ajay Banerjee
T was an introductory meeting between Guido Haschke and Julie Tyagi in 2001 at the wedding of Carlo Gerosa’s daughter in Lugano, Italy, that set the ball rolling for the multi-million dollar (Rs 3,500 crore) VVIP copter deal, and the resultant scam. This included alleged tweaking of the tender to make AgustaWestland the only eligible company and handing out suspected illegal pay-offs to the tune of Rs 350 crore in India and Europe.

Procurement policy aimed at ‘high probity’

The key players

How the money moved






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A deal hits the choppers
With serious charges of kickbacks being levelled in the Rs 3,500-cr deal to purchase 12 VVIP copters from AgustaWestland, the Italian conglomerate, the UPA government is in the dock again over corruption. Deciphering the intricate maze of the sordid dealings of the shady arms market. 
By Ajay Banerjee

IT was an introductory meeting between Guido Haschke and Julie Tyagi in 2001 at the wedding of Carlo Gerosa’s daughter in Lugano, Italy, that set the ball rolling for the multi-million dollar (Rs 3,500 crore) VVIP copter deal, and the resultant scam. This included alleged tweaking of the tender to make AgustaWestland the only eligible company and handing out suspected illegal pay-offs to the tune of Rs 350 crore in India and Europe.

Julie Tyagi, a former IAF pilot and cousin of former IAF chief Shashindra Pal Tyagi, had known Gerosa, a partner of Guido Haschke, for long and acted like oil on a rusty machine as the Haschke-Gerosa duo worked to secure the tender for AgustaWestland. Julie allegedly received cash payments on the basis of bogus engineering contracts routed through Haschke’s companies.

Meanwhile, around the time Julie was introduced to Haschke, his cousin SP Tyagi was in line for the top post in the IAF. He went on to become the chief — December 31, 2004, to March 31, 2007. During this period, the Haschke-Gerosa duo, accompanied by the UK-based Christian Michel, joined hands with the Tyagi brothers — Julie, Dosca and Sandeep — for allegedly tweaking the Indian helicopter tender specifications, using the position of their cousin SP Tyagi.

The Finmeccanica probe by a court in Busto Arsizio, Italy, says about Rs 350 crore was funnelled as bribe, a large chunk of it went to the Tyagis, Carlo Gerosa, Guido Haschke and Christian Michel. Money was paid by AgustaWestland through Haschke’s companies in Tunisia, Africa, and partly routed through IDS Infotech in Chandigarh.


AW 101

A medium/heavy lift helicopter used both for military and civil transport, it is powered by three turboshaft engines. 

Most variants are equipped with self-defence systems like chaff and flare dispensers, electronic support measures, infrared jammers. 

The Indian requirement was a tall-boy cabin and high tail boom to allow ground vehicles to come close to the helicopter’s rear exist to cut down the threat exposure of the VVIP.

Developed jointly by Westland, UK, and Agusta, Italy, to become AgustaWestland in 2000. 

In military service with Britain, Denmark and Portugal. 

In the US, a variant was to serve in the Presidential fleet, but the acquisition process was cancelled.

VVIP chopper

Around 2001, India had finalised its decision to buy a specialised helicopter for VVIP travel. The norms fixed were to have a helicopter with ability to fly at altitudes of up to 6,000 metres. In March 2002, New Delhi issued a global tender, three copters makers were shortlisted. AgustaWestland was on that list but was left out as it was not certified for the required altitude. The Russian Mi-17-2 could not meet operational requirements (ORs), and only EC-225 of Eurocopter, France, was found suitable for acquisition.

Since it was a single-tender situation — not permitted in Indian defence deals — the then Principal Secretary (Brajesh Mishra) to Prime Minister, in November 2003 asked that specifications be lowered, particularly the one on the 6,000 m altitude. Lowering it to 4,500 m would open the tender to more copter makers. Six months down the line, the NDA government was voted out of power. The UPA appointed Pranab Mukherjee as Defence Minister on May 25, 2004. “The new specifications were discussed between March 2005 and September 2006 and the changes were incorporated,” said the MoD factsheet. SP Tyagi was the IAF chief at the time.

When the new specifications were being discussed between by the MoD, IAF, PMO, SPG and the NSA, faraway in Europe the three cousins of SP Tyagi were allegedly in touch with Haschke and Gerosa, informing them that the specifications would be tweaked.

The warrants in Italian Court say: “Julie, Dosca and Sandeep Tyagi promised and indeed partly corresponded money to the Chief of Staff [SP Tyagi] to act contrary to his duties.” The same warrants have the statement of a witness, thus far identified only as ADR, which says: “In 2005 at a meeting in Delhi, where Carlo Gerosa was present, [Air] Marshal Tyagi informed us that the operational requirements would be lowered”. He adds: “I have met personally Marshal Tyagi 6/7 times”. The warrants in court mention that ADR was a person introduced by Haschke and Gerosa.

Haschke in his interrogation says, “Around the same time (early 2005), Carlo Gerosa also told me that a direct cousin to the Tyagis has become Chief of Staff in the Indian Air Force. Knowing this, Carlo and I had the idea to try to get a contact within AgustaWestland”.

