Are elite Indians insensitive to fraud?

An article by the Mumbai correspondent of The Financial Times titled “India elite yet to absorb Gupta lesson” published on June 20 expresses wonder and dismay over the absence of any public criticism in India of the misdemeanours of Mr Rajat Gupta, whom a New York Court has recently convicted of insider trading, leaving everyone in the corporate world of industrialised countries in a state of indescribable shock.

Taking off from there, the article carries a stinging rebuke to the business class in India: “This lenient approach to alleged corporate misdemeanours remains common in India. It is part of the reason the rallying-round that preceded Mr Gupta’s trial, and the lack of criticism that followed its conclusion, looks poorly judged…his fall is emblematic of many of the practices the country still has to do more to leave behind.”

At first sight, the conclusion seems too sweeping.

What gives credence to it is the fact that it is backed by acute observations of India’s business climate and the working of regulatory watchdogs.

For instance, every schoolboy knows insider trading is a widely prevalent phenomenon in India, but is not regarded as a crime deserving of harsh punishment like 25-30 years of incarceration as in the US. Neither the Government nor the Securities and Exchange Board of India (SEBI) loses its sleep over it. Nor, most of the time, over manipulative market machinations.

There has not been a single instance of any of India’s corporate luminary being hauled up and sent to jail on such charges.

SHOWERING ENCOMIUM

The FT write-up bluntly states: “No chief executive, for instance, has yet suffered this fate during numerous recent corruption investigations, including those into the misallocation of mobile telecom licences.” (Well, this applies with equal, if not greater force, to political personages in positions of power and authority who are implicated in a variety of criminal cases involving corruption, possession of assets unexplained by their known sources of income, rape, murder and the like.)

The several manifestations of the softness of India’s business community towards Mr Rajat Gupta referred to in the article are blots on the business escutcheon. Even when his trial was on, more than 300 of the prominent tycoons of India’s business and industry as also noted professionals rushed in with a public statement showering encomium on him in respect of his integrity and character. No less was the alacrity to testify to his innocence shown by the top academics of the Indian School of Business (ISB), Hyderabad, which he had helped to found and of whose Governing Body he was the founder-Chairman.

Indeed, even after he was formally arraigned, he dragged his feet in resigning from the post on moral grounds, parroting the usual excuse of politicians of being innocent until proved guilty. Not one in the business establishment came out with the demand for his resignation.

CHANGING ETHOS

Even today, there is at least one person on the ISB’s Governing Body who belongs to an outfit which gained notoriety during the trial of Raj Rajaratnam and Rajat Gupta for security fraud in the US and who, some years ago, had to settle with the US Securities Exchange Commission charges of fraud and deceit by payment of a hefty sum without admitting or denying them. He was also reportedly stripped of operational responsibilities by the multinational he was working for at the time. In this background, the laid-back reaction by India’s elite to Mr Gupta’s trial and conviction should come as no surprise. It is all of a piece with the promiscuity and permissiveness that has come over the Indian ethos. Even the most outrageous conduct has ceased to shock and there is no stigma attached to the perpetration of the most egregious transgressions of values that were once regarded sacrosanct.

What else is to be expected when, as the former Supreme Court Justice Mr Santosh Hegde, who is also an active member of Anna Hazare’s campaign against corruption pointed out, “boisterous receptions” are accorded to political bigwigs when they come out of jail on bail?

As he put it, “Today people are sent to jail in a procession as if they are going on a foreign trip. And when they get bail and come out, we receive them in a way that shows the degeneration in societal thinking.”

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