India launches second graft probe into AgustaWestland

By Nigam Prusty

NEW DELHI (Reuters) - Investigators have launched a second corruption probe into defence firm AgustaWestland in connection with a deal to sell 197 army helicopters, authorities said on Saturday, potentially dealing another blow to a company that India might blacklist.

New Delhi is already investigating the firm, a division of Italian defence group Finmeccanica , for bribes allegedly paid to Indian officials in a separate 560 million euro helicopter deal.

AgustaWestland has denied any wrongdoing and has tried to prod the Indian government to pay for three helicopters it has already delivered as part of the deal, after the government froze payments in February.

"CBI has registered a preliminary inquiry," said a spokesperson for the Central Bureau of Investigation (CBI), an agency like the FBI in the United States. The spokesperson, who spoke on condition of anonymity, also told Reuters the inquiry was being carried out following a request from India's defence ministry.

Finmeccanica declined to comment. A spokesman for AgustaWestland said the company had received no communication from Indian authorities concerning the probe.

A source in the Indian defence ministry said that the latest case is in connection with allegations that a brigadier in the Indian army offered to swing the deal for the sale of 197 helicopters for a bribe of $5 million.

Those allegations first surfaced in documents sent by Italian investigators to their Indian counterparts, the source said. The deal has been suspended without being awarded to any company.

AgustaWestland expressed surprise at press reports of an inquiry given the tender was suspended and the company had not made the shortlist for the deal.

Defence Minister A.K. Antony may blacklist AgustaWestland from doing business in the country, a decision that could help the government clean up its image after a series of corruption scandals spanning defence to telecommunications.

Antony, who has a corruption-free image that sets him apart from many politicians, is believed to favour blacklisting the firm. But he could be outvoted by cabinet colleagues who fret it could hamper defence purchases in the future, several government sources have said.

Finmeccanica said in May that it did not expect India to blacklist either the group or AgustaWestland for the time being.

Indian defence deals have been hit by a series of corruption allegations that have plagued sales agreements and hobbled efforts to beef up the armed forces, especially against perceived threats from neighbours China and Pakistan.

India is the world's largest arms importer and has targeted a $100 billion splurge on defence spending over 10 years.

(Writing by Matthias Williams; additional reporting by Lisa Jucca in Milan; Editing by Ron Popeski)