AP declines refund in Volkswagen deal

Deccan Herald - Internet Edition: "The government said it rejected the repayment offer by the car major as the CBI was probing the scandal.



The Andhra Pradesh government on Tuesday refused Rs 11.6 crore ($2.6 million) from German car manufacturer Volkswagen. The amount had been allegedly embezzled by its CEO in India Helmut Schuster after pressurising the state government to part with it in return for setting up a car manufacturing unit in the state.

The surprise turn of events came after days of speculation about the government’s response to the Volkswagen repayment offer, apparently a face-saving measure.

It seemed to be a last-minute decision since Volkswagen’s special envoy Frank Elbe had been in the city for two days and had even taken an appointment with Chief Minister Y S Rajasekhara Reddy on Monday. The meeting was postponed to Tuesday. Mr Elbe met Mr Reddy only to be told that the cheque would not be accepted.

A statement from the chief minister’s office said the government refused to accept the money on the grounds that the Central Bureau of Investigation (CBI) was probing the financial scandal. The statement said Volkswagen was still considering setting up its plant in the coastal city of Visakhapatnam.

The money had been paid by the state government in January this year to a fake company Vashishta Wahan for setting up Volkswagen’s car factory in Visakhapatnam. Vashishta Wahan was reportedly floated at the instance of Mr Schuster, who allegedly siphoned off the money.

A team of state officials would visit Germany this year to discuss the project with Volkswagen, the statement said.

“In view of the ongoing CBI inquiry into the issue, we have declined to accept the money. We are more interested in seeing that Volkswagen sets up its car plant here,” Rajasekhara Reddy told media after meeting Frank Elbe here.

Owning moral responsibility for the damage caused by Schuster’s suspected illegal dealings, Volkswagen had on July 21 announced that it would return the money to the state government, thereby putting the latter in a fix over whether or not to accept the money as the CBI has stepped up investigations.

The scandal had surfaced in July when Schuster was sacked by the company for alleged misdealings. Corruption charges rocked the state government forcing the chief minister to seek a CBI probe and transfer Minister for Major Industries Botcha Satyanarayana.

CBI investigations showed that Ashok Jain, one of the promoters of the front company, is already in judicial custody while the CBI is awaiting the return of another director Jagdish Alagar Raja, currently in Germany to cooperate with authorities in probe against Schuster.

The CBI reportedly found that Schuster siphoned off Rs 3.6 crore while Raja gave a loan of Rs 5 crore to V G Joseph, chairperson of Garden City College in Bangalore, and paid another Rs 2 crore to his sister-in-law Gayatri in Chennai. Joseph, who had claimed that the money was paid to him for land purchased by Raja, recently returned the money to the CBI.

The CBI is also making efforts to recover the money from Gayatri, who is now in London. "