India to Investigate Corruption in Italian Copter Deal

Adrian Dennis/Agence France-Presse â€" Getty Images The president and chief executive officer of Finmeccanica, Giuseppe Orsi, in this July 11, 2012, photo.

India’s Ministry of Defense initiated on Tuesday an inquiry into the allegations of corruption in the purchase of 12 helicopters from an Italian company.

The order came after the arrest of Giuseppe Orsi, the chief executive and chairman of state-controlled Finmeccanica, by the Italian police for alleged bribery. India’s Ministry of Defene signed a contract with AgustaWestland, a subsidiary of Finmeccanica, for 12 helicopters at a total cost of 556.3 million euros ($747.4 million) in February 2010. The deliveries were scheduled for January to July this year.

In early 2012, media reports about the allegations of bribery in the deal started surfacing in Indian and international media. The Indian government made inquiries to the Italian government but did not get specific information.

In November, the Indian defense minister A.K. Antony responded to a question from Parliament by explaining the efforts by his ministry to get specific details of the allegations of bribery.

His statement said the contract with the Italian company contained the standard clauses on penalties related to the “use of undue influence and against employment of agents and agency commission.” It further said that any breach! of these clauses entitled the Ministry of Defense to cancel the contract and recover any damages related to the cancellation.

The inquiry ordered Tuesday will be conducted by India’s central bureau of investigation.

However, Laxman Behra, an expert on defense procurement who works for Institute of Defense Studies and Analysis, said it is unlikely that the agreement with Agusta Westland will be abandoned before the bribery investigation is completed.

“The deal is already on,” he said. “The company has already delivered three helicopters and rest are in process to be delivered in the rest of the year. I do not think that the deal will be canceled. Action will be taken, as per the agreement, if the allegations of the bribe will be confirmed.”