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INSIDE INDIA - Ensemble of articles on governance and public affairs

INSIDE INDIA - Ensemble of articles on governance and public affairs

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Published by Praveen Kumar 3
Comments welcome at pryveen@yahoo.com. This volume is an ensemble of articles on governance and public affairs authored by one and only Praveen Kumar.

The Hong Kong-based Political & Economic Risk Consultancy (PERC) in a 12-page report on a business survey of 12 economies of Asia released on June 3, 2009 where 1,274 expatriates working in these countries were interviewed showed Indian bureaucracy at the bottom at the 12 position as the least efficient bureaucracy after Philippines and Indonesia in 10 and 11 positions respectively. The report says that working with the country’s civil servants in India is a “slow and painful” process and it continues to report that “They are a power centre in their own right at both the national and state levels, and are extremely resistant to reform that affects them or the way they go about their duties.”

The cause of the malady in reference to India is analyzed and remedies are recommended in the article, ‘The Crumbling Steel Frame of India’ of this volume. The deterioration is a post-independence phenomenon. The once steel frame of Indian bureaucracy of the British vintage gradually crumbled to its extant putridity under the sad auspice of its corrupt and incompetent UPSC (Union Public Service Commission) and the deterioration trickled fast downwards in the last six decades to bring India to this sad state of affairs.

This volume is a first hand account of the observations, impressions and experiences of the author as an insider. Naturally, most illustrations in this volume are from Karnataka police where the author served at senior levels for nearly three decades. However, this makes no difference to the over all picture of India as situation is not much different elsewhere.

As far as Karnataka is concerned, in spite of misdeeds of notorious scoundrels like R.S.Chopra, A.R.Nizamuddin and degenerates of the similar ilk, situation is better there than some of the more notorious state police organizations of India. The core weakness in Karnataka governance lies in sweepingly conforming to the putrid system and bad culture against conscience to cover own tracks. It is mere cowardice of mediocrity and gross selfish interests of ignobility and nothing more. Yet, no way can Karnataka administration be called as an efficient, healthy and responsible bureaucratic setup yet.

Faithful assessment must precede reconstruction. This volume is an effort in this direction. Complacency leads to stagnation and is a dangerous indulgence in a rotten situation like India’s. This volume is intended to breach the vicious indulgence involved and inspire India to its rich potentialities on the way to much dreamed of world leadership.

India is a civilization of diversities and a culture of contradictions. India’s is an inclusive way of life. Along its long history, it saw umpteen falls and rises without losing its innate vitality and always rose from worst quagmires unscathed. This resilience of India underscores its unique heritage spawned by its thoughts and philosophies that perhaps are nearest to the true nature of the universe that the scientific world of today is engaged in to probe, discover and formulate as the Grand Unification Theory (GUT). This is the secret of the eternal strength of India. This resilience of India gives hope. The present fall is not forever. Time of revival shall come. India shall see a better system replace the present corrupt and incompetent UPSC and a healthy administrative system replace the extant inefficient and rogue bureaucracy.
Comments welcome at pryveen@yahoo.com. This volume is an ensemble of articles on governance and public affairs authored by one and only Praveen Kumar.

The Hong Kong-based Political & Economic Risk Consultancy (PERC) in a 12-page report on a business survey of 12 economies of Asia released on June 3, 2009 where 1,274 expatriates working in these countries were interviewed showed Indian bureaucracy at the bottom at the 12 position as the least efficient bureaucracy after Philippines and Indonesia in 10 and 11 positions respectively. The report says that working with the country’s civil servants in India is a “slow and painful” process and it continues to report that “They are a power centre in their own right at both the national and state levels, and are extremely resistant to reform that affects them or the way they go about their duties.”

The cause of the malady in reference to India is analyzed and remedies are recommended in the article, ‘The Crumbling Steel Frame of India’ of this volume. The deterioration is a post-independence phenomenon. The once steel frame of Indian bureaucracy of the British vintage gradually crumbled to its extant putridity under the sad auspice of its corrupt and incompetent UPSC (Union Public Service Commission) and the deterioration trickled fast downwards in the last six decades to bring India to this sad state of affairs.

This volume is a first hand account of the observations, impressions and experiences of the author as an insider. Naturally, most illustrations in this volume are from Karnataka police where the author served at senior levels for nearly three decades. However, this makes no difference to the over all picture of India as situation is not much different elsewhere.

