India Charges Former Telecom Minister, Executives :: WSJ

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NEW DELHI—India's federal investigation agency Saturday charged former telecommunications minister Andimuthu Raja with cheating and forgery, and named Anil Dhirubhai Ambani-headed Reliance Communications Ltd. and its unit as among the beneficiaries in the case of an allegedly rigged radio-spectrum sale in 2008, which has put immense pressure on the ruling government.

In a high-profile case, that has embarrassed the country's prime minister, the Central Bureau of Investigation also charged Raja with conspiracy, criminal misconduct and abusing an official position, and has also named three senior executives at Reliance Telecom Ltd.--Managing Director Gautam Doshi, and senior vice presidents Hari Nair and Surender Pipara--for abetment to crime.

Reliance Telecom runs global systems for mobile communications, or GSM, services in eight of India's 22 service areas, while Reliance Communications, India's second-largest mobile-phone operator by subscribers, is in 14 service areas. Chairman Anil Ambani has already been questioned in the case.

The CBI has been probing allegations that the sale of spectrum was done at below market price. Other allegations included bringing forward the cut-off date for filing applications, designed to benefit some companies. The agency has so far arrested six people in the case, including Raja who resigned late last year following the allegations.

It estimated the government has lost more than INR300 billion (more than $6.67 billion) of potential revenue, much higher that its previous estimate of INR220 billion. A report by a federal auditor last year estimates the potential losses at close to $40 billion.

The agency filed charges against former telecom secretary Siddartha Behura and R.K. Chandolia, the former minister's then personal secretary, accusing them of conspiracy, cheating, criminal misconduct and abusing an official position. Raja and his aides said they would contest the charges against them. They have previously denied any wrong doing."The investigation relating to the issuance of new Unified Access Services Licences and subsequent allocation of second-generation spectrum during 2008-2009, has established commission of offences punishable" by the then telecom minister Raja, his aides and some companies, the CBI said in a statement.

Swan Telecom Pvt. Ltd.--now called Etisalat DB Telecom Pvt. Ltd.—and Unitech Wireless Ltd.—the telecom arm of real estate firm Unitech Ltd.—were also named as having gained from the irregularities.

The agency accused officials at Reliance Telecom of cheating the government by structuring a deal in a such a way that the Reliance company had an equity holding in Swan Telecom which is above the permissible limits.

Reliance Telecom held a 10.71% stake in Swan Telecom, which applied for license in March 2007. This would violate Indian regulations, which don't allow telecom operators to own 10% or more of any rival in the same service areas.

The agency said the three executives at Reliance Telecom made commercial decisions at Swan Telecom and its related companies.

The CBI also alleged Reliance Communications itself benefited from obtaining licenses to offer dual technology services using both the GSM and code division multiple access network, ahead of competition.

"The chargesheet is being studied, and as legally advised, the persons so named deny the charges and will defend themselves in the appropriate legal proceedings," Reliance Telecom said in a statement. Reliance Communications wasn't immediately reachable for comments. Etisalat DB Telecom couldn't be reached for comments.

Unitech Wireless also denied any wrongdoing and said it will argue its case in court.

The charges against Raja--the second instance of a former cabinet minister of the ruling party being charged with corruption--marks an intensification of the government's efforts to clean up its image, and that of India's telecom sector which has been a symbol of the country's economic growth in the last decade or so. India is the second biggest and the fastest-growing telecom market in the world.

Former telecom minister Sukh Ram--also a member of the then ruling Congress Party--was convicted on corruption charges in 2009 after he was arrested in 1996. A trial is yet to begin in one of the cases against him.

The government has been under severe pressure after a raft of corruption cases blew up towards the end of last year, including the graft-tainted Commonwealth Games in October and allegations that apartments in a Mumbai housing project intended for war heroes and widows went to politicians, bureaucrats and their relatives.

India was ranked 87th of a 178 countries--below nations such as Serbia, Ghana and Botswana--in terms of a lack of transparency and corruption in a global ranking of least corrupt nations by non-governmental organisation Transparency International in its 2010 report. Denmark, New Zealand and Singapore were ranked the highest at number one for being the least corrupt.

The Indian government's efforts come even as crucial states such as West Bengal and Tamil Nadu are going to polls over the next two months. Prime Minister Manmohan Singh has repeatedly vowed to stem corruption.

The high-profile case of faulty bandwidth allocation has seen other top industrialists like Tata group's R.K. Krishnakumar and Prashant Ruia of Essar Group being among those questioned by the probe agency.

Apart from the CBI's views, the federal auditor--Comptroller & Auditor General of India--said that as many as 85 of 122 licenses that were bundled with bandwidth were issued in 2008 to ineligible companies.

Raja had been the telecom minister from May 2007 to Nov. 14, 2010, spread across two successive terms of the central government. It was during his terms that the controversial 2008 allocation of spectrum took place.

The agency Saturday also filed charges against the directors of Swan Telecom, Shahid Balwa and Vinod Goenka, for cheating and forgery.

Charges were also filed against Sanjay Chandra, the director of Unitech Wireless--for cheating. Chandra couldn't be reached for comments.

Granting licenses in January 2008 to Swan--which later sold a 45% stake to Emirates Telecommunications Corp.--and Unitech, which later diluted its stake in its mobile phone venture, Unitech Wireless, to Norway's Telenor AS, cost the government billions of dollars in potential revenue.

Shahid Balwa is a co-founder of Swan, and also of real-estate company DB Realty Ltd. Balwa said he would contest the charges against him. Swan's Goenka wasn't immediately available for comments.

The case is also being investigated by the Enforcement Directorate, which probes violations of foreign exchange laws and money laundering, under the supervision of the Supreme Court. Two separate parliamentary panels are also probing the case.

"There is enough incriminating evidence against the accused persons," the judge at the CBI court said. He also issued summons to all accused in the case to appear before the court on April 13. The CBI said it would submit supplementary charges in the case on April 25.