A meeting

Assured that the changed specifications would bring AgustaWestland into the race, a meeting took place in December 2005 at a small Italian city, Cascina Costa, where a contract was signed between Guido Haschke’s company Gordian Services Tunisia and AgustaWestland’s Bruno Spagnolini. This had the backing of Joseph Bears. Investigators in Italy have found transactions of “amounts agreed by the representatives of AgustaWestland (Bears and Spagnolini) with intermediaries Guido Haschke, Carlo Gerosa and Christian Michel, including bribes to be paid to public officials in India to fulfil their duties and in particular to manipulate the call for tenders”.

It was Joseph Bears and the CEO of Finmeccanica, Giuseppe Orsi, who were keen to have Christian Michel on board and roped him in. The first deal was that Agusta was to pay Rs 210 crore to the middlemen, later it was hiked in stages to Rs 350 crore. “The deal was that Tyagis were to get 60 per cent of the share, while the rest was to be shared among middlemen,” the warrants say.

“Bears and Spagnolini corresponded to the consultant Christian Michel, allowing a sum of Rs 210 crore in part to support the corrupt activities aimed at the acquisition of the contract,” the Italian warrants say.

New tender, tweaking

Following the ‘tweaking’, a global tender was issued on September 27, 2006. Besides AgustaWestland, Sikorsky of the US (used by the US President) and the Russian Mi-17-2 (used by the Russian President) responded. The Russians did not want the integrity pact, hence were debarred, leaving the other two in the race.

The AgustaWestland, which entered the fray only due to the lowering of the operational flying ceiling to 4,500 m, now had the biggest advantage, thanks to some technical tweaking done under the name of safety and security of the VVIPs, who were to use the choppers. This was done by introducing a comparative flight test with engine failure. The Sikorsky, like all big copters, has two engines, while the AgustaWestland is the only copter in the world having three engines. “The requirements were changed to, then, introduce a comparative test flight with engine failure [situation], [This was] for the benefit of Agusta, the only [one] equipped with three engines, thus, to assure that AgustaWestland acquires the contract,” say the warrants.

With this, AgustaWestland emerged the clear winner. The money was paid to tweak the tender in such a fashion that it left no scope for a change even after Tyagi retired in March 2007. The three-engine test aimed at safety and security was not challenged by anybody. Ideally speaking, this was again a single vendor situation, as AgustaWestland was only one with three engines.

The contract was signed in February 2010. Three years down the line, it is set to be cancelled. The MoD has asked Agusta why the deal should not be cancelled.


Air pockets

Aug 1999 The IAF proposes replacement of Russian 
Mi-8 VIP.

March 2002 Global tender issued. AgustaWestland does not meet requirement of flying to 6,000 m. Only EC-225 of Eurocopter, France, found suitable.

Nov 19, 2003 Since it is a single-vendor, change in requirements mooted. Choppers ruled out due to altitude need now join fray.

May 2004 NDA loses polls.

March 2005 to Sept 2006 Matter discussed, changes incorporated.

Jan 3, 2006 Defence Acquisition Council accepts necessity for 12 helicopters.

Sept 27, 2006 Tender issued with new requirements: Sikorsky, USA; AgustaWestland; and MI-17-2, Russia, respond. Russians do not submit to integrity pact, thus ruled out.

April 2008 Evaluation approves Agusta helicopter.

Sept 2008-Jan 2009 Contract Negotiation Committee meets Agusta, recommends price of Rs 3,500 cr.

Jan 2010 Cabinet Committee on Security gives nod.

Feb 2010 MoD signs deal.

Dec 2012 First delivery of three choppers.

Feb 2012 Lorenzo Borgogni, former head of external relations, Finmeccanica, arrested in Italy; spills beans.

Feb 2012 MoD seeks factual report from Indian Embassy in Rome, and update in April 2012

July 2012 Embassy makes formal request to the Naples prosecutor’s office.

Oct 2012 MEA takes up matter with UK in view of the involvement of British citizen (Christian Michel).

Nov 2012 Letter received in MoD from Director, Income Tax (Investigations), regarding allegations against Indians possibly involved in the deal as middlemen.

Feb 12, 2013 Giuseppe Orsi, CEO, Finmeccanica, arrested. MoD orders CBI probe, puts on hold payments and deliveries.

Feb 15, 2013 MoD serves show-cause notice to Agusta to cancel contract.



Procurement policy aimed at ‘high probity’

The policy

After the 1987 Bofors scandal, the government banned middlemen in defence deals. Detailed instructions came in February 1992, following a Group of Ministers report, resulting in the first Defence Procurement Procedure (DPP) a decade later.

Since 2012, the UPA promised to revise the policy every year. It aims to ensure “expeditious procurement of approved requirements of the Armed Forces... by optimally utilising the budgetary resources. While achieving the same, it will demonstrate the highest degree of probity.... In addition, the goal of achieving self-reliance in defence equipment will be kept in mind”.

The procedure

DEMAND Service headquarters prepare details of requirement, based on which the Defence Acquisition Council, headed by the Defence Minister and on which the three service chiefs are represented, accords Acceptance of Necessity.

