The Hindu : Front Page : CBI probe sought into Volkswagen deal

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Friday, Jul 15, 2005

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CBI probe sought into Volkswagen deal

S. Nagesh Kumar

Botcha Satyanarayana relieved of Major Industries portfolio; Telugu Desam seeks his dismissal

Andhra Pradesh Chief Minister Y.S. Rajasekhara Reddy addressing a press conference in Hyderabad on Thursday. — Photo: K. Gajendran

HYDERABAD: Andhra Pradesh Chief Minister Y.S. Rajasekhara Reddy has decided to seek a probe by the Central Bureau of Investigation (CBI) into the Volkswagen car project. He also relieved Botcha Satyanarayana of his Major Industries portfolio.

The CBI would be asked to investigate "generally all issues," including the role of Mr. Satyanarayana and officials in transactions aimed at persuading Volkswagen AG of Germany to invest upwards of Rs. 4,000 crores to set up a car factory in Visakhapatnam, Dr. Reddy said here on Thursday.

The probe will run parallel to an investigation by the public prosecutor of Braunschweig, Germany.

Equity participation

On the advice of Dr. Helmuth Schuster, head of Volkswagen India till June 15, the Andhra Pradesh Industrial Infrastructure Corporation (APIIC) released the equivalent of Rs. 11 crores towards equity participation in Vashista Wahan Private Ltd., a special purpose vehicle created at the instance of Volkswagen.

Dr. Reddy said he was shifting Mr. Satyanarayana to facilitate an independent inquiry. This is the second case referred by the Congress Government to the CBI, the first being the murder of Telugu Desam MLA Paritala Ravi.

The Chief Minister confirmed that the Rs. 11 crores released by HSBC Bank to Vashista Wahan "has gone out." The CBI would investigate why and where the money had gone. But "if a particular officer has swindled the money, it is their [Volkswagen's] responsibility since they are the principals and a multi-billion [dollar] company at that." He released copies of a letter e-mailed by Volkswagen confirming that Jagadeesh Raja of Vashista Wahan had arrived in Hanover on July 13 and would meet the authorities to clear the situation.

Talks started in 2002

Dr. Reddy said negotiations with Volkswagen for setting up a car factory had started in 2002, when N. Chandrababu Naidu was Chief Minister. Dr. Schuster held negotiations with the Governments of Maharashtra, Tamil Nadu, Rajasthan and Andhra Pradesh.

Ministerial delegations from the State visited Wolsberg, headquarters of Volkswagen, twice and met Dr. Schuster.

Along with the chief adviser of the Volkswagen India project, Ashok Jain (whose services have since been withdrawn), Dr. Schuster met Mr. Naidu in Hyderabad.

After the Congress came to power in May 2004, Dr. Schuster and Mr. Jain met Dr. Reddy and secured confirmation of the Government's continued interest in the project.Dr. Reddy's announcement did not satisfy the Opposition Telugu Desam Party. Demanding Mr. Satyanarayana's dismissal, Mr. Naidu alleged that there was "a clear collusion" between some bigwigs in the Government and Dr. Schuster. "Merely changing his portfolio is no punishment."

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