Violations in India, penalties elsewhere

British engineering giant Rolls-Royce recently agreed to pay a $809-million fine (over Rs. 5,500 crore) for its corrupt practices in India, Russia, China, Thailand, Nigeria and Malaysia.

In the U.S., on January 6, Mondelez International, formerly known as Kraft Foods and of which Cadbury is now a part, agreed to pay $13 million to the U.S. authorities for paying an Indian agent, who in turn may have bribed government officials, for obtaining 30 different licences for phase II of its chocolate factory in Baddi, Himachal Pradesh. In October 2016, Cognizant admitted to possible violations governing anti-bribery laws of the U.S. in its operations in India. In September 2016, Anheuser-Busch InBev paid $6 million to settle corruption charges against one of its Indian companies where it had only a minority stake — the Indian company in question allegedly tried to buy off an employee who had turned whistle-blower and was informing U.S. authorities about its practice of using third-party sales promoters to pay bribes to Indian government officials. In 2012, Oracle paid a $2 million civil penalty in the U.S. to settle charges arising from a slush fund in India used to pay bribes.

It is almost an annual feature in the U.S. to see an American corporation admitting to have violated the Foreign Corrupt Practices Act (FCPA) in its Indian operations, and agreeing to pay huge penalties. These could range from bribing government officials to misleading accounting practices in order to hide slush funds. A similar parallel can also be occasionally seen in the U.K., as the Rolls-Royce case illustrates.

Paying for others’ sins

A scan of global anti-corruption jurisprudence and its impact on ordinary Indians inevitably throws up a ‘robbing Peter to pay Paul’ scenario. An aggressive global firm enters the Indian market, realises that it is deeply corrupt, engages middlemen to pay bribes to bureaucrats and politicians, secures huge businesses and swells its balance sheet. If caught, it apologises for the ‘mistake’, and offers to pay financial penalties to offset possible criminal trial and long jail terms for its officials — all in the home country, not India.

An average Indian pays either by way of taxes into government coffers that go into official purchases made from that company, or from his personal finances to buy its product. In those purchases, the ordinary Indian pays more than the legitimate market price because of corruption, contributing a part of the kickback paid to the middlemen who facilitate the company’s business in the Indian market.

Worse, when the company offers to pay a fine to offset criminal proceedings, that average Indian consumer would also partially contribute to it, because it is from markets like India that such foreign companies make their profits, part of which would be used to pay off their governments that uphold law.

To be fair, it is the effective implementation of anti-corruption laws in the U.S., the U.K. and most other developed economies that are forcing global business giants to pay huge fines for their questionable practices. It is a demonstration of the effective implementation of laws of their homelands, and caution to anyone from those economies against bribing someone in countries like India.

The troubling questions

What is worrying is the attitude of the Indian government and its anti-corruption bodies to this by-now-well-established global phenomenon. It is not known if India gets a share of the fine imposed under FCPA or other anti-corruption laws in developed economies.

There is nothing on record to show that in the long history of FCPA in the U.S., which came into being in the post-Watergate period in the 1970s, the Indian government has evolved any mechanism to regularly follow FCPA filings, and seek domestic remedy here in India. Nor is there any assurance that agencies such as the Central Bureau of Investigation (CBI) and Enforcement Directorate (ED) would take evidence from those filings to pursue cases here against those involved.

Despite landmark judgments of the Supreme Court to improve our anti-corruption architecture, at least one loud nationwide movement against corruption, and the issue of graft finding a regular appearance in political rhetoric, it is a fact that India does not have an effective anti-corruption mechanism yet in place.

The CBI, ED and other agencies are only as good, or as bad, as those political leaders in power. Successive governments have deployed them for political score-settling than for fighting big corruption. At the highest levels, there is also a clear link between the corrupt big sharks and political funding.

The last significant reforms in the administration of CBI and ED were ordered by the Supreme Court in the Vineet Narain case of 1997, by which it tried to bring some amount of autonomy to the agencies, especially bringing in supervision by the Central Vigilance Commission. However, the agencies have remained caged parrots, as the Supreme Court observed during the last government’s tenure.

It is no more just about autonomy of anti-corruption agencies or enactment of the long-pending Lokpal act. It is now troublingly also about competence and accountability. Anecdotes emerging from those investigated in recent times, closure of cases and chargesheets, and the apex court order ordering the CBI to probe its former chief Ranjit Sinha, all point towards mounting incompetence in Indian agencies, especially in exploiting the digital databases across the world, celebrating whistle-blowers and enforcing the law with impartiality.

Unless urgent parliamentary oversight — not perfect, but the best among the available options — is brought on to federal investigation agencies, nothing may change.


Unless parliamentary oversight is extended to them, our

anti-corruption agencies would continue to face issues of competence and accountability

Recommended for you