The Ketan Parekh stock scam of 2002 was probably a direct outcome of the legislators failing to put in place necessary safeguards after the Harshad Mehta manipulations a decade before. The scam exposed the ineptitude of the SEBI as well as of the RBI, which seemed unaware for nearly three years of what was happening within the confines of a small cooperative bank in Ahmedabad. The Madhavapura Cooperative scam was in no way less than the stocks scam in that it impacted small depositors of the bank.

The cleansing of corporate America can be looked upon as an evolutionary process in the movement of a free market economy. After all, it’s only in the last few years that punishment for corporate crime has become commensurate with the act. Twenty years ago, Mike Milken of “junk bonds” fame, was sent to jail for a mere 22 months. But when, despite the powerful Securities and Exchange Commission and the Internal Revenue Service, auditors like KPMG and Arthur Andersen were found to be in collusion with companies to fudge numbers, the US government moved fast and hard. The Corporate Fraud Task Force was set up to investigate and prosecute executives who break the law. In fact, in August 2002, the US promulgated a revolutionary ordnance forcing managements of large companies to swear by their past numbers. The results are there to see. Last year, WorldCom chief Bernard Ebbers was sentenced to 25 years in prison for fraud leading to the company’s bankruptcy.

In India, special courts have been set up to set up securities frauds but few convictions have been secured. Even the joint parliamentary committee’s report on the UTI case is consigned to the archives. The CBI does have an Economic Offences Division but its teeth are pared. Even the National Crime Records Bureau has limited data related to white-collar crime.

... contd.