The world is their bazaar
Published by Forbes on 1987-12-28
IN THE SEEDY BAZAARS OF TEHRAN, there is an old Persian saying that translates something like this: "Create an aura of mystery around you, and you will forever enjoy power and prosperity."
Leaning forward in his chair over a vegetarian lunch at his Trump Tower apartment, a sound-deadening 53 stories above the noisy Manhattan streets, Srichand Hinduja is practicing what the adage preaches. He is lecturing a reporter about his and his family's high ethical standards while carefully avoiding specific answers to specific questions. Behind him, through the floor-to-ceiling windows, Fifth Avenue is visible. The apartment which cost $ 3.3 million when the Hinduja brothers bought it four years ago, is furnished garishly and expensively. On a living room shelf sits an elaborately framed photo of the late shah of Iran. Others photos surround it -- George Bush, Margaret Thatcher, Edward Heath, Indira Gandhi, Rajiv Gandhi, Mother Teresa. Hindujas are in each picture. Everything is calculated to impress, to overwhelm. What a great man this must be. What wealth and power he must possess. Srichand Hinduja, 52, is one of four brothers, the others being Gopichand, Prakash and Ashok. While nobody knows much about all their businesses, an aura of mystery, power and money has followed them from Bombay to Tehran to London to Geneva and now to New York and Washington.
The brothers emerge from a dim background. They made a fortune in Iran under the shah, and although devout Hindus -- and thus "infidels" -- they are still doing business in Iran with the ayatollah's thugs. The family supposedly sells Iran harmless commodities such as fertilizers and edible oils. But court records in New York reveal that the Hindujas have acted as middlemen for supplying U.S. spare parts for the ayatollah's languishing air force from U.S.-based suppliers, in apparent defiance of an American embargo.
The fact is that much of the Hinduja empire is invisible. A company that they own in partnership with Arab money, Gulf Oil Trading Co. (Gotco), deals in crude oil and refined petroleum products, lubricants and chemicals (it also owns the rights to use the Gulf Oil logo outside the U.S. and U.K.) -- but this is one of the few familiar names in their portfolio. One thing seems clear about the Hindujas: Their known and admitted businesses could hardly support such a style of living and scale of influence-buying. Only the tip of the iceberg is visible; the Hindujas show only what they want to show. They do not admit to things like Iranian arms deals.
Like the Rothschilds of old, the Hindujas have sent different brothers to different financial centers, where each works and entertains in breathtaking luxury. Unlike the Rothschilds, however, the Hindujas shroud their center of operations in extreme secrecy. They have numerous residences, and have registered their companies in many countries, including such tax havens as the Bahamas, Panama, Liberia, Liechtenstein, Singapore and Luxembourg.
Srichand Hinduja is the power of the family. Gopichand Hinduja, 47, runs Gotco, has the main Tehran contacts and still travels there frequently. Prakash, 42, lives in Geneva and looks after the Hindujas' investment firm, Amas, S.A. Ashok, 38, lives in Juhu Beach, Bombay, and deals with the film world there from his palatial estate.
Now the Trump Tower is filled with high-living foreigners, and international dealmakers are no longer a novelty. But the Hindujas are notable on two scores: the scale of their spending and the miasma surrounding how they make their money.
If the family is today well connected, the brothers were scarcely born well connected: Srichand's birthplace was the dusty town of Shikarpur, in what is today Pakistan's Sind province; Gopichand was born in Calcutta; and Prakash and Ashok in Bombay. None of them reportedly made it past high school. They speak English poorly and read it painfully. Fifteen years ago they were modestly wealthy but almost unknown even in their native India. Today all four move about in chauffeur-driven Rolls-Royce sedans and fly in private jets. Hinduja wives and daughters, dripping diamonds, move about in smart society and ski in Switzerland's more expensive resorts. When in public view, they make a show of spending money as if it meant nothing to them. This month, thousands of people were invited for the wedding of Srichand's daughter, Shanu, in Bombay; hundreds were brought in at the Hindujas' cost from many corners of India and the world for the weeklong celebrations.
