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Former ‘partners’ accuse each other of fraud in massive defence deals

Edmonds Allen has alleged that his estranged associate Abhishek Verma was involved in money laundering, illegal dealings with defence manufacturers, forgery and tax evasion, charges that have been denied by Verma.

T.R. VIVEK  NEW DELHI | 13th May 2012

Edmonds Allen (centre) receiving an honorary doctorate from University of Cumberlands.

t seems a case where truth tumbles out when two "business partners" have a public falling out over vast sums of money. In the last week of April, Claxton Edmonds Allen, a New York real estate consultant, started circulating documents totalling nearly 500 pages that alleged that his estranged associate Abhishek Verma was involved in money laundering, illegal dealings with defence manufacturers, forgery and tax evasion. Allen further accused Verma of attempting to manipulate trade policy to benefit specific foreign defence firms. Allen claims he was Verma's business associate for nearly a decade and that he handled some of his investments in the United States. Since January this year, Allen has written to the FBI and a host of Indian authorities including the Defence Minister, and the bosses of CBI and the Enforcement Directorate detailing what he claims are Verma's alleged misdeeds.

While new "facts" emerge each passing day as the slanging match between the two sides intensifies, the claims and counter claims of both Verma and Allen need to be thoroughly investigated. After all, allegations of influencing matters of national security, and large-scale money laundering carry grave consequences.

Allen's "proof" against Verma consists of lengthy email conversations, credit card and banking transactions, and communications with defence companies. He claims he is willing to come to India and depose before any agency and wants to be enrolled as an informer under the Central Economic Intelligence Bureau's 20% reward policy. Till a week ago, Allen claimed that he hadn't even got an acknowledgement for his voluminous letters to various Indian agencies. But now he says the same agencies are keen to pursue the matter against Verma.

In a strongly worded letter in February to the Enforcement director, eminent jurist Ram Jethmalani said that Verma, a "protected favourite" of the CBI seems involved in ownership of $205 million, and that Allen was willing to help investigations by coming to India and providing ocular and documentary evidence.

Abhishek Verma, the son of former Congress MP and spokesperson Srikant Verma, for his part claims that Allen's documents are "forged and elaborately fabricated". Those close to Verma say that he will initiate legal proceedings and "expose" Allen and the assorted dirty tricks departments working overtime to malign him. One person close to Verma claims that it is easy to hurl accusations against him since he has been featured in controversies for the last 17 years. "It's like arresting a one-time thief for any crime that happens in a village," he says.

The flamboyant Verma has had a troubled business career. Born into an influential Congress family, he was accused in the naval war room leak case along with fellow arms dealer Ravi Shankaran. He spent a couple of years in Tihar jail, but according to photographs supplied by Allen, in relative comfort using his mobile phone freely to conduct business from the jail and procure a steady supply of luxuries, charges that Verma dismisses as false.

ABHISHEK VERMA'S DEFENCE

Abhishek Verma, who claimed to have suffered a heart attack two weeks ago, agreed to meet this correspondent at his south Delhi Farmhouse but cancelled the appointment at the last minute since he had suddenly developed "high blood pressure". However, he categorically denied any links with Edmonds Allen or Ganton. He dubbed the documents Allen has supplied to the CBI and FBI as forged and fabricated. It is likely that Verma will come out with his own set of papers in the next few days to challenge the credibility of Allen and his claims. One person close to Verma pointed out: "Even if there was one per cent truth in the matter, he would have been in the back foot. But in this case he is on the offensive." Here's a gist of Verma's defence:Image 2nd

• Members of Team Anna led by Prashant Bhushan and Arvind Kejriwal were misled in releasing some forged and fabricated documents to the press on the 26 April 2012. "They were misled by a disgraced former Deputy Director of the Enforcement Directorate against whom I am an approver of the CBI court in a case of corruption and misuse of his official powers for the past decade. The disgraced former officer of the Enforcement Directorate and his associates in the seats of power who (sic) are still actively and openly helping him," he said.

• Prashant Bhushan himself had questioned the authenticity of these documents.

• The allegations are baseless and incorrect as they are based on concocted documents circulated at the behest of persons who are engaged in litigation with him.

A partnership gone sour

The business relationship between Verma and Allen, who has suddenly turned whistleblower, is rather strange and extremely complicated — not unusual in the world of arms dealers. According to Allen, in 2005, he set up a company called Ganton in the tiny tax friendly US state of Delaware at the behest of Verma, and to ostensibly invest some $205 million he had in spare. That wasn't unusual. Almost 50% of the Fortune 500 companies in the US are incorporated in Delaware, because unlike other states like New York it taxes only the income and not the assets.

With a power of attorney from Verma, Allen claims he acted as the president of the company which subsequently opened an Indian subsidiary called Ganton India, which had Verma's Romanian fiancée Anca Neascu as the managing director and Gili Golan, a friend with an Israeli passport, as the chief operating officer. Allen claims, somewhat implausibly that it was only as late as 2011 when he discovered the dubious nature of Verma's businesses and decided to go public with the details.

