When watchdogs don’t watch

NEWSPAPER reports suggest that disinvestment chief Arun Shourie’s ministry isn’t too happy with Prime Minister Vajpayee’s statement that the CAG should monitor PSUs even after they have been privatised, if the government continues to hold a stake in them. Vajpayee’s statement, of course, is an old-style politician’s response to increasing instances of corruption being unearthed — that corruption is a private sector phenomenon, and so government bodies such as the CAG should keep a watch as long as they can.

Shourie’s ministry’s view on the other hand is, correctly, that one of the reasons PSUs can’t function well is they have bodies like the CAG constantly second-guessing them — if you don’t change this even after privatisation, why privatise? Implicit in this is the belief that the private sector has enough checks and balances to ensure fraud doesn’t take place and that, if there is a fraud, the law of the land is there to take care of it anyway.

Both the PM and the disinvestment ministry are correct, but only partially so. As the events at the Madhavpura Mercantile Co-operative and the Global Trust Bank show, privately-run organisations are just as easy prey to fraud. As for whether the law of the land is good enough to detect this, clearly it isn’t — had the stock markets not collapsed, and Ketan Parekh been able to carry on with his juggling of funds, the fraud would never have been detected. Similarly, the fact that both the Zee Group and HFCL were funding Parekh came out only because of the crash — if things had gone according to plan, Parekh would have met his obligations, returned the money to both groups, some accountant/auditor or the other would have certified that all was well with the company, and no one would have been any the wiser.

This, of course, is the reason behind the incessant number of frauds being unearthed almost every other day — whether in the public sector, or in the law-enforcement arena. India’s just not spending enough effort in anti-fraud activities. The fact that the country’s stock market regulator has just 20 persons in its surveillance department — that keeps tabs over 7,000-odd companies and over 15,000 market intermediaries — speaks volumes for how casual we are. If SEBI asks for more staff, it’s certain they’ll be told there’s an austerity drive on, and downsizing is today’s mantra. This applies not just to SEBI, but to all law-enforcement agencies like the DRI, the ED, the CBI, whoever — when’s the last time you heard of top finance, legal or computer professionals joining these bodies to augment their skill-sets?

Needless to say, it is exactly this kind of laxity that ensured that even in a fully government-run set up, you could have somebody like B.P. Verma become customs and excise chief. And despite whatever Chief Vigila- ance Commissioner N. Vittal may say about his warning the government not to appoint Verma, the fact is Verma doesn’t even figure in the list of 900-odd corrupt officers on Vittal’s own website. Given the disastrous manner in which it began — when a dead officer’s name was entered in the corrupt category — what is one to make of the CVC’s website? That not all officers listed on it are corrupt, or that not all the corrupt officers are on it?

Vittal says Verma was issued a warning letter on an order he’d passed, and that’s why Vittal warned Finance Secretary Piyush Mankad against appointing him. The fact, however, is Verma’s order was upheld by CEGAT, the appellate court for customs and excise — CEGAT has also upheld Verma’s orders in two more cases the CVC investigated. So does that make CEGAT corrupt as well?

An even more curious case, which shows the office of the CVC in very poor light, is a recent ruling by the Delhi High Court to quash a May 1997 order of the CVC where it said that (then) chief of the Cement Corporation of India Anand Darbari could not be given vigilance clearance even though the investigation conducted into his actions didn’t show he was corrupt. The court has passed strictures on the CVC’s (not Vittal, but S.V. Giri) conduct, and has ruled the CVC’s clearance to Darbari is ‘deemed to have (been) given’ and that Darbari should be appointed as head of the Airports Authority of India, the job he was selected for, but didn’t get, in 1997.

Darbari’s case is especially perverse because when the vigilance wing of the Cement Corporation examined and then cleared Darbari of charges of wrong-doing, the CVC said it wasn’t satisfied, and appointed a two-member committee to examine the same charges. When this committee exonerated Darbari, the CVC said it’s report was only preliminary, and then issued a chargesheet against him, and a CBI enquiry was ordered. When the CBI enquiry cleared Darbari, the CVC said the report was flimsy! The CBI which investigated the matter again, cleared Darbari once more, but by then he was removed from his job at the Cement Corporation because of the CVC case!

So where’s the problem? With the Vermas and Darbaris, the system that cleared them, the CVC’s office, or is it with the courts? Either way, it’s a stunning indictment of the country’s vigilance/investigative set up. God help us!

Earlier Columns