But this is not Lifestyles of the Rich and Famous, and the Hindujas are not all play. Far from it. They are all business. Their lavishness has a purpose -- to create and nurture a mystique, to expand their contacts, prestige and influence.
Their choice of business associates is similarly motivated. Their attorney and a principal adviser on the U.S. is Theodore Sorensen. This old-time Kennedy liberal makes no secret of his expectations of high office in any future Democratic administration. Among other things, he eases the way into liberal and Democratic circles for the Hindujas. Sorensen has confided to at least one acquaintance that he is a bit uncomfortable representing the brothers. He has also said that he would like to know more about them. But money is money. Sorensen is a partner in the New York law firm Paul Weiss Rifkin Wharton & Garrison, which reportedly earned $ 700,000 in fees last year from the Hindujas. He declined to talk about his fees and services.
John Lawrence is one of the highest priests of the Boston Brahmin establishment. He has become deeply involved with the Hindujas. Self-assured, silver-haired, the 78-year-old Lawrence was a leading Boston businessman, whose family put Massachusetts on the world textile map. He has been president of the Hinduja Foundation U.S.A. since early 1985 and, until this past May, was also president of the Harvard-affiliated Massachusetts General Hospital. As head of the Hinduja Foundation, which shares a plush suite of Manhattan offices with two Hinduja companies, Amas Securities and Hinduja Brothers Inc., Lawrence handled the brothers' donation of a $ 2 million endowment (domiciled in Switzerland and managed out of London) to encourage medical and public-health research at Harvard and Massachusetts General, with the intent of developing public-health programs in India. Lawrence introduced the Hindujas to Harvard President Derek Bok. Lawrence insists he does not get involved in the Hindujas' business dealings or in making connections for them: "I've stayed out of that," he says. "Ted Sorensen does that kind of thing for them."
The family likes to mix with prominent personalities: Edward Heath, member of the British parliament and ex-prime minister, is involved in helping the family set up a charitable foundation; Richard Helms, former director of the CIA, and reportedly a consultant to the Hinduja family, will not say how he helped them, William P. Clark, a close friend of President Reagan's and former head of the National Security Council, acknowledges that he was compensated by the Hindujas for performing unspecified services; Charles A. Percy, ex-senator from Illinois and former chairman of the Senate Foreign Relations Committee, visited the brothers in India; Hugh Carless, a former British ambassador to Venezuela, with reported close links to U.K. intelligence officials, does work for the brothers in London; A. P. Venkateswaran, a former Indian foreign secretary, is president of the Hindujas' foundation in India; Air Marshal O. P. Mehra, former chief of staff of the Indian Air Force, heads the brothers' Sportsmen's Welfare Fund in India; Khodadad Farmanfarmian, former governor of the Central Bank of Iran, now serves as the Hindujas' chief financial adviser in London.
Associate with the powerful and people will think you are powerful. Prime Minister Margaret Thatcher of Britain was a prominent guest last year at the Hindujas' annual bash in London. Reputedly, the brothers gave #25,000 to the Tories. In Washington Representative Jim Wright (D-Tex.), the ambitious Speaker of the House, was a guest at a Hinduja party.
The Hindujas' philanthropic interests are, to say the least, catholic. In addition to the Harvard medical foundation, the family has given money to the International Society of Krishna Consciousness, the ubiquitous Hare Krishna people. A nice balance, that.
Who pays for the parties, the socializing, the lavish living? Beyond the sanctimony, the brothers are stubbornly reticent when it comes to talking about their business interests. In Sweden and India, however, where the brothers are better known than in the U.S., newspaper and magazine articles have speculated that the Hindujas deal in arms as shadowy middlemen -- something that the Hindujas have vehemently denied. Indian journals have suggested that the $ 400 million deal in which India bought submarines from West Germany. And in April Sweden's largest-circulation newspaper, Dagens Nyheter, reported that the Hindujas were paid commissions by Nobel Industries. Executives of a Nobel subsidiary, A. B. Bofors, have been indicted in Sweden on charges of making illegal weapons sales to the Middle East (FORBES, Oct. 19). The Hindujas apparently represented Bofors and Nobel in Iran during the 1970s, when the shah embarked on his great development and arms acquisition program. Lately Bofors has admitted that it paid $ 45 million to three companies in connection with India's recent $ 1.3 billion order for 155mm howitzers. It hasn't named the Hindujas or anyone else publicly. In India, as well as in the Middle East, commissions are often another name for baksheesh -- bribes.
