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html Manmohan Singh’s public-private partnership with Rajat Gupta How the PM has been actively supporting Gupta's campaign to influence public policy and expand his business empire A special investigation by Kapil Bajaj How Manmohan used the PMO, Planning Commission, various ministries, and public funds to promote former Mckinsey boss Gupta’s Indian ventures How Manmohan turned Gupta’s private network into a powerful body influencing public health policy, with zero accountability to the public How Manmohan helped Gupta’s business and health education network to con the states into parting with hundreds of crore of public funds and parcels of free land How Manmohan helped create the ‘non-profit’ smokescreen that Gupta used to expand his illegal private equity business in education How Manmohan’s support contributed to Gupta’s clout, compromising regulatory oversight of his dubious dealings How Manmohan’s support blinded the government to national security implications of Gupta’s fast growing PE investments, particularly his links with Pakistan New Delhi, 14 March 2011: Neither coalition dharma nor plain ignorance explain why Prime Minister Manmohan Singh has been actively promoting Rajat Gupta’s various ventures in India, particularly exMckinsey boss’s bid to recast India’s healthcare and education. Why would the Prime Minister of a country be so shockingly indulgent with a man who represents the heart of corporate America and is a globally-connected private equity investor? So indulgent that Manmohan’s principal secretary (MoS rank) works under Gupta in an organization that gives the wily businessman a free run of India’s public health administration. Manmohan’s PS might soon be working under a man convicted of fraud! Here’s a blow-by-blow account of how Manmohan used his office to promote Gupta’s ventures at a huge cost to the public, disregarding the law, rules, regulations, proprieties, and anything else that came in the way. PMO at Rajat Gupta’s disposal Manmohan Singh not only blessed American PE investor Rajat Gupta’s various ventures in India, most notably Public Health Foundation of India (PHFI) and Indian School of Business (ISB), but also put at Gupta’s disposal the services of the PMO, Planning Commission, and the ministries of health and HRD.
to the governing board of PHFI. approved “one time contribution” of Rs 65 crores to the PHFI initial corpus of Rs 200 crore. education/training. Manmohan’s support has helped PHFI insinuate itself into India’s public health administration as a powerful policy-influencing body. There is no information in the public domain on how this money is being spent. where Gupta is founder-chairman and managing director emeritus.Manmohan had the finance ministry sanction a grant of Rs 65 crore to PHFI’s initial corpus and approved the appointment of four senior bureaucrats. had reportedly conceived PHFI over a decade ago along with Barry R. Rajat Gupta. including his principal secretary TKA Nair. Describing itself as an ‘independent foundation’ and a ‘public-private partnership’ (PPP). subsidies and large parcels of prime land from the central and state governments. strengthening existing institutions. PHFI is seeking to set up 8-10 institutes of public health in India and to introduce public-private partnership (PPP) in formulation of public health policy. Even the PPP agreement signed between the two sides for creating PHFI has not been made public. chaired by Manmohan. neither the private partners nor the government have published any report on the organisation’s finances. and service delivery. 2006. Despite receiving hundreds of crores of rupees in grants. Manmohan played the key role in bringing ISB promoters and the Punjab government together for building a new campus of the B-school at Mohali. Bloom is the dean of HSPH and Berman now works for the World Bank. a Harvard alumnus. on a 99-year lease for Rs one per acre! PM admits Gupta’s corporate network into public policy! Manmohan Singh launched and blessed PHFI at a gala function in Delhi on March 28. PHFI’s corpus of funds reportedly holds over Rs 400 crore. and Rs 80-90 crores were being generated from some high net worth Indians. where the super-rich promoters of the project have been given 70 acres of prime land. and conducting research to enable appropriate policy formulation”. three months after the launch of PHFI. Bill & Melinda Gates Foundation (or BMGF whose ‘global development programme advisory panel’ is chaired by Rajat Gupta) would contribute an equal amount. Manmohan’s blessings and active support has enabled Gupta’s PHFI to open four ‘Indian institutes of public health (IIPHs)’. which get a steady stream of government-funded students despite having no recognition or accreditation from any statutory authority in India for any of its courses. Since the launch of PHFI in March 2006. which is chaired by Gupta. For an organization whose governing board is dominated by people representing big business. PHFI has so far received over Rs 100 crore in budgetary support from the Centre. a government notification had then said. . Manmohan has been equally supportive of Hyderabad-based Indian School of Business (ISB). both within the government and outside. Bloom and Peter Berman of Harvard School of Public Health (HSPH). PHFI does not submit itself to the RTI Act. whose market price is estimated to be Rs 105 crore. On 06 July 2006. 2005. or an audit by the CAG. Manmohan has set a sweeping public policy agenda of “building new world-class institutions of public health. the Cabinet Committee on Economic Affairs (CCEA).
