When ‘lobbying’ becomes corruption

The Associated Chambers of Commerce and Industry of India (Assocham) in an open letter to the Prime Minister October 21 asked: “Every citizen in a democracy has a right to influence government decisions, but should it be perceived as a mala fide act of criminality?” The group was reacting to the criminal cases instituted by the CBI against industrialists and bureaucrats.

Without taking a stand on whether specific cases were right or wrong, the industry body was suggesting that legitimate representation was being misunderstood and harming progress by delaying decision making.

It is a tough issue to judge, and governments of rich and poor countries, autocratic and democratic political systems, all face the same issue: when is it ‘influence’ and when is it a quid pro quo ? You may as well ask if the chicken or the egg came first.

System of quid pro quo Walmart, the world’s largest retailer headquartered in the US, stands accused of bribing government officials in Mexico for licences, re-zoning and clearances needed for establishing its rapidly growing number of retail outlets. The slowdown of Walmart’s intentions in India also began with suspicions that similar problems may exist in its Indian operations.

JP Morgan Chase, the US financial services holding company, reportedly got creative in its efforts to influence decision making in China.

Rather than cash dealings, the bank would hire the near and dear of influential senior personnel of state-owned enterprises who (in return?) would give the bank business when the company tried to raise funds in global markets.

Internally, in JP Morgan, the scheme was known as the ‘sons and daughters’ hiring programme.

Investigators have unearthed various company documents and emails that suggest there was a clear intent, while hiring, that the person would use his or her personal connections to generate business for the bank.

Since this activity amounts to providing something of value to foreign officials in return for an advantage, it falls within the purview of the US Foreign Corrupt Practices Act (FCPA). Reportedly, the investigation by the US Securities and Exchange Commission and the state of New York has extended to other financial institutions, and not only in China but elsewhere in the region, for it is believed that the practice was common.

Such a system of quid pro quo so widely resembles a commercial transaction that it is not surprising to read of another such investigation in the state of New York.

A panel set up by the Governor of New York about five months ago has found that for many years, organisations have been making payoffs to state politicians. Bogus non-profit organisations were being funded by public money, and businesses were making targeted campaign donations to buy preferred legislation.

The panel used methods resembling a terrorism investigation. It used undercover agents, recorded phone calls, and scanned CCTV footage. A consultancy was retained to use a sophisticated data analytics platform to scrutinise reams of documents and fund raising data.

80:20 rule US laws recognise that people would want to make representations to their legislators in a democracy, similar to how Assocham has a detailed set of rules that govern the lobbying process. Lobbyists have to be registered, file regular reports; laws specify who they can employ, and try to regulate the revolving door between lobbying companies and the Congress.

Recognising the impact of US laws and regulations, even foreign governments and corporations retain lobbyists. The objective of all the regulation is to make lobbying an influencing and representation process rather than a method to buy favours.

Yet, in the New York probe, the panel found clear links between lobbying activities and what they call ‘custom-tailored laws'. Some of the actions were seen as deplorable conduct, although legal. If even mature democracies such as the US continue to find that laws and regulations only drive corrupt behaviour under the mat rather than drive it out, what hope exists for India, you may ask. There is, perhaps, an 80:20 rule functioning in societies.

If 80 per cent of the people stay on the right side of the law and moral expectations of behaviour, the remaining 20 per cent can be monitored, caught and punished. But when it is the other way around, we face comments of systemic corruption and find ourselves deep in a mess.

In this regard, India has a long way to go, and the Lokpal Bill is but one step. Another is the recent Prevention of Corruption (Amendment) Bill 2013 with which the Government has taken steps to punish the companies that bribe. An organisation that seeks to obtain or retain a business and, in return, promises a public servant a financial or other advantage would be liable to pay a fine. This would bring India in line with its counterpart legislation in the US and the UK (the Bribery Act).

The New York Times broke the story of Walmart’s bribery in Mexico, as it did with the story of JP Morgan Chase’s activities in China. So there is another lesson in it for us. You don’t need a Tehelka to do investigative journalism. Mainstream news organisations should also use their muscle and reach and go beyond news reporting to serve as responsible and effective watchdogs.

(The author is Dean of Jindal Global Business School, Sonepat, Delhi NCR.)

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