"Good corporate governance is about 'intellectual honesty' and not just sticking to rules and regulations, capital flowed

towards companies that practiced this type of good governance"- Mervyn King While it seems unlikely that Mervyn King had foreseen a CWG scandal while he said the aforesaid sentence, this report explores the 2010 CWG Scam from the angle of Corporate Governance and its utter failure

The 2010 Commonwealth Games ScamFailure of Corporate Governance

Group-7
Ajay Lodha (FT13303) Bipul Kumar (FT13316) Gaurav Dalvi (FT13328) Jeewant Gupta (FT13340) Niyati Mehta (FT13353) Rohit Kalla (FT13365) Srinivasan Iyengar (FT13377) Vinay Tiwary (FT13390)

The Commonwealth Games is an international, multi-sport event that involves athletes from the Commonwealth of Nations. It was first held in 1930 and has been taking place every four years, except the 1950 British Empire Games, which took place after a 12year gap from the 3rd edition of the games. The Games are the third largest multi-sport event in the world just after the Olympic Games and the Asian Games The 2010 Commonwealth Games were held in New Delhi, India from 3 rd to 14th October, 2010. Officially known as XIX Commonwealth Games, the event saw a huge participation of 6081 athletes from across 71 Commonwealth nations and dependencies, competing against each other in 21 sports and 272 events, making it the largest Commonwealth Games till date. They were also recognised as the first Green Commonwealth Games. The Games were used by India to showcase its potential as a strong emerging economy in front of the world and was considered as a stepping stone to the next destination of hosting the Olympic Games. The event grabbed lot of international media attention, prior to the advent of the games also. Hosting an event of this magnanimity, led the Central and New Delhi government to undertake a lot of infrastructural development in and around the city. From four lanes flyway to expansion and modernization of Indira Gandhi International Airport, from teaching English to bus drivers to streamlining the power distribution process, the government undertook various measures. The initial cost of the Games, as estimated by India Olympic Association in 2003, was 1,620 crore (US$294.84 million) which escalated to 11,500 crore (US$2.09 billion) as the official total budget for the Games in 2010.However, delays in deadline of infrastructure development etc. has rocketed the cost to be somewhere near 70,000 crore, making it the most expensive Commonwealth Games ever. Various scams and scandals started circulating the Games even before they started and it involved business units both from public and private sector and politicians, bureaucrats and corporates. Queen Baton Relay The first major scam that hit the Games was in July, 2010, when the British government raised questions over a substantial amount of money that was transferred to a little known UK company A M Films company from the Games Organizing committee(OC) for the Queen Baton Relay held in London. The entire deal came under scanner when the OC asked for VAT refund of 14,000 in March 2010 but there was no written contract between CWG and A M Films. Also the cars, vans etc. were rented at exorbitant prices, no tendering procedure was followed and even relevant paper work for the contract was absent. About 4.50 lakh was transferred to this firm, with no concrete deal to back it. The OC said it made payment of nearly 2.5 lakh for video equipment purchase while the

