Saturday, 15 October 2011


Never before has a scam been enjoyed and celebrated by such a massive proportion of Indian people. Apart from the very poor in remote rural areas who have no access to television, everyone seems to have relished the fast-pace Twenty-20 cricket matches of the India Premier League (IPL), which finishes its third season with a final tomorrow (Sunday) blighted by massive allegations of corruption.

India is of course a country of scams. To many abroad it is seen sentimentally as Mahatma Gandhi’s country of khadi cloth, good ethics, and care for the poor. To some it is an economic miracle and a future super power, while to others it is an unkind cruel place of caste, ethnic and rich-poor divisions and violence. Above all however, and not far below the surface, India is a maze of unethical, unlawful and illegal swindles that link most politicians, many bureaucrats, and a large number of businessmen and others.

It is scarcely surprising therefore that there is a scam surrounding the IPL, which has grown in just three years to a massive $4bn wealth-creating package of sponsorships, broadcasting and other franchises, fees and other takings.

Cricket is not just a national sport in India but also a passion, and people have watched in awe as the rupee and dollar figures have grown to such an extent that over $300m has recently been bid for new franchises, raising the total from eight to ten teams.

 A lot of the IPL activity has been alleged in the past week or so to be unethical, unlawful and sometimes illegal. Politicians and others are said to be laundering black money via Mauritius and other tax havens which, though officially recognised, hide investors’ identities through shell companies and benami (false) names. There are suggestions that matches and bids for team franchises have been fixed, and that there have been bribes, tax evasion, illegal betting, and breaches of foreign investment rules.

At the centre of the growth, and the controversy, is Lalit Modi (left), creator and chairman of the IPL and vice president of the highly politicised Board of Control for Cricket in India (BCCI), who is facing calls for his resignation [and was suspended on April 24] .

 “Overlord of a national passion” was the headline on a Financial Times profile of Modi two years ago. More details of his business career appeared in the India’s Mail Today newspaper a few days ago headlined “Modi and controversy go a long way back”.

The national celebration of the lucky few getting rich in a poor country is one of India’s many curious contradictions. The poor have (up to a point) always admired the massive illicit personal wealth of some politicians, such as chief ministers Mayawati and Jayalalitha in Uttar Pradesh and Tamil Nadu, because it shows what can be achieved from a deprived background. Similarly, the successes of the IPL organisers, cricketers, and the business and film star cricket team owners, have been enjoyed as a symbol of hope for what might be, as well as a spectator sport (now switched to tracking the leaks and scandals).

Earlier scams and political corruption have also been celebrated to a lesser extent, and some have even done the country good for a time. While stock market fraud primarily makes the price-fixers rich, it also benefits private investors and boosts company capitalisations, and the country has revelled when the Bombay Sensex has soared in past scams. Also, as an ex-army friend has reminded me, the Bofors gun at the centre of 1980s corruption allegations won India a border war with Pakistan at Kargil in 1999 – though it has also stymied defence purchases for 20 years.

This celebratory reaction probably partly explains why the workings of the IPL were not looked at earlier by the government’s financial and criminal investigations agencies, nor the media, even though rumours of illicit deals and links between politicians and investors have been around for some time. It was just too big a tamasha (party), with too powerful hosts, to be interrupted.

Club of friends

As one of those involved said to Tehelka weekly news magazine last week, “It’s common knowledge that ….politicians running across aviation, agriculture, road transport and the Opposition, are minting money and have undeclared stakes in every cricket pie”. Last September, Outlook weekly news magazine noted that “the IPL is largely a club of friends with mutual interests, and often conflicts of interest”.

The main reason for the lack of investigations is of course that, as in virtually all scams (not just in India), politicians are so deeply involved that few officials would dare start inquiries. And most of the Indian media does not begin to investigate until it is fed information.

 This suddenly came unstuck earlier this month because of the involvement of Sashi Tharoor (left), an ambitious former top United Nations official who last year became an MP and a gaffe-prone external affairs minister. Tharoor helped a consortium based in his home state of Kerala to bid for one of two new IPL franchises on offer this year, and a woman friend, Sunanda Pushkar, was promised a $15m sweat equity stake on account of future consultancy work.

Known as Kochi, the consortium put in the highest bid of $333m, which apparently upset Lalit Modi’s plans for who should win. The consequential row went public on Twitter and exploded in the past two weeks into a scandal that has led to a stream of media leaks, presumably from the government and political parties and mostly directed against Modi. There have been rows in parliament, tax and other raids, and calls for an official inquiry. Tharoor has been forced to resign from his minister’s post, and Pushkar has given up her $15m.