Martin Ardbo, a former managing director of Bofors, confirmed to FORBES that he has dealings with the Hindujas in Iran during the shah's time. Other businessmen spoke to FORBES about the Hindujas' interest in weapons transactions in Nigeria and elsewhere. With so much smoke, can there not be fire?
The Hindujas deny the commission charges and have threatened to sue Dagens Nyheter. But the joint authors of the article, Bo G. Andersson and Bjarne Stenquist, told FORBES that they stood by their story and that there would be no retraction. Despite the Hindujas' threat, there has been no lawsuit so far. It is possible, of course, that the Hindujas may have nothing to sue about.
FORBES has learned that a Hinduja associate approached at least one private individual in the U.S. for high-level introductions in a turbulent Asian country, where an unnamed client wanted to peddle arms.
Their approach to deal making is not always indirect. The Hindujas continue to operate openly in Iran: Alcari, S.A., Panama-registered Metalco and Ashok Trading, situated in Tehran, are among the companies the brothers use to sell fertilizers, lead, zinc, sugar and other commodities to the ayatollah. While tens of thousands of the shah's supporters have been murdered by Khomeini's people, and many times that number have fled, the Hindujas apparently were not punished for dealing with the shah.
Despite occasional media criticism of them abroad, little bad publicity has so far followed the Hindujas to the U.S. Brother Gopichand granted an interview granted an interview to the New York Times in October 1986. He must have found the resulting article most pleasing. It ignored the whiff of scandal that has followed the Hindujas from India and thence to Europe. The article stated that the Hindujas had given away $ 100 million to charities. Where did the money come from for this largesse? A Hindujas family representative was cited by the Times as claiming that companies owned by the brothers had annual revenues of $ 11 billion.
What are the facts? A few things are know about the family. Their father, Parmanand Hinduja, now deceased, left his native Sind in what is now Pakistan (see box, p. 92) in 1915 to become a moneylender in Bombay and subsequently an importer of dried fruits from Iran and an exporter of jute, textiles, sugar and tea to Iran. Thus began the family's Iranian connection, which flourished first under the shah and now flourishes under the fundamentalist dictatorship there.
The brothers have told friends that when their father died, in 1971, he left his four sons a total of $ 1 million plus land in Ahwaz, Iran, valued subsequently at $ 3 million. That doesn't add up to big money by international standards. Yet FORBES' research suggests that the family is worth perhaps a half-billion dollars and possibly more. That's pretty good appreciation on a base of $ 4 million just 15 years ago.
Following up on father Parmanand's dealings in Iran, the brothers dubbed Hindi movies into Persian and exported them to Iran. Indian movies are big in the Middle East (see box, p. 90), and a single hit, Sangam, ran in 100 theaters in 27 Iranian cities. The Hindujas subsequently named their most visible company after that movie. The brothers reportedly paid the equivalent of $ 6,000 for the Iranian rights and netted perhaps millions from them.
Owning overseas rights of movies and videos, of course, is a well-known way of getting around exchange controls. What are the foreign rights to a given film worth? Not necessarily what they bring in at the box office, but any amount the seller sells the rights for. For example, if a film is produced in Italy, the box office proceeds from, say, Japan need not end up in Italy. If an Indian film grosses well in Egypt, all the Indian government need know is how much the producer says he got for the Egyptian showings or rights. A good part of the money could, in fact, end up in Switzerland or New York.