his principal secretary (MoS rank). Raj Mitta. two multilateral institutions (Tim Evans and JVR Prasada Rao). RA Mashelkar. and EMRI. represent business/corporate entities (Mukesh Ambani. Notably. the $1. (On 12 March 2011. Shiv Nadar. Amartya Sen. Anil Seal and James Curran). including the chairman. Gautam Kumra and Kiran Malhotra). however. Montek Singh Ahluwalia. At least 10 members of the PHFI board are either foreigners or NRIs. some of which like BMGF have roots in business/corporate entities (Ashok Alexander. another American company whose stock was traded on the tips allegedly leaked by Gupta. since then. Can’t you even smell the sleaze.4 billion private equity firm. and one has come from a central government-run medical institute (K Srinath Reddy). Harpal Singh.Ten of the 28 members of the PHFI governing board. Sujatha Rao and RK Srivastava). David Lynn. Gupta felt compelled to take a leave of absence from his own baby –New Silk Route Partners. The prime ministerial faith in Gupta has remained intact even after the former Mckinsey boss was formally charged on 01 March 2011. the Prime Minister of India. Since then up to 10 March.) Companies that dumped Gupta may have been sensitive to their public image. ‘partnership’ has been conferred on only three. Ravi Narayan and Rohini Nilekani). Lincoln Chen. Nor has Manmohan voiced. PHFI lists 36 foreign universities/institutions as its ‘partners. the need for Gupta to step down from PHFI board. Punendu Chatterjee.’ Of the Indian institutions. Kathy Cahill. Gupta has had to resign from five more organizations. While three foreign universities have been represented on PHFI board. Rajat Gupta. does not seem to think that Gupta’s alleged involvement in one of the largest insider . Mr. Seven members represent non-profit/voluntary organizations. including chairman Rajat Gupta. where he is founding general partner and chairman. a US citizen since 1984. including P&G. so that he could directly intervene in sorting out the problems that the foundation might face. PM? Manmohan nominated TKA Nair. Uday Khemka. no Indian university has been given a place. Gupta’s exit from various organizations had begun as far back as 19 March 2010 when he had to resign his Goldman Sachs directorship after learning that the US government prosecutors suspected him of complicity in insider trading of Goldman shares allegedly committed by his old friend and Galleon Group founder Raj Rajaratnam. a PPP that provides ambulances for medical emergencies in several Indian states. Nor is there representation on PHFI board of National Institute of Health and Family Welfare or All India Institute of Hygiene and Public Health or any of the public institutions under Indian Council of Medical Research (ICMR) and Council of Scientific and Industrial Research (CSIR). Mirai Chatterjee. to the PHFI board. So much has been Manmohan’s liking for Gupta that his PS continued to be on PHFI’s board under the chairmanship of Gupta even after it was reported in April 2010 that the US Securities and Exchange Commission was examining the possible role of the former Mckinsey boss in causing insider trading of Goldman Sachs stock. four academia (AK Shivakumar. Twelve of the 28 members of PHFI board belong primarily to an organization that is not Indian or is headquartered abroad. The central government is represented by four bureaucrats whose clear mandate is to act as ‘facilitators’ (TKA Nair.
” he said. He called on PHFI to develop a “new cadre” of “public health managers” and “invest in capacity-building in existing public health institutions across the country. Gupta continues to be a member of the Prime Minister’s global advisory council for overseas Indians. plan panel’s deputy chair (MoS rank) who is a well-known PPP evangelist. Plan panel. 1956.” Manmohan told PHFI “to develop an Indian agenda both in academics and research. Manmohan nominated on the PHFI board Montek Singh Ahluwalia. Manmohan gave PHFI virtual carte blanche to recast the entire public health system in the country. Doctor’s orders Manmohan Singh also approved the appointment of K.” and wished that the foundation will become a template for forming PPPs in other social-sector programmes run by the government. (The health ministry has also been generous with money. The ministry of health and family welfare was told to nominate its Secretary as well as the Director General Health Services on the PHFI board and provide smooth ‘facilitation’ to the PHFI’s objectives. spending crores of rupees of funds available under National Rural Health Mission on supporting PHFI’s various programmes.trading cases in US history is enough of a reason for him to distance himself from the accused! Manmohan’s PS continues to work under the ‘able’ guidance of Gupta to recast India’s healthcare system.) Since turning up at the PHFI launch function.” He encouraged PHFI to influence public health policy at the state level. Manmohan’s steadfast support is the most important reason why Gupta continues to hold on to the boards of Public Health Foundation of India (PHFI) and Indian School of Business (ISB). ministries at Gupta’s service In order to lend Planning Commission’s long-term policy-formulation support to PHFI’s PPP agenda. It’s most unlikely that Reddy’s secondment from an ‘institution of national importance’ to PHFI was ever duly approved by the AIIMS governing body and was in compliance with AIIMS Act. “The setting up of the PHFI presents a unique opportunity to develop innovative models of publicprivate partnership in major social-sector programmes. the head of his medical team. HRD minister Kapil Sabil too has been providing his enthusiastic support to the foundation’s objective of promoting PPPs in education. Srinath Reddy. Reddy is Gupta’s right hand man whose AIIMS background is used by the wily businessman to build credibility and legitimacy for PHFI. on a five-year secondment from AIIMS. as PHFI president. saying: “We also hope that our state governments will find it beneficial to partner your initiative to introduce greater levels of expertise into their public health system. ‘Health policy? It’s all yours’ Launching PHFI in March 2006. Such prime ministerial faith in an organization chaired by an American private equity investor and dominated by foreigners and corporate honchos!! Manmohan’s links with Gupta .
