Exclusive: A quid-pro-quo between Rajiv Gandhi and Olof Palme on the Bofors payments?

This is the first time that any official confirmation has been made about a quid-pro-quo which has been a matter of conjecture but never established.
 Exclusive: A quid-pro-quo between Rajiv Gandhi and Olof Palme on the Bofors payments?
Exclusive: A quid-pro-quo between Rajiv Gandhi and Olof Palme on the Bofors payments?

Former Indian Prime Minister Rajiv Gandhi and his Swedish colleague Prime Minister Olof Palme discussed the details of a financial quid-pro-quo before the Bofors gun deal was signed in March 1986. Bofors would pay money to a foundation in Sweden to make it easier for payments to be made to Indians and others. 

This conversation took place on a flight in the latter part of January 1986 when the two Prime Ministers were traveling together. Rajiv Gandhi “urgently requested Olof Palme to receive funds from Bofors as a counter-weight” to payments in India," Sten Lindstrom, the police official who led the investigations has told TNM.

“Olof Palme and Martin Ardbo informed Rajiv Gandhi that the funds could be paid from Bofors to a foundation in Sweden for the purpose of promoting industry and employment in the Karlskoga region” where the Swedish arms manufacturer is located.  This conversation took place towards the end of the negotiations, at a time when the Swedes were worried the contract would be granted to the French whose lobbying in New Delhi and Paris was fierce. The Howitzer contract with Bofors was signed in March 1986. 

This is the first time that any official confirmation has been made about a quid-pro-quo which has been a matter of conjecture but never established. Ardbo who was Managing Director of Bofors was also the chief negotiator in the deal, probably the only person who had full knowledge of all the main players and their political, technical and financial roles. “I got this information from Martin Ardbo some six months before he passed away in 2004,” Lindstrom said. "Remember he was a sick man, unable to leave Sweden because of the warrant against him and I think he wanted to get this off his chest." 

The information, however, came with a rider. If it became public, Ardbo said he would deny it. That had been his position right through the scandal even when he was thrown to the wolves by both governments and Bofors. In his sensational diaries and notes, Ardbo maintained that he would take the truth with him to his grave. “I believe there is more information and knowledge about the monies than Ardbo told me – some of that information can show Sweden’s knowledge about the bribes,” Lindstrom told TNM. Carl Johann Arberg, the Swedish State Secretary at that time was also in the know about the private conversation between Palme and Gandhi.

In a written commitment dated July 4, 1986, Bofors said it would make the payments to a foundation called Berglagsfonden. The contribution to the foundation was SEK 50 million and statutes for the foundation were successfully concluded and confirmed by the government on October 23, 1986. Also referred to as the "Bofors Fond av 1986" the body was meant to be active for five years. "Palme had a problem with accepting any money from Bofors for his party and this was the solution," Linsdtron said, adding that he travelled to Orebro where the foundation is located to confirm the fact of the payments and other details. 

While it has always been suspected that some monies may have been routed back to Sweden, Ardbo confirming the facts that were discussed during a flight between the two Prime Ministers does several things. One, it shows that the Indian Prime Minister was aware of the illegal payments made in connection with the purchase of Howitzers from the very beginning – and this explains his cover up actions from the word go. Second, it shows how Sweden took instructions from India not only in the run up to the signature of the deal but also during the cover-up. Finally, it shows how two democracies colluded to keep facts away from their respective people and the world and how the work of a third democracy – Switzerland – was allowed to wither away to serve political exigencies and a few people in India. 

Interestingly, this note from Sweden - to which TNM has had access - was established following a detailed Letter Rogatory (LR) from India in 2003 asking about the payments to the foundation. The National Democratic Alliance (NDA) was in power then. “I gave the information to the Chief Prosecutor in Sweden to pass on to the Indians and never heard back,” Lindstrom said. The details of the flight conversation was not sent to India, Lindstrom said as Ardbo had told him he would deny it.


 The Bofors-India Howitzer gun deal for the purchase of 410 155mm guns was signed on March 24, 1986. The total value of the deal was US$1.4 billion and a manufacturing contract for almost double that amount making it the biggest contract Sweden had ever signed. Money marked for development projects was diverted to secure the contract and institutions were bypassed. Up to US$10 million in bribes had been paid when the scandal erupted. To date, it is unknown if more was paid, as was contractually agreed to between Bofors and the middlemen. The total amount that was to be disbursed as bribes was three percent to be paid over a period of time with each delivery.

Allegations of bribes to Indians and others first surfaced in a leak to the Swedish National Radio a year later leading to a massive political uproar in India. It was alleged then – and established now – that bribes had been paid. The investigation by Indian journalists (including this reporter) contributed to the fall of the Rajiv Gandhi government in 1989 and the call for fresh elections. In 1997, the Swiss government transferred final documentary evidence from Swiss banks to India. They confirmed all the information which had been ferreted out by journalists and much more. The fate of the boxes remains unknown. “I believe there is a lot of information available with India now – information that would complete what we know till now,” Lindstrom said. The Bofors-India scandal also tarnished Olof Palme's international reputation as a lover of peace given the fact that he and his cabinet colleagues actively lobbied with India for the contract. 

The Gandhi connection

 While a series of payments were made to middlemen and others, information that Ottavio Quattrocchi, a close friend of the Gandhi family, had also been paid remained the most explosive piece of information. 

Ardbo personally handled the AE Services contract which was a front for Quattrocchi. In connection with this bribe, he met a “Gandhi trustee lawyer” in Geneva – it was the first time that the Gandhi name had surfaced in the media investigation. AE Services’ contract was unique. It assured Bofors that the contract with India would be signed within a certain time period failing which it need not be paid. “This is a political payment and people behind this company are no ordinary middlemen,” Lindstrom had told this reporter while handing over the diaries. That payment totalled US$ 7 million and unlike other monies that remained untouched, this one travelled around the world before landing in London. AE Services was a UK based company.

Ardbo had also noted in his notes that links between Q (Quattrocchi) and R (Rajiv) were a problem and should be protected at all costs. This was the main plank on which operation cover-up was constructed by India and stretched to three countries – United Kingdom, Switzerland and Sweden.

One of the first actions of the United Progressive Alliance (UPA) government when it came to power in 2004 was to unfreeze Quattrocchi’s account in London from where he retrieved the bribes. The case was also closed by the UPA government despite the evidence from Switzerland which was sent to India in 1997.

The scandal dealt a blow to Karlskoga where jobs were threatened. When Ardbo had returned to Karlskoga with the India deal in his pocket, he hoisted an Indian flag and announced that not only would the deal spur the region’s economy, it would secure jobs for decades. 

The new evidence comes at a time when there is a move in India to re-open the artificially closed Bofors investigations. While in monetary terms Bofors has been bypassed by other, much larger scams, the Howitzer story is one that damaged every institution in India including the army. In an interview to this reporter, General Krishnaswami Sundarji had said all this was done to save the skin of one person. It has also been called one of the worst political scandals of the 20th century. 

Today’s revelations are an opportunity for the Narendra Modi government to take the lead in dotting the i's and crossing the t's of India's worst corruption scandal to date. Will the government seize the opportunity? The nation wants to know. 

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