Ambani's 2007 Swan stake sale involved $4m Swiss funds

The Supreme Court has got into the bring-back-the-black-money game by appointing its own Special Investigation Team (SIT), but there’s little doubt that it is going to be a long haul.

But one case has made considerable progress in terms of the money trail, and it involves the 2G (second generation) spectrum scam. And the Central Bureau of Investigation (CBI) suspects that there could be a link to jailed former Communications Minister A Raja.

A key element in the CBI’s case against Raja is that he had favoured Swan Telecom with licences and spectrum. Anil Ambani’s Reliance Telecom is also alleged to have had a shareholding in Swan - in contravention of the Unified Access Service Licence (UASL) rules which state that no operator can have a stake of 10% or more in another mobile company in the same circle.

The question is: who owns Swan Telecom?

The CBI discovered many complex links between the Reliance Group and Swan - and the trail leads to Switzerland through Mauritius. Funds from Switzerland, routed through a Mauritius-based company called Mavi Investment Fund - with $31 million in free funds around end-2007 - seem to hold the key to unravelling the scam, or at least some aspects of it.

[caption id=“attachment_37017” align=“alignleft” width=“380” caption=“The CBI discovered many complex links between the Reliance Group and Swan.Reuters”] [/caption]

On paper, Shahid Balwa, a Mumbai-based realtor, who’s now in jail, owns a clear majority in Swan (90.1%) through a company called Tiger Traders Pvt Ltd. Reliance Telecom, which is a subsidiary of Reliance Communications, held 9.9% in Swan till 2007-end.

So far, it seems like there is no breach of the telecom policy. But here’s the complication: the CBI says that Reliance Telecom had pumped over Rs 1,000 crore into Tiger Traders through many companies. And that’s why three of Anil Ambani’s top corporate honchos - Gautam Doshi, Surendra Pipara, and Hari Nair - are in the jail on charges of cheating and fraud.

Strangely, Reliance Telecom, with Rs 1,000 crore investment in Swan Telecom, was a minority partner, while Tiger Traders, with a small investment of Rs 99 crore, was the majority stakeholder!

Raja granted a licence along with 2G spectrum to Swan Telecom in January 2008. A month before that (5 December 2007) Reliance Telecom sold its Swan stakes to a Mauritius-based company called Delphi Investments.

The CBI suspects that it was a quid pro quo between Raja and Anil Ambani after the latter’s company was allotted a dual technology licence. (Before this Reliance Communications used CDMA technology for its mobile services; now it had a licence to operate GSM services, too).

The CBI had sent a Letter Rogatory to Mauritius asking who the real owners of Delphi were since Reliance Telecom had sold its entire equity in Swan to Delphi, located in Port Louis, Mauritius in December 2007. The stake purchase was done using funds from Mavi Investment Fund. Mavi, which is a registered foreign institutional investor (FII) in India, is probably only a pass-through vehicle for investors who seek anonymity.

Apart from the ownership of Delphi, the CBI also sought details of 15 other Mauritius-based companies which had flourishing businesses in India.

The money trail in the 2G spectrum scam accidentally led the CBI to discover an amount of US$31 million with Mavi. Like many companies in Mauritius, the official owner holds only 1% in Mavi. The CBI is interested in finding out who invested $4 million from Mavi to buy Delphi (See Editor’s note on changes made to this copy below).

Who owns the rest of Mavi’s $27 million? The formal owner of the company certainly doesn’t and the market buzz is that many Indian diamond merchants and share brokers have stakes in Mavi through which they route investments to India.

Documents received through diplomatic channels suggest that Delphi’s owner is Mavi Investment Fund. A Swiss company had put US$ 4 million in Mavi to buy Delphi. The CBI is now on the Swiss company’s trail, as it still doesn’t know the owner (or owners) of that company.

The investigating agency suspects that a front for A Raja got the 9.9% stake in Swan sold by Reliance Telecom.

Thus the trail of $4 million takes the CBI to Switzerland, but the agency says it is not interested in finding out who owns the rest of the $27 million in Mavi. “Our mandate is to trail the money related to the 2G spectrum scandal and we are going to stick to it,’’ a CBI official said.

Interestingly, the details of all the Mauritius companies sought by the CBI reveal that most of them are ‘one-dollar’ companies. The dummy owners of these companies are Mauritius citizens and each one of them has only 1% in their respective companies. The antecedents of the “others” (Indians), who own decisive stakes, are not known. The CBI may pass these diplomatic documents to the Enforcement Directorate (ED) for further investigations.

Editor’s note: Please note that this is a changed version of our earlier story. We have changed a part of the sentence in the para starting “The money trail…”. _In the previous version, the para read thus: “_The money trail in the 2G spectrum scam accidentally led the CBI to discover an amount of US$31 million with Mavi. Like many companies in Mauritius, the official owner holds only 1% in Mavi. The CBI is interested in finding out who invested $4 million from Mavi to buy Reliance Telecom’s 9.9% stake in Swan Telecom.”