Mumbai: Four years ago, Pune-based businessman Hasan Ali Khan was probed on suspicion of money laundering. The amount involved has varied and has been pegged at as much as $8 billion by some officials.
Earlier this year, another name emerged—Kolkata-based Kashinath Tapuriah —who was arrested on 24 March following the arrest of Khan earlier on 7 March.
Investigators then said that Khan was merely a front for Tapuriah, the real kingpin behind the racket. Also thrown into the mix was the name of arms dealer Adnan Khashoggi and shadowy figures of Russian and other provenance.
The chargesheet, along with supporting documents and statements running into hundreds of pages, filed by the Enforcement Directorate (ED) at a Mumbai sessions court on 6 May, seeks to untangle the complicated web of financial transactions that form the basis for the case against Khan and Tapuriah.
But the chargesheet may be fatally flawed because it takes at face value certain documents that are forgeries, according to a key witness in the case. Mint has a copy of the chargesheet, obtained from this witness, who does not want to be identified.
“It is evident, but ED doesn’t ask the question why they forged these documents,” he says.
This person, who has known Tapuriah closely for decades and was at one point custodian of key documents, also doesn’t know the reason for their presumed fabrication.
A key piece of evidence cited in the chargesheet is a December 2006 letter from Swiss financial services company UBS AG, which says Khan had in his account some $8 billion, of which he could immediately withdraw $6 billion. The document was seized and forwarded to ED by the income-tax (I-T) department.
Based on this and other similar documents, Khan’s income has been assessed by the I-T department at Rs37,273 crore in the 2006-07 financial year. His income in the seven years till March 2007 was assessed by the I-T department at Rs1.1trillion, whereas in fiscal 2004 his income was assessed at just Rs648,000.
Did Khan withdraw the money from UBS? Unlikely, because the whole controversy revolves around his inability to operate this account.
“The I-T department’s assessment of Khan’s income in fiscal 2004 (Rs648,000) is likely correct because for that year they couldn’t find any forged bank document,” according to the witness.
Another key document cited in the chargesheet is a notarized self-declaration by Khan from 29 July 2003, in which he says he opened an account in UBS, Singapore, in 1982, with an initial deposit of $1.5 million, and goes on to describe his transactions with Khashoggi.
In 1997, Khashoggi remitted some $300 million to Khan’s UBS account from the US “with a condition to refinance $500 million” later, but the funds arrived at Zurich with a tag: “Funds from weapon sales”. The Swiss authorities froze the account, following which he and Tapuriah made several attempts to move the money but there is no evidence to show that they succeeded.
Launched in 2007, ED’s investigation deals largely with what happened after the UBS account was frozen.
Among the many contradictions between his declaration and statements made to investigators, Khan has consistently denied knowing Khashoggi or acknowledged the initial deposit of $1.5 million in his UBS Singapore account. He says he did try to open an account there “sometime in 1986-87” with a cheque for $1.5 million issued by brother-in-law Hyder Ali Khan, but the cheque bounced.
“That they had cut some deals with Khashoggi and a Russian politician and businessman, who flew them in his personal jet to London from Switzerland, is undeniable,” said the witness. “But what they were, and why at all these immensely influential people were dealing with Khan and Tapuriah remains a mystery.”
Khan, who has been interviewed by ED 17 times, has distanced himself from the declaration cited above, saying it was prepared by Tapuriah, and that he signed it at his instruction. Tapuriah, whose statements were recorded by ED 12 times, agrees that he drafted it, but hasn’t provided a good enough reason for this.
Tapuriah says he met Khan in 1994 when his company, Kolkata-based Incab Industries Ltd, was in financial distress.
Tapuriah was looking to raise money for a rescue and Khan offered to help but couldn’t do so immediately.
Tapuriah says he continued to remain in close contact with Khan because he needed money for Incab. But he lost control of the firm as early as 1996, when its lenders reached an agreement with Malaysia’s Leader Universal Holdings Bhd for revival under its management.
