: Is Jeff Skilling, the former CEO of Enron more guilty than some Indian corporate chieftains? What was Skilling’s crime? More than just leading a financial fraud that destroyed a company, his crime was also to trigger a run on corporate America, in which every public company came under the scanner from shareholders and regulators. US district court judge Sim Lake, while handing out the sentence, said that Skilling’s crimes “have imposed on hundreds if not thousands of people a lifetime of poverty”. In other words, the man is being sent to prison for 24 years for what he did to employees who lost their jobs and retirement benefits.
But fundamentally what Skilling and those of his ilk did was no different from what thousands of executives do routinely in India when they manipulate the rules in the Company’s Act related to reporting figures. “Creative accounting” is hardly seen as a crime in India. Yet thousands of investors read, believe and act on the created numbers, often losing their life’s savings by betting on patently misreported figures. This is no different from what Enron did. And as for depriving employees of their savings, the jute barons of Calcutta made a lifetime of robbing their employees of their PF money. How many prosecutions and convictions did this lead to?
India’s record on white-collar crime is shameful. Less than 5 per cent of white-collar criminals actually face conviction here. From letting Warren Andersen, Union Carbide’s chairman during the methane gas leak disaster in Bhopal walk free, to the limp conviction of a handful of people in the huge securities scam of 1992, the laws related to financial crime have been shown to be weak, and their enforcement even weaker. Even the extradition notice to Andersen took 10 years coming. Despite a Special Court being set up to try all those who perpetrated the securities scam of 1992, the accused stayed out of jail. Harshad Mehta, after spending some time in prison, came back to stalk the markets in the late 1990’s before his second conviction prior to his death.
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...
Sundeep Khanna