The study prescribes for the government a framework for formulation of HR policy in healthcare. Manmohan praised Gupta. Rather than slog over training of grassroots health workers. 2011. and more recently to create the PHFI”. then a director in McKinsey's Stamford (Connecticut) office. PHFI conducted a study. On 27 September 2006. Gupta wants PHFI and Indian institutes of public health (IIPHs) to target the lucrative end of the training market.’ which was notified on 02 January 2009. In fact.” On 01 June 2007. Manmohan. six months after he launched PHFI. Gupta’s ‘world class’ schools con the public! . a wide-ranging.e. heart-to-heart interview in which he talked about the need to attract about $150 billion of investments in infrastructure through privatization and PPPs. whose Harpal Singh sits on the board of PHFI.” wrote Financial Times on 08 March. corporate groups like Fortis. Manmohan gave Gupta. as a market Gupta-led PHFI sees education and training as its entry into India’s healthcare sector and a strategy to influence all levels of institutional decision making. but we can train people who will train ASHAs. “He (Gupta) had an open door to Prime Minister Manmohan Singh’s office.” Gupta had told this writer in 2007. i. the centrally-sponsored scheme for rural India. (The project has been in limbo after the Supreme Court set aside acquisition of land at the project site by the state government. led by World Bank’s Peter Berman. a centre of excellence. On 16 August 2005. other promoters and the state government for building the B-school as “a fine example of public-private partnership. have long been lobbying for an unfettered access to medical education ‘market’. which recommended sweeping changes in power and irrigation policies. on human resource needs of India’s healthcare sector. “We can’t train six lakh ASHAs (Accredited Social Health Activists who work at the grassroots) required under NRHM. praising Gupta “for the initiative he took to set up a business school in Hyderabad. He also praised Mckinsey “for the initiatives it has taken in India to work with state governments” and stressed the need to form PPPs for “the successful implementation of our social and human development initiatives. Manmohan received from Gupta and some CII representatives a Mckinsey report on Bharat Nirman. Manmohan delivered the keynote address at Mckinsey’s board meeting.Manmohan’s association with and liking for Rajat Gupta goes back several years. conducting ‘public health management’ courses – in line with the Prime Minister’s advice – to create ‘public health managers’. On 24 November 2009. expressed his “delight” at the signing of an MoU between PHFI and the state government for building the first of the few planned Indian institutes of public health (IIPHs).) Visiting the ISB campus in Hyderabad on 05 December 2006. Education as a bridgehead.” On 23 October 2007. Gupta was one of the guests invited to President Obama’s first state dinner to welcome Manmohan Singh in Washington. on a visit to Mohali to lay the foundation of a government institute. Manmohan nominated Gupta to his ‘global advisory council on overseas Indians.