One of the key inconsistencies ED hasn’t resolved is when Khan and Tapuriah began their association. Khan’s notarized statement says Tapuriah, whom he describes as an adviser, asked him to move his account from Singapore to Zurich in 1986 after some $240 million was transferred to it. Tapuriah maintains he met Khan only in 1994.
The chargesheet also cites an agreement between Tapuriah and Khan in 1984 for the supply of metal scrap from West Asia to Indian steel makers, but this also may be a forgery, according to the witness cited above.
A dispute arose over the transfer of the $240 million cited above into Khan’s UBS account in Singapore, according to his notarized statement, because “goods had not been delivered on time”, and $140 million from the transaction had to be returned. But this couldn’t be done because the beneficiary had died by then and did not leave instructions on succession.
ED has been unable to establish beyond what is in the notarized statement, most of which Khan has anyway denied in his statements to the agency. The ED chargesheet concludes: “Both Khan and Tapuriah did not cooperate with the investigation and gave evasive replies…and did not disclose true facts.”
ED issued letters rogatory, or requests, to state authorities for disclosure of information on financial transactions, to several countries—Switzerland, Singapore, the US, the UK, Hong Kong and the UAE—but no one replied “except a part reply received so far (from) the US”, the agency says in the chargesheet.
But there seems to be some doubt about the authenticity of even this.
Documents attached to the chargesheet show the US department of justice had in March last year enquired with Barclays Capital, New York, and disclosed to India’s home ministry some transactions of S.K. Financial Services, a firm linked to Khan and Tapuriah.
But the department’s original note to Barclays was seized from Tapuriah’s home by the Indian investigating agencies. The seizure has been recorded in the chargesheet, and when asked about it, Tapuriah says he wasn’t sure who sent it to him.
“How could the original note from the US department of justice reach Tapuriah,” asks the witness in the case. Besides, “nowhere does the ED say that the US authorities had confirmed as genuine the letter received by the Union home ministry”.
In the absence of information from overseas, ED’s investigation shifted focus to how Khan had in 1997 obtained a passport from Patna stating incorrect personal particulars with the help of Tapuriah and his political contacts. At that time, Khan already had a passport but it had been impounded by a court in Hyderabad.
To evade Indian immigration control, Khan and Tapuriah, along with one of the latter’s political contacts, travelled via Kathmandu to Singapore in 1997. There Khan opened a bank account with the help of a local businessman of Indian origin known to Tapuriah in Swiss Bank Corp. (SBC), which merged with UBS a year later.
Khan says Tapuriah had power of attorney for the SBC account, and he moved large sums of money into this, starting with $75 million. Tapuriah denies any such transaction, although he confirms having helped Khan obtain the passport from Patna and with the opening of the SBC account.
ED’s investigation effectively begins with the opening of this account in Singapore and the agency concludes that Khan obtained “passports on the basis of forged and fabricated documents” to open “foreign bank accounts for movement of funds, which had a criminal origin”.
Where the money came from and where it went, if at all there was any movement of funds after 1997, remains unresolved. The authorities declined to comment when asked about the seeming lack of clarity in the chargesheet and the authenticity of the documents cited. Khashoggi has never commented on any association with Khan or Tapuriah.
Switzerland’s ambassador to India Philippe Welti had said in end-March that the Indian government hadn’t done its bit to secure information about black money stashed away in banks in his country. He wasn’t specifically referring to Khan and Tapuriah.
He said Switzerland was willing to share information on “tax frauds” but wouldn’t entertain requests from investigating agencies. Requests must be routed through the Union government following procedures agreed upon by the two countries, he added.
Incidentally, late last month Swiss National Bank said in a statement that at the end of 2010 Indians held about $2.5 billion in all in Swiss bank accounts, down from $3 billion two years ago. Indian media reports had speculated that as much as $1.5 trillion was stashed away by Indians in Swiss-numbered bank accounts.
ED has summarized its charges against Khan and Tapuriah in 69 pages; the rest, divided into three sections, are supporting documents such as Khan’s notarized self-declaration, agreements for transaction, bank statements, notes from the I-T department, and depositions of the accused and four other witnesses.