Documents shared by Allen include a January 24, 2012 legal notice to him from the New York based law firm Schechtman Halperin Savage (SHS) on behalf of Verma asking Allen to release the $205 million along with interest and profits accrued from money market operations in US and other jurisdictions. However Verma claims he was in no way involved with Ganton at any point of time. That implies that the legal notice from SHS too was cooked up. The consequences of perjury and turning to investigating agencies like US FBI with forged documents can be severe, in case Verma is correct.

Who is Edmonds Allen?

The story of how the two got together or at least Ed Allen's version of it, is the stuff of Bollywood. "At the end of 1999, a very bright American investment banker called Stephen Karolyi who I knew for many years and his Venezuelan wife moved to India in 1999 to sell kidnap insurance. The Karolyis met Verma and introduced him to me," says Allen. According to him, Verma in April 2000 said he had $200m stashed away in Europe and wanted someone to handle it. "I told him to invest in US because if you invest in US you can get to it unlike in tax havens such as Caymen Islands which were coming under attack from various governments. I've met people in the money laundering business in US. Tax havens were closing down. A friend of mine actually put BCCI [a dubious Luxembourg bank started by a Pakistani financier Agha Hasan Abedi] out of business. I asked Verma to put it [$205 million] here because he had to pay tax on it somewhere, so why not in America?" says Allen.

Ed Allen's career is the classic American Dream, and some facts about it are rather odd. He graduated from Virginia's Washington and Lee Law School in 1968 and joined a Wall Street law firm. After three years he quit to join General Electric Credit Corporation and specialized in structuring tax oriented deals. After a stint with Merrill Lynch he started his own real estate finance firm. When the housing market collapsed in 1974 he dabbled in film distribution, selling low budget Italian and French movies in North America. When that too didn't work, he joined the board of an oil and gas firm, which soon went bankrupt as did a company called Air Florida, which he helped restructure by selling its assets. Then business took him to Turkey where he donned the role of a firearms distributor for Remington. Since 1982, Allen has served as president of Compass International Corporation, an investment banking firm involved in leverage buyouts and venture capital efforts with real estate interests and coal mining operations in Ohio and Kentucky. Currently, besides being the president of Ganton, he's a partner at the New York firm Park Avenue Realty Consultants. In April this year, the University of Cumberlands based in Williamsburg, Kentucky gave him an honorary doctorate in administration for "making a name for himself as a professional of high ethical standards".

Truth or Dare

Given his training as a lawyer and a long career in the cut-throat world of leveraged buyouts and vulture funds, it is surprising that Allen went along unsuspectingly to partner Verma. Didn't he do a background check on a man who claimed to have $205 million worth of investible surplus? "Look, this was in 2000 before the days of Google. And it's hard to check out a name like Abhishek Verma. That's like looking for a John Smith in the US. There are millions of them. He told me he had made his millions exporting computer software from India. The Karolyis spoke highly of him. They said Verma came from a very well-known family. He was a very nice, very charming and attractive man. He is one of the most charming men you could ever meet. I believed him; I really wanted this to succeed. Maybe in hindsight I was naive," says Allen. According to the deal, Allen says he was to get 10% as commission on the $205 million and the profits earned from it. But for all his efforts over the last ten years, Allen claims he has made not more than $50,000.

When in January 2011, Rheinmetall Air Defence AG (a company blacklisted by India which refrained from participating in the recent Defexpo in Delhi) from Zurich transferred $530,000 to Ganton's US account, Allen as the company's president says he was clueless as to why this "largesse" was given to it. After all, he claims, he wasn't aware of any services Ganton had rendered to Rheinmetall. This is where it gets murkier. In what seems like the transcript of email conversations with Allen someone using the email id This e-mail address is being protected from spambots. You need JavaScript enabled to view it explains the transaction's logic (Allen claims it is one of the many email addresses Verma continues to use). The email says that the $530,000 received as "consultancy payments" from Rheinmetall were to be paid as kickbacks to people in India for a "job well done". "These payments in India were to be paid by us and balance margin (profit)was to be kept by us. However job in India ws delayed due to reasons beyond our control as the control is with the Govt/Military... Thus we are holding on to the funds..." Allen claims Verma refused to pay Rheinmetall the money by telling them that a suspicious JP Chase bank had frozen the amount. "He forged a Financial Crimes Enforcement Network letter to this effect to dupe Rheinmetall," says Allen. Again, this charge is denied by Verma, who claims that this and similar claims by Allen are fabrications.

Then Allen produces Ganton's JP Morgan Chase Bank debit card transaction statements to allege that Verma milked cash from Rheinmetall type of deposits. The statements show numerous cash withdrawals in the region of $200-$300 multiples times in the same day from ATMs in Delhi's Khan Market and Vasant Vihar. There are also several transactions made at luxury stores such as Louis Vuitton and Hermes, and Victoria's secret lingerie purchases. However, there is nothing in the bank statements that clearly indicates Verma was using it.

Even in the dealings with defence firms such as Agusta Westland, an Italian helicopter maker that wanted to sell in India though Ganton or the Green state owned arms maker HDS, Verma's name never figures in the various agreements and documents Allen claims to be the smoking gun.

A persistent Allen now says that he is in the process of collating more evidence from the 12,000 or so email correspondences he has had with Verma, his associates, banks and defence companies Ganton was dealing with.

Can the Indian investigating agencies get to the truth cutting impartially through the maze of dark claims and counterclaims?

 
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