As far as Karnataka is concerned, in spite of misdeeds of notorious scoundrels like R.S.Chopra, A.R.Nizamuddin and degenerates of the similar ilk, situation is better there than some of the more notorious state police organizations of India. The core weakness in Karnataka governance lies in sweepingly conforming to the putrid system and bad culture against conscience to cover own tracks. It is mere cowardice of mediocrity and gross selfish interests of ignobility and nothing more. Yet, no way can Karnataka administration be called as an efficient, healthy and responsible bureaucratic setup yet.

Faithful assessment must precede reconstruction. This volume is an effort in this direction. Complacency leads to stagnation and is a dangerous indulgence in a rotten situation like India’s. This volume is intended to breach the vicious indulgence involved and inspire India to its rich potentialities on the way to much dreamed of world leadership.

India is a civilization of diversities and a culture of contradictions. India’s is an inclusive way of life. Along its long history, it saw umpteen falls and rises without losing its innate vitality and always rose from worst quagmires unscathed. This resilience of India underscores its unique heritage spawned by its thoughts and philosophies that perhaps are nearest to the true nature of the universe that the scientific world of today is engaged in to probe, discover and formulate as the Grand Unification Theory (GUT). This is the secret of the eternal strength of India. This resilience of India gives hope. The present fall is not forever. Time of revival shall come. India shall see a better system replace the present corrupt and incompetent UPSC and a healthy administrative system replace the extant inefficient and rogue bureaucracy.

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Published by: Praveen Kumar 3 on Mar 05, 2010
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I begin this paper with the exordium of the article, “Investigation of
Economic Crimes” from my recent book on policing, “Policing the Police”
published in 2000 (NPA Library 001 Accession No. 65724 & 65725) wherein
discussing the impact of liberalisation on Indian economy and economic
crimes, I said, “With the liberalisation, the aboideau of scams and financial
irregularities is thrown open and the Indian financial market is flooded with all
conceivable kinds of frauds, shady transactions and corrupt practices. As long
shadows of mixed economy receded from the four-decade-old sky of the
Indian republic in 1990s, the Indian economy is sweltering under the heat of
economic crimes. Not that economic crimes are new to human generation or
India; small fraudulent dealings were born with man and bound to continue as
part of his nature till the imbalance of supply and consumption haunts his
existence. What manifested are organised frauds to loot the public its money
by clever use of the financial environment and the innocence of the hoi polloi;
ill-conceived financial rules and laws and slack financial practices and
procedures evidently failed to carry the weight of the liberalised economy. The
people who were inured to protected economy and state control cannot easily
adapt to liberalised economy where all sorts of worms and creatures creep,
waiting to make best use of the laissez-faire. Rules and laws being not
tightened to meet the challenges of the liberal atmosphere, unscrupulous
elements have a field day in playing with the public money either to intentionally
defraud or experiment in risky projects. The plans are always mega-schemes
running for hundreds or thousands of crores of rupees of the gullible public.
Corruption in government and public life ease the process. Bribes play key
roles in keeping rules, laws and regulatory authorities shut.”
Edwin H. Sutherland, renowned American criminologist in his
propaedeutic of white-collar crimes in his celebrated ouvrage “Crime and
Business” preconises the special nature of the crimes when he says, “Since
the crimes are generally violations of trust, they create and extend feelings of

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55

distrust. Leadership against white-collar crime is generally lacking, since most
leaders come from the upper socioeconomic class and since the persons in this
class who do not participate in white-collar crimes are generally reluctant to
attack other members of their own class.” Economic crimes as another facet
of the white-collar crimes with its nonasuch etat in the caste hierarchy of
crimes transcend the lesser crimes in gestalt and content as its raison d’etre
in the tapestry of the civil society and ipso facto grow ectogenesis to the normal
reach of the societal leadership including the law-enforcing agencies. It is a
tragedy of the criminal justice system.

