Scams without end

Published: December 14, 2012 - 12:59 Updated: December 17, 2012 - 16:13

Retired bureaucrat, Javid Chowdhury’s book makes damning revelations about how the much vaunted new economic policies created an enabling environment for financial scams

Sanjay Kapoor Delhi 

In 1991, the Central Bureau of investigation (CBI) while investigating the funding of Kashmiri militants came across a diary detailing pay-offs to the country’s political and bureaucratic elite. The list of beneficiaries was “politically neutral” and had a fair sprinkling of both ruling party and opposition leaders. Many bureaucrats, too, embellished the list by their presence. For quite a while the diary was buried deep in the vaults of the CBI till media expose followed by public interest litigation forced the Supreme Court to oversee the supervision of the probe by investigating agencies. Known as the Jain Hawala scandal, the case defined the way the courts and investigating agencies like CBI and Envorcement Directorate (ED) countenance scandals involving people in high places. Despite the courts providing immunity to CBI and ED from political interference, this high profile case came to grief due to the manner in which it was investigated.  

Javid Chowdhury was the Director of Enforcement who probed the Jain Hawala case and saw how the case was subverted from within. In his extremely explosive first book, colorlessly titled as “ The Insider’s view- memoirs of a public servant”, Chowdhury cites instances where investigating officials worked hard to dilute the case. The Prevention of Corruption (PC) act needed a creative interpretation it to slap it on those who were not public servants. Chowdhury writes “It is beyond my comprehension why the CBI pursued these cases as one under the Prevention of Corruption Act. There was a cut and dried case of violations under the Foreign Exchange Regulation Act.”  FERA had stringent provision and the onus of proving innocence rest on the accused. If they had been booked under FERA, many of the top politicians and bureaucrats would have been put behind bars for long years as some of them like late Rajesh Pilot and Devi Lal had admitted to the media about accepting funds from Jains. Despite all the noise, there were no convictions in the case. 

Hawala was not the only scam that Chowdhury investigated. It seems at the time he was in revenue ministry, financial scandals were breaking out all around him. Neo-liberal economic policies initiated by the government of P V Narasimha Rao and fathered by Manmohan Singh saw the government on the retreat allowing stock market bandicoots and country’s amoral private sector to find ways to earn whopping windfall gains. In 1992, the country was hit by a securities scam when some stock market brokers in connivance with bankers and public sector managers illegally began to use public sector funds to bloat the market and enlarge their profit. Manmohan Singh who was then the Finance Minister had famously said that he would not lose sleep over the rise and fall of the stock market. Chowdhury also finds other economic managers of his government displaying cavalier attitude towards the scandals. Montek Singh Ahluwalia, who has been a powerful voice in Manmohan Singh’s regime, comes up short on his estimation. What comes through in the book is how a section of the government was complicit in many of the scams that took place in those days and subsequently.  

An old fashioned bureaucrat who believed in strict implementation of rule of law, Chowdhury found it difficult to digest what was being passed off as economic liberalization. In his book, he is critical of India’s private sector and the media for projecting FERA as an obstacle in the country’s growth. As ED he knew that most of those who ran a campaign against the foreign exchange regime were FERA violators and wanted to get rid of the law at all costs.  

It is in this kind of environment, the country also became poorer by another scam caused by a Rupee-Rouble Trade agreement between India and Russia. Chowdhury says that ED picked up “ only a small fraction of the illegal transactions- normally a strike rate of 2 percent is considered very creditable. “ The possibilities of scam arose because the trade was based an artificial rupee-rouble exchange rate, huge overvalued in favor of the rouble. After the collapse of Soviet Union, its legal inheritor, Russia, was saddled with colossal rouble credit as the exports from India were rather limited. The difference in exchange rate between the agreement rate and market rate gave arbitrage opportunities to the venal. Different methods and devices were used by dubious businessmen and exporters in connivance with Russian bureaucrats to switch rouble into dollars. Chowdhury leaves a thought with the readers about why this scam was allowed to perpetuate even when it’s nature and modus operandi was known at the top. Interestingly he says that the Rupee-rouble trade agreement at every stage was negotiated by Manmohan Singh in different capacities in the country’s financial sector. “ In other words, these events occurred during his watch”.  This is quite a damning charge. 

At plenty of places in the book, it is apparent that Chowdhury is holding back the identity of the people and key information. One wonders why he is doing that as anyone nuanced in these investigations is knows that many of the worthies whose identity he has concealed have come under media glare. 

Chowdhury uses an easy pen and shows his penchant for humour when he writes about his visit to Geneva in the company of former CBI Director, Joginder Singh. There are many other nuggets, too, in the book that makes this book a great read.  

Retired bureaucrat, Javid Chowdhury’s book makes a damning revelations about how the much vaunted new economic policies created an enabling environment for financial scams
Sanjay Kapoor Delhi 

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