Four charges of allegations of corruption and pay-offs mentioned
New Delhi, June 07, 2005 (The Hindu)

The Central Bureau of Investigation (CBI) on Monday registered a First Information Report (FIR) on alleged corruption in the purchase of arms and ammunition from the South African armaments major, Denel.

The FIR follows a month-long scrutiny of the papers submitted by the Defence Ministry to the CBI. The case, the first in a deal finalised during the previous National Democratic Alliance regime, was filed against unknown public servants of the Ministry of Defence; M/s. Denel (Pty) Limited and their officials; M/s. Varas Associates and their officials; and others in connection with the alleged payment of 12.75 per cent commission to M/s. Varas Associates. The payment was for securing contracts for the supply of anti-materiel rifles.

The case was registered under Section 120-B read with Section 420 of the Indian Penal Code and various provisions of the Prevention of Corruption Act, 1988, a CBI spokesman said here.

The FIR mentioned at least four allegations of corruption and pay-offs. It alleged that Denel had paid $24,08,373 and $10,00,672 to Varas Associates, a company based in the Isle of Man, on January 27, 2003 and $1,51,350 on June 19, 2003.

The invoices in question were sent by the Varas office to the Denel headquarters. The first signed by an unknown person of May 1, 2002 is for $1,43,446 for "fees for technical services as per agreement." The third signed by Marc Craig Veitch, in his capacity as Director, on May 30, 2003 is for $4,50,364 also for "technical services." The second, apparently signed by Veitch on December 8, 2002, for $3,93,720 "fees for consulting and technical services as per agreement" allegedly related to the arms deal with India, giving as a reference project AM-2 and AM-3 which reportedly was the contract for Denel-produced rifle.

Varas Associates, which was appointed to act as an agent for Denel by its head office, was paid 12.75 per cent commission on all deals that it secured for Denel. Varas traded on its influence with the Indian Military's Price Negotiation Committee (PNC) in New Delhi.

A document purporting to be secret minutes of the PNC meeting on May 23, 2003 to procure 200 anti-materiel rifles and one lakh rounds of ammunition had allegedly been provided by Varas to Denel as part of its "consulting and technical service." The FIR alleged that in spite of the specific prohibition for engagement of agents in the procurement process, Denel had appointed Varas its agent.

The South African newspaper, Cape Argus, had carried a report in April alleging that Denel had paid a British company about Rs. 20 crores to obtain confidential documents from the Indian Defence Ministry. It claimed that an anti-corruption unit was probing allegations of pay-offs to the British company for giving Denel a classified report of the PNC on a tender for anti-materiel rifles (bunker busters).

Following the Bofors scandal, a mandatory clause in defence procurement agreements states that a company can be blacklisted and all contracts cancelled if it uses middlemen. Apart from supplying the rifles, Denel is involved in putting up an ordnance factory in Nalanda, Bihar. It is also in the race for a Rs. 6,000-crore tender for supplying artillery guns to the Army.