DEFINITION AND SCOPE OF ECONOMIC CRIMES

For E.H.Sutherland, white-collar crime is a violation of trust. His view
emerges from his definition of the white-collar crime as a violation of criminal
law by a person of the upper socioeconomic class in the course of his
occupational activities. The trend of economic crimes has seen sea-change
since the ancien regime with more and more such violations being committed
for the res gestae by individuals or organized groups with or without inside
cooperation and raisonne exploitation of the weaknesses of the extant financial
laws and procedures, the financial institutions and the people who man them.
In the maelstrom, economic crimes can be defined simply as fraudulent
financial transactions for financial gain.
Popular realms of economic crimes these days include political and policy-
making sector, government sector, financial sector, commerce and industry
sector and individual entrepreneurs and cover events and activities like
deposits fraud, shares and securities fraud, company regulations violation,
fraud concerning government funds, counterfeit, import and export fraud,
foreign exchange violation, telemarketing fraud, patent infringement, copyright
violation and piracy, tax evasion, smuggling, hoarding and black-marketing,
adulteration, drug-trafficking, insurance fraud, money laundering, high-sea
fraud, telecom and electricity fraud, computer manipulation, internet fraud,
land deals fraud, bribery, cheating, breach of trust and unauthorized
commission to name just a farthing of what actually exist and accrescently
expand with the ingenuity of the persons involved. Some of them like deposits
fraud, company regulations violation, fraud concerning government funds,
import and export fraud, foreign exchange violation, tax evasion, smuggling,
hoarding and black-marketing, adulteration, drug-trafficking, insurance fraud,
high-sea fraud, bribery, breach of trust and unauthorized commission are d’
accord with the definition by Sutherland as committed in the course of

PRAVEEN KUMAR

56

occupational activities, while others like telecom and electricity fraud,
cheating, patent infringements, copyright violations and piracy and counterfeit
are ectogenesis. Commission of these crimes in gargantuan scale sponte sua
by individuals and organised groups extra-muros to the occupational activities
with or without the cooperation of the invisus insiders constitutes the recent
trend in economic crimes. Shares and securities fraud, counterfeit cheques,
telemarketing fraud, software piracy and patent infringement, software
copyright violation, computer manipulation, Internet fraud and land deals fraud
in mammoth scale are relatively recent trend in the field. High sea fraud,
insurance fraud and money laundering also continue to be periculous threats
to the economic security of the country.

RECENT TRENDS

The flagitious security scam of 1992 involving Rs 8000 crores as the avant
coureur stirred the national conscience to the issue of the economic security
and showed how facilely it can be periclitated by the unscrupulous large-scale
inside trading and fraudulent stock manipulation. The supercherie run the corso
from the late Harshad Mehta case of 1992 to the ban on the high-profile fund
manager, Samir Arora from the capital markets by the SEBI in 2003 on the
charge of inside trading in securities. Why the security scam of 1992 failed to
shut the aboideau in the Indian security market in the last eleven years and why
even successful and high profile fund managers like Samir Arora prefer to
resign their lucrative jobs in companies like Alliance Capital Mutual Fund and
resort to such violations? The obvious answer is that the exposures are just the
prevarications from the zeitgeist and neither the concerned regulations are
stringent enough nor the regulating agencies like the Securities and Exchange
Board of India (SEBI) and the Reserve Bank of India (RBI) and the people
manning them in their aidos are competent to cleanse the capital market and
protect the interests of the investors. Jucta est alea. The occasional exposures
are just eyewashes. Such frauds are bound to squeeze Indian economy in years
ahead.

Another facet of the incompetence of the regulating agencies in the capital
market is the malengine of floating apocryphal companies to fleece the public
in crores by offering shares and disappearing after defrauding the public.
There are hundreds of such flagrant cases reported in1990s with almost none
booked for the falsi crimen.
Another serious fraud of recent origin is the use of counterfeit cheques. The
use of stolen cheques and writing cheques on accounts either closed or having

