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Who got the $ 60 million?

Published by Forbes on 1988-06-27

THE PUBLIC RARELY glimpses the inner workings of a modern international armaments transaction. But a window is opening in both Stockholm and New Delhi, where a juicy arms scandal is unraveling. Under immediate investigation is $ 60 million worth of payments from Swedish arms maker Bofors A. B. to its India agents. Bofors has vigorously resisted disclosing those agents' identities.

In Stockholm, Swedish Prime Minister Ingvar Carlsson says he wants full disclosure of who got the money, and why. Grumbles Anders Carlberg, president of Sweden's Nobel Industries, which owns Bofors: "The investigations have damaged us."

Nobel Industries was created 120 years ago by Alfred Nobel, inventor of dynamite and creator of the Peace Prize (see box, p. 52). Bofors, which makes ammunition and large guns, added around $ 640 million in revenues and $ 61 million in profits to its $ 2.4 billion (revenues) parent. Bofors' future seems bright, too. Not long ago it sold $ 102 million worth of RBS-70 missiles to Pakistan and $ 83 million of the same missiles to its own neighbor, Norway, and also won contracts for 40mm and 55mm guns for Indonesian patrol boats. In the U.S. Bofors is now trying to win a big U.S. Army contract for an antitank guided-missile system, potentially worth at least $ 1 billion.

Bofors' fortunes turned suddenly upward in 1986, when practically out of the blue it received an order for FH-77B 155mm howitzers. The customer: India. Why did India, which has never bought much from Bofors in the past, suddenly splurge for $ 1.3 billion worth of the company's howitzers? One reason was that Sweden's prime minister and disarmament advocate Olof Palme personally lobbied in favor of the deal (FORBES, Oct. 19, 1987). But it is now becoming clear that the Bofors lobbying took other forms as well.

Until last year, Bofors resolutely denied that large payments were made in the howitzer deal. But after energetic digging by Swedish journalists, including Bjarne Stenqvist and Bo G. Andersson of Stockholm's Dagens Nyheter, Bofors came clean -- up to a point. It admitted it had paid about $ 60 million to its India agents.

For what services rendered was the $ 60 million paid? Carlberg now insists the payments "weren't bribes or commissions but windup costs" paid to Bofors' agents responsible for the India territory.

The $ 60 million in payments, Carlberg avers, was necessitated by a meeting in October 1985 between Palme and Rajiv Gandhi in New York. India's need for new howitzers was discussed: Gandhi, says Carlberg demanded of Palme that there be no middlemen in any future weapons deals between Sweden and India.

Palme relayed the information to Carlberg. As a result, Carlberg now says he had to wind up a longstanding deal with Bofors' Indian representatives. To do so, he says he agreed to pay them $ 60 million. It was windup money, he argues, not a commission.

But $ 60 million? To wind up a sales agreement? An unlikely story. Did Bofors' "windup" payment include foregone commissions -- money the agents would have earned from the howitzer sale? "I won't answer that," says Carlberg icily.

Who received the payments? "I'm not going to tell you," Carlberg answers. "We have disclosed what we are going to disclose, and that's it."

But FORBES has learned that at least some of the Bofors payments went to a Geneva-registered company called Moineau S.A. Moineau had two code names, Moresco and Pitco.

Who's behind Moineau S.A. and its facade companies? In late April Radio Sweden and one of India's most prestigious national daily newspapers, The Hindu, disclosed that Moineau S.A. is owned by India's fast-rising arms dealers, the mysterious Hinduja brothers (FORBES, Dec. 28, 1987, and May 16), who are based in London, Geneva, Bombay and New York.

The Hindujas were agents for Bofors in Iran during the 1970s. At that time they reportedly helped to set up an explosives plant in Iran, for Nobel Kemi, which later became part of Nobel Industries.

In late April, India's Joint Parliamentary Committee ruled that Bofors need not reveal the identities of whoever received the questionable payments. But the committee's report has touched off a political storm in India. Ram Jethmalani, one of India's most eminent lawyers and a member of India's upper house of parliament, told FORBES: "There is no doubt in my mind that Bofors made its payments to people very close to Rajiv Gandhi himself." Meanwhile, the scandal is spreading beyond India. In March, Bofors' former agent in Singapore pleaded guilty to forging end-user certificates that allowed Bofors to reroute weapons and ammunition to unspecified countries, which reputedly included Iran. He was sentenced to four years in prison.

Also interesting is Martin Ardbo, the former managing director of Bofors (he was fired last year). Ardbo is now being investigated by Swedish police in connection with the smuggling of some 310 Bofors RBS-70 antiaircraft missiles and 40mm antiaircraft guns to Iran, among other countries. Ardbo was also closely involved in Bofors' $ 1.3 billion howitzer deal with India.

Pranay Gupte,
Senior Writer and Global-Affairs Columnist

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