Concerns raised over business relationships and finances of Sudhir Choudhrie and his son Bhanu, from one of India’s most high-profile families

This article is more than 3 years old

This article is more than 3 years old

When Sir John Rose stepped down as chief executive of Rolls-Royce in March 2011, the company had been transformed.

The so-called “Lion of Rolls-Royce” had been in charge for 15 years and overseen the expansion of one of Britain’s best-known blue-chip companies into an engineering giant on the world stage.

The firm that had made engines for Spitfires during the second world war had become a £13bn leviathan. Yet, cracks in its carefully crafted corporate image were about to emerge.

Exactly how it started is still unclear, but by December 2012, Rolls-Royce had put itself on red alert. It acknowledged, somewhat opaquely, that it had a problem – and the Serious Fraud Office said it was investigating.

At first, the SFO focused on the company’s activities in the emerging markets of India and China, but the list of jurisdictions was to grow.

Before long, the SFO declared it had opened a criminal investigation into allegations of bribery and corruption at Rolls-Royce.

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In an unusual move, the company, which had conducted its own internal review of its business, made clear the seriousness of the situation. “It is too early to predict the outcomes, but these could include the prosecution of individuals and of the company. We will cooperate fully,” Rolls-Royce said.

In an effort to get ahead of the problem, but in a way that underlined its predicament, the company appointed Lord Gold, a former head of litigation at City law firm Herbert Smith, to review Rolls-Royce’s “compliance procedures”.

Four years since the first reports of potential problems, and three years since the SFO began its inquiry in earnest, the scale of the investigation has become apparent.

The Guardian has established the SFO team is now 30-strong, and is being supported by so-called “blockbuster funding” – money from the Treasury to cover exceptional costs.

“It soon became clear that it was multiple jurisdictions, across several strands of its business,” said a source with knowledge of the inquiry.

So what has happened in the past three years?

The SFO has given little away and has only confirmed making two arrests. They happened in February 2014, when it emerged that two businessmen Sudhir Choudhrie and his son Bhanu were questioned as part of its wide-ranging investigation into the activities of Rolls-Royce.

Facebook Twitter Pinterest Rolls-Royce staff working on the BR725 engine. Photograph: Rolls-Royce Deutschland/Rolls-Royce plc

Neither has been charged and a few months after the arrests, the two men had their bail conditions lifted, but the Guardian understands the SFO’s inquiries are continuing.

The early focus on the Choudhries has been intriguing – their lawyers said they had not and have never been middlemen for Rolls-Royce, nor paid bribes to government officials or acted as middlemen in defence deals.

In short, they say they have done nothing wrong.

So who are they? The Choudhries are among the wealthiest and best-known families in India. They have a wide range of business interests and have become familiar faces in political circles in the UK too.

They are entrepreneurs and philanthropists, and have also been major donors to the Liberal Democrats. They and their extended families own a number of mansions in the heart of London’s Belgravia.

With such a high profile, they have not avoided scrutiny – or criticism.

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In India, for instance, Sudhir Choudhrie was investigated in 2004 by India’s Central Bureau of Investigation (CBI) – the country’s foremost law enforcement agency – over suspicions related to alleged payoffs to a company agent.

Years later the investigation was dropped, with Choudhrie insisting he had been a victim of a plot to damage his reputation. His lawyers told the Guardian: “Sudhir Choudhrie was investigated but was never arrested. He was subsequently cleared of all allegations of wrongdoing and the investigation as a whole was closed in 2011.”

In a closure report filed in a Delhi court that year, the CBI stated it did not find any evidence to suggest there was any payoff to Choudhrie or his companies.

A list compiled and disseminated by the CBI names Sudhir Choudhrie as one of 23 “unscrupulous persons” on a list of “undesirable contact men”. The list, which has been seen by the Guardian, is undated but is understood to still be in circulation in the Indian government. Choudhrie has challenged its authenticity. His lawyers say that although he has been made aware of it, he has no knowledge of its content and has never been contacted about it by any official body.

Separately from their alleged interaction with Rolls-Royce, there have been other occasions when the family’s finances have raised concerns.

One Swiss banking source has described to the Guardian and BBC how money transfers between the Choudhrie family group’s companies sparked an anti-money laundering alert at Clariden Leu, which was then a private banking division of Credit Suisse.

The Guardian has seen a report created by the risk management team at Clariden Leu in October 2008, which highlights the flow of vast sums that triggered the inquiry.

The report analysed 18 “account relationships” and looked at money transfers between companies owned or managed by members of Bhanu Choudhrie’s extended family. One was Belinea Services Limited, which received €37,200,000 (£33,400,000) from Rosoboronexport State Corporation, the Russian state’s arms dealership. Bhanu Choudhrie was a director of Belinea.

Facebook Twitter Pinterest Visitors at the Rosoboronexport stand at the 2015 Dubai Airshow. Photograph: TASS / Barcroft Media

In the year leading up to the report, another company, the Seychelles-registered Cottage Consultants, received €28,100,000 from Rosoboronexport and transferred €22,700,000 to an Isle of Man bank.

