APRIL 27, 2014

By Naresh Minocha, Our Consulting Editor

THE Nation should be grateful to Priyanka Gandhi Vadra for narrating a sob story about the slur campaign against her husband, Robert Vadra. She has thus inadvertently turned the national focus on the larger issue of suspicious and perhaps illegal benefits accruing to politically exposed persons (PEPs), their family members & associates.

Mrs. Vadra claims she has eternal faith in the truth. So has the public. Then what is the hitch in the UPA appointing an independent commission to unravel the truth about the wealth allegedly amassed by her husband and other such VIPs?

Congress bête noir Narendra Modi has publicly challenged UPA to undertake all sort of investigations into his activities to uncover any alleged wrong-doing. Can Priyankaji formally urge the Supreme Court to institute such a probe into all business transactions of the Gandhi family to prove her faith in the truth?

The case for probe against Mr. Vadra is strong as he is a deemed public official by virtue of alloment of a ministerial house, grant of Special Protection Group security and provision of other privileges available to super VIPs in Government.

The proposed commission should be mandated to not only investigate her husband’s real estate deals but also the transactions of all other PEPs’ families right from the initiation of economic reforms in mid-1991. This would effectively rule out political vindictiveness.

Such an exhaustive probe would also establish the growing trend of non-cash bribes channeled through a complex web of subsidiaries and transactions that appear to be normal business and often go undetected. The Commission’s findings would also perhaps establish a co-relation between manipulated reforms and crony capitalism.

As put by Asian Development Bank in its anti-corruption & Integrity Report for 2013, “Corruption is not single-celled. It does not move in just one direction and has many causes and symptoms. It has no single cure and will continue to grow and fester unless addressed from multiple fronts.”

And the most crucial front that has been poorly investigated in India is the nexus between PEPs and businessmen. The latter group is ever eager to manage its turf through favourable regulations & their interpretation and their faulty implementation.

The PEP-business nexus extends from issue of invitation to hand-picked businessmen to attend innocuous, high-profile get-togethers to announcement of tax concessions. Some businessmen pay bribes/donations to secure invitations for get-togethers where they can do networking with powers that be. The nexus has always been a dark alley in the fight against corruption.

International Anti-Money Laundering (AML) organization, Financial Action Task Force (FATF) of which India is an active member, defines PEP “as an individual who is or has been entrusted with a prominent public function. Due to their position and influence, it is recognised that many PEPs are in positions that potentially can be abused for the purpose of committing money laundering (ML) offences and related predicate offences, including corruption and bribery….”

In its guidance on PEPs issued in June 2013, FATF has also defined domestic PEPs, their family members and close associates.

The guidance says: “If a financial institution or DNFBP (Designated Non-Financial Business or Professions) finds that a PEP has known family members and close associates, it should search its records to determine whether it may be providing financial services to such members or associates, and if so classify them as PEPs and apply the required enhanced due diligence measures.”

Has any concerned Indian regulator advised stakeholders of real estate sector to exercise due diligence in the case of Mr. Vadra? Certainly not. On the contrary, the authorities in Haryana have allegedly bent rules to favour Vadra as has been brought out by persecuted honest IAS officer Ashok Khemka.

Dubious loans, equity investments, consultancy fees and donations by businessmen to PEPs’ family members and associates have been an integral part of new wave of crony capitalism, which is the other side of economic reforms coin.

Sons, daughters, sons-in-laws (foster one too) of PEPs have been entangled in such controversial transactions. PEPs in this case include former Chief Justices of India (CJIs) and ministers from both Congress and BJP at the Centre and the States. Unfortunately, the Supreme Court’s public interest-centric activism has been wanting in the overall domain of PEPs except for the 2G and Coalgate scams.

Though the Apex Court has overseen several cases including that of two ex-CJIs Justice Y K Sabharwal and Justice K.G. Balakrishnan, no case has matured into a final verdict that should have hopefully shed light on what constitutes illegal gratification given to PEPs, their families and associates.

The other day Priyankaji emotionally complained before the electorate that her husband is a victim of smear campaign. Addressing a public gathering in her mother’s Lok Sabha constituency, Rae Bareli, Mrs Vadra reportedly said: “Lot of harsh words are used for my family and my husband.”

Priyankaji is right to the extent that loud mouths like Uma Bharti have no business to say that BJP Government will send Vadra to jail. Umaji, who is an ex-CM, should know that judicial process cannot be bypassed. Ms Bharti should thus apologize to Priyankaji for calling her husband a thief. If Mr. Vadra has cheated exchequer of any revenue, then it is for the judiciary to define such crime and award the punishment.

Invoking Nobel Lauerate Garcia Marquez’s letter whose authenticity has been doubted by many, Mrs Vadra said: “We must instead say what is in our heart. This feeling comes to me too. See what elections are becoming. What kind of politics is playing out? This country which was the land of Gautam Buddha and Mahatma Gandhi... its character is being changed.”

“I have learnt from Indira Gandhiji that if truth is in one's heart it will become your strength... the harder you try to make one fall the stronger we will stand up. The more they try to humiliate, more strongly will I fight.”

