Madhav Mehra's Blog

I-T Tribunal’s revelations, 25 years after the Bofors gun deal was signed, that  Quattrocchi and Win Chadha, the middlemen involved, did indeed receive kickbacks, has shaken the tectonic plates of the ruling party. The party had just exorcised  the ghost of emergency passing the blame squarely on Sanjay Gandhi. Mr Digvijay Singh smells a rat in the timing of the order. The order was passed on 31 Dec 2010, 3 days before the Chief Metropolitan Magistrate was scheduled to pass order on the closure report submitted by CBI against Quattrocchi. Apparently our CBI sleuths have learnt little from WikiLeaks. In 1973 Richard Nixon said, you can afford to disobey all the 10 Commandments as long as you follow the 11^th Commandment – thou shalt not be found out. That in these days of Facebook, Twitter and WikiLeaks and millions of blogs “thou shalt be found out” is as certain as death. Here are some international examples that should give solace to investigators of Bofors and Aarushi murder and reinforce the inevitability of truth having the last laugh.

Bloody Sunday

Massacre of 13 unarmed civilians that took place 38 years ago in Londonderry in Ireland, known as the Bloody Sunday, is a classic example how efforts to hide truth are self-destructive and can cause the greatest damage to the very people who conspire to conceal. On 30 January 1972, unarmed civil rights marchers were fired at by a Parachute Regiment of the British Army killing 13 males including 7 teenagers. The outcry led to the appointment of a Tribunal under Lord Widgery, the then Lord Chief Justice of England and Wales. The report exonerated  the army and said “there was no reason for a soldier to fire at the marchers unless he was fired at in the first place.” Bernadette Devlin, a young Northern Ireland MP who had witnessed the massacre was prevented to speak in the House. She  punched Sir Reginald Maudling, the then Home Secretary, as he made a statement that the British Army had fired only in self-defence. The stink finally led to the appointment of a second commission of enquiry in 1998 under Lord Saville assisted by one Canadian and another New Zealander jurist who was later replaced by an Australian. The report published 12 years later with testimony of 900 witnesses and cost of £195 million held the army responsible for the massacre and stated soldiers had concocted lies to hide their acts. A note discovered in 1992 showed Ted Heath, the then prime minister, reminding Lord Widgery ‘we are not just fighting a military war in Northern Ireland, we are fighting a propaganda war as well”. The failure to face the truth resulted in an explosion of violence in Northern Ireland and complete alienation of Catholics who till then had backed British Army as being neutral.

Fall of Jeffrey Archer

Another classic example is that of Jeffrey Archer , the brilliant Baron of Weston-super-mare in the county of Somerset  who became an MP for Lincolnshire at the age of 29. He soon discovered that being clever by half is no longer an option in this internet world. People will read your fiction by all means but if you fictionalize your achievements they will throw you like a hot potato. His two encounters in the courts one in 1987 and another in 2001 show how moral perceptions had changed in the interregnum between the nineties and the dawn of new century. Mr Archer’s calculated deception and  lies made him win his libel suit of £500,000 against Daily Star in 1987. The real classic is the instructions to the jury by Mr Justice Caulfield, after the trial, reminiscent of groupthink and delusion of the invulnerability of the ruling classes. Pointing to Lady Archer, he asked the jury to look at her elegance and said “Is he in need of cold, unloving, rubber-insulated sex in a seedy hotel round about quarter to one on a Tuesday morning after an evening at the Caprice?^[

It was common knowledge that the Archers lived separate lives. Judge’s summing up convinced the jury that the payment in question made by Jeffrey Archer to the prostitute was a philanthropic act and not for services rendered. The judgment led to the ruin of Lloyd Turner the editor of Daily Star who had reported the story of Jeffrey Archer’s sleeping with a prostitute. He was sacked by the owner within a few weeks of the judgment.

In Nov 1999, as Jeffrey Archer announced his candidature as London Mayor , News of the World got hold of Angela Peppiatt, Archer’s former personal assistant and published a story alleging Jeffrey Archer had perjured at the 1987 trial. Angela had kept a diary of all Archer’s movements. He was charged in Sept 2000. On 19 July 2001, Archer was found guilty of perjury and perverting the course of justice at the 1987 trial and sentenced to four years’ imprisonment by Mr Justice Potts. Imagine  for one Jeffrey Archer found out , how many have still remained unmasked?

