In yet another twist to the criminal proceedings against them, Giuseppe Orsi, former president of Finmeccanica and Bruno Spagnolini, former CEO of its subsidiary AugustaWestland were acquitted of the charges of corruption in the sale of 12 VVIP helicopters to India by an Italian court of appeal on Monday.
The initial reports suggest that they have been acquitted for want of sufficient evidence. This is interesting not just because both of them had earlier been convicted by a court of appeal based on the same evidence but also because another accused in the same case, Guido Ralph Haschke, had even confessed to the crime in the court under a plea bargain.
This verdict may not bring down the curtain on the case as the prosecutors in Italy perhaps still have the option of challenging it but either way, it is unlikely to make the Indian government change its mind on continuing with the investigations being carried out by the Central Bureau of Investigation and the Enforcement Directorate.
It will be hasty to pass any definitive judgement without studying its fine print on what impact the verdict will have on the investigation being done by the Indian agencies but it may not spell the end of the road for them as the acquittal is apparently based on the technical ground of insufficient evidence which not the same as an honourable acquittal on merits.
A Press Information Bureau release of 29 April 2016 stated explicitly that ‘in the matter pertaining to acquisition of AgustaWestland helicopters, the undisputed central issue that stands out is corruption, especially bribery’. The government cannot afford to let this stand be affected by the Italian court’s verdict, considering that the progress made by the Indian investigators so far in their independent probe.
While the Italian court’s order may not have a substantial impact on the case in India, the investigators will have to factor in this new development while building up a prosecutable case as the reasoning underlying the Italian court’s order could possibly shore up the case for the defence in the Indian courts. They also have to reckon with the unlikelihood of discovering any smoking guns.
As the past cases of similar transgressions in defence deals show the investigations could stretch on for years and eventually may even fall through as it happened in the case against the South African firm Denel when the Central Bureau of Investigation filed a closure report in the Patiala House after eight years of investigation into allegations of corruption in the purchase of anti-material rifles.
It is will be presumptuous to proffer any advice to the investigation agencies on how to do their work but they do need to speed up the process taking a leaf out of the Italian book. This applies to every investigation but the fact that a former air chief is accused of being complicit in the transgression, in this case, makes it somewhat unique. What is at stake is not just his reputation but the very fundamentals of the justice system for, as the adage goes, justice delayed is justice denied.
There is no question that punitive action has to be taken in such cases against those found guilty of transgression but it is equally important to draw lessons from the causes underlying the transgression and take preventive action. An elaborate system of checks and balances is already built into the procurement system. The challenge is to plug the loopholes, if any, and to make this system work.
In a very broad sense, there are three vulnerable stages in the entire procurement cycle: framing of the qualitative requirements of the equipment to be bought, field trials and commercial negotiations with reference to a benchmark price that is to be worked out just before opening of the commercial offers.
This is borne out by the findings of a 2013 report of the Comptroller and Auditor General of India on acquisition of the VVIP helicopters. The report questions the manner in which the specifications were changed, flight trials were conducted and the benchmark price was fixed in this case. While the first two vulnerabilities have been receiving some attention, the process of benchmarking continues to suffer from ambiguity.
Benchmark price is used as a reference point to assess the reasonableness of the commercial offer. According to the report, the benchmarked price of Rs 4,871.50 crore determined by the contract negotiation committee in the instant case was unreasonably high and, therefore, it was an unrealistic yardstick to assess the reasonableness of the price of Rs 3,966 crore quoted by Augusta Westland.
There is no doubt that the committee would have felt quite satisfied by bringing down the quoted price to Rs 3,726.96 crore but in the process, it may also have unwittingly left enough scope for over invoicing which possibly led to the money changing hands.
It would be naive to assume that the committee was complicit in overestimation of the benchmark price. Anyone familiar with the system would know that this has been – and continues to be – the most neglected aspect of the procurement process. This is a loophole that needs to be plugged by ensuring greater professionalization of the process of cost estimation, which includes benchmarking.