India's prestigious national honors – the Padma Awards – have kicked up a storm this year due to the inclusion of controversial nominees including Sant Singh Chatwal, a New York-based American-Indian hotel magnate and associate of US Secretary of State Hillary Clinton. Chatwal was accused during the 1990s of a series of misdoings including a US$9 million bank fraud.

The Padma awards are given to civilians who have excelled in their fields and whose personal integrity is supposedly above question. Chatwal, 61, an important fundraiser for the Clinton political machine in Washington, DC, serving as a trustee of the William J. Clinton Foundation, and is particularly well-known for his closeness to Hillary Clinton.

In the run-up to the 2008 US presidential elections, the businessman raised millions of dollars for her during the primaries, and also made political contributions to the campaign of vice-president Joe Biden, as well as top Democratic Senator Christopher Dodd, who is now co-chair of the Senate India Caucus. His connections to the Clintons shine the spotlight once again on the legions of allegations of questionable associations that have dogged both Bill and Hillary for decades. Those have led to such embarrassments as the last-minute pardon for fugitive financier Marc Rich during the final days of Clinton's presidency.

Acccording to media reports, Chatwal defaulted on massive loans obtained from Indian and US banks including Lincoln Savings, First New York Bank for Business, Bank of Baroda, Bank of India and State Bank of India. Barack Obama's finance committee reportedly refused to accept any contribution from him because of his "background and baggage," according to the Hndustan Times. Chatwal had offered to organize a US$10 million fundraising event for Obama which was politely turned down.

One of the 13 non-resident Indians nominated for the Padma awards this year, Chatwal recently also announced his plan to establish 25 hotels under the Hampshire Hotels chain in India by 2011. The Padma Vibhushan is the highest, followed by the Padma Bhushan and the Padma Shri. While the Padma Vibhushan is awarded for exceptional and distinguished service, the Padma Bhushan is given for distinguished service of a high order and the Padma Shri for distinguished service in various fields like the arts, literature, business and sports.

The award to Chatwal became controversial following the revelation that the Central Bureau of Investigation (CBI) had registered five cases — related to defrauding Indian banks – against him between 1992 and 1994. Three of the cases were closed, while Chatwal was acquitted in the other two. He was reported to have settled a case with the US Federal Deposit Insurance Corporation for US$125,000 against claims of US$14 million in the bankruptcy of First Bank of New York in 1997.

However, in his media interviews, Chatwal, who is also chairman of Indian American Democratic Committee says he is "pained" and "personally hurt" by the "malicious campaign" against him in India. The entrepreneur, who has apparently been nominated for his contributions "to promoting Indo-US ties," denied reports that his offer of donation was turned down by Obama's campaign managers.

"To all these leading Democrats and presidential candidates, I gave my personal checks and none of them were returned by any of them," Chatwal told PTI. He added that donations -- which are governed by strict rules and regulations by the Federal Election Commission and ethics rules of the US Congress -- would have been returned if there had been any "blemish" against him or if his contributions were considered "tainted".

"If that was case, how come I was invited for all the events President Obama, vice-president Joe Biden and secretary of state Hillary Clinton hosted for (Prime Minister Manmohan Singh) during his state visit in November," he said.

Be that as it may, Chatwal's nomination for the Padma awards raises questions of the government's absence of due diligence in conferring the honors and raises other reservations whether the awards are for sale for political gain. According to sources, Chatwal's name had not even featured in the initial list proposed by Home Ministry committee members. It was later added, leading to the suspicion that the hotelier may have exercised influence in getting his name included in the list.

However, the government – though red-faced -- is defending its decision to honor Chatwal on the ground that he has "promoted India's interests in the US" and that the cases against him were "closed". But apparently established procedure was not followed in investigating the cases.

Few are convinced that the businessman, even if he boosted India-US relations, deserves the honor of a Padma Bhushan. In fact the controversy has prompted two senior journalists, Vir Sanghvi and Pritish Nandy, to file a Right to Information application to find out how Chatwal's name figured on the list.

The debate has also led people to call for the scrapping of the Padma awards. There's growing skepticism that the awards, associated increasingly with favoritism and strings-pulling, are conferred on those who have friends in positions of power.

Certainly, the awards have provided grist for political mills. The opposition right-wing Bharatiya Janata Party (BJP) has questioned the Prime Minister as to why an alleged fraudster was getting the award. The ruling Congress party has washed its hands of the issue, holding the Home Ministry responsible. In fact Deputy Leader of Opposition Gopinath Munde even wrote a letter to Manmohan Singh demanding that Chatwal's award be retrieved.

Chatwal, meanwhile, has accused the BJP of playing politics. He told the media that he has been awarded the 'Ellis Island Medal of Honor,' which is only given after the United States government makes sure that there is nothing against a person."

Chatwal's Ellis Island Medal of Honor, established in 1986 to pay tribute to the immigrant experience and individual achievement, is recognized by the US House of Representatives and the Senate. Chatwal insists that he has been cleared of all allegations of wrongdoing.

"I have really no idea about BJP's objection. I love my country and have been working for the past 30 years. I don't care for the parties. They will come and go," Chatwal told journalists.

Be that as it may, one good has emerged from the ruckus created by Chatwal's nomination. The Home Ministry has decided to further probe the allegations of corruption against the hotelier. If the fresh charges of fraud leveled against him are found to be true, the businessman's nomination will be scrapped.