Financial Daily from THE HINDU group of publications
Monday, Nov 14, 2005
Industry & Economy - Economic Offences
Columns - Wide Canvas
The Volcker inquiry saga
Ranabir Ray Choudhury
Already, Mr Natwar Singh has been relieved of the Foreign Minister's portfolio and the Justice Pathak inquiry authority has been set up to institute a probe into "the two contracts in which Mr Natwar Singh and the Congress Party are said to have been non-contractual beneficiaries".
Of course, this cannot be the end of the story because, irrespective of the findings of the authority, a lot of political mudslinging will take place on the issue of why the scope of the probe has been limited to the two specific issues, the clear implication of the guideline being that "there will be no roving probe" into the 125 Indian companies singled out in the Volcker report for having transacted business through the oil-for-food programme by paying bribes to the Iraqi authorities.
This apart, the Government has also made sure that the Pathak inquiry body "will not have the statutory obligation to issue a notice to Ms Sonia Gandhi to summon the president of the Congress Party," which is bound to be pointed out by political opponents of the Congress Party as a ploy to keep the Congress chief out of the line of fire of the inquiry.
The specific terms of reference of the inquiry authority are: To go to the root of the pay-offs in the UN administered oil-for-food programme during the regime of Saddam Hussein; to investigate the two contracts for about three million barrels of oil on which Hamdaan Exports allegedly paid surcharge in 2001; to look into the source of information, materials and documents that were available with the Volcker Committee and give its opinion on the authenticity and reliability of oil contracts and whether the purported transactions were genuine or not; to inquire into whether Hamdaan Exports, owned by Andaleeb Sehgal (a relative of Mr Natwar Singh's son), received any money or other consideration from any Government to any Government or individual in connection with these contracts.
In other words, the target of the inquiry is to establish beyond any doubt whether Mr Natwar Singh had in any way influenced the Iraqi authorities to be allotted oil, the sale of which in the international market at higher prices yielded a substantial profit.
What is important is to take into account the established fact that a whole lot of other Indian corporate entities, apart from Hamdaan, too engaged in these oil-for-food transactions after paying surcharges to the Iraqis (in the shape of after-sales service and inland transport fees).
In the eyes of the Indian public these transactions, though equally culpable in the eyes of the law (the surcharge payments had been declared illegal by the UN), are less important because in the case of Hamdaan a direct link with an important politician has been uncovered. Similarly, for the Congress Party the link between the payments and politicians is even more direct, the point of interest being who received the benefits on behalf of the party.
The political angle makes these two transactions specially interesting because of the political ramifications that could be uncovered not merely in dealings with Iraq but also in an effort to run down people and political parties perceived to be unfriendly by the powers that be on the international scene. Indeed, it has been suggested that the inclusion of the names of the former Foreign Minister and the Congress Party could very well be part of a global campaign to run down all those who have not extended open and unstinted support to Washington in its military campaign against Saddam Hussein.
But for those corporate and other entities with no overt political affliliation, the question to ask is whether they have broken any law by engaging in the transactions concerned, particularly since they were in all probability unaware that what they were in fact paying were bribes in the shape of Iraqi surcharges.
The problem is evident from the Union Finance Minister's recent statement that the tax authorities would be looking into the status of the expenditure incurred by the companies involved in their balance-sheets, specially whether any tax set-offs have been claimed against these sums.
What this means is that, since the payments were illegal in the eyes of the UN, the Indian Government can blacklist such payments under the relevant tax laws if set-offs have been sought on normal technical grounds. But, interestingly, the question survives whether there are any other Indian laws for the infringement of which the companies making the payments concerned can be pulled up.
The upshot of all this, therefore, is that if one leaves aside the issue of whether an Indian export outfit received benefits from the Iraqi oil-for-food programme by virtue of its family connection with a Union Minister as also the Congress Party (as vague as this may sound) the Volcker Committee's findings are of no immediate interest to Indians other than the tax authorities and those who have direct or indirect links with the corporate entities involved.
Certainly, the antecedents of Masefield AG of Switzerland would be of some interest solely because of the alleged deals with Hamdaan Exports and the Congress Party, but beyond that they would hold no interest for Indians if only because it is just one more contractual player in a network which included more than 2000 such entities.
In view of f all this, the point can perhaps be made that the most important contribution of the Volcker Committee report would be to tone up the functioning of the UN set-up itself, in other words leading to its reform a need for which has already been urgently felt.
In fact, ever since the committee began issuing its interim reports, the reform angle has been continuously harped on by the Secretary-General, Mr Kofi Annan.
One of the terms of reference of the Volcker Committee was "to determine whether any United Nations officials, personnel, agents or contractors engaged in any illicit or corrupt activities in the carrying out of their respective roles in relation to the programme, including, for example, bribery in relation to oil sales, abuses in regard to surcharges on oil sales and illicit payments in regard to purchases of humanitarian goods".
When he released the final report, Mr Paul Volcker, a former Chairman of the US Federal Reserve, that "What stands out is not only individual instances of corruption but the politicisation of the process," the report itself stating that the initiative's "gatekeepers" the Secretariat, the Security Council and United Nations contractors, had failed "most grievously" in their responsibilities to monitor the programme's integrity.
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