Money trail: Sehgal, Khanna floated 50:50 JV but split oil booty in 4:1 ratio

New Delhi
7 August 2006

Andaleeb Sehgal and Aditya Khanna floated a 50:50 joint venture
company called INDRUS (derived from India-Russia) in 1996-97 and registered it in
Channel Islands. They began doing business in commodities in Russia but their forays
in that country had not shown sufficiently encouraging success.

It was while grappling with the failure of the venture in Russia that Sehgal came in
contact with Jamil Saidi. Saidi suggested Sehgal to explore the possibilities of doing
business in Iraq and by December 2000, the thought of doing "business in oil in Iraq"
had taken concrete shape in the minds of Sehgal and Khanna.

The primary reason for thinking about engaging in the oil business in Iraq was that the
other businesses which Shri Andaleeb Sehgal had attempted to do in Iraq, namely trade
in commodities such as wheat, rice and sugar had not fructified and the business forays
in Russia had not shown sufficiently encouraging success, the Justice RS Pathak Inquiry
Authority report read.

In January 2001 a Congress delegation visited Iraq. Payments and other financial
transactions began two months later. Between March and December that year, Sehgal
and Khanna negotiated, delivered and signed two contracts and worked for bagging a
third contract from the Iraqi regime of Saddam Hussain.

They may have floated a 50:50 joint venture but Andaleeb Sehgal and Aditya Khanna
were to distribute the money they earned by "doing business in oil in Iraq" in the ratio of
4:1. They received a total sum of 1.46 lakh dollars out of which $ 68,293 were received in
the accounts of Hamdaan Exports and Sehgal Consultants in India.

"For his share, Aditya Khanna received $ 32,558 which he retained in the accounts of
INDRUS," the Justice RS Pathak Inquiry Authority report observed. Justice Pathak's
report in the matter of Contract No M/09/54 and Contract No M/09/57 as mentioned in
Paul A Volcker's report was tabled in Parliament on Monday.

The total sum of 1.46 lakh dollars received by Sehgal and Khanna amounted to five
cents per barrel of oil. The entire amount was received in the bank account of INDRUS.
The duo paid a total sum of 7,48,550 dollars as surcharges to the State Oil Marketing
Organisation (SOMO) owned by the Saddam Hussain regime.

CONTRACT NUMBER M/09/54:

In March 2001, Masefield AG told BNP Paribas, Paris to transfer 61,969 dollars from
Chase Manhattan Bank, New York into Account No 12349 with Jordan National Bank,
Cyprus held by Andaleeb Sehgal. Out of that sum, 60,000 dollars went into Account No
500320/02 in the name of Saddam Z Hassan and Ibrahim Ali Shaiyeb of SOMO.

On May 15, Hamdaan Exports Limited Account No 12367 in Jordan National Bank,
Cyprus received 438,973 dollars from Masefield. On May 27, all of that money went into
Account No 500320/02 held in the name of SOMO officials. Sehgal paid a total surcharge
of 4,98,518 dollars to the SOMO officials.

On June 6, Masefield transfers 96,785.99 dollars into the INDRUS account with Barclays
Bank PLC. Hamdaan Exports received 47,000 dollars as commission payable to it for the
execution of the Contract M/09/54. This amount does not include the amount retained by
Khanna as his commission in the INDRUS account, to which he admitted.

On August 9, 3793.52 dollars was received in the Hamdaan Exports account.

CONTRACT NUMBER M/09/57:

Masefield transferred 2,40,268.80 dollars into the Hamdaan Exports account with Jordan
National Bank, Cyprus. Out of that sum, 1,90,450 dollars were paid as surcharges to
Iraqi officials. Sehgal transfers the remaining 50,000 dollars to the INDRUS account and
later shifts 17,500 dollars to the Hamdaan Exports account in India.

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