Martha Stewart

Martha Stewart the American icon was charged for insider dealing for avoiding loss of much smaller amount , a sum of $45, 673. She was indicted in 2003 for securities fraud, obstruction of justice, and conspiracy and finally served 10 months jail sentence. There also there is a lesson. Martha was not jailed for insider trading. The charge could not be proved. She was sentenced for making false statements to a federal investigator.

The Mark Hurd Affair

Recent removal of Mark Hurd CEO of Hewlett Packard by HP’s board of directors is significant. HP stock dropped by 10% as the news of sacking hit the markets. The expenses for which he was removed were a paltry sum. This was a claim of expenses ranging from $1000 to $10,000 for dinners that Mark Hurd had with Jodie Fisher, the female contractor, at the centre of the storm. In fact he was prepared to reimburse these expenses. Mark Hurd was removed by the board not for having dinners with Jodie but for concealing them. Mark Hurd is the man who built Hewlett Packard into world’s largest technology company.  But in this world where trust is a fading specie, morality has become a key issue. The board felt that Mark Hurd’s spectacular performance   is no excuse for concealment. Organisations will have to be transparent to elicit trust of the community and investors. This brings into fore the centrality of transparency which is key to sustainability of corporations in this turbulent world marred by a cringing crisis of confidence.

Action against Citigroup for misstating sub-prime exposure

 Judges in USA are coming heavily on Banks who are found to be concealing information even after their settlements with Securities and Exchange Commission. Judge Jed Rakoff did not approve SEC settlement with Bank of America on the ground that the fine imposed by SEC was hurting shareholders when it should hold bank executives to account. A federal judge is holding up the SEC’s effort to let Citigroup’s top executives off the hook for misleading their own shareholders about $40 billion in subprime debt.

There is an endemic culture of lies and concealment in banks. In 2001, Eliot Spitzer, the then  Attorney General of New York had fined Citibank, Merrill Lynch and CSFB a sum of $1.1 billion for selling junk stock to clients. In 2007, when investors all over the world were freaking out about subprime mortgages, Citi executives were lying to the world  about their relatively limited exposure to the crisis. They bragged: everything was going to be fine, because Citi had only $13 billion in subprime holding! The trouble was, Citi also had about $40 billion more in subprime mortgage exposure included in mortgage-backed securities and other fancy financial instruments. And according to the SEC, top management at Citi knew about the extra $40 billion in subprime holdings but instead  went around parading the lesser figure of $13 billion. The fraud at the Citi branch of Gurgaon shows that the bank has still not been able to address the ethical issues and embed them in the culture.

Fraud charges against Goldman Sachs

The importance of transparency is underscored by the fraud charges filed by SEC against Goldman Sachs. The SEC charged Goldman with “making materially misleading statements and omissions” in marketing the $2 billion Abacus CDO. Specifically, Goldman did not inform investors that the securities underlying the CDO had been selected by Paulson, instead claiming that they had been chosen by ACA Management. The bank led ACA Management to believe that Paulson & Co. was taking a $200 million “long” position—i.e., that the hedge fund was betting the securities would rise in value. Goldman Sachs have finally settled the case paying a fine of $550 million.

Only the Truly Transparent will survive

Following the flak received by iconic brands like BP and Toyota, companies all over the world have realized that only the truly transparent will survive.  Transparency is also crucial for innovation, the fuel of growth.  Candor inspires commitment, confidence, collaboration, creativity, and therefore spurs innovation and improves competitiveness. Transparency is the most powerful weapon in a perpetually turbulent world. The problems that we face in this turbulent world are so complex that no one person has all the answers. The increased flow of information helps it tap the resources of every individual in the company to deal with the crisis and meet the unexpected challenges that have now become the face of the normal.

Transparency is the surest antidote to corruption where millions of blogs and social networks keep a 24/7 vigil. In this multi-reality, meta-digital world of fast and furious change , transparency  also acts an armor that protects you from changing realities. Both investigators and criminals involved in Bofors, Aarushi murder, CWG scam or 2G fiddle need to realize that truth will assert itself at the end. Sooner they stop running away from it, quicker they will cut down their own misery.

Madhav Mehra