From Vadra to Gadkari, in-house ‘clean chits’ mean nothing

by Nov 14, 2012

When it comes to forensic accounting, S Gurumurthy is something of a bloodhound. It was he who in the late 1980s, working alongside the Indian Express, unravelled the maze of shell companies and other corporate sleights of hand that underlay Dhirubhai Ambani’s Reliance empire, which had been built by taking liberties with the law and by brazenly bending rules and regulations.

In particular, Gurumurthy deployed his formidable skills to raise the spectre of doubt and establish that Ambani was the ultimate owner of a group of companies registered in the Isle of Man, including some with insouciant names like Crocodile Ltd and Fiasco Overseas Ltd, which channelled investments into Reliance shares in India, and manipulated the market.

These and other exposes, which were published in the Indian Express, turned the heat on the Ambani empire, which was at that time locked in a war with Nusli Wadia. It was classic David-vs-Goliath battle, one that Gurumurthy waged with great gusto, particularly at investors’ meetings in Chennai where he was constantly heckled and virtually set upon by Reliance shareholders who had much to lose from his muck-raking campaign against the group.

AFP

It was vintage stuff, and it is to Gurumurthy’s credit that he was able to make mind-numbingly tedious accounting entries into the stuff of spy thrillers with his breathless commentaries, which did not conform to known norms of journalistic narrative structures. In fact, Gurumurthy’s articles would begin as languorous philosophical explorations, but he would unfailingly connect the dots and establish the larger picture of corporate malfeasance. And although in the end, nothing ever came of it – after all, given Ambani’s famed reach in the government, no one would touch him – the Indian Express campaign of those days, and Gurumurthy’s inputs, established a high watermark for the fusion of forensic accounting and investigative journalism.

Today, Gurumurthy has deployed the selfsame accounting skills in defence of BJP president Nitin Gadkari, who faces charges that his business empire was built on laundered money, channelled similarly through an array of shell companies.

The issue has profoundly embarrassed the BJP, and virtually caused a rift in the top leadership and even within the mothership RSS, over the desirability of having Gadkari step down. The controversy has hobbled the party at a time when it could have been on the offensive by capitalising on similar exposes against Congress president Sonia Gandhi and her family, including her son-in-law Robert Vadra.

It is in this context that Gurumurthy says he stepped in with an offer to “probe” Gadkari’s books of accounts. In a two-part article in the New Indian Express (here and here), Gurumurthy says he felt that the media reportage of the Gadkari controversy had been characterised by excessive sensationalism, and that he therefore “spoke to the chartered accountant handling Nitin Gadkari’s case whom I knew and asked him whether Gadkari was ready for a probe by me.” Gadkari, he says, approved of the suggestion, and flew down to Chennai the very next day to meet him.

Gadkari had all along claimed that he was open to an official investigation of his business transactions, but he may have had no reason to fear being subjected to Gurumurthy’s famed investigative eye, given that Gurumurthy is a member of the RSS and a BJP supporter.

Gurumurthy claims that his investigations established that the shell companies that accounted for much of the investments in Gadkari’s Purti group were owned right from 2002-03 by the Nagpur-based Mehta Group, which had an asset base of Rs 2,000 crore. These were the same shell companies, over which there had been a media frenzy when it was established that the registered addresses of the companies were fake.

Gurumurthy claims that the media circus over the shell companies caused the media-shy honchos of the Mehta Group to go underground – and extract a promise from Gadkari that he would not name them as the eventual owners of the Purti group. Which is why Gadkari had to face the heat, he says.

In addition, Gurumurthy offers an insight into why corporate entities operate through shell companies. “Shell companies and multi-layer pyramidal holding are not uncommon to the world of business,” he says. “Most of these companies normally exist only in name, with non-entities as directors. Accounting firms register and keep shell companies in their shelf for sale. They are sold and bought like ready-made shirts. This is a global practice. Their offices and sometimes directors also remain unchanged even after new owner buys them.”

In effect, therefore, Gurumurthy has given Gadkari a ‘clean chit’ – although he can’t seem to make up his mind whether he has or has not. “It is ridiculous to say that I have given a clean chit to… Gadkari. I do not know enough about him a clean chit,” he says.

All these explanations, however, appear a bit too convenient; in much the same way that the Haryana government issued a ‘clean chit’ to Robert Vadra over his land transactions on behalf of DLF from which he profited enormously, they don’t amount to anything more than a hill of beans.

There is an open-and-shut case for an independent investigation into Vadra’s shadowy transactions, which bear the stench of influence peddling and insider trading, based on his proximity to Sonia Gandhi and the influence he wields in a political system that worships power satellites. Likewise, only an independent investigation can establish authoritatively whether Gadkari’s business unduly profited from his political standing and whether he was laundering money.

However, both the Congress and the BJP are happy to issue ‘self-certifications’ from within their ranks, which is no substitute for the real thing. Each sees wrongdoing only “on the other side”. The same Gurumurthy, for instance, is happy to pronounce the National Herald case, in which Sonia Gandhi and Rahul Gandhi stand accused of grabbing prime real estate land, as “a fraud all the way”. Needless to say, the Congress certifies itself innocent.

Yet, anyone who followed Gurumurthy’s record of taking the heat to the Reliance empire in the 1980s, based on diligent study of the corporate-neural networks and the maze of shell companies, will have occasion to feel considerably saddened by his seeming defence of the same kind of mazes that operate to this day. Bloodhounds are at their best only they sniff out crimes, not when they are issuing tail-wagging ‘clean chits’ to one of their own.

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