INSIDE INDIA

57

insufficient fund to defraud is a vieux jeu in the business world. The computer
revolution has added a new dimension to it. Often software that can produce
legitimate checks is used to generate counterfeit checks with fictitious names
and account numbers to defraud in business dealings. Counterfeit is
anadyomene in a different sancy these days in the shape of fake stamps scam
of mammoth scale run in interstate level with a highly organized plexus.
Telemarketing is another genre of fraud that is in rise that involves the so called
boiler rooms or the telemarketing company promoting sales of worthless goods
through phone solicitation by promising customers riches and gifts that never
come. This form of fraud is already having pollent foothold in big cities of India.
Another fraud is floating teakwood or such plantation companies those
mobilize funds from the public with the pollicitation of distribution of the gain
pro rata only to disappear before the climacteric approaches. However,
prompt response from the law-enforcing agencies perficiently controlled the
menace and the defalcation of this shape is in degringolade sinsyne. The
episode marks that prompt response from the law-enforcing agencies do have
desired effect on the spread of the economic crimes.
Copyright violations and piracy are major threats to the book publishing,
cinema and audio and videocassette industries. Patent infringements are the
crimes those threaten new products. The computer revolution has brought
software to the ambit of such threats apart from functioning as a facilitator of
fraud and economic crimes by other means also. Fraudulent interference with
the software or programmes used for financial transactions is a convenient tool
to defraud companies and establishments in crores in a single stretch or di
grado in grado and do away with all evidence to the act. Lack of proper
understanding of the intricacies of the computer and its software and absence
of due pernoctation at higher levels contribute for such frauds being ascensive.
A byproduct of the computer revolution is the Internet fraud that has diverse
gestalt and international ramifications. Innovative Internet solicitation to part
with money for goods, schemes or services of fraudulent edge is the staple of
such frauds. Another aspect of the Internet fraud involves tampering with
others’ financial or establishment accounts by breaking into their passwords
and copying digital signatures to illegally siphon funds or other valuables to own
account. Innovative works of the hackers help the process.
A very disturbing fraud these days, concerns prime government or private
lands in the heart of big cities left unattended for various reasons. The quiddity
of the rite de passage here is the study of the system for weaknesses.
Innovative tregetours expiscate in poor laws, procedural loopholes, lack of

PRAVEEN KUMAR

58

coordination among and incompetence of concerned government departments
like the city development authority, the city corporation, electricity and water
supply bodies and the land registration office, and the greed or indifference of
the people who man the government bodies an opportunity to gobble prime
lands worth of several crores of rupees. The ichnography involves obtaining
false power of attorney of the true owner of the land by impersonation from
an unvigilant or greedy notary and selling the land using it. In some other cases,
the tricksters raise buildings on such unattended lands after paying land taxes
for those lands and obtaining sanction for the building plan from the engineering
wing of the city corporation with the help of the tax records as proof of their
ownership of the lands. Such gross anomalies are possible only because of the
lack of coordination, defective procedures and sheer lethargy, incompetence
and greed in the government bodies. The swindlers here secundum artem
exploit the gross weaknesses and failures of the government bodies to make
colossal gains for themselves. The res gestae involved in such frauds and the
ease of the method render it a potential mode of the economic crime of the
future.

High-sea fraud involving disappearance of the whole ship or its cargo or
carrying false cargo and financial or insurance claims on the basis of
mendacious documents may become assez bien a popular means in days ahead
to become rich a pas de geant because such crimes seldom draw the avizefull
attention of the public and the fraud is limited to the concerned cloistered
circles. Insurance fraud on the other hand will re-emerge to the center-stage
in the ambience of the privatization of the insurance sector and its consequent
proliferation. Money laundering is the cleanser of all economic crimes and the
means of salvation to economic criminals; ergo, it is jus naturale that it re-
emerges in various avatars from time to time. Hawala transactions will
continue to exist in different shapes and forms. The secrecy code of the Swiss
banks provides the requisite refuge to the ill-gotten money of the swindlers
among politicians, senior government officials, industrialists, businessmen and
enterprising individuals.
Export and import fraud of the recent origin involves false declaration of the
country of the origin to evade anti-dumping duties in addition to over-invoicing
of exports to fraudulently avail export incentives.
Cheating, breach of trust and embezzlement are common economic crimes
all over the world. A survey conducted by Pricewaterhouse Coopers, an
accounting firm and Wilmer Cutler & Pickering, a law firm as reported in the
New York Times of July 13, 2003 states that more than a third of the American

INSIDE INDIA

59

firms surveyed in the last two years were found to be the victims of one or the
other kind of economic crimes like asset misappropriation and embezzlement.
The survey also suspected doubtful financial disclosures by more than half of
the companies surveyed. It is the case in India too. The external auditors tend
to take refuge under the plea that they audit only the documents provided to
them by the companies and sweep inconvenient facts under the carpet for quid
pro quo. The dictum, fraus est celare fraudem, is conveniently forgotten. It is
on record that almost no auditor is dealt till now for professional apostasy in
independent India and the organization responsible to oversee the auditors
condones the professional betrayal and becomes a partaker in the irregularity
as per the dictum, chi tace confessa.

