French Magistrate Seeks India’s Cooperation in Rafale Corruption Probe: Report

French news site also reveals letter Anil Ambani sent Macron and France's finance minister after Narendra Modi’s 2015 Paris visit, seeking reduction in €151 million tax bill.

New Delhi: Days ahead of Prime Minister Narendra Modi’s visit to France, the French news portal Mediapart has revealed that Paris magistrates have sent an official request to the Indian government seeking its cooperation with an ongoing investigation into payments allegedly made in India by Dassault Aviation as part of the 2015-16 deal for the sale of 36 Rafale fighter jets.

“The magistrates are notably interested in studying the case files of two Indian investigations which, as Mediapart has previously revealed, detail evidence that Dassault secretly paid several million euros to Indian based business intermediary Sushen Gupta in its attempts to secure the deal signed in 2016,” the report, written by Yann Phillipin, says.

It is not immediately known what the Indian response will be. Requests of this kind are usually channeled through the external affairs ministry and taken up by the concerned department in India – in this case most likely the Department of Personnel and Training (DOPT) and Ministry of Finance, which look after the Central Bureau of Investigation and Enforcement Directorate respectively.

The Wire has written to the Indian embassy in Paris seeking information on the status of the French request and this story will be updated when a reply is received.

Gupta is currently the subject of a money laundering investigation by the ED in the VVIP chopper scam. Reports published by Mediapart in 2021 exposed Gupta’s deep business connections to Dassault and Thales over a 15-year period, which allegedly involved paying him “several million euros in secret commissions to offshore accounts and shell companies” using inflated invoices for software consulting.

Today’s explosive Mediapart story also looks at another part of the Rafale puzzle – the tax reduction Reliance Group billionaire Anil Ambani secured from France in 2015.

Mediapart reveals how Ambani wrote to French economics minister (and now president) Emmanuel Macron and finance minister Michel Sapin, requesting their personal intervention to reduce a €151 million tax bill. 

What Anil Ambani eventually was asked to pay was a greatly reduced amount, € 6.6 million, the report says – a sum that was close to the amount the Indian businessman had proposed as a settlement with the tax authorities.

Ambani was with Modi in France in 2015, during the visit where the prime minister decided to scrap an earlier deal for co-production of 126 Rafales with Hindustan Aeronautics Ltd with one for the outright purchase of 36 aircraft from the French manufacturer Dassault.

Mediapart found evidence of Ambani’s letter in confidential documents gathered by France’s tax administration. Its sources said that some of these have been added to evidence collected in the French judicial investigation into the corruption allegations surrounding the 2016 sale of 36 Rafale fighter jets to India. 

Ambani was brought into the deal as Rafale’s partner because that is what the Modi government had insisted on, former French president François Hollande revealed in a 2018 interview. Dassault Aviation and Reliance have denied this and the Indian government said at the time that it had no say in the ‘commercial decision’ taken by the French company. The Indian Supreme Court refused to order a probe but the deal is the subject of a current criminal investigation in France. 

The Indian Air Force’s Rafale jets will participate in the Bastille Day military parade on July 14, in which Modi is a guest of honour – a decision that has been criticised by quarters in France who have cited the downslide of human rights in Modi’s India.

Macron role raises eyebrows

The Mediapart report says that as the Rafale deal – of which Reliance would be the main beneficiary in India – was being worked out during 2015, Anil Ambani’s Flag Atlantic France was granted a € 144-million tax reduction. This action came after he wrote to ministers Sapin and Macron on April 14, 2015. 

While Sapin was finance minister and had direct control over the tax department, the report highlights that “Macron’s involvement raises questions because, at the time, he had no authority over the public finances directorate, the Direction Générale des Finances Publiques (DGFIP).”

This tax reduction was first reported by French daily Le Monde, which had further quoted an unnamed Reliance employee as having said that he and Anil Ambani had met Macron at his office, “where the tax problem was settled in a phone call to his administration”.

Macron and his office have not directly addressed questions on this. Macron’s former advisors at the economy ministry had told Le Monde that they had no recollection of a meeting between him and Ambani.