Companies involved

Anyone looking at some of the leading businessmen and companies involved in the IPL would surely have noted long ago that virtually all of them are at the wrong end of India’s corporate respectability spectrum. There is Vijay Mallya of United Spirits and the Kingfisher beer and airline businesses, infrastructure operator GMR that has grown miraculously fast in recent years and grabbed massive land holdings along with airport franchises in Delhi and Hyderabad, and the secretive Subrata Roy of the Sahara group that is famous for its chit (small savings) fund and real estate activities.

Also owning a team is Mukesh Ambani of Reliance Industries (RIL) who has been a strong Modi supporter from the beginning of the league. Those trying to win teams this year include commodity trader Adani, which has been in legal trouble over non-payment of customs dues and monopolising coal imports, and the Videocon electrical white goods and oil exploration company run by Venugopal Dhoot.

Lalit Modi comes from the Delhi-based Modi family business group headed by his father, K.K.Modi. Lalit Modi was not regarded as a success until he started the IPL, and his earlier business ventures include a controversial lottery franchise in the north-eastern state of Manipur.

Modi’s friends and relatives

His relatives crop up as both IPL stakeholders and franchisees. His brother-in-law is a part-owner of the Rajasthan Royals team, which has several shell company investors plus Lachlan Murdoch, son of Rupert Murdoch, the international media tycoon. His step son-in-law, Gaurav Burman, runs Elephant Capital, a private equity company, along with brother Mohit Burman who is also an investor in the King’s XI Punjab team. Elephant has a stake in IPL’s on line and broadcast licensee Global Cricket Ventures. (The Burman family control the Delhi-based Dabur health care and food company).

Bharatiya Janata Party (BJP) politicians are deeply involved. Lalit Modi has close links with Vasundhara Raje, the BJP’s former Rajasthan chief minister, which are now being challenged on the fringe of the IPL story by Congress politicians. Modi faced tax and other charges after Raje lost power last year. He has sought help from Narendra Modi (no relation), the BJP chief minister of Gujarat. Adani is based in Gujarat and Lalit Modi reportedly wanted it to win the Kochi bid that was secured by Tharoor’s Kochi team. Kochi was allegedly offered a $50m bribe to back off by Lalit Modi (who has denied the charge), so that Adani could take over.

Patel and Pawar

Praful Patel, India’s urbane but under-performing aviation minister, who I described as the government’s “Teflon man” in an earlier blog, has also been a target of leaks to the media. He frequently issues smooth denials of any problems, and of his own lack of responsibility for the worsening state of Air India and India’s over-crowded and potentially dangerous skies and airports.

This week he was rebutting leaks by denying any involvement in the IPL, even though his 24-year old daughter works for the league and, with him, reportedly sent an e-mail to Tharoor about cricket teams’ potential profitability. “Children should not be targeted,” said Patel a few days ago. He is closely involved with India’s cricket in other ways because he is a senior member of the Nationalist Congress Party, which is led by Sharad Pawar, once one of India’s most powerful politicians but now a not very effective agriculture minister. Pawar is former president of the BCCI and is at the centre of a row over what should happen to Modi. He is in line to become president of the International Cricket Council.

It is not clear whether Pawar and Patel are being targeted by the Congress Party as a warning not to upset the stability of the governing coalition, or by the opposition BJP to embarrass the government.

A writer in the Indian Express the other day said that “in many ways, the IPL is a confirmation of what India really is – an emerging economy”. He is correct. The scandal shows how far the country has to go before it can claim to have moved on from being under-developed in terms of market regulation and ethics.

As the economy has been liberalised over the past 20 years, brilliant entrepreneurship has been generated, but unparalleled greed has grown at all levels of society. People from the top of the government down to a village headman use cronyism, patronage, bribery, coercion and generally low ethics to build status and wealth. That looks like continuing for generations because there are still some 700m or more people clambering to enter the economy and reap the benefits of new riches.

On the IPL, the current furore will no doubt lead to one or two resignations, but inquiries will be controlled to protect many of those involved. Some new regulations might be introduced to control the league. The flow of news leaks that is fuelling blanket media coverage will slow down soon and the fuss will almost certainly die away, maybe in a week of two, when it will be neatly swept from headlines by other news.

Thanks: ridingtheelephant

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