The Manmohan Singh government deliberately botched a 2007 inquiry into a cash hoard of $8 billion parked in a Swiss bank by an Indian businessperson with close links to a senior politician in the UPA, according to officers involved in the initial investigations into what is known as the Hasan Ali Khan case. They claim that the UPA "deliberately botched" the recovery of $8 billion in cash parked in a Swiss bank by Khan, an Indian national. According to them, this was done to protect a prominent UPA politician who has been active in Central and state politics for decades. "Pressure was brought upon authorities both in India as well as in Switzerland to ensure that the cache of evidence discovered during a chance raid on Hasan Ali Khan by Income-Tax authorities got pigeonholed and replaced with patent forgeries. The men and women investigating offshore accounts say that the probe into the Swiss bank accounts of Khan and his associate Kashinath Tapuriah "was deliberately steered into a stone wall" by the Ministry of Finance during the UPA period. "Necessary queries and needed follow-up were not done, while overall the matter was given a much lower priority than it obviously merited", an officer connected with the initial inquiry claimed. It needs to be noted that Hasan Ali Khan, who was incarcerated along with an associate, Kashnath Tapuriah, denies any wrongdoing.
The 2007 income-tax raid on Khan's and his associates' residences uncovered Swiss bank records stored on a laptop showing deposits of $8 billion. An officer said that the bank in question confirmed in writing to the Central Board of Direct Taxes (CBDT) that the accounts were genuine "but subsequently backtracked". He added that "the UPA government seemed completely uninterested in seriously quizzing the bank about its change of stance". Instead, the Manmohan Singh-led government "accepted the later denial of the Swiss bank that the accounts existed". They added that "what the bank cleverly said was that the account did not (at that time, which was 2010) exist, while not commenting on the earlier records shown to them of accounts dating from past years". Instead of going to Swiss authorities with the genuine records, "they were shown fake records other than the four pages of genuine bank statements, which of course they denied were theirs".
The initial letter from the Swiss bank confirming the $8 billion account is, according to them, still in the possession of the Enforcement Directorate. "Now that the Narendra Modi government has come, we expect that the Swiss bank in question will be asked to explain how and why they backtracked on the earlier authentication of the Hasan Ali Khan account", a senior officer said, adding that "computer records with the bank will show exactly what happened to the cash".
Interestingly, while the account had $8 billion in 2006, by the time the income-tax raid on Khan got conducted a year later, the amount had fallen to $6.6 billion. "This was clear evidence that the account was in the process of getting cleaned out, but the UPA government did nothing to follow up the trail in a meaningful way. Routine letters which they knew to be ineffective were all that got sent", said an investigating officer, adding that "this was just eyewash and we all knew it".
The officers were especially unhappy that the Swiss bank was not questioned in detail about the discrepancy between their initial certification that the account was genuine and the subsequent backtracking. Interestingly, while the account mentioned in the papers recovered from the income-tax raid had $8 billion, a year later this had fallen to $6.6 billion. "Clearly a process was on to empty the account", a senior official said, adding that "this process (of clearing out the account) got completed within a short time of the accounts being discovered by the tax authorities", a process officially confirmed by the Ministry of Finance in January 2011.
The officers claim that "the reason why the matter was (in effect) allowed to be dropped was because the cash belonged to a senior UPA leader" who held important jobs at both the Central and State level during his career. "It would have been a fit case for the Prevention of Money Laundering and other Acts to be brought into full operation, but thus far, the only substantive charge against Hasan Ali Khan is a passport violation", an officer complained, adding that they were certain that Prime Minister Narendra Modi and Finance Minister Arun Jaitley would reopen the Hasan Ali Khan matter without regard to who it will implicate.
An officer pointed out that "over the past three years, Swiss banks have changed their procedures so as to make possible discovery of secret accounts in cases where criminality (such as bribe-taking but not simple tax evasion) is suspected". Other officers said that "the UPA government refused to show any urgency in taking advantage of the new procedures in Swiss banks, and adopted a routine approach". An officer claimed that "very often the foreign banks would be told only that there was only a tax violation, something they knew that Swiss banks did not take as seriously as money laundering or other bigger acts of criminality".
According to the officers, "there were both genuine documents as well as forged statements (on the laptop), and this was used to create an impression that all the documents were forged". The forged documents were "deliberately created so as to mislead investigators in the event of discovery and were camouflaged for the genuine accounts", an investigator said, adding that "this was clear to the officers, who, however, were told to concentrate on the forgeries rather than the four genuine pages of account details".
It needs to be mentioned that Hasan Ali Khan denied that any of these accounts was his, and was spared interrogation by the authorities until the authorities were pulled up by the Supreme Court in 2011 for this lapse. He was subsequently incarcerated and is still in prison in Maharashtra.
The officers pointed out that black money could easily be checked with political will. "For example", an officer pointed out, "the Customs and Excise service generates huge volumes of black money by deliberately allowing under-invoicing of exports". He said that "such exports go to a dummy entity in some tax haven, and immediately afterwards gets re-sold by that entity to genuine buyers at a much bigger price". His colleagues said that a special SIT needed to be constituted to examine the way in which export containers were cleared, so as to stop such under-invoicing. "Should the government check on the way in which exports flow to dummy companies and immediately thereafter get sold to third parties, several thousand crores can be saved".
Another was of the view that "details of the beneficial owners of Participatory Notes owners names be collected by the CBDT and by SEBI, black money can get plugged, and laws and procedures must change to effect this". An officer was rueful that the ease with which financial transactions can get tracked if properly followed was not made use of by the Manmohan Singh government. He was hopeful that the Narendra Modi government "would make full use of increased banking transparency to stop the flow of illegal funds abroad" by businesspersons, politicians and officials. The team saw the Hasan Ali Khan case as a fit case for setting an example to those who have siphoned off money for decades.
If in such a process the government succeeds, "Mr $8 billion" may have a lot of explaining to do.
