The Central Bureau of Investigation (CBI) has registered a case against the U.S.-based firm CDM Smith, its Indian subsidiary and officials, besides unidentified officials of the National Highway Authority of India (NHAI), for alleged bribery of more than $1.18 million to secure work contracts.
On Saturday, the agency conducted searches at four locations in Bengaluru and one in Chennai on the premises of the firm and of Mr. Gopakumar, then director of finance of its Indian subsidiary. Among those named in the FIR is S. Krishnamurthy, the then manager of Bengaluru-based R.V. Infra Solutions.
CVC reference
The case has been registered on a reference from the Central Vigilance Commission (CVC).
It has been alleged that between 2011 and 2016, CDM Smith’s Indian subsidiary conspired with unknown NHAI officials and private persons to secure highway construction projects. The bribe amounts were paid through fraudulent or non-existent subcontractors who had not provided any services in the execution of the NHAI contracts awarded to CDM Smith India Private Limited.
The Indian subsidiary claimed the amounts involved as “allowable business expenditure” in its Income-Tax returns to evade detection of the bribes paid, it is alleged. However, the company later submitted before the Income-Tax Department that certain expenses were not covered under the Income-Tax Act and voluntarily offered such expenses for disallowance.
The disallowance sought was for over ₹6.87 crore. Similarly, CDM Smith Inc. sought more than ₹1 crore as disallowance. The total amount, as disclosed by U.S.-based CDM Smith before the Department of Justice there, was equivalent to $1.18 million.
The FIR alleges that the general contract clause between NHAI and the subsidiary did not allow subcontracting of work, except with the prior approval of the Authority. However, the company allegedly engaged various subcontractors without any such approval.
It is alleged that the subsidiary showed payments to various “subcontractors”, some of which did not exist, only to withdraw the amounts from their accounts immediately. The money so withdrawn was paid allegedly to Mr. Krishnamurthy for paying bribes to the NHAI officials concerned.
Also, the NHAI officials permitted release of Service Tax reimbursements to the subsidiary on the basis of non-project specific challans, allegedly in violation of the general contract clause.
