Pune businessman Hassan Ali Khan was recently served a Rs 36,000-crore income tax notice for alleged money laundering. The Sunday Express looks at the evidence against the man and traces his story. By Ritu Sarin,Mohan Kumar & Chandan Haygunde It has the makings of one of the biggest foreign exchange scandals. Ever. And proof of the extent of the alleged violations came on December 22,2008,when the Enforcement Directorate (ED) slapped a show-cause notice on Pune businessman Hassan Ali Khan for acquiring and holding a staggering $8 billion (Rs 36,000 crore approximately) in a single bank account in Zurich,Switzerland. The 18-page show-cause notice,available with The Sunday Express,has demanded that the businessman immediately repatriate the amount,with updated interest,through banking channels to India. Khan has been given one months time to reply to the show-cause notice and also explain how his funds grew from an initial deposit of $1.5 million in 1982 to a balance of $8 billion by 2006. Khan,55,was famous in Punes business circles as a flamboyant businessman and racetrack owner. On January 7,2008a day after raids by the Income Tax Departmenthe admitted to ED officials that he had NRI status at Dubai only till 2003. This meant that he would not have escaped FEMA. A day later,the ED recorded the statement of one of Khans associates,Kashinath Tapuriah,who confirmed the existence of documents proving the $8 billion deposits and also revealed Khans links with others in the unfolding money laundering scandal. Arms dealer Adnan Khashoggis name was also found sprinkled in the impounded documents with a clear indication of at least one proposed $300 million deal between them for a chateau that Khan purchased in Switzerland. The evidence Correspondence between Khan and top managers of the UBS AG Zurich bank and bank statements,requested by Hassan himself,showed his last balance as $7.78 billion. Statements of both Philip Anandraj and Tapuriah (described as Khans adviser) have proved to be very damaging for him since they unspooled several of his connections and foreign exchange transactions. Tapuriah,for instance,named two politicians as the ones who allegedly referred Khan to him (A.S. Chowdhary and Vijay Bhaskar Reddy). During the probe,the ED obtained a document notarised by one Nicolas Ronald Rathbone Smith,of the Notary Public of London,who certified the genuineness of the signatures on Khans passports. Khan,in this notarised statement of 2003,had allegedly mentioned the opening of the first UBS Singapore account in 1982 and noted how Adnan Khashoggi had assisted in the account being transferred to UBS in Zurich and how he later wanted to purchase a hotel in Switzerland. ED officials contacted in Mumbai allege that a considerable portion of Khans Swiss bank funds could have been converted to AAA UBS bonds and transferred to other banks there. It is suspected that the accounts with such huge deposits contained money originating from various international destinations and are proceeds of heinous crimes such as terrorism,arms trade,gun running,corruption and organised forgery,fraud and other crimes, a confidential report filed by the ED in January 2008 and accessed by The Sunday Express,states. The EDs show-cause notice is also ominous,for it says,The (present) complaint is restricted only to the dollar account with UBS AG,Zurich. Further investigations in respect of the other issues involved in the case are in progress and the same will be dealt with separately. The fallout of the scam on Khan has been immediate. Even as his panel of lawyers is understood to be drafting his reply to the show-cause notice,his opulent houses in Pune and Mumbai,his 32 horses and his vehicles (a Mercedes and a Porsche,among others) have been attached by the I-T Department. The Mumbai Police have lodged an FIR against him for allegedly possessing three passports. In fact,it was after being on the run for almost a year that Khan finally made his appearance last month and surrendered before the Worli Police as he ran out of options to dodge the authorities. He was crippled as his passport as well as that of his second wife Rheema were seized by the Department and later impounded by the ED. According to a top ED official,stage one of the investigation is focused on Khan,after which the role of his wife as well as those of Anandraj and Tapuriah will be probed. The man Khan settled down in Punes posh Koregaon Park in 2000 after marrying Rheema,daughter of Pune-based horse trainer Abbas Ahmed Abbas. They first met each other at the Mahalaxmi racecourse in Mumbai. Khan divorced his first wife Mehboob Unnisa Begum,with whom he used to live in Hyderabads Banjara Hills,and moved to Pune. Abbas,who now lives in a middle-class locality of Pune,told The Sunday Express,My daughter is married to him. I have nothing more to say. I have no comments on the cases filed against him and the media reports. According to Khans account to investigating agencies,his father was an excise officer