rest assured. Manmohan helps Gupta siphon off public resources While the July 2006 approval of the Prime Minister-chaired CCEA had been for a “one-time contribution” of Rs 65 crore to PHFI’s initial corpus. which are being spent on government . PHFI’s “charter”. the government allocated additional money to the foundation – Rs 36. Australia and New Zealand by including them in Schedule 3 of the MCI Act. With five years of glorious history behind it. For an organization almost entirely supported by public funds. upon completion of the studies. clinical research. it’s his connections. the UK.” (PHFI may not have been accredited itself but it intends to accredit all other public health institutions in India. AICTE or any other statutory regulator. includes the objective. It’s not excellence and fair play that is nurturing Rajat Gupta’s public health baby. PHFI admits that none of its courses has been recognized or accredited by MCI. In case you wonder about the professional value of the courses offered by PHFI’s foreign partners. PHFI has recently approached the government with a draft bill to try to get a “central university status. short-term programmes and workshops run on public funds.15 crore in annual plan for 2007-08 – without an explanation.5 lakhs per candidate.” which will give it an unchallenged right to access public funds to set up campuses across India and recast the country’s healthcare system to suit its agenda. vast public resources. but are “recognized by the health ministry under NRHM. Canada and Australia.IIPHs’ one-year post-graduate diplomas (public health management.” not tests. Being a ‘world-class’ institution of Manmohan’s dreams. Europe. Such is the kind of ‘public-private partnership’ that Manmohan Singh and his blue-eyed boy have been promoting! It involves assuming the airs and graces of a “world-class” institution while using the power wielders in the government to corner public resources – both financial and human. ‘Self-sponsored candidates’ are also welcome as long as they can pay a fee of Rs two lakhs for the one-year postgraduate diplomas. There is no information in the public domain on how Rs 65 crore and subsequent allocation of Rs 36.15 crore have been spent.” and. are “expected” to work with PHFI for three years. Canada. PHFI itself only admits candidates with “a relevant post-graduate degree from an accredited institution” in its studentship programme for preparing its ‘future faculty’! Under this programme. Similarly ‘credible’ methods are employed in hiring people. “recommendations letters” and “bonds”.) Ironically. candidates “with substantial work experience” are usually sent to study for a year at one of the “30 eminent schools of public health in the USA. PHFI does all admissions on the basis of “recommendation letters. the health ministry conveniently issued a notification on 07 March 2008 recognizing “all post graduate medical qualifications” awarded in USA. Doctoral programmes prescribe five years of compulsorily working with PHFI with one programme requiring the signing of a “bond”. etc. It admits to its flagship post-graduate diploma courses primarily ‘in-service candidates nominated by the government’ – and charges the government a fee of Rs 2. given on its website.). the UK. “Establishing an independent accreditation body for degrees in public health which are awarded by training institutions across India”. It’s not clear if more money was allocated in subsequent years. 1956. biostatistics and data management.
Around the time Punjab government approved Rs 105 crore largesse to the corporate coterie behind ISB. 2010. PHFI has been receiving lavish grants and free land from state governments for setting up IIPHs under ‘PPP’ – thanks to Manmohan’s open encouragement. though it’s not publicly known whether it also made a financial grant. its financial grant.82 crore on acquiring 51. whose market price was Rs 105 crore.25 lakh per annum. Gupta’s ‘philanthropy’ gives Punjab a kick in the belly With Manmohan’s intermediation.50 crore per acre at the time of acquisition.employees made to study its unaccredited courses. and Atul Punj (Punj Lloyd). If the project had gone through as planned. Delhi government reportedly spent Rs 13. No such rule can even be imagined to be applied to ISB. at a token rate of Re one an acre on 99 years’ lease to the cash-rich ISB and the wealthy promoters of its second campus – Sunil Mittal (Bharti Enterprises). engineering and other institutions. the state government’s contribution would have been over Rs 100 crore. which charged Rs 18 lakh and 70 thousand for its one-year post graduate programme in management . which represents AICTE-approved.19 acres of Gram Sabha land in Kanjhawala village. if any. taking into account the market price of Rs one crore per acre of land at the Mohali project site prevailing then.S. Gujarat government provided 50 acres in Gandhinagar and Rs 25 crore in grant. The ‘PPP’ model usually employed by PHFI is to get the state government to provide about 40 acres of land free of cost and also bear 20-50 per cent of project cost of Rs 140 crore per institute (excluding the cost of land). president of Punjab Unaided Technical Institutions’ Association (PUTIA). was quoted as saying in an IANS report of 14 August 2010. Dhaliwal. Orissa government provided 40 acres near Bhubaneswar. which is home to an ongoing farmers’ movement against arbitrary land acquisition.” J. The PUTIA members must comply with the state government guidelines that cap the fees they can charge students at Rs 1. “Their intention is clear. Andhra Pradesh government reportedly provided PHFI with 43 acres of land in Rajendra Nagar area of Hyderabad free of cost and Rs 30 crore in financial grant for setting up IIPH (Indian institute of public health). While the state government reportedly acquired the land at Rs 63 lakh an acre. The debt-ridden Punjab government gave 70 acres of prime land in Mohali. private management. For IIPH-Mohali. for the IIPH project is not publicly known. Why is ISB an exception?” Dhaliwal demanded to know. “Other (private) institutions in Punjab purchase land at commercial rates. another of Gupta’s educational enterprises planned in Mohali is progressing at a huge cost to the state and its people. which Manmohan Singh personally blessed but is currently stuck after a land dispute. Analjit Singh (Max). it also decided to exact property tax from educational institutions outside municipal limits by enacting the Punjab (Institutions and other Buildings) Tax Act. its market value was Rs 1. Sunil Kant Munjal (Hero group). Hundreds of crores of subsidy for the outsiders will be paid out of the pockets of the local educational institutions. Punjab government had agreed in September 2006 to share 50 per cent of the project cost of Rs 140 crore and provide 35 acres of land free.