Sapin also told Mediapart that he had “no recollection” of Ambani’s letter. “The only possible thing that my cabinet may have done is to transfer the correspondence to the DGFIP for [their] study,” he told Mediapart.

The report highlights how Reliance Flag Atlantic France, which operated a cross-Atlantic underwater telecommunications cable linking France and the US, drew the French tax inspection directorate’s attention with its alleged tax evasion and avoidance practices.  

Reliance artificially transferred the profits from its French subsidiary to the mother company of its telecommunications activities, Reliance Globalcom Limited, which is registered in Bermuda, the British overseas territory which until recently featured on the European Union’s blacklist of non-cooperative tax havens, the report said.

Anil Ambani’s ‘trump card’

French tax authorities pored over detailed documents on Reliance Flag Atlantic France’s internal operations to determine that it owed them € 151 million in taxes and penalties for the 2008-2012 period. This amount is high largely thanks to a taxing strategy. As an expert told Mediapart: “The tax authorities come up with [this] atomic weapon to push the company into providing the documents and reach an amicable settlement. It is therefore normal that there is a very steep reduction of the tax due if the company finally plays the game.”

By the end of 2014, Reliance provided documents and in early 2015 proposed that it pay € 6.2 million. French authorities said this was too little. 

“But Ambani had a trump card to play,” the report said.

In March 2015, Reliance secretly became designated as Dassault’s new principal Indian local partner in the as-yet unsigned Rafale contract, undoing the Indian government-owned HAL’s appointment in this role three years ago. 

A month later, in April 2015, Modi visited France with Anil Ambani. Thus, Mediapart notes: “In all probability, with the Rafale deal still not inked, the French authorities would have been cautious not to upset Ambani, whose group was appointed as Dassault’s new principal partner by Modi’s government, as François Hollande confirmed in a previous interview with Mediapart, adding that France “didn’t have the choice” in the matter. The Indian government, Reliance and Dassault all denied the former French president’s version of events.”

Anil Ambani’s letter, dated April 14, 2015, named Modi. “I am pleased with the strong momentum of bilateral exchanges between our governments led personally by Visionary Prime Minister of India, Mr. Narendra Modi during his visit to France on 10 and 11th April 2015,” it began.

In it, Anil Ambani also said that he was put in an “extreme and unreasonable situation” with the tax amount. “It is requested that the matter may kindly be reviewed in a fair, reasonable and transparent manner, and the highly unjust and unfair tax demands proposed as above may kindly be quashed, to give reassurance to Indian investors like Reliance that they will not be subjected to unnecessary tax litigation and high-pitched demands,” he added.

Tax deal struck in a week

The reaction to Anil’s letter was swift, as according to the report, on April 20, 2015, the central directorate of the tax inspection services wrote to its regional office asking for a copy of the Reliance case file “following the written request by the company (Indian CEO) made directly to the minister”, which was a reference to Sapin. The documents were sent the very same day.

The report says that the next day, the head of Ambani’s other French subsidiary, Reliance France, wrote to Sapin, with copies sent to Macron, Ambani and also India’s ambassador.

“I am pleased to inform you that an agreement has been reached on the terms of a settlement with the French Tax Authorities […] and that, in our opinion, this represents an equitable and appropriate settlement in all the circumstances,” she wrote, adding: “We have been requested by Mr. Anil Ambani to advise you that (a) we do not require any further assistance from your department and (b) the request set out in his letter of April 14, 2015 is hereby withdrawn.”

She also concluded by thanking Sapin “for your time and attention to this matter”.

By October 2022, the matter was resolved with Reliance’s deal with tax services formally signed. 

While Mediapart’s source at the economy and finance ministry told the outlet that Ambani’s letter “had no effect on the final settlement,” experts consulted by the reporter pointed out that while the reduction may be justifiable, the fact that no penalties were imposed on the debt – thus affecting a gain of around 1 million euros – pointed to favourable treatment. Further, Reliance was deemed as having acted in “good faith” – something that experts said were odd given that it used a “structure of aggressive tax optimisation in a tax haven.”