opposite party claimed of providing services of car hire, makeshift toilets, barriers and electricity. Pulling out of sponsors This was followed by two state run firms- NTPC and Power Grid Corp of India withdrawing their sponsorship of the CWG due to the negative publicity stemming from various allegation of mismanagement of funds by the OC. Just a week before that, Premier brands- the merchandising partner of CWG pulled out of the event. EMAAR MGF Inspection of the CWG Village built by EMAAR-MGF in September showed the poor state of the entire preparation. The infrastructure was of poor quality, with leakages, water clogging, collapse of a footbridge etc. thus making the entire village filthy and uninhabitable. The company was penalised for 183 crore for the structural defects and inadequate amenities like power and waste supply which resulted in major irregularities in the construction of CWG Village. Timing, Scoring and Results system An illegal contract was awarded to Swiss firm , Swiss Timing Omega, to install Timing, Scoring and Results (TSR) system for the 2010 CWG at an exorbitant rate of 90 crore, by the OC of the games. The OC had rejected the lowest bid quoted by Spanish firm MSL of 62 crore and granted the contract to Swiss timing Omega, causing a loss of over 90 crore to the exchequer. Charges related to forgery, cheating and conspiracy have been already filed against members of OC Suresh Kalmadi, Lalit Bhanot, V K Verma, Surjit Lal, ASV Prasad, M Jayachandran, promoters of two construction companies P D Arya and A K Madan of Faridabad-based Gem International and A K Reddy of Hyderabad-based AKR Constructions, Swiss timing Omega Irregularities in tendering of contracts The status in the society gave the organizing committee full freedom to exercise its own rules as noted by CAG. The organizing committee gave contracts worth 310 crores purely on the basis of nomination and no tender was floated for the same, which included the much debated aerostat contract. K-Events, an Italian firm was appointed by OC on the basis of nomination of the company Wizcraft. 28 contracts to the tune of 356.14 were awarded on the basis of single contract. In some cases the other tenders were disqualified on the basis of questionable grounds. One such example was the Village catering and the Games Management system. CBI booked Suresh Kalmadi and in its charge sheet has given details of how he bent the rules and overlooked objections raised by government officials to grant the contract to a Swiss form for TSR causing a loss of 95 cr to the exchequer. Contracts for overlays, waste management , image look (14 contracts) worth Rs 1253 crores were awarded to vendors who didnt fulfill the eligibility criteria stipulated in the tender

contract. Impact on the infrastructure The Commonwealth games related infrastructure projects left the capital city like a war zone . Practically all the roads were dug up and the building materials lying everywhere. Pedestrians had to jump over the cables and rocks as the pavements resembled like craters. With the amount to the tune of 50,000 cr invested the people of the country expected a better output. The below mentioned are the highlights, The newly built shooting range at the Siri Fort area collapsed after one heavy shower. The foot over bridge adjacent to the main venue of the Commonwealth Games collapsed while being erected, injuring 27 workers who were dumped into a tow away truck to a municipal hospital and dished out a compensation of measly Rs 50,000 ($1097) for broken skulls and multiple fractures. Many of the games venues leaked during the monsoon and roofs of some collapsed. The Commonwealth Games village, the place where athletes from participating countries were put up was infested with dog poo, snakes, clogged toilets, and unfinished work. Quality Compromised The CVC scrutinized several games related stadia up gradation and civil works projects including construction of roads, pavements, road grade separators, street lighting etc., which cumulatively added to 2,477 crore. During the course of its investigation the CVC zeroed in on role of the third party quality assurance agency appointed by civic agencies to monitor the quality of work and materials. The CVC concluded that all the certificates issued were without any ground verification or technical examination and were all fake or forged. Funds from the SC/ST development were diverted in the CWG games expenditures. The equipment for the CWG was hired by the OC at a rate of atleast 14 times the actual price. The committee had hired equipment at an inflated rate of Rs. 42.34 crore (over Rs 1400 higher) against the actual cost of Rs. 2.80 crore , thus giving undue benefits to the companies . Medical equipment including treadmills had been bought or rented at atleast 67 times higher than their original price. Simple things like liquid soap dispensers were rented at a price of Rs 9,379. Apart from the financial irregularities there were many other implications such as displacement of over one lakh families due to infrastructure projects , locking up homeless citizens & beggars , exploitation of workers and child labor and the list continues.