SQR FORMULATION Simultaneously, as Staff Qualitative Requirements (SQRs) are drawn, a Request for Information (RFI) — a global request for suppliers to respond — is floated. Details are put on the Web.

REQUEST FOR PROPOSAL The Service compares the responses from manufacturers with its own requirements and draws up parameters before sending a Request for Proposal (RFP). Unlike the RFI, the RFP is restricted to shortlisted manufacturers with a clause to maintain confidentiality.

BIDding Manufacturers send in technical and commercial bids. The technical bid is opened first and compared to the SQRs by a Technical Evaluation Committee, and companies that make the grade are sent information to be ready for technical evaluation, followed by trials. There is a Technical Evaluation Oversight Committee to ensure there are no flaws in the process.

TECHNICAL TRIALS The trials are conducted by the Service arm concerned, which prepares a detailed technical report. Once the Service arm makes its choice of products, the vendors whose products are shortlisted are called in before opening of the commercial bids. It is after this that the L1 (lowest bidder) is identified.

NEGOTIATION Once L1 is declared, the government constitutes a Contract Negotiation Committee to determine the final price. It is cleared by the Ministry of Finance and then the Cabinet Committee on Security.

INTEGRITY PACT The DPP also has Transfer of Technology clause and a binding Integrity Pact for all contracts over Rs 100 crore to prevent corruption.

EXCEPTIONS Deviations to the procedure have to be approved by the Defence Minister through the Defence Procurement Board.

— KV Prasad



The key players

Lorenzo Borgogni: Former head of external relations, Finmeccanica. Knew too many secrets, was arrested in 2012 following a phone tap in Italy by agencies there looking for links between the Mafia, big companies and government officials. He decided to become a state witness. Known as ‘Pentito’ in Italian — someone who repents and cooperates with the investigation in order to get a lesser sentence — Borgogni cannot be termed a whistleblower. However, his revelations on the secret deals between Finmeccanica and India have uncovered the alleged bribe story and links to India.

Bruno Spagnolini: CEO of the AgustaWestland Holdings; mentored the VVIP chopper deal worth Rs 3,500 crore and signed a deal with middlemen to pay bribes.

Guido Haschke: Manager and partner of Gadit SA of Lugano, Italy, and Gordian Services based in Tunisia (Africa) with office in Chandigarh by the name of IDS Infotech. Agusta routed the alleged Rs 350 crore bribe through his companies for distribution.

Carlo Gerosa: Partner of Haschke, and first proven contact of Tyagi brothers Julie, Dosca and Sandeep, all cousins of former IAF Chief SP Tyagi.

Julie Tyagi, Dosca Tyagi and Sandeep Tyagi: The go-betweens who allegedly got the specifications changed during the term of their cousin as IAF chief — December 31, 2004, to March 31, 2007. This allowed AgustaWestland to compete in the tender.

Christian Michel: UK national, global wheeler-dealer and specially appointed consultant by AgustaWestland for the copter deal. Owns Global Service Trade Commerce, headquartered in London, with an office in Dubai. His father Wolfgang Michel, of German origin, was well known in arms circles in the 1970s and 1980’s in Iraq, Iran, Russia and even India.

Giuseppe Orsi: CEO, Finmeccanica, since May 2011, arrested in Italy for allowing illegal payments. He is a personal friend of Christian Michel.

Joseph Bears: The kingpin for AgustaWestland. Haschke and Gerosa were allegedly working at his behest. Christian Michel was his appointee and a trusted aide. Bears’ name had also cropped up during the decade-old oil-for-food scam but escaped arrest.

ADR: (Only abbreviation used in the court warrants in Italy) The ‘nuts and bolts’ man for the team of fixers. He met former IAF Chief SP Tyagi ‘6/7 times’, including when Tyagi in uniform visited the Finmeccanica stall at the Air Show in Bangalore.

Giorgio Zappa and Luciano Zampini: Part of the AgustaWestland team that interacted with Indian officials. 



How the money moved

AgustaWestland entered into a contract with Haschke’s IDS IT and Engineering Tunisia to route the Rs 350 crore bribe to India and elsewhere.

AgustaWestland signed an agreement with Guido Haschke, Carlo Gerosa and Christian Michel “for paying in conclusion of agreements to provide the resources needed to pay for the corrupt Indian officials”.

Agusta, when transferring money to Tunisia, showed false liabilities in its balance sheets against fake engineering bills raised by IDS Tunisia.

IDS Tunisia moved some of the money to IDS Infotech, Chandigarh, raising fake invoices.

The Italian court warrants detail the fictitious bills originating from Chandigarh. Between 2007 and 2011, a total of Rs 152 crore was transferred from IDS Tunisia to IDS Infotech. For example, in 2008, the list of bills and their reference numbers mention Rs 7 crore as “advance payment according to article 7.3 of the ‘agreement’”.

One of the middlemen, Guido Haschke, was a director in the Chandigarh company as well as the one in Tunisia.

Julie Tyagi, a cousin of former IAF Chief SP Tyagi, was given prepaid credit cards of an international bank.

— Ajay Banerjee



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