Even as the first three VVIP AgustaWestland helicopters which arrived at Palam Air Force base here last December are being kept in running condition by the Indian Air Force, the Rs. 3,600-crore deal with Italy’s Finmeccanica, marred by allegations of bribery, has created an air of uncertainty for the delivery of the remaining nine AW 101 helicopters to the IAF.

In a significant development, in Italy, where the trial is set to resume in Milan from September 17 into alleged corruption by top executives of AgustaWestland and Finmeccania, the judge has approved the list of witnesses requested by the prosecution and the defence and it will be up to the two sides to decide which of the witnesses to call for testimony.

According to a report in defence news website this week-end, the trial of former Finmeccanica CEO Giuseppe Orsi is expected to pick up momentum when the court in Milan takes up the list of potential line up of influential witnesses from the U.K., Italy and the U.S. and decides during the course of trial on calling them for depositions.

Mr. Orsi, as head of Italy-based Finmeccanica and its U.K.-based helicopter unit AgustaWestland, is accused of taking part in a bid to corrupt Indian officials during the competition for a new Indian Air Force VVIP helicopter.

AgustaWestland bagged the order worth 560 million Euros for 12 AW101 helicopters in 2010.

As such, the testimony of potential witnesses could provide a rare insight into how defence deals are made in emerging markets, the report in Defense News said.

“The judge has now approved the lists of witnesses requested by the prosecution and the defense, and it will be up to them to decide during the course of the trial which of the witnesses they feel it necessary to call,” it quoted a spokesman for Ennio Amodio, a lawyer representing Mr. Orsi, who has denied all wrongdoing, as having said.

Hearing on Sept. 17

Though the next court hearing date is September 17, but a potential Italian lawyers’ strike could postpone it further, the report quoting the spokesman said.

Mr. Orsi, along with former AgustaWestland official Bruno Spagnolini, is accused of channelling funds through consultants Guido Haschke and Carlo Gerosa to three cousins of former Air Chief Marshal Shashi Tyagi, who was the IAF chief from 2005 to 2007.

According to the prosecution documents, specifications in the helicopter tender were crafted to suit the AW101, including the lowering of the operational altitude from 18,000 feet to 15,000 feet. A requirement for flying after losing power in an engine was also allegedly added to favour the AW101, the only competitor with three engines. Former IAF Chief Shashi Tyagi has denied all wrongdoing, claiming the specifications were changed before he became head of the Air Force.

“The accusations were first made by former Finmeccanica executive Lorenzo Borgogni after he was sacked by Mr. Orsi for ethical violations following Mr. Orsi’s appointment as Finmeccanica CEO in 2011. Prosecutors then built their evidence on the strength of interviews, seized documents and wiretaps,’’ the report said.

The Indian Defence Ministry will have ringside seats for the trial as it has signed up as a civil party to the proceedings, ensuring its lawyers have access to prosecution evidence.

“For the defense, spokesman Amodio has requested about 50 potential witnesses, including Mr. Tyagi, who may be called to testify about the competition, Phillippe Harache, the former deputy CEO of Eurocopter. Christopher Kubasik, former chief operating officer at Lockheed Martin, and Australian truck and logistics millionaire Lindsay Fox may be called to testify about Mr. Orsi’s professional track record,’’ the report said.

Geoff Hoon, the former U.K. Defence Secretary and now AgustaWestland manager; Tony Pawson, the head of the U.K. Defence Export Services Organisation (DESO); and Jackie Calcutt, a former DESO official now working for AgustaWestland in India, have been listed to give evidence about the Indian defence market. Also on the list is Ratan Tata, former chairman of the Tata Group, the report said but did not elaborate.

The report quoted lawyers connected to the case as having said that despite early reports, India’s Defence Minister A.K. Antony was not a potential witness.

The CBI has already booked Mr. Tyagi, his three cousins, and nine others, including the two companies, and European middlemen, involved in the alleged kickbacks of around Rs. 362 crore.

Mr. Orsi was arrested on charges of international corruption, bribery and billing fraud over the sale of VVIP choppers to India and spent 80 days in preventive detention. Mr. Spagnolini faces similar charges. In all, two Swiss middlemen, Guido Haschke and Carlo Gerosa were paid commissions totalling some 56 million Euros through an elaborate system of fake billing using fictitious IT companies based in Mauritius and Tunisia.

The IAF selected the three-engined AW 101 for its VIP squadron in 2010. The delivery of the 12 helicopters would have been completed by 2013-end. However, the Defence Ministry has put on hold the delivery of the remaining nine choppers. Sources said that IAF has put up the infrastructure and its pilots have also received training in the U.K. over the past year. The IAF also recently got spares for the three helicopters which have to be kept ready and flying lest the machines get stranded and rusted, the sources said.

“However, the government has to take a decision on allowing delivery of the remaining nine helicopters,” they added.

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