in Hyderabad,where Khan studied till Class 12,and went on to sell antiques,claiming to be a descendant of the Nizams family. He then started a car rental service in 1970,before switching,in 1988,to a metal trading business in Dubai. Khan said this business,called Great Ventures,closed down in 1993. Meanwhile,Khan entered the world of horse racing in Hyderabad in 1991 with only two horses. Then in 1994,he began racing at Mumbais Mahalaxmi racecourse,where he also was a punter. Soon,he expanded his horse racing activities to Pune,Bangalore,Chennai and Delhi. Police say his horses even began racing in Switzerland and London. Khan has reportedly won four races and was also a member of the Royal Western India Turf Club (RWITC),Pune. According to Imtiyaz Sait,a trainer at the RWITC,Khan used to sit alone in a corner of the members enclosure at the racecourse. None of us knew him well. He kept to himself, Sait said. Many of his other ventures were failures. After closing down the car rental and then a scrap business,Khan started a jewellery shop in Kuwait in partnership with a man called Hussain from Jammu and Kashmir in 2006-07. Pune Police say they interrogated Khan in March 2007 soon after his name appeared in the media for his alleged involvement in the multi-crore hawala racket. The passport fraud Khan possessed three passports,the first issued in Hyderabad,the second in Mumbai in September 1998,and the third in Patna in April,1997. On how he lost his original passport in UK,Khan is believed to have said that he owed a huge chunk of money to some illegal Russian nationals who seized his passport. The Indian High Commission issued him a fresh passport. His passports bear fake addresses and documents. The Worli Police have sent summons to several persons who they believe helped Khan get away. They allegedly include a Bandra-based builder,a Pune-based government official,and a few real estate agents from Lonavala who helped Khan rent apartments. Khan is alleged to have shifted to the private residence of a government official,paying a rent of around Rs 5,000 per day,in Lonavala between July and October 2008. Khan is understood to have said that it was when he was staying in Tulip Building,Pune,in February last year that he came to know about the allegations of passport fraud. He claims he left for Mumbai with his wife and son after police came looking for him. He then stayed at his friend Yusuf Lakdawalas resort for four months,from March to June 2008,during which time he moved the Bombay High Court seeking anticipatory bail,which was rejected. Since then,he was on the run. The Worli Police then moved an application before the Bhoiwada Metropolitan Magistrate and on April 30,2008,the court declared Khan an absconder. Khan surrendered on November 15 and after spending over 20 days in custody,was released on bail by the Sewree sessions court. Khans lawyer Ishwariprasad Bagaria said in his defence: Going through the preliminary reports of the Worli Police presented during the remand stage,there was no evidence against Hassan Ali Khan. He claimed Khan hadnt cheated while obtaining the passports. He said all documents submitted to the Regional Passport Office were genuine and that the police had registered a false case against him. How that argument stands in court remains to be seen. The other players Philip Anandraj Owner of an Indian restaurant in Zurich,Kormasutra,he was found at Khans Pune residence during the IT raid. He said he was there to recover $5 lakh from Khan. Khan wanted to acquire Kormasutra,he said. Kashinath Tapuriah Director of 16 Kolkata companies,he had sought Khans help for his sick firm. He helped Khan with contracts of supplying scrap to SAIL,Tata Steel. Adnan Khashoggi He is described as an arms dealer who gave the reference for opening Khans account in UBS Singapore. The show-cause notice says Khan and Khashoggi finalised a deal for the purchase of the Swiss Chateau Gutsch. Swiss bankers M. Rohner,at UBS Zurich,wrote to Khan,assuring him he could withdraw $6 billion and leave the remaining bound till January 2007. After Dr Peter Weilly,Markus Grossmann is mentioned as Khans portfolio manager. How his bank account swelled Evidence from a June 2003 document recovered by the agencies,duly notarised by the Notary Public of London • Khan had an account with a deposit of $1.5 million with UBS Singapore. The recommendation was organised by Dr Peter Weilly through arms dealer Adnam Khashoggi,whose portfolio was handled by Weilly • A payment of $240 million was approved by Weilly and accepted by Reto Hartman at UBS Singapore • After the $240 million transaction,the account moved from UBS Singapore to UBS Zurich in 1986 • By December 1997,the deposit amount reached $560 million. Due to certain problems,Khan could not operate this account • As on August 31 2006,the balance in the account was $6.6 billion • Balance as on November 2,2006: $7.7 billion • Balance as on December 8,2006: $8.04 billion (With Mustafa Plumber and Smita Nair)
