Home Business Dutch officials allege money laundering linked to Reliance promoter group

Dutch officials allege money laundering linked to Reliance promoter group

Strongly deny any suggestion of impropriety, full compliance of rules: RTGIL, now East West Pipeline

The Fiscal Intelligence and Investigation Service & Economic Investigation Service (FIOD-ECD) of the Dutch government, which has been investigating the case, arrested three former employees of A Hak, NL, and produced them in court Friday. (Source: FIOD website)

Dutch investigators have alleged that an estimated $1.1 billion in profits earned by Dutch pipeline firm A Hak NL, through over-invoicing services and works rendered to Reliance Gas Transportation Infrastructure Ltd, were “creamed off” to Singapore-based Biometrix Marketing Ltd, a company they claim is allegedly linked to Reliance.

Reliance Gas Transportation Infrastructure Ltd (RGTIL) is now called East West Pipeline Ltd (EWPL). It is a privately owned entity.

The Fiscal Intelligence and Investigation Service & Economic Investigation Service (FIOD-ECD) of the Dutch government, which has been investigating the case, arrested three former employees of A Hak, NL, and produced them in court Friday.

Both Reliance Industries Limited and EWPL issued statements “emphatically” denying any wrongdoing.

The arrests in The Netherlands were made in connection with alleged over-invoicing of materials and services supplied by A Hak International Contractors Asia FZE (a firm set up by A Hak, NL, in the UAE) for building a gas pipeline with RGTIL in India between 2006 and 2008.

A statement by the Dutch Prosecutor’s Office said the arrested former executives of A Hak allegedly received payments up to $10 million for their alleged involvement.

According to case details accessed by The Indian Express, profits of about $1.2 billion were “creamed off” by A Hak International Contractors Asia through “four insurance companies” allegedly using false insurance contracts.

Of this, up to $1.1 billion were invested in two companies allegedly related to RGTIL (EWPL now) through “bearer documents”, the Dutch investigators alleged.

A bearer instrument is a document that entitles the holder of the document rights of ownership or title to the underlying property, such as shares or bonds.

When contacted by The Indian Express, EWPL said the pipeline project was built by a privately owned entity, in which promoters’ private funds were invested.

A Hak was one of the contractors, it said, but denied any wrongdoing.

“No public funds were invested and all borrowings from banks, financial institutions and others have been fully repaid by the promoters. We strongly deny any suggestion of any money having been laundered at any stage during the implementation of the project. Suggestion of such impropriety lacks logic and economic rationale and is emphatically denied,” EWPL said in a statement.

“East West Pipeline project was implemented in full compliance with all rules, regulations and applicable laws. All applicable taxes and duties have been duly paid,” it added. And that EWPL had no branches or subsidiaries outside India including Singapore.

The case details accessed by The Indian Express said bearer documents were later transferred to Biometrix Marketing Ltd through a web of transactions involving about 15 companies based in Dubai, the Caribbean and Switzerland among others.

The investigators have allegedly found that the ultimate beneficial owner of some of these entities, which are said to have routed the money to Dutch officials allege money laundering linked to Reliance promoter group Biometrix Marketing, is James Walfenzao, a Dutch national.

Interestingly, James Walfenzao has been linked to the Reliance Group earlier as well. As per the Swiss leaks, all offshore companies which form part of the Reliance Industries Ltd offshore corporate structure were set up by Walfenzao on April 13, 2005.

Walfenzao is president of The Corpag Group, a fiduciary management expert which specialises in setting up trusts and tax-exempt vehicles in offshore jurisdictions. Corpag Services (Malta) Limited and Walfenzao have also been named in the Paradise Papers leaks.

The Dutch public prosecutor’s office said in a statement that the Dutch firm (A Hak) acted as a so-called “invoice duplicator” — meaning the Indian company was able to claim costs twice from its gas customers.

The real losers “were probably individual citizens in India” as the cost of production of gas is passed onto the consumer, the statement said.

EWPL, however, said that the suggestion that a higher capital cost would result in higher tariff is “wrong” and “not in line with the applicable tariff regulations in India”.

“According to the tariff regulations, the cost of fixed assets to be reckoned for the purpose of transportation tariff is lower of actual cost or the cost normatively assessed by the statutory authority, Petroleum and Natural Gas Regulatory Board (PNGRB). Tariff has been approved for the East West pipeline on the basis of normative cost determined by PNGRB by employing professional consultants which is evident from the tariff order dated 19th April 2010. Hence, the actual cost of setting up the East West Pipeline is not relevant for fixing the transportation tariff,” EWPL’s statement said.

“As a matter of policy and good governance, at all times we have cooperated with the statutory authorities and will continue to do so. It is clear from the media reports that the investigation has proceeded on assumptions and presumptions without factual basis. We once again strongly deny suggestions of any impropriety,” EWPL said.

In a statement, RIL said: “Our attention has been drawn to media reports on purported investigation by Dutch Authorities linking Reliance Industries Limited (RIL) and a gas pipeline laid in India in 2006. RIL or any of its subsidiaries neither set up any gas pipeline in 2006, nor have contracts with any Netherland company for setting up of any gas pipeline and hence the report cannot relate to RIL. RIL has always complied with all rules, regulations and applicable laws and any suggestion of impropriety by RIL is emphatically denied.”

A Hak didn’t reply to an email query from The Indian Express.

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