How did the Hinduja family get involved with movies? As moneylenders. The going rate for lending money to Indian moviemakers is close to 50% a year -- 4% a month. Sometimes foreign and subsidiary rights are thrown in as a sweetener. At any rate, the Hindujas exported lots of Indian films to Iran and the Middle East. They continue prominently as moneylenders to Bombay moviemakers.
Beyond movies and small-scale trading, Parmanand Hinduja's four sons broke into the international big time about 15 years ago. The late Indira Gandhi, then India's prime minister, complained to the shah of Iran that India couldn't afford to pay for Iranian oil after the steep price rises following the Yom Kippur War of 1973. "Madam then sell us more of India's goods and services," the shah told her at a private meeting, according to a participant. According to Iranian and Indian sources, India's annual exports to Iran rose from roughly $ 50 million in 1974 to several times more by 1978. The Hindujas, as Indian nationals with extensive contacts in Iran, were in the middle of it all.
Doing what? In the biggest single deal, they pushed through a $ 630 million iron-ore project, called Kudremukh, receiving perhaps as much as $ 10.5 million in "commissions." Although the brothers have denied getting anything out of this deal, there is evidence that the Indian government paid the money into a Swiss bank account for commissions. While no evidence has surfaced linking the Hindujas to payments, speculation persists.
The brothers, operating under the shingles of two main companies -- Sangam and Ashok Trading -- also represented a variety of Western and other firms eager to cash in on the shah's development boom. Among the Hindujas' clients were said to be Daimler-Benz and Magierus of West Germany, Nitro-Nobel of Sweden (now of Norway), Lockheed Corp., Tat Computers of India, Mitsui, Japan Air Lines and Pan American Airways.
After the shah fell and after his moderate successors lost office, Khomeini's ayatollahs were only too glad to use a wide-ranging network like that of the Hindujas. The ayatollahs, as much as Pahlevi royal relatives, were greedy for greenbacks. And Iran, whose name stinks of blood, lawlessness and fanaticism in the international community, needed arms.
That the Hinduja influence had not faded with the shah's overthrow was clear in 1980-81, when Pan Am had problems repatriating its Iranian funds. The airline's executives contacted the Hindujas. An approach was reportedly made to Hojatollislam Rafsanjani, the powerful speaker of the Majlis, the Iranian parliament -- the same Rafsanjani who was later to play a key role in sabotaging, as well as possibly in setting up, the Reagan Administration's Iran-arms-for-contra-money deal. Pan Am got its funds, and the Hindujas can have free seats in first class.
Thus, step by step, the family fortune grew as the brothers deftly crossed and recrossed the fine line that divide business and politics. In a world where national boundaries are increasingly porous and where money is no longer something physical but mere blips on a computer screen, where a can or cassette of movie film may be more valuable than a tanker of oil, in such a world people like the Hindujas know how to operate. They deal, not only in metals or money, not only in commodities or credit, but also in influence and in the ability to shelter money from national taxations.
As a result of its investigations in the U.S., Britain, Sweden, Switzerland, India and France, FORBES was able to identify 24 companies owned by or associated with the Hindujas. But the real number may be as high as 100 -- mostly companies registered in such tax havens as Panama, Liberia, Liechtenstein, Luxembourg, the Netherlands Antilles, the Bahamas, Bermuda and Singapore. Perhaps the only man besides the brothers who knows just how many companies the Hindujas own is a Zurich lawyer named Reiner Rippmann. He has been a member of the boards of a couple of their companies (Amas, S.A., for example), and reputedly buys dummy firms at their behest. Rippmann did not return calls from FORBES.
Arms, ayatollahs, a shadowy global network of companies. Suspicions of arms dealing. Foreign movie rights. Buying and entertaining their way into influential circles. The Hindujas flaunt their wealth but conceal its flow. FORBES found that the brothers' flagship company, Sangam Ltd., reported to the U.K. Registrar of Companies in its last available report -- dated 1983 -- that annual sales for that years were #304,589 and that the company's net assets were barely #57,200. Does one hire Ted Sorensen with that kind of money? Or buy multimillion-dollar apartments in Manhattan and London, seaside villas in Cannes and Bombay?