In the academic year 2010-11.” writes Vikas Kahol in Mail Today of 17 August 2010. I firmly believe in the Gandhian philosophy that says. and allocate public funds to serve its interests. One of these measures is the well known ‘revolving door’ tactic – appointing Gupta. Srinath Reddy. Manmohan creates ‘revolving door’ for Rajat Gupta & Co With Manmohan’s blessings and approval. ISB is a rich organization. Since Punjab government also believes in the same Gandhian philosophy.(PGP) for 2010-11 (including compulsory items like accommodation and meals).’ which he wrote for Mint of 06 March 2011. president. boost its authority in the country’s health administration. Bharatiya Kisan Union (Rajewal). which has a fee of Rs 25 lakh 20 thousand (payable over a 14-month period in five instalments). other board members and PHFI-sponsored-or-sympathising people on important government committees and encouraging key government officials to work for PHFI on secondment. ISB. “If the cause is just. Gupta explains his philanthropic philosophy: “Very often. which Rajat Gupta counts among his “philanthropic” activities in India. “The public deserves to know how the land acquired from farmers was later given to a private organization. American India Foundation. people ask me how I am able to raise such significant philanthropic donations for a variety of initiatives (such as ISB. “ISB is being established at the cost of farmers. Having had the first hand experience of Gupta’s ‘philanthropy. and so on) when these projects are not single-donor led and governed with their name on the initiative. a Chandigarhbased social activist. ‘Essential principles for successful philanthropy. ISB’s Hyderabad campus collected about Rs 100 crore from about 560 students enrolled in PGP.’ “several farmers’ organisations have begun consulting legal experts to ascertain whether allotting government-acquired land to a privately managed institution is a violation of the Land Acquisition Act. was quoted as saying. then there were bagfuls of more money to be collected from those enrolled in short-duration executive education programmes whose annual enrollment runs into several hundreds and one-year post graduate programme in management for senior executives (PGPMAX). the farmers insist that the government could not allot the land to a private body. it used the Land Acquisition Act (which is meant to be used only for a public purpose) to drive farmers out of their land to make way for Gupta’s ‘humanitarian project’. PHFI. who also belongs to Punjab RTI Activists’ Federation. More fees will be collected from 750 people ISB expects to enroll in executive education programmes at Mohali campus. Urban Development Institute. Why did it need charity from the state?” HC Arora. it will rake in Rs 58 crore and 80 lakh from the new campus in the first year. ISB Hyderabad campus will charge Rs 21 lakh per PGP student. was quoted as saying. Did Punjab chief minister think of investing money in improving government schools? What will the common man gain from an ISB in Mohali?” Balbir Singh Rajewal. who sits on PHFI board as the director of Bill and . controls 260 acres in Hyderabad of which it has utilized no more than 80 acres in its decade-long existence! In a column titled. For academic year 2011-12. K. means will come”. If 2011-12 fee per student (Rs 21 lakh) were to be collected from 280 PGP students that ISB website says it plans to enroll at Mohali branch in 2012. Interestingly. the government has used a host of measures to lend legitimacy and prestige to PHFI. Rajat Gupta and Ashok Alexander. For example.
