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International

Dassault Paid 1 Million Euros as 'Gift' to Indian Middleman in Rafale Deal, Found in Anti-Corruption Audit: Report

Promptly after the Rafale deal was finalised in 2016, Dassault had agreed to pay one million euros to one of its sub-contractors in India, Defsys Solutions.
Newsclick Report
05 Apr 2021
Rafale

In yet another controversy over the Rafale fighter jets deal, an investigation by a French publication has revealed that Rafale manufacturer Dassault agreed to pay one million euros to an Indian middleman following the finalisation of the Rafale deal on September 23, 2016.

According to French online publication Mediapart, which published on Sunday the investigative report titled ‘Sale of French Rafale jet fighters to India: how a state scandal was buried’, Agence Française Anticorruption (AFA) discovered this separate arrangement in mid-October 2018 during a routine audit of Dassault. However, Dassault has not been able to adequately explain this payment to the anti-corruption authorities in France.

Promptly after the Rafale deal was finalised in 2016, Dassault had agreed to pay one million euros to one of its sub-contractors in India, Defsys Solutions.

While auditing Dassault, AFA had come across an item of expenditure in company’s accounts from 2017, which amounted to 508,925 euros and was put under “gifts to clients”. The AFA audit report, as accessed and reported by Mediapart, said the expenditure “seemed disproportionate in relation to all the other entries” under that same category.

Then, Dassault provided the AFA a “proforma invoice” from March 30, 2017, which was raised by Defsys Solutions. The AFA audit report said that the invoice amounted to more than one million euros and it was meant for manufacture of the 50 car-sized models of Rafale, Mediapart reported.

"The company (Dassault) said the money was used to pay for the manufacture of 50 large replica models of Rafale jets, even though the inspectors were given no proof that these models were made," Mediapart reported while citing the confidential audit report. When the AFA asked Dassault why it had ordered an Indian company to make models of its own aircraft, at the cost of 20,000 euros a plane, and why the expenditure for that was clocked as “gift to client”, the plane-manufacturing company could not provide a satisfactory explanation.

The AFA inspectors had then suspected that the said payment was made on false grounds to hide financial transactions, the Mediapart report said.

Besides, Defsys Solutions, the apparent recipient of the payment, is owned by Sushen Gupta. As also mentioned by Mediapart, Gupta was arrested in 2019 by the Enforcement Directorate of India for laundering around Rs 55 crore, allegedly paid as kickbacks to swing a chopper deal in favour AugustaWestland. Gupta was later released on bail.

However, the AFA decided not to alert the prosecution authorities over the suspicious payment. Moreover, Charles Duchaine, AFA Director, only mentioned the entire matter in two short paragraphs in the final report on the Dassault audit, according to Mediapart.

While Duchaine refused to comment on the matter when questioned by Mediapart, a Dassault spokesperson also followed suit.

The Rafale jets are first major acquisition of fighter jets in over two decades for India. However, the deal announced by PM Narendra Modi in 2016 has been mired in controversy. In 2019, an investigation by the Hindu revealed that three senior Defence Ministry officials who were the domain experts on the seven-member Indian Negotiating Team had concluded that the Narendra Modi government’s new Rafale deal for 36 flyaway aircraft was not on “better terms” than the previous offer made by Dassault Aviation during the procurement process for 126 aircraft under the former United Progressive Alliance government.

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