Nitin Gadkari must answer, so should several agencies

All charges against Nitin Gadkari and Robert Vadra are being hurled on the basis of documents available in public domain with government authorities. The watchdogs that were supposed to react, act and prevent financial wrongdoings on real-time basis have steadfastly done nothing. Their silence is deafening as much as the silence of Gadkari, says MR Venkatesh.

The charges made out by the media are serious. The silence of the man in the eye of the storm makes it worse. Internal party dynamics is adding fat to the fire. Conspiracy theorists are running riot. Political adversaries are strangely taking a philosophical line. But they are not attacking him on specifics. The political career of Bharatiya Janata Party president Nitin Gadkari, so assiduously built over decades, now runs the risk of facing an abrupt end.

Interestingly, all these charges are hurled on the basis of documents available in public domain with government authorities. More to the point, watchdogs that were supposed to react, act and prevent financial wrongdoings on real time basis have steadfastly even refused to comment post these "exposes".

Why? Are our watchdogs incompetent? Or are they trained to be incompetent? Either way, their silence is deafening as much as the silence of Gadkari.

Readers may be well aware that the charges against Gadkari are three-fold -- one that addresses of some directors in which Gadkari has financial interests are fake, second that the directors themselves are fictitious and finally there is a money-laundering angle. Believe me, all these charges are grave. Crucially, they raise questions about standards of probity in public life.

Let me elaborate. Several of our Rajya Sabha members have produced dodgy evidence about their residential status especially in states in which they are not usually domiciled. And that includes the prime minister who is a Rajya Sabha member from, believe it or not, Assam!

Well, this may not be exactly illegal in the absence of any law to the contrary. But it is a question of morality. Consequently, I leave it to the readers. Nevertheless, this issue of 'false' addresses of the directors can be cured by filing the correct addresses with the Registrar of Companies. Much ado about nothing? I presume so given the prevailing moral fabric of the country.

The second charge is slightly complex. Persons whose names appear as directors in some of the companies have stated that they have nothing to do with them, much less as directors. At this point in time it is obviously their word against that of the company (which is distinct under the law from Gadkari).

But questions do arise. If they are not directors, their signature was possibly forged or their digital signature misused. However, there are several systemic checks and balances made out precisely to counter such frauds. Clearly, if these are forged someone somewhere has short circuited the system.

In the alternative, under the glare of media some of these persons are denying their relationship with the company. In such a scenario only a probe by the RoC can reveal the truth. I understand that the RoC has already initiated a probe under the Companies Act on these companies. Let us wait till the probe is completed. And till then -- judgment reserved? I guess so as we have no other alternative.

Multi-Layering: The name of the Game

Forget Gadkari for a moment. Several of our corporates including some of our largest private sector banks have multi-layered ownership. There are several reasons for the same -- some are legal, some historical and some obviously are done with sinister motives -- read money-laundering. Needless to emphasise, we will focus on what matters.  

Now on to the third charge against Gadkari: multi-layering investments with a view to launder his illicit wealth. Put bluntly, the charge is that he laundered his illicit wealth by routing it through his driver, accountant and astrologer as he did through several downstream companies into companies where he had financial interest.

But importantly, Gadkari has not been in power for over a decade. This is where the charge becomes slightly bizarre: Illicit money was allegedly received for favours done when he was a minister more than a decade ago in the late 1990s. Is this being laundered at his leisure without any let of fear of any authority since then?

What makes successive exposes (including Robert Vadra, Gadkari and Virbhadra Singh) in recent times extremely disconcerting is that evidence obtained by media are NOT confidential documents obtained from government through secret sources. Rather they are obtained either simply by filing applications under the RTI Act or from the RoC website of the respective companies.

In other words, obtaining information has virtually become extremely easy for media, activists and of course political rivals. Naturally questions arise: If information is so easily and readily available, what prevents our watchdogs from doing their duty, given the fact that these documents were filed with them?

The silence of these watchdogs is disturbing, isn't it?

Watchdogs or priest in dead man's house?

Money-laundering, readers may be well aware, is the process of removing the taint from money obtained through illicit means and re-introducing such cleaned up money into mainstream economy.

To illustrate, a politician may 'launder' money received as bribes as agricultural income from his farm. Why farm income? First, it attracts zero tax. Second, it carries very little evidence. Third, you can claim that you sold your farm produce in cash. Naturally using the farm route is a popular route to launder illicit wealth. Is that why most of our leaders are farmers?

It may not be out of place to mention that a workshop on the topic of anti-money laundering was held a few months back in Chennai. An officer from the Reserve Bank of India, during the course of his presentaion, waxed eloquent on how systemic checks were put in place to prevent money laundering in India.

The Financial Intelligence Unit, he pointed out, was set up by the government in 2004 as the central agency responsible for receiving, processing, analysing and disseminating information relating to suspect financial transactions by coordinating and strengthening efforts of national and international intelligence.

The main function of FIU, he explained, was to receive cash or suspicious transaction reports, analyse them and, as appropriate, disseminate information to intelligence or enforcement agencies and regulatory authorities.

This information so received is further analysed in order to uncover patterns of transactions suggesting suspicion of money-laundering and related crimes while also maintaining a database on cash as well as suspicious transactions on the basis of reports received from reporting entities.

Importantly, the FIU is an independent body reporting directly to the Economic Intelligence Council headed by the finance minister, no less.

While the audience was impressed by the force of the presentation, I for one innocently asked a question: Why is it that the FIU did not intervene, as it should by design have, on real time basis in the case of money laundering allegedly carried out in 2G case?

More to the point, when is it that the FIU has ever raised the flag of money being laundered by our politicians? Has it ever put one in the dock? Put differently, if Gadkari was laundering money for over a decade, as alleged by sections of the media, what was the FIU doing? Sucking thumbs?

Or is it a case that all our politicians are so clean that none of them launder their illicit wealth? Obviously an impossible proposition.

In the alternative, is it that the FIU is merely a priest in a dead man's house -- not a watchdog as it is widely presumed? Is that why it was the last one to know of alleged money-laundering in the 2G case? If that were the case, why have an FIU at all?

Remember that we are part of an international arrangement called the Financial Action Task Force that requires some global standards to be met. In this anti-money laundering exercise several government agencies are involved. It is indeed stunning to know that all of them have remained silent on Gadkari's (or for that Vadra's or Virbadra Singh's) transactions.

Similarly, there are stringent Know Your Customer norms that prevent fictitious persons from opening bank accounts. If the addresses are fake and directors are fictitious, surely, someone within the bank too have played ball somewhere on these norms.

In case our anti-money laundering mechanism, notably FIU fails, we lose credibility at an international level. If we allow such rampant laundering domestically, what is our moral right to persuade a country like Switzerland to disclose the names of those who have laundered Indian wealth on its soil?

But there is yet another alternative. What if banks have reported to the FIU on all these transactions involving Gadkari (or for that matter Vadra or Virbhadra Singh) which in turn passed on information to the EIC which as I already pointed out is headed by the finance minister. Possibly it is here it reached a dead end. That explains the inexplicable silence of the UPA on this matter.

In short, did the FIU detect any suspicious transactions involving Gadkari? If so, did it report to the EIC? Did the EIC smother any further investigation? Will someone from FIU or EIC answer these questions along with Gadkari please?

PS: The answer to my question to the RBI official is the trigger for this piece.

MR Venkatesh is a Chennai-based chartered accountant.