To lend an appearance of legitimacy to PHFI’s various projects. the health ministry appointed Reddy as the president of National Board of Examination (NBE). were appointed on Planning Commission’s ‘taskforce on planning for human resources in the health sector’. joined PHFI.’ the highest policy making and steering panels. (So Reddy is in a great position to not only help private healthcare providers like Fortis. respectively. Reddy and AK Shivakumar. Earlier. was made a partner in ‘centre of excellence for the prevention and control of cardio-metabolic diseases in South Asia. For instance. seeking to shape policies that will suit the PHFI’s network of private interests. Manmohan approved the October 2010 formation of Planning Commission’s high-level expert group on universal health coverage. Grave conflicts of interest PHFI’s business lineage makes its formation and activities riddled with fundamental conflicts of interest. but can also endorse the qualifications of the students returning from PHFI’s 36 foreign partnering institutions. . to be chaired by Reddy and with Shivakumar as one of the 15 members. In October 2009. who is partnering with ISB in setting up Max India Institute of Healthcare at the upcoming ISB campus in Mohali. as a member or chair. have been appointed on ‘mission steering group’ as well as ‘empowered programme committee.) In June 2009. the health ministry appointed Reddy on the ‘Task force for setting up of the National Council for Human Resources in Health. National Institute of Health and Family Welfare. and Mahatma Gandhi Institute of Medical Sciences-Wardha are being commandeered to support and partner with PHFI. which used to own pharma giant Ranbaxy and now runs hospitals across India. a member of PHFI board.’ which has since drafted a bill to set up such a council. As long as Manmohan is behind him. in getting their hospitals recognized for award of post graduate degrees. were appointed on the ‘international advisory panel on NRHM’ chaired by the health minister. Shivakumar and Analjit Singh of Max group. It has direct interest in shaping government’s health policy. Fortis also wants to be a big medical and nursing education provider. Tarun Seem. PHFI president K Srinath Reddy alone now sits. under National Rural Health Mission (NRHM). AIIMS. in May 2006. which has been described as a ‘technical support institution’ for NRHM. for example. on at least seven crucial committees of the government. public institutions like AIIMS. From the government side. a serious conflict of interest in such an appointment is a trivial matter. who worked for five years as Director NRHM. Reddy and Shivakumar (who is also a visiting professor at Gupta’s ISB) are also present in the Central Council of Health and Family Welfare as well as the governing body of National Health Systems Resource Centre.Melinda Gates Foundation’s (BMGF’s) India AIDS Initiative. its governing board has Harpal Singh of the Fortis group. The NBE accredits medical institutions for the award of its postgraduate degrees (such as DNB) and conducts screening tests for foreign medical graduates. which is represented on PHFI board. All India Institute of Hygiene and Public Health.’ which PHFI launched in April 2010. the scheme that is the primary means of supporting PHFI with public funds. which conducts post-graduate and post-doctoral medical examinations and awards degrees (equivalent to university degrees) in existing and upcoming specialties.
Gupta and other corporate investors flout the regulations by getting the non-profit managements of the educational institutions to outsource most of the work to their profit-making companies. He is reportedly close to invest $70 million (Rs 315 crore) in Hyderabad-based Sri Chaitanya educational group. Gupta has violated the law by founding and investing in Vienova. Nor does it occur to the unsuspecting ‘Caesar’s wife’ that there is a glaring and grave conflict of interest between Rajat Gupta’s government-supported-and-subsidized educational enterprises. Gupta has been using New Silk Route Partners (NSR). to run educational institutions. money-spinning ISB and PHFI with generous cashand-kind help from the government. particularly where they share the blame? The answers are well known. This ‘two-tier arrangement’ invariably results in violations of laws governing public trusts/societies and the Income Tax Act. that all PE investments seeking a backdoor entry into education are essentially illegal and should be discouraged.PHFI does not think it problematic to be forming relationships in crucial public health matters with pharmaceutical companies. in violation of the law of land which does not allow commercial organizations. which mostly go unpunished due to the connivance of the regulatory authorities. which is one of the largest networks of private schools and colleges in India. Sri Chaitanya runs about 160 institutions. Private deals behind ‘philanthropy’ With Manmohan Singh helping to create an aura of “philanthropy” behind him. “to work together in the areas of public health. Vienova also provides online tutoring services. his $1. to look to control various kinds of educational institutions in the country.300 crore) private equity firm. view industrial pollution. who is providing unstinted support and encouragement to Gupta.4 billion (Rs 6. it’s naive to ask questions like: (a) How is the presence of corporate representatives on PHFI board affecting its priorities and decisions? (b) How will industry representatives on PHFI board. Rajat Gupta is seeking to turn education into a huge profit-yielding business. In October 2009. PHFI signed an MoU with Confederation of Indian Industry (CII) “for policy and advocacy initiatives on key public health issues where India Inc can play a major role”. mostly in Andhra Pradesh. Rajaratnam. PHFI tied up with Pfizer. US-based pharma company. namely ISB and PHFI. and his outright illegal PE activities in the education sector. a Gurgaon-based company that runs a chain of five schools in western Uttar Pradesh and is aiming to expand its operation to over 50 schools in the next three years. let alone private equity (PE) firms. who founded and headed hedge fund management firm Galleon Group. Given PHFI’s genetic makeup. medical research and education”. In February 2011. Apart from running and expanding his “non-profit”. Gupta’ liaison with a man in trouble Gupta has been named by a US prosecutor as a “co-conspirator” with Raj Rajaratnam in Galleon hedge fund insider trading case. It does not occur to the innocent Prime Minister. is accused of using . the trusts or societies thus pay fees to the corporate investors for providing various services. like Mukesh Ambani.