Priyankaji, emotional drama can cut ice with the gullible rural folk for a while. It cannot and must not put off the demand for an impartial investigation for truth, which the UPA has resisted to the hilt.

The public wants to know why Gandhi-Vadra family has locked this truth in their hearts and files? Why have they stone-walled legitimate media queries about their businesses including that of prime ministerial prospect Rahul Gandhi.

The public wants point-by-point reply to issues raised by BJP leader Dr. Subramanian Swamy on different occasions including the ones on Backops Services Pvt. Ltd. A similar reply is required on charges leveled by Arvind Kejriwal in October 2012.

Interestingly enough, Mr. Kejirwal, who had demanded an FIR against Mr. Vadra, later maintained silence on this issue. This obviously contributed to his rise to Chief Ministership in January 2014 with the blessings of Gandhi family! Why he did not order filing an FIR against Mr. Vadra as Delhi CM on the lines of one he ordered on the issue of gas pricing? Why did Mr. Kejriwal not investigate whether Mr. Vadra exercised any influence in grant of approvals by Delhi Government to DLF projects?

To unravel the business relationship between Vadra group and DLF group, one has to access all Central and Congress-ruled State Government files to know the details of various regulatory approvals given to DLF group of companies. Only a national commission can do that.

The proposed panel also must find out whether there was any dilution in official objections to DLF applications before and after Vadra-DLF entered into business relationship. It should also find out whether there was any change in the pace of grant of approvals by Haryana, Delhi and Rajasthan Government to DLF after emergence of Vadra on the realty scene.

Whether there has been any accounting fraud or any other legal violation in Vadra-DLF transactions can be established only by accessing the books of accounts of all relevant firms. Only a national commission or a supreme court appointed special investigation team (SIT) can do that.

To know whether Mr. Vadra has been favoured by any Congress-ruled State Government, one has to access all relevant documents which are buried in the Government files. One has to access all telephone records of Vadra and his appointments over the last 10 years. Only a national commission can do that.

This investigative approach mooted for finding whether there was illegal gratification given by DLF or any other entity to Vadra should also be applied similarly in all other PEPs whose wealth accretion at supersonic speed has resulted in public outcry.

Loans from regulatory approvals-seeking companies to PEPs has been the common strand of all scams from 1992 Securities Scam to 2G scam to Jijaji, to borrow a word from Mr. Modi’s lexicon.

Remember the Rs 32.74 lakh that Harshad Mehta’s Growmore deposited in the account of K.J Investments, a company owned by two sons of Gandhi family loyalist-cum-veteran CEO, V Krishnamurthy in 1991-92. Central Bureau of Investigation (CBI) considered it as bribe, whereas Mr. Krishanmurthy described the amount as a loan. In 2000, a special court absolved Krishnamurthy of all charges including the Rs 32.74-lakh ‘loan’.

Way back in 1959, the Supreme Court, on the other hand, had dismissed contention of a bribe-seeking junior railway employee that he accepted a loan (not a bribe) of Rs 375 for financing his children’s education from the bribe-giving petty contractor. The railway employee made this claim after he was caught red-handed accepting the extorted bribe.

Whether a dubious payment is loan or bribe or a business enabler given to PEPs as quid pro quo for favours thus needs legal clarity. This is urgently required as provision of unsecured, informal loan or the so-called business advance as in the DLF-Vadra case, is becoming a fashionable trend in PEPs domain.

Himachal Chief Minister Virbhadra Singh, his wife and a company promoted by their children have all taken separate loans aggregating to a few crore of rupees from the promoter of hydro-electric projects whose default has been repeatedly condoned by the State Government.

Disgraced ex-President of BJP Nitin Gadkari also took loans from two real estate developers.

Why is that real estate companies are fond of entering into business relationship with PEPs and their family members? Recall the transformation of Pawan Impex, a shell company owned by two sons of Justice Sabharwal into a joint venture with Kabul Chawla, the promoter of well-known BPTP group. Recall Sabharwal sons’ another JV with another real estate developer, Purshottam Bagheria.

Any discussion on PEPs would not be complete without citing the case of Karnataka ex-BJP CM B.S. Yeddyurappa (BSY) family-controlled trusts Prerana Educational and Social Trust (PEST)/ Prerana Education Trust (PET).

The Trust had reportedly disclosed to CBI in May 2012 that it received Rs 44.06 crore from 49 donors between September 2006 and March 2011. What has not yet been established that some of the donations have been quid pro quo deals for approvals given to certain mining and metallurgical companies.

The list of cases of financial transactions between PEPs’ families and companies seeking favours and approvals is long and varied.

UPA allowed this rot to grow for obvious reasons. It is now left to the Supreme Court to seize an opportunity to direct UPA to set up a national commission on PEPs to identify legal loopholes and lay down water-tight guidelines to minimize the scope for corruption. Or would the apex court wait for new Government to take a lead in this arena? Or would the new Government also look the other way round like the UPA? Or would the new Government wait for the constitution of Lok Pal and thus pass the buck to it?

How long the public has to wait for the truth?