The kid gloves are off
Rajat Gupta’s release from prison in the US insider trading case is a wake-up call for Indian law enforcers
The release from prison after two years of Rajat Gupta, the Indian-born former director of investment bank Goldman Sachs, should be a moment of truth for regulators, law enforcers and corporate executives. The incarceration of IIT-and Harvard-educated Gupta, a poster boy for the Indian success story in the US, on charges of leaking confidential market-sensitive information must send shivers down the spines of those who believe that being politically and financially influential can check the long arm of the law. While we may ponder philosophically on the fall from grace of a storied hero, the key point is that Gupta is not the only corporate leader to have faced serious charges or conviction. Last year, a court granted bail to B Ramalinga Raju after suspending his seven- year rigorous imprisonment sentence in the Satyam Computers accounting fraud case. Subrata Roy Sahara of the Sahara Group is in prison pending trial in a refund default case, while a clutch of telecom executives are out on bail in the 2G spectrum scandal while the corruption cases drag on.
In the US, Joe Nacchio of Qwest, Bernie Ebbers of WorldCom, Kenneth Lay and Jeffrey Skilling of Enron and lifestyle purveyor Martha Stewart have been among the high-profile corporate figures convicted on insider trading or fraud charges. In India, however, progress has been slow or tardy in law enforcers going after big names while investigating corporate wrongdoings. That, however, seems to be changing. Last week, market regulator Sebi banned those declared as wilful defaulters by banks from accessing the capital market while the Serious Fraud Investigation Office (SFIO), set up more than a decade ago as a multi-disciplinary forensic agency to crack down on white-collar frauds, probed companies that lent money to Vijay Mallya’s defunct Kingfisher Airlines in its loan default case.
The public outcry in Mallya’s case is a pointer to the increasing democratisation of India’s corporate culture and the social and political pressures ministers and officials will face if they are perceived as being lenient towards the high and mighty. Officials in the CBI, SFIO, SEBI and RBI should wake up to the ever-increasing calls for public accountability. On the other side, independent directors and boards in public companies have to discharge responsibilities on the other side to ensure there are no knocks on their doors from crime-busters.