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Oil stain spreads to defence deals

Sunday 6 August 2006, by SARIN*Ritu

Investigating the Volcker allegations in the oil-for-food scandal, the Enforcement Directorate has been drawn into a parallel probe that, in its scale of alleged violations, may turn out to be far bigger than the Iraqi payoffs.

As reported first by The Indian Express, NRI businessman Aditya Khanna has been identified as the main beneficiary of the Volcker payments, along with Andaleeb Sehgal (close friend of Natwar Singh’s son Jagat Singh), named by Paul Volcker in his UN report.

But while scrutinising companies which were allegedly used to route the oil-for-food pay-offs to the beneficiaries, particularly one named Indrus located in Jersey in the Channel Islands, the ED has located an entire web of offshore companies linked to the Khanna family, from where huge illegal foreign exchange remittances to India have allegedly been traced.

What makes this significant is that the ED has recently informed the Ministry of Defence (MoD) that there is evidence which indicates that these very companies were dealing in arms purchases and subsequently routed money in a ‘‘disguised’’ form to India.

Some of the companies under probe are South Asian Properties, New Haven Limited and Leaderwick. Sources told The Sunday Express that the probe now involves the ownership pattern and transactions of these companies in the Channel Islands and even the Isle of Mann.

Top Government sources confirmed that a ‘‘definite’’ arms link has been unearthed in these transactions and that the MoD was informed about the developments ‘‘at the relevant time.’’

The ED asked the administrator of Channel Islands for ownership details and later went to London to collect papers from the British Serious Fraud Office.

Yesterday, CNN-IBN had reported that the MoD has issued an advisory after receiving information from ‘‘official agencies.’’ The channel quoted the advisory as saying that ‘‘persons by the names of Vipin Khanna, Aditya Khanna and Arvind Khanna and certain companies they are associated with have been involved in the introduction of products of arms manufacture to both India and Pakistan...all necessary action be taken to fully safeguard India’s security interest. The people and companies they represent be denied access to any defence personnel and facility.’’

Following the parallel probe into the Khanna empire, the ED is now set to dispatch not one but several show-cause notices to the Khannas.

The first one will deal with the oil-for-food payments received by Aditya Khanna. Transactions traced to his brother Arvind Khanna-a Congress MLA from Sangrur who admits to doing business with the MoD-could be the subject of action under the Foreign Exchange Management Act (see box).

Incidentally, the name of Indrus and another company Coburg cropped up in the ED’s probe after a statement by Aditya Khanna himself. In this, Khanna had claimed that of the $70,000 share which Andaleeb got for the Iraqi oil deal, $25,000 came from oil firm Masefield via Indrus and $45,000 from Masefield to Indrus and was then routed via Coburg to Andaleeb’s company, Hamdan Exports.

Khanna is also said to have told ED that he received only $18,000 for the oil-for-food contract and that the remaining $15,000 was paid to British consultant John Ball.

‘We deal with Defence Ministry, did Rs 80-cr business last year’

The Sunday Express contacted Cong MLA Arvind Khanna:

Has ED questioned you, your brother Aditya or your father, Vipin Khanna, on transactions other than those directly connected with the Volcker probe?

They have only asked us about our business, companies we own in India and, of course, about Indrus. Indrus was set up by Aditya and Andaleeb in London in 1999 and the oil-for-food contract was its only major deal.

Have you been questioned about offshore companies allegedly linked to your family such as South Asian Properties, New Haven and Leaderwick?

Except for Leaderwick, I am not aware of the others. Leaderwick is a London trading company dealing with trade in foodstuffs, commodities.

Does your family deal with arms sales?

I have a company in New Delhi named TSL which deals with the Ministry of Defence in equipment, software, avionics. We did Rs 80-crore sales last year. We are not arms agents.

Do these companies also supply arms and equipment to Pakistan?

I would not be surprised if they do. So many European firms supply to both India and Pakistan. I cannot say which but it is possible they do.

There are allegations of large sums of money made in your name by members of your family settled abroad in violation of Indian laws.

My father (Vipin Khanna) and my brother are NRIs but they hold Indian passports. I was also an NRI for 10 years and settled in New Delhi 13 years ago. The only large receipts I have got are gifts from my father over eight years adding up to Rs 8 crore.

See online : The Indian Express

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