New Delhi, Nov. 7: The enforcement directorate is preparing to probe other Indian companies listed in the Volcker report if it finds major wrongdoings in the Hamadan Exports case, which is being viewed as a litmus test.
ED officials said they were preparing to investigate others among the 129 companies listed by Paul Volcker as having paid “illegal surcharges” to the Saddam Hussein-run Iraqi government.
However, officials added this would depend on either of two things: a decision taken at the political level, or if they are able to pinpoint “some concrete offence” in the Hamadan probe.
The Volcker report had named 129 Indian companies, including big names like Ranbaxy, Tata International, Dr Reddy's, Godrej & Boyce, Alembic, state-run Rites and Balmer Lawrie, as among those that allegedly paid illegal surcharges to Saddam Hussein’s Iraq while trading under the UN supervised Oil for Food programme.
Politically, the action against Hamadan would be construed to mean that the government is only interested in alleged wrongdoings by a firm run by a businessman close to one of its own ministers. If the ambit of the probe was widened, it would target some of the best known entities of India Inc.
This presents a difficult choice under any circumstances. Officials, however, say their preparations stem from the “strong possibility that the ‘test case’ could yield something”.
The enforcement directorate is poring over a host of records pertaining to Hamadan Exports ' books of accounts, computer stored data, and banking data to determine whether the Iraq trades were above board and unearth any records of surcharges being paid.
One major area of concern for the investigators is that they aren’t sure whether the payment of surcharge to the Iraqi government can be booked as an economic offence under the existing laws. A case may, however, be made out of having violated an international contract in this case, a UN one. However, there too there are loopholes in both the contract law and the Indian penal code could let off companies for having paid surcharges abroad.
Unlike the US, there are no laws here which even prohibit payment of kickbacks abroad to get business there. Laws against bribing public servants do not cover foreign governments.
Another problem compounding the confusion in the investigation is that oil purchases and sales in third countries do not have to be recorded in the export-import records using a coding system as nothing but remittances for trading services flows into the country from such deals.