In the sketchy way they are willing to discuss their businesses publicly, the Hindujas say they make money selling metals and fertilizers to the ayatollah's regime through their Geneva-based company Alcari, S.A. and through their Panama-registered outfit Metalco. But a knowledgeable metals dealer told FORBES that, even taking into account the fact that Iran is forced to pay up to 15% premiums on its purchases, the Hindujas' metals sales could hardly exceed $ 2 million annually. Fertilizers? A high official of Nobel Chemicals Ltd. in London (associated with Sweden's Nobel Industries), who once dealt with the Hindujas in Iran, says that any claim by the brothers to be big selling fertilizers would be "ridiculous." Much of the global fertilizer market is dominated by five or six major Western manufacturers (such as West Germany's BASF), he pointed out.
By all accounts Indira Gandhi, a cultivated but calculating woman, disliked the brothers for their style and was suspicious of their motives but nevertheless found them useful in dealing with Iran. She used them to help keep Islamic Iran neutral in 1971 when India went to war with Islamic Pakistan. Rajiv Gandhi, her successor, shared his mother's reservations about the Hindujas. Now he reportedly finds them equally useful and somewhat more acceptable. Perhaps emboldened by such political blessings, the Hindujas have made a sharp departure from their traditional trading and finance activities into manufacturing. In late October, in partnership with a Fiat subsidiary, Iveco, they bought into the highly prized Indian truck manufacturing subsidiary of British Leyland. The Hindujas acquired 39.9% of Ashok Leyland, which gives them control of the company.
This is age-old bazaar economics adapted to the jet-and-computer age.
Trying to trace their deals is frustrating and usually in vain. The deals are designed to be untraceable. The Hindujas also have their way of soliciting silence: Virtually everyone associated with them seems to be inexplicably dumbstruck. For example, FORBES contacted a Plainview, N.Y. businessman named Parviz Lavi, who is being sued by Alcari, S.A. in U.S. Federal Court in Brooklyn, N.Y. The suit alleges that Lavi was to have supplied 20,000 fuses -- worth $ 11.2 million -- for jets to the ayatollah's air force in 1981 but did not deliver as agreed on the deal, causing the Iranian air force to confiscate a Hinduja deposit. Lavi is countersuing the Hindujas.
On first contact, Lavi spoke excitedly of having got hold of documents linking the Hindujas to arms deals in Iran. "I have enough evidence to blow them away," said Lavi, an Iranian emigre, adding that he wanted to consult with associates before showing the "evidence" to FORBES. But he never got back to us and hasn't returned repeated calls. Court documents associate the Hindujas with General Hassan Toufanian, the shah's top weapons buyer. Say this for the Hindujas: They are relentlessly apolitical.
Various reports have linked the family with Princess Ashraf, the shah's notorious twin sister. It has been widely reported that she and the Hindujas were partners in many deals, including arms buying. Ashraf, whose commercial adventures were well known in the shah's time, has complained privately that the Hindujas owe her money -- possibly as much as $ 5 million. Princess Ashraf agreed to meet with FORBES to talk about her dealings with the Hindujas. The meeting was to have taken place at one of the Pahlevi family's homes, at 32 rue Paul Valery in Paris. However, it was her daughter, Princess Azadeh Chefik, who turned up for the meeting. She denied that he mother ever had anything to do with the Hindujas. She further denied that Princess Ashraf had gone to India with the brothers in 1977-78 (although that visit received considerable media attention).
Later an associate of Ashraf told FORBES that the 69-year-old princess felt the Hindujas were not "beyond blackmail." At any rate, the princess had somehow changed her mind about talking with this magazine and denied through her daughter that she knew the family.
Thus, behind the glitter and the hobnobbing with famous people lies a tale of sharp dealing. Here's one example: India's prestigious Tata Group invited Hinduja investment in its London, New York and Washington hotels. The Hindujas came in with $ 17.5 million. Then they demanded a seat not only on the board of the Tata subsidiary that ran the hotels but also on the board of the parent company in India. The Hindujas also began accusing Tata executives of incompetence. Participants at board meetings say that Srichand Hinduja frequently spiced his accusations with four-letter words. Finally, the Tatas had had enough. They bought out the Hindujas for a reported $ 25 million. From the Hindujas' point of view, the termination arrangement was just great: They made perhaps $ 7.5 million in less than two years, plus such goodies as free rooms in Tata hotels.
