Hit-or-miss approach to scams

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Investigations into scams by law enforcers take such a circuitous path that it diffuses the real issue.

Imagine you were a modern-day Rip Van Winkle who retired into the hills in the nineties and woke up to catch up on the news this week. “Wow”, you would think, “India’s finally got a government which means business. How proactive it is in getting after the rich and the influential to root out corruption and fraud.”

Hogging the headlines were reports about the CBI filing a First Information Report (FIR) against Kumar Mangalam Birla and P. C Parakh in the coal scam; the Mumbai police arresting NSEL’s Anjani Sinha; the Supreme Court directing the CBI to launch investigations on the Radia tapes, and so on.

But it is when you delve deeper into these cases and follow the twists and turns of each one, that you realise that you were too hasty in your appraisal. For all the raids, summons and charge-sheets that fly about when a case is in the news, Indian investigations usually drag on for years and seldom end in the prosecution of the wrong-doer.

That probably has a lot to do with the strange modus operandi of the law enforcers.

What’s the crime, again?

To start with, many investigations seem to start off with only a fuzzy idea of the offence. Take the coal-gate scam which is now making the waves. The premise is that the exchequer has made huge ‘notional’ multi-million rupee losses due to ‘irregularities’ in the allocation of coal mines.

After filing 13 other charge-sheets relating to this scam in the past year, last week, the CBI created a stir by filing a FIR against the Chairman of the Aditya Birla group and former Coal Secretary P. C. Parakh for their involvement. But what are the charges? CBI’s statement isn’t exactly illuminating — “It is alleged that during the year 2005, the said persons in criminal conspiracy with one another and then public servants by abusing their positions as such showed undue favour to Odisha-based Industry in allocation of Talabira II and Talabira III coal blocks along with a Public Sector Undertaking of Tamil Nadu.”

While the allegation seems to be that Birla lobbied with the Coal Ministry to allot the group a coal mine after it was initially refused, it is not in the least clear where the ‘criminal conspiracy’ part comes in. Does lobbying for allocations which are at the discretion of a Ministry amount to a crime? Does the CBI have any proof of bribery or corruption of government officials? If it does, why is that not the crux of the case? If it doesn’t, what of the reputational damage to those named in the FIRs?

It transpires that having ‘named’ its suspects in a case, the CBI usually frames its charges against them only when the matter comes to court. Incidentally, it hasn’t yet framed charges on any of its 13 other charge-sheets in coal-gate. And some of these cases are now more than a year old.

Hunting in packs

The other puzzling thing about Indian investigators is their tendency to seek safety in numbers. Often, after unearthing evidence of skulduggery, investigators don’t immediately pursue the lead to its logical end. Instead, they go about activating as many other law enforcers, who then bury the suspect under a flurry of accusations.

Ever wonder how the Sahara group, originally accused of illegally collecting Rs 19,500 crore from two crore investors, is now being tried for contempt of court? Or how the National Spot Exchange case, a simple case of securities market violations, has morphed into a web of intrigue? Even as traders on the exchange are crying hoarse about repeated defaults in settlement of their dues, the investigations are taking a meandering course. The NSEL is now being probed by the IT department for tax evasion, the enforcement directorate for money laundering and the Ministry of Corporate Affairs for violation of corporate law; even as the Forward Markets Commission and the Finance Ministry are on the original case.

Thus, it is the norm for the authorities investigating a financial fraud to swiftly ‘widen’ it into a ‘probe’ on income tax evasion, accounting fraud, money laundering or any number of other dubious endeavours. Soon, you have all of India’s investigative agencies — the police, CBI, IT department, the enforcement directorate, and the Serious Fraud Investigation Office, directing their investigative prowess at a single offender.

It isn’t clear if this hit-or-miss approach to investigations helps nail the guilty. But it does serve to diffuse the issue and completely confuse the lay public about the nature of the fraud and who actually committed it.

Justice delayed and denied

The frenzy of activity that usually accompanies a newly-revealed scam has you believe that investigators are hot on the heels of the guilty.

But tracing the history of big scams over the past decade shows that the investigations usually drag on for years without prosecution of the accused or closure for the victims. The 2G spectrum scam, on which the Supreme Court made fresh directions to the CBI even this week, is celebrating its fifth anniversary this year. The scam dates back to telecom licences issued in 2008; and was exposed by the Comptroller and Auditor General in 2010.

The coal-gate scam on which CBI has recently filed FIRs pertains to coal blocks allotted way back in 2005.

And these cases are positively new compared to some that are still ponderously winding their way through the labyrinth of the Indian legal system.

As recently as August this year, the Supreme Court chided the Centre for failing to get to the bottom of what really transpired in the Harshad Mehta scam of 1992. It was ruling on a transaction relating to the biggest securities market fraud in Indian history. When Harshad Mehta died of natural causes in 2001, nine years after he was accused of perpetrating the fraud, 27 of the cases initiated against him were still pending. A few of them still are.

Why, prosecution isn’t particularly quick even when a perpetrator knocks at the law enforcers’ door and confesses to fraud in writing. Ramalinga Raju did so in the Satyam scam.

Overall, therefore, the chances are that the reformist zeal on display now will stir up head and noise. But that’s about it.

But if you’re eager to read about the closing chapters of coal-gate, spectrum-gate and other ongoing sagas, we suggest you retire to the hills for another nap. Wake up in 2023, and we may just be able to tell you when the case is coming up for the next hearing.

Published on October 20, 2013
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