Chance to start afresh

There is a lesson in the morality play that we are witnessing today which has been triggered off by the 2G financial scandal. It comes from a scene in Malcolm Gladwell’s recent collection of essays called What the Dog Saw, and I have condensed it below:

On the afternoon of October 23, 2006, Jeffrey Skilling sat at a table at the front of a federal courtroom in Houston, Texas, waiting to be sentenced by the judge. Mr. Skilling was no ordinary criminal. He was wearing a navy blue suit and a tie. Huddled around him were eight lawyers. Outside, television-satellite trucks were parked up and down the block. Skilling was head of the energy firm, Enron, that Fortune magazine had ranked among the “most admired” in the world and valued by the stock market as the seventh-largest corporation in the United States. It had collapsed five years ago, and in May, Skilling had been convicted by a jury for fraud, and almost everything he owned had been turned over to compensate former shareholders.

“We are here this afternoon,” Judge Simeon Lake began, “for sentencing in United States of America versus Jeffrey K. Skilling, Criminal Case Number H-04-25.” The judge asked Skilling to rise. He then sentenced him to 292 months in prison – twenty-four years, one of the heaviest sentences ever given for a white-collar crime. He would leave prison an old man, if he left prison at all.

“I only have one request, Your Honor,” said Daniel Petrocelli, Skilling’s lawyer. “If he received ten fewer months, which shouldn’t make a difference in terms of the goals of sentencing, if you do the math and you subtract fifteen percent for good time, he then qualifies under Bureau of Prison policies to serve his time at a lower facility. Just a ten-month reduction in sentence….” It was a plea for leniency. Skilling wasn’t a murderer or a rapist. He was a pillar of the Houston community, and a small adjustment in his sentence would keep him from spending the rest of his life among hardened criminals. Judge Lake thought for a while, then he said “No”.

Indians are not unfamiliar with Enron. As a result of its involvement in the beleaguered power plant at Dabhol, the words ‘crony capitalism’ entered our vocabulary in the 1990s. Unlike India, persons in high places in the United States serve time in jail. American judges are in the habit of meting out exemplary punishment, as Judge Lake did to Jeffrey Skilling of Enron. Indians would dearly like to substitute in the narrative above any number of names, although Andimuthu Raja, former Minister of Communications is the one that comes to our mind today.

Wasted rage?
As things stand in today’s India, we investigate, charges are filed; we even establish guilt; but then years go by, and nothing happens. People lose interest. It would be a real shame if all the valuable rage we have accumulated over weeks in the 2G affair were to go waste. One way to ensure it does not happen is to actually put a few people behind bars this time and do it reasonably quickly. It would go a long way to restore our faith in the system.

In a recent opinion poll, 83.4 per cent of the people in eight major Indian cities believed that corruption had gone up after liberalisation, which only confirms that people still do not understand that corruption persists in India because reforms are incomplete and scams occur in sectors like mining and real estate, which have not yet been reformed. That it occurred in telecom, an otherwise reformed sector, does come as a surprise. It has happened because the minister created artificial scarcity in the spectrum and gave it away in driblets to those who allegedly bribed him. The scam could have been avoided if the licenses were awarded via open, transparent bidding on the Internet, as in the case of the 3G spectrum.

The 2G scandal should also remind us about the real corruption of India which does not make the headlines. The ordinary, small and medium entrepreneur still faces on the average 27 inspectors who have the power to close his factory unless he pays a bribe. The most notorious are those in the excise, sales, and the income tax departments. Of course, for every bribe-taker there is a bribe-giver, who is also guilty of wrongdoing. But remember, it is an unequal relationship. The citizen is always vulnerable before a person in authority. The official holds the threat of closing a citizen’s enterprise. A few states have tried to rein in petty officials but mostly they run amok, rapaciously. Hence, many young, honest men and women today shy away from becoming entrepreneurs. The ‘inspector raj’ is one of the reasons that India has failed to create an industrial revolution.

Beginning of accountability
Returning to the big picture, it is a matter of some cheer that in recent months ministers have been sacked, serious inquiries have begun, individuals have been arrested. We are also heartened by Nitish Kumar’s huge victory in the Bihar elections, which he claims was the result of good governance. We would like to believe that this is a turning point in our history, the beginning of some sort of accountability in our public life. It is sobering to remember, however, that we said the same thing in 1989 when Rajiv Gandhi’s Congress-led government was defeated after the Bofors gun scandal when the Prime Minister’s family and friends were allegedly involved in bribes and kickbacks.

We ought to take inspiration from the United States not only because it punishes guilty persons in high places as Judge Lake did in the narrative above, but it enforces its Foreign Corrupt Practices Act (FCPA) vigorously. If any of the telecom licensees in the 2G scam had been American companies—for example, AT&T– India would have quickly found its smoking gun. Ten years ago, America’s Justice Department was investigating 5 to 10 companies involving foreign bribery at any given time; today, it is 150. Under American inspiration, Britain just passed a new Bribery Act, which is even tougher than the U.S. law. To ensure that companies don’t simply consider FCPA fines as a “cost of doing business,” the U.S. attempts to jail corporate officials, both American and foreign.