In a recent setback for the Modi government, the French authorities are beginning a judicial investigation into the much controversial Rafale deal from 2016.
The €7.8 billion sale of 36 fighter aircrafts in September 2016 to India from France has allegedly been hemmed in major corruption. The major accusation is on the French aircraft manufacturer Dassault.
The national financial prosecutor’s office (PNF) had reportedly refused to investigate the sale, which led to a French investigative platform Mediapart accusing PNF and the French Anti-corruption Agency of burying the suspicions surrounding the deal.
On 4th April 2021, Mediapart’s Yann Philippin published the investigation report, whose abstract said, “Mediapart can reveal that, alongside this controversial deal, Dassault also agreed to pay one million euros to a middleman who is now under investigation in India in connection with another defence deal.”
It must be mentioned that Dassault rejected such accusations, saying that the company’s audits revealed no discrepancies.
French media agency France24 reported that after these reports, France’s Sherpa NGO, which specializes in financial crime, filed an official complaint about “corruption” and “influence peddling” among other accusations, prompting an investigating magistrate to be designated to probe the deal.
Sherpa had previously too asked PNF to investigate the deal in 2018, but no action was taken by PNF.
The PNF’s decision to seek a formal probe thus represents a U-turn from the stand it took in 2019. At that time, its head, Eliane Houlette, going against the advice of one of her staff and without carrying out any investigations, dismissed an initial complaint filed by Sherpa. The reason she cited to justify her decision was “to preserve the interests of France”.
Now, two years later, writes Phillipin, “her successor as head of the PNF, Jean-François Bohnert, has decided to support the opening of a probe after the complaint was updated with details from Mediapart’s recent series of investigations.”
The report by Mediapart claims that Rafale jet maker was unable to adequately provide documentation for this 2017 contract for aircraft models, leading the anti-corruption agency’s inspectors to suspect that it was a “bogus purchase” or one that was designed to conceal a middleman payment.
The suspicious payment was unearthed by the Agence Française Anticorruption (AFA) – a body that is answerable to the French government and was set up in 2017 with the aim of checking whether large companies have implemented the anti-corruption procedures set out in the French law – as part of a scheduled audit of the Dassault Group.
“As they combed through the 2017 accounts the AFA inspectors raised an eyebrow when they came across an item of expenditure costing 508,925 euros and entered under the heading “gifts to clients”. This amount ‘seemed disproportionate in relation to all the other entries under the same heading, said the subsequent confidential report of the AFA audit…,” the media report noted.
“To justify this larger than usual ‘gift’ Dassault supplied the AFA with a ‘proforma invoice’ dated March 30th, 2017, which was supplied by an Indian company called Defsys Solutions. This invoice, which related to 50% of the total order (€1,017,850), was for the manufacture of 50 models of the Rafale C, with a price per unit of €20,357,” the report added, quoting the AFA audit findings.
To this, many questions were raised when the Dassault was asked for an explanation by AFA officers as to why the Rafale jet maker asked an Indian company to make models of its own aircraft, each the size of a small car, at 20,000 euros a pop? Secondly, the AFA asked why was this expenditure recorded as a ‘gift to the client’?
According to the Mediapart report, the Dassault Group was not able to provide the AFA with a “single document showing that these models existed and were delivered”.
The Defsys Solution, as The Wire reports, is owned by the Gupta family in India, who have been reportedly acting as middlemen in the aeronautical and defence industries for three generations.
France 24 reports that Dassault had initially won a contract in 2012 to supply 126 jets to India and had been negotiating with Indian aerospace company Hindustan Aeronautics Limited (HAL), and reportedly the jets were to be manufactured in India.
By March 2015, those talks had almost reached a conclusion, according to Dassault.
But in April of that year, after Modi paid an official visit to France, the talks suddenly broke down to the general surprise. Reliance Group, which has no experience in aeronautics, replaced HAL and finalized a new contract for 36 jets.
In January 2016, at the time of the negotiations, Reliance had financed a film co-produced by Julie Gayet, the partner of Francois Hollande, who was France’s president at the time.
Thus, the criminal investigation will examine questions surrounding the involvement of former French president François Hollande, who was in office when the Rafale deal was signed, and the current French president Emmanuel Macron, who was Hollande’s economy and finance minister at the time, as well as the then defence minister, Jean-Yves Le Drian, now Macron’s minister for foreign affairs.
The investigation will also involve Anil Ambani’s Reliance group, which as mentioned, was Dassault’s Indian partner in the deal. According to The Wire, Dassault and Reliance created a joint venture company called Dassault Reliance Aerospace Limited (DRAL) in 2017, for the building of an industrial plant near Nagpur.
The wire reports that the confidential documents obtained by Mediapart reveal how Dassault had in fact no interest in forming a partnership with Reliance other than for political reasons. And its primary expectation from Reliance was “marketing for programs and services with the GOI”.
In a statement to Mediapart, Sherpa’s lawyers William Bourdon (founder of the NGO) and Vincent Brengarth said the launch of the probe “will necessarily favour the emergence of the truth and the identification of those responsible in what increasingly resembles a state scandal”.