to form Taj Capital Partners. primarily into India and other South Asian investments. The PE firm aimed to put $2 billion. including former Goldman Sachs Asia chairman Mark Schwartz. have already confessed to wrongdoing.500 crore Satyam fraud as an independent director of the IT company and chairman of its audit committee. The first to deal a blow to the reputation of the elite B-school was M. However. Both socialized together and attended parties hosted by AIF along with their wives. the ISB Dean.75 million from Rajaratnam in exchange for illegally providing tips on Mckinsey’s client companies.his network of contacts. ISB also has the dubious distinction of B. including the $1. Ramalinga Raju. who had to resign in January 2009 from his post after details emerged about his role in the Rs 7. Of the 26 people that the US Attorney’s office has charged in connection with Galleon. Their business partnership goes back to 2006. Kumar. confessed to receiving $1. Rajaratnam continues to have an investment in the fund managed by NSR. to track down non-public information which he then used for trading in securities. Many of Rajaratnam’s erstwhile friends and associates. 19 have pleaded guilty. During Gupta’s time at McKinsey. Subsequently. Ram Mohan Rao. “They (critics) say Mr Gupta worked with Mr Kumar to corner private and government business and gain favour in Asia’s third-largest economy. which Gupta had founded. Kumar had to resign from ISB board in January 2010 after pleading guilty in the Galleon case. half of it through a hedge fund run by Rajaratnam. Prosecutors told the court how Kumar arranged to have an overseas entity receive payments from Rajaratnam through a Swiss bank account.75 million paid by Rajaratnam. counting friends among the high and mighty. writing in The Hindu Business Line of 07 March 2011. now called New Silk Route Partners (NSR). Gupta is charged with passing confidential information to Rajaratnam on companies including Goldman Sachs and P&G.” wrote Financial Times on 08 March 2011. when Gupta joined Rajaratnam and two other partners. according to media reports. raking in profits worth $45m. including Gupta and Anil Kumar (another Mckinsey executive). including Kumar. The two operated as a forceful double-act to secure business for McKinsey. win access in Washington and build a brotherhood of donors around the Hyderabad-based ISB and a handful of social initiatives. Kumar’s wrongdoing and now Gupta’s alleged involvement in corporate corruption have been described as part of “ignominious hat-trick” for ISB by BS Raghavan. Satyam Computer chairman and the prime . Rajaratnam withdrew from the deal when the other principals of the firm. Gupta has had a long association with Rajaratnam. Kumar headed an operation to outsource high-level McKinsey research to India. Rajaratnam had also served on the council of trustees of American India Foundation. Gupta and Rajaratnam are also said be close to US’ Democratic Party. who pleaded guilty in January 2010 in Manhattan federal court to securities fraud and conspiracy in the Galleon case. Gupta’s Mckinsey and ISB pal pleads guilty Gupta has also had a long association with Anil Kumar. who worked for Mckinsey under Gupta’s leadership and later joined his former boss in setting up ISB. Kumar made $2. no less. The money was then invested in Galleon under the name of a worker in Kumar’s household.6 million in illicit profits from this arrangement. decided against being a hedge fund.
Chandigarh-based Nectar Lifesciences – another instance of direct conflict of interest between his business ventures and his Prime Minister-supported campaign to control India’s public health policy. including Coffee Day Resorts. RBI found that Rajat Gupta acted illegally and in collusion with other foreign investors.4-billion private equity firm. RBI has the power to cancel voting and dividend rights on the bloc of shares. INX Media.) Gupta and other investors acquired a 24. including Ramesh Vangal. once serving on its executive board. With about 4. including a $70 million (Rs 315 crore) investment in Sri Chaitanya educational group and $40 million (Rs 180 crore) in restaurant chain Ohri's. New Silk Route Partners (NSR). Rajat Gupta’s “centre of excellence” – Manmohan Singh’s 23 October 2007 description of ISB – has consistently been getting linked to corruption and fraud. Gupta’s $1. an NSR-owned telecom tower operator. Gupta colludes with friends to control bank In an order dated 12 October 2009. In its order dated 14 October 2010. Ascend Telecom Infrastructure.92 percent stake in the bank by buying shares from the four companies belonging to C. Reliance Infratel. which concluded that Gupta and other investors were “acting in concert”. Rolex Rings.” the RBI found. KS Oils. If the shares change hands without regulatory clearance. And the Prime Minister of India has consistently been promoting Gupta’s bid to set up more such centres of excellence with huge amounts of public money and resources – be it his personal intervention in getting ISB-Mohali project off the ground or his open and active support to turn a private association put together by Gupta into a central policy-making authority in public health. NSR announced the merger of