There is also a tale of meanness -- the bazaar mentality breaking through the jet-set aura. A couple of years ago the Hindujas threw a large dinner party at their Trump Tower apartment catered by the Raga Restaurant, owned by India's Tata Group. The bill came to $ 4,782, but the Hindujas refused to pay it. Why? Well, they said, the Raga serving staff damaged an expensive dinner table in the apartment. The management immediately paid $ 1,200 to the Hindujas to cover the cost of repairs. To this day the final settlement of the Raga bill is pending. Another example: A London tailor has complained that Srichand Hinduja ordered suits with only the jackets to be made in London. No pants? Srichand Hinduja wanted the material and pattern for the trousers sent to Bombay, where they could be stitched at less expensive Indian labor rates.
People like the Hindujas go on the assumption that everyone is for sale. But they are learning that there are limits. Says one former Hinduja executive: "Everyone comes to a certain point when you ask questions for which there are no answers. I left the Hindujas because the cover-ups were obvious." Another executive left the Hindujas after learning that they were being investigated by French, Swedish and West German intelligence agencies.
Some U.S. banks have evidently caught a whiff. Bank of America in 1984 asked the Hindujas to withdraw a $ 40 million deposit. Citibank, to this day, holds them at arm's length. Small wonder, then, that the Hindujas bank with minor institutions, like the Luxembourg-based Bank of Credit & Commerce International. The shadowy outfit formed with Middle East money was used by Alcari in connection with the Iran military spare parts deal.
Yes, the family did talk briefly with FORBES. But requests for a follow-up interview met obstacles. Pressed for information, Srichand Hinduja said he objected to the kinds of queries FORBES had been making and brought up the question of legal action if we pursued the story. Why should such a self-styled ethical people object if a reporter asks tough questions?
Shortly after Hinduja spoke with FORBES, the family's spokesman, Ted Sorensen, telephoned and said that his client was "highly agitated." He then offered his assistance in clearing up "any misunderstanding." But no interview ensued. Clearly, the brothers did not want anyone writing about anything but their philanthropy and high moral standards.
The fact is that the brothers have made smoke-screening into a science -- even while mixing ostentatiously in social and political circles. They belong to the traditionally secretive Sindhi community, where the byword is: Trust only fellow Sindhis, and then sparingly. The brothers communicate with one another in coded telexes, or they discuss their business during walks in London parks. In his letters to associates or friends, Srichand Hinduja's stationery for a long time wouldn't even bear a permanent address: He'd simply write, "Camp London." That's very Hinduja: No place is home, every place is a stop en route to somewhere else.
With the media, their first step is to co-opt the threat. Vir Sanghvi is editor of the prestigious Calcutta-based weekly Sunday. Earlier this year, when Gopichand Hinduja suspected that an article Sanghvi was writing would be critical, Hinduja said: "Our families have known each other for so many years. Why spoil this relationship with one article?" Sanghvi published his article anyway last May, and since then the Hinduja brothers have badmouthed him. Not so long ago another journalist came to an interview and was reportedly handed an envelope full of British currency. He refused the money and stalked out.
What are the brothers up to in the U.S.? Why are they spending so heavily to get Ted Sorensen, lavishing gifts on Harvard, spreading largesse among Washington influentials? They would, of course, like Americans to think they are about to make major investments here. But the open American business scene, with its prying journalists and easy access to information, would probably not be congenial to them. A more logical explanation is that they want to build prestige here and in the U.K. in order to enhance their ability to move money in Asia.
At any rate, those who sup with the Hindujas -- whether in New York, London, Geneva, Paris or Bombay -- might well be advised to use a long spoon.
Senior Writer and Global-Affairs Columnist