NATURE OF RECENT TRENDS

A careful study of the recent trends in the economic crimes brings out
interesting factors common to most of them. The most striking of them is the
growth of the economic crimes usaque ad nauseam to the status of an
entrepreneurship both in terms of respectability a la its description by
Sutherland and concomitant responsibility, its sheer volume, interstate or
international spread, highly organized operational plexus, hi-tech tools
employed, highly efficient division of labour with minions at the cutting-edge
level as front operators far removed from the main characters and the brain
behind the operation at concentric circles, resourceful big actors en arriere,
detailed planning, study and probouleusis prior to the operation, professional
touch to the whole operation and high risks and high profits involved.
The recent economic frauds are high-money soigné scams running to
multiple crores. The materfamilias of all the scams of modern India namely the
security scam of 1992 involved Rs 8000 crores while the recent fake stamp
scam allegedly involves Rs 80,000 crores. The Indian Bank scam of the 1990s
involved Rs 1300 crores while the fodder scam of Bihar ran to Rs 1500 crores.
Other major scams of lesser volume are the Bihar bitumen scandal of Rs 350
crores, Bofors scandal of Rs 64 crores, HDW submarine scandal of Rs 64
crores, Bihar medical bills scandal of Rs 60 crores, ayurved scam of Rs 32
crores, telecom scam of Rs 6 crores inter alia. However, the leading role in
such embezzlements must go to the banking sector that gobbled public money
to the tune of Rs 1,20,000 crores in three years with the euphemism of non-
performing assets or bad loans that in most cases are advances paid to well-
to-do favourites for consideration with the understanding that the clause of the
non-performing assets take care of that.

PRAVEEN KUMAR

60

An important aspect of the modern economic frauds is that the brain behind
the operation who normally are the people of procerity remains incognito and
far removed from the cutting-edge operations by several levels and ensures
that the law-enforcing agencies never reach him under any circumstance and
there remains no evidence against him a la mode the Mafia and its leader, Al
Capone. This holds good for all recent major scams and the veracity of the
person identified in them as the el patron should be taken cum grano salis.
These crimes au fond are well-plexured conspiracies.
These economic crimes are marked by callida junctura. The cooperation
of right people inside and outside the target institution is bought a grands frais
for use at right time. This brings much needed aex triplex to the process and
adds to the plexus of the operation and brings the elements of corruption to the
process. Extra muros entrepreneurs mastermind these frauds as opus
reticulatum after detailed study of the weaknesses and failures of the laws,
procedures, institutions and the men concerned and right and adequate
preparations.

Free market economy in a poor, unenlightened and developing country like
India is like spreading delicious foods around a person dying of hunger with
injunctions to open the dishes only after performing an impossible feat. Imagine
the consequences. In a country like India where easy life and chaltha hai
mindset are the bedrock of life and hard work and commitment are anathema,
where merit and brilliance are looked down upon, where character, discipline
and integrity are belittled as the dernier ressort of weaklings, where criminals,
swindlers and murderers become popular political leaders, where democratic
votes are hostages to the riches you throw away, where the hapless hoi polloi
is the prisoner of the vagaries of the arriviste along the ladder across the
political spectrum, where imported isms rule the mindset in lieu of the genuine
and holistic welfare-interests to meet the besoin of the plebeian and the
country, where mediocrity and dishonesty reign supreme and the
administration and the law-enforcing agencies crawl before the criminal
political masters and the mesquin and lowly higherups lest their career interests
are harmed, the free market economy turns an apollyon like a pachyderm
allowed a free-run in a plantain plantation. Free market economy per se is not
bad. It is best suited to the countries where it is born in the ambience of
enlightenment, civility and respect to law and societal mores where apolaustic
deviants are only exceptions. Otherwhere, economic crimes are bound to grow
exponently with the disillusioned cleverer elements as the provenance
resorting to exploit the weaknesses of the financial laws, procedures and the

INSIDE INDIA

61

institutions and the niaiserie, greed and the lethargy of the people around them.
In the ambience of the survival of the fittest, it is hard to find fault with such
criminals. Necessitas non habet legem. It is the inadequate laws, nonpareil
institutions and the mediocre or greedy attercops in charge who inadvertently
lure the desperate people to intelligently exploit them for survival. For, survival
is the prime principle of life. And everything else is secondary to it. Exitus acta
probat. Add to it the fact that money is the blut und ehre that can buy anything
from respectability to the friendship of the people who matter, you have the
right recipe for the wild choresis of the economic crimes limited only by the
limits of the creativity of an original mind thrown to infinite possibilities provided
by the inferior laws, procedures and the institutions created by the lesser minds
of the post-independent genre and equally poor manning of them. The trend for
the future can only be defined as unspeakable varieties of every conceivable
hue that is allowed by the financial laws and procedures, financial institutions
and their practices.

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