Suresh Kalmadis bail, A surprise ? Though Mr Kalmadi was arrested under sections of 120 B and 420 (criminal conspiracy and cheating) and jailed for over 10 months, he was granted bail on January 18, 2012. The investigation for the report declared: Even though, his name had figured in the FIR lodged by the police, in the charge sheet filed by Central Bureau of Investigation (CBI), his name wasnt mentioned at all !! Justice Gupta gave his verdict in favour of Mr Kalmadi stating that there was no allegation of money trail to him (and Mr Verma) and also all the allegations of him threatening the witnesses and tampering with evidences were incorrect. The bench also upheld stating that there was no allegation that the accused will flee from law and trial and hence could be granted bail. So, Mr Kalmadi was allowed to walk scot-free with a bail amount of Rs 5 lakhs. The other pointers of the funds mismanagement included: After having won the bid to host CWG, the initial budget that was quoted was around Rs. 200 crore. Then considering the other aspects, it was escalated to Rs. 800 crore citing reasons for the beautification of the city etc. And finally they approached the Cabinet with a proposal of over Rs. 1600 crores. To add to the fury, Organizing Committee rarely met and endorsed post-facto decisions, which were taken in a centralized system. As against the originally approved 36 member panel who were to travel to London for the Queens baton, 52 people had gone to London (including Mrs Suresh Kalmadi), thereby leading to an extra Rs. 14 lakh expenditure, which had to be borne entirely by the Organizing Committee (OC). There have been signing up of documents and agreements by Mr Harish Sharma who had booked 102 hotel rooms for the OC officials. Two brazen things that unfolded were: the rooms were null and void, although money was paid for the same. Secondly, the post of Mr Sharma as Joint Secretary, did not exist. Also, several gift items were purchased, an entry of which was never made in the accounting books. Mr Kalmadi had also caused a huge loss of over Rs 90 crore, when he awarded the contract to install the Timing, Scoring and Result systems (TSR) to a Swiss firm at an exorbitant price. Also, there were cases of the gym equipment - imported from China, were not only of sub-standard quality but also heavily priced.

CWG : A potpourri of mishaps It glorified national shame rather than the national pride. When more than a third of the nation is reeling under poverty, there was no need for such an extravaganza, wherein the funds could have been actually used appropriately for building up the nation. It was completely irrelevant to the common man, whose daily concern is to feed the family rather than the commonwealth games. This was reiterated by the facts like the streets of Delhi were deserted during the cycling competition and also most of the stadia were unoccupied during the games. Also, the volunteers (10000 out of 22000) had quit less than a week before the event. There had been usage of the child labor on a very large scale for the construction activities. The wages that were paid were below the market price that has been set for the Labourers. Also the construction activities did not provide a proper rehabilitation to the dislodged residents (especially the slum dwellers).Their houses simply paved the way towards the construction of the swanky footpaths, malls and roads and these poor people were neither compensated for their land, nor rehabilitated properly. Also, there were instances of racism that were reported, wherein the athletes from Africa were not given an accommodation on par with their Australian or New Zealander peers. The racism also penetrated into the actual games, wherein there was a display of racial bias towards the African athletes. Also the safety of the athletes was not taken into consideration. There were heavy boycotts by the athletes citing various reasons for pull-out at the last moment - ranging from safety to dengue fever and improper accommodation. To add another feather to the cap of sham, Indian athletes who had won in competitions had been tested positive for the intake of the performance enhancing drugs. Also, in certain cases, when India did not win a medal, there were many hoot calls by the Indian audience - instances of various ethnic and racial slurs at the foreign athletes Also, there were lot of financial irregularities in the payments and many cooked up transactions for which there were no deliveries or excess payment.These set of events have definitely given an indication to the globe about the chalta hai attitude of the Indians and is a clear interpretation that India is unable to host any major international sports meet. It was truly a Common-wealth Games, where the management had clearly mismanaged the common-mans money in the name of the Organization of the games. It was simply a drain of the public funds.

References :
1. http://www.timesnow.tv/articleshow/4362965.cms 2. http://indiatoday.intoday.in/story/cwg-scam-ms-gill-sunil-dutt-warned-pm-onsuresh-kalmadi/1/143659.html 3. http://en.wikipedia.org/wiki/Suresh_Kalmadi 4. http://www.ndtv.com/article/india/kalmadi-granted-bail-may-return-as-head-ofindian-olympic-association-168617 5. http://www.dailypioneer.com/nation/36571-suresh-kalmadi-granted-bail.html 6. Major scam hits Commonwealth Games; http://www.thehindu.com ; July 2010 7. www.wikipedia.org 8. Commonwealth games scam; http://www.ekakizunj.com 9. Timeline: Commonwealth Games 2010; http://www.livemint.com; September 2010 10. CWG scam: EMAAR to be penalised village;www.ndtv.com; October 2010 Rs. 183 crores for athletes

11. CWG scam: Delhi court orders framing of charges against Suresh Kalmadi & others; www.timesofindia.com; December 2012