Ascend Telecom Infrastructure.000 towers across India. Gupta has also invested in a pharma company. both Hyderabad-based. has let it be known that the 01 March charge-sheeting of their boss will have no impact on its operations. Sivasankaran of the Sterling group. in buying shares in Tamilnad Mercantile Bank. Gupta has been spending most of his time striking private equity deals in India. and Ortel Communications. the day US SEC brought charges against Gupta. A complaint from C Kanagaraj. Gupta’s PE firm to buy big into India After stepping down from Mckinsey in 2007. Sure enough. a Tuticorinbased bank that has traditionally been controlled and patronized by the Nadar community. It was reported on 04 March 2011 that NSR is expecting to strike deals worth $150 million (Rs 675 crore) in the coming weeks. (Gupta and Vangal had jointly founded in the mid-1990s IT firm Scandent Group. and India Telecom Infra Ltd (ITIL). led to an RBI investigation into the share transfer. He has so far invested in about 15-20 companies.accused in one of the biggest corporate frauds in India’s history. the merged entity will have a nationwide footprint. Destimoney. Aster. a shareholder. Banking regulations require prior RBI approval for any trade in five per cent or more of the equity of a private bank. “The investors had a clear understanding and co-operation among themselves and had a common purpose of obtaining substantial acquisition of shares/ representation on the bank’s board and thereby gain control of TMB. the Bombay High Court issued a directive to the RBI to decide on the .
Gupta also has the confidence to influence India’s most important financial regulators. won a licence to operate broadband wireless access (BWA) services in Madhya Pradesh. inducted Gupta in its supervisory board. as a founding General Partner. and substantial investments in the neighbouring country. among others. according to media reports. Indonesia. Beaconhouse claims to be one of the world’s largest primary and secondary education (K-12) chains. Lahore and Karachi. Oman. with schools in Pakistan. the UAE.700 paycheck for 2009. Sivasankaran had purchased a block of shares of from Citi Venture Capital. Bangladesh. Gupta Pak link: national security issues Manmohan Singh’s special relationship with Rajat Gupta also has national security implications considering that New Silk Route Partners (NSR) has Abdul Hafeez Shaikh. Aster Private Ltd. Sberbank. providing ‘Qubee’ broadband internet services in Islamabad. the Philippines and Thailand. So far nothing has been heard as to how the government has been treating NSR’s growing investments in India. NSR is represented on the board of KS Oils by Vivek Sett. In June 2010. another PE investor. In June 2008. the Madhya Pradesh-based edible oil company. which is controlled by Lahorebased Kasuri family whose most prominent member is former Pakistan foreign minister Khurshid Mahmud Kasuri. that the former had substantial presence in Pakistan.transaction in question by February 2011. such as those in the telecom sector. the income tax department had raided KS Oils offices across Madhya Pradesh in March 2010 on reports of massive tax evasion.) Reason: Gupta’s connections in India which Sberbank brought to bear on its plan to enter Indian banking . Rawalpindi. from national security angle. the UK. another NSR company. Malaysia. The same ministry had objected to UAE-based Etisalat acquiring a majority stake in Swan Telecom on the ground. there was no report of the home ministry raising national security concerns despite the fact that Augere operates in Pakistan. The court also directed the bank not to take any major policy decision until the RBI’s decision. Russia's largest state-run bank. was being investigated in December 2010 by the Intelligence Bureau (IB) for share price rigging and insider trading. Pakistan’s finance minister. (The maximum that other directors got was $112. Sberbank also made Gupta its highest-paid director with a $524. Insider trading again! Gupta’s another connection with C Sivasankaran is through KS Oils.200. Notably. making him the first ever foreigner to be so appointed. which. in which Gupta’s NSR is one of the investors. has dealings with Huawei. Augere Mauritius. Gupta pulls strings in the financial capital Being Manmohan’s blue-eyed boy. the Chinese telecom company that had prompted the home ministry to raise national security concerns in the Etisalat and other cases. Interestingly. Augere launched the service in Pakistan in July 2009 and in Bangladesh in October 2009. NSR’s other investments in Pakistan include Beaconhouse School System.
Gupta quit the Sberbank supervisory board in June 2010 but remains a ‘strategic adviser’ to the bank. Mission accomplished. All facts and figures cited in this article can be cross-checked with the information available in public domain.sector in a big way. Sberbank received clearance from the RBI for opening a full-service branch in New Delhi. Successfully so. In August 2009. The writer is a Delhi-based journalist and takes full responsibility for what he has written.) . (End of Matter) (This investigation is based on information available in public domain.
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