On company documents, Bhanu Choudhrie is described as the “first and sole director” of Cottage Consultants. The company is owned through bearer shares, which means it is owned by whoever physically holds the share certificates. Bhanu Choudhrie has denied being a beneficial owner of the company.

Cottage Consultants had also received €9,700,000 from an entity called “ABC”, with the money originating from Vnesheconombank, a now-sanctioned Moscow bank.

The Guardian asked Bhanu Choudhrie about the transfers that had alerted Clariden Leu. His lawyers said he had no knowledge of the internal report and any suggestion that these payments were improper or illegal was false and defamatory.

The twists and turns of the Choudhries’ business empire have rarely been out of the news in recent years, but it is their apparent knowledge of the bureaucracy and red tape in their home country – and how best to navigate it – that might make them seem ideal middlemen for any company hoping to break into the lucrative Indian market. One such firm is alleged to have been Rolls-Royce.

The firm was involved in the the massive – and massively complicated – Hawk deal, which involved India buying Rolls-Royce engines and BAE-produced planes.

A first tranche of this was agreed in 2004, a second in 2010. The total value of all the contracts involved came to £2.1bn.

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The parts were assembled at Hindustan Aeronautics Limited, an Indian state-owned aerospace and defence firm, where Sudhir Choudhrie’s uncle had been the chairman.

The Guardian has spoken to one Rolls-Royce source. The source said the Choudhries and their companies had worked with the firm during this period.

“You had to work your way and it took time,” said the Rolls-Royce source. “We needed to have Indian partners or a sister company in India.”

The source said local fixers would help arrange the deal, before senior Rolls-Royce figures arrived to complete it.

The Guardian and the BBC understand that millions of pounds of Rolls-Royce money went to the Choudhrie family.

Even if this were true, it does not mean there has been any wrongdoing. Using middlemen is not illegal, so long as they abide by the rules.

The Guardian asked the Choudhries to explain what role, if any, they – or their companies – had played in the Hawk deals. Lawyers for the Choudhries said they had not been middlemen or intermediaries and that any allegation that Rolls-Royce had paid them for the purpose of securing deals in India was untrue.

The Guardian has been told about a curious meeting between Bhanu Choudhrie and a British businessman.

It came from a banking source who spoke to the Guardian. The source alleged that Bhanu Choudhrie and a former BAE executive called Peter Ginger visited Geneva together in 2007. Ginger was BAE’s president in India until 2005.

The Guardian has been told that during this trip, Ginger allegedly deposited hundreds of thousands of pounds in cash into a Clariden Leu account from another account he held.

By 2009, the account, which was called No 120467 Portsmouth, held about 1m Swiss francs.

The Guardian has seen a copy of a bank document that shows the details of the Portsmouth account.

Separately, documents discovered among the Panama Papers – the investigation into the Mossack Fonseca law firm carried out by the Guardian, the International Consortium of Investigative Journalists and Süddeutsche Zeitung – also reveal the family of Peter Ginger asking for a payment from an educational foundation with an apparent link to Bhanu Choudhrie.

Facebook Twitter Pinterest The Mossack Fonseca law firm sign in Panama City. Photograph: Carlos Jasso / Reuters/Reuters

An email seen by the Guardian shows the Panamanian foundation paid to cover the university costs of one of Ginger’s relatives. In one email, a member of the family requested money from the foundation to pay an allowance. “[…] is now back in [university ] for the summer term so we would be most grateful for payment to the same account as before,” he wrote.

He added: “I hope this is in order and meets with [the] foundation council’s approval. Please don’t hesitate to contact me or […] if you have any questions.”

The payment was for £540 for four weeks of “food and subsistence”.

We asked Ginger and Choudrie to explain these apparent interactions. Is there a benign explanation? Could the banking source in Geneva have got it wrong? Lawyers for Bhanu Choudhrie insist he has. “Our client has no knowledge of what bank accounts have been set up or operated by Mr Ginger or what sums (if any) he has deposited in them in cash. Mr Choudhrie did not pay any bribe to Mr Ginger.”

They added: “Our client has no knowledge of any payments made [by the Foundation].”

The Guardian asked Ginger why he visited Geneva with Bhanu Choudhrie, and why the Panamanian foundation was funding his relative’s education. He declined to comment on the allegations: “I am not prepared to talk about it at all. I’m not going to respond to the media at all.”

BAE Systems said it had “no record indicating that Mr Ginger had a personal financial relationship with Mr Choudhrie during the period that Mr Ginger was employed by the Company”.

The episode may be nothing more than an intriguing vignette, but the SFO may have an opportunity to judge for itself. The source, who asked not to be named, has offered to speak to the SFO’s investigators.

The Choudhries had to wait seven years to be cleared after Indian authorities launched an inquiry – the SFO has been looking at them, and at Rolls-Royce, for a mere three. And the investigation appears to be broadening even now.

Panorama: Rolls-Royce will be broadcast on BBC1 at 8.30pm on Monday 31 October.