Media allege corruption in massive Israel-India arms deal

Allegations of possible illegalities in a massive arms deal between Israel and India have surfaced over the weekend in the Indian media. The size of the deal between the Indian Ministry of Defense and Israel Aerospace Industries, estimated at $1.5 billion, had grown to allow for the payment of commissions, which is illegal in India, said the press there.

The deal in question, signed in late February between Israel Aerospace Industries and the Indian Defense Ministry, is for the delivery of 2,000 Barak Mark VIII missiles, which were originally designed as sea-based weapons.

According to the deal, a third of the value of the deal will be spent in India, where the IAI will make offset purchases from Tata, a local consortium.

An Indian daily from New Delhi, DNA, says it has information showing that $120 million of the overall deal is described as "business expenses." According to Josy Joseph, a journalist, officials familiar with the deal told him that an IAI representative explained these costs are meant to cover insurance, bank and transportation costs.

However, the newspaper hypothesizes the actual payments are for commissions, or even bribes, for senior Indian government officials who approved the deal.

IAI refused to comment on Saturday, but Israeli sources familiar with the deal said the entire process followed regulations and was clean.

Last week IAI filed a report with the regulatory authorities here that it had concluded a $1.4 billion deal but did not specify the country. Indian sources said New Delhi had requested the deal be kept secret.

The newspaper notes (although does not offer details) that Elul, a subsidiary of Elul Asia, belonging to David Kolitz and Israel Yaniv, was also involved in the deal. According to the report, Elul is known for its ties to Tata.

Nine years ago, Yaniv retired from the weapons development authority Rafael, where he worked in marketing, and then joined Elul, setting up a subsidiary where Elul is a co-owner.

Rafael is also involved in the deal, as a subcontractor in the manufacturing of the Barak missiles, but the extent of its role in the project is not known.

The links between Elul and Indian business activities are, according to the daily, based on ties with the Indian businessman Sudhir Chowdhary, who resides in Britain.

"The Israelis joined up with Chowdhary for him to manage their contacts in India with officials in government and the army," according to the newspaper.

Kolitz said in response that he is not involved in any arms deal and has no ties with Chowdhary. "I wish I could benefit from a 6 percent commission," he said.

The daily maintains that Chowdhary has family connections with a senior minister in the Indian government and with senior army officials.

His name had previously been linked by the Indian media to another Israeli arms company, Soltam, in relation to a deal for an upgrade of artillery, in which there were suspicions of wrong doing.

The report in DNA raises questions about the new arms deal, including the actual approval of the deal by the government, which is currently led by the Congress Party; its head, Sonia Gandhi, is under investigation for her role in an earlier deal for Barak missiles, from the 1990s.

The newspaper article questions how it was possible to approve the deal on the day parliamentary elections (for the lower house) were declared, when Indian governments are forbidden from doing so since the deals will be binding on the incoming government.