- Top accountants destroying vital documents, politicians
accepting huge donations - it can't get much worse
-
- Enron is a case study in the dangers that will inevitably
arise when unrestrained corporate greed is joined at the hip with the
legalised
bribery and influence-peddling that passes for government these days. This
could easily be a comment about the Indian situation, but it is in fact
the New York Times (NYT) writing about the mounting evidence of
Enronís
fraud and its cozy relationship with US policy makers.
-
- Last Friday, the auditing giant Arthur Andersen
announced,
it had destroyed or deleted an undetermined number of electronic and paper
documents related to Enronís financial troubles. Soon after this
astonishing disclosure, the US Attorney General John Ashcroft and his chief
of staff David Ayres stepped back from the Justice Departmentís
criminal investigation into Enron citing ìconflict of interest.
Ashcroft had received $ 61,000 in campaign funds from Enron executives
and $ 25,000 from its CEO and chairman Kenneth Lay.
-
- Lay, a close buddy of US President George W. Bush had
met top White House officials before the collapse, raising questions about
how much the government knew about Enronís problems and what help
had been offered. While US authorities insist that Enron continues to be
investigated by several Congressional committees, the Securities Exchange
Commission (SEC) and the Justice Department, the American people wonder
if anyone ëun- connectedí with Enron will even be available
to conduct the probe. The NYT says that SEC Chairman Harvey Pitt may also
ëhave to excuse himselfí from the investigation because,
ëas
a lawyer in private practice he did work for Arthur Andersen, the company
that audited Enronís books with its eyes closedí.
-
- Another disturbing revelation is that Enronís
top 29 officials had cleaned out their own holdings when the stock began
to plummet. ëYouíll have to look long and extremely hard to
come up with an example of corporate treachery in the United States
thatís
as horrible as the Enron debacleí, says the NYT. Well,
Enronís
corrupt influence over our own policy makers, bureaucrats, bankers and
lenders was just as pervasive. They bent backwards to please Enron, made
scandalous lending decisions and twisted the rulebook to clear the project
twice over.
-
- The difference is that Enronís shenanigans in
India continue unchecked. Last fortnight, the Financial Express reported
that officials of the controversial Dabhol Power Company (DPC) had removed
certain critical parts, e-chips and code CDs from the plant to render it
unusable. An anonymous letter had informed the Industrial Development Bank
of India (IDBI) that these parts as well as several ëplant-related
maps, manuals and other papers were burnt and some were taken out of the
country.í When IDBI asked DPC for an explanation, it was startled
to receive an admission.
-
- DPC Managing Director K Wade Cline said that the parts
were removed for ësecurity reasonsí so that they could be
ëused
optimally in futureí. He said that the plant could be recommissioned
upon various ëpreparatory stepsí being taken. As for maps,
manuals and documents, he said that they were removed to London for the
arbitration proceedings. He claimed that no originals were destroyed and
only duplicates were eliminated in order to minimise storage costs.
-
- Doesnít this sound exactly like the actions of
Enron and its auditor Arthur Andersen in the US? These shocking
developments
only expose, once again, the failure of Indian financial institutions (and
bureaucrats and politicians) to take charge of the closed DPC plant and
to safeguard national interests. These institutions have pumped in over
Rs 6,200 crore into the 2184 MW DPC project. They have a first lien over
all the assets and properties of DPC and have even guaranteed the loans
of foreign lenders.
-
- Moreover, according to IDBI, as much as 75 percent of
shares of the three major lenders are pledged with it. Why IDBI, even the
15 per cent shareholder of DPC, the Maharashtra State Electricity Board
(MSEB) has not been informed about the removal of critical equipment and
document. The lethargy of Indian institutions in safeguarding their
interests
only compounds their original failure to assess DPCís costs and
viability before taking such an extraordinarily high exposure to the
project.
They not only endorsed its ridiculously high costs, but also underwrote
the exposure of more prudent foreign lenders.
-
- The lenders have yet to initiate any action against DPC
officials under various Indian statutes including the Customs Act of 1962.
Only the MSEB seems to have asked some tough questions so far. The
Financial
Express reports that MSEBís investment subsidiary, which holds the
DPC equity stake, has said that Enronís action in removing critical
equipment ëis extremely serious in relation to the exercise of
direction
under article 226 of the Constitution of Indiaí.
-
- The MSEB has asked DPC for a detailed list of equipment
and documents that have been removed along with the permissions if any
that were obtained for their removal. MSEB has pointed out that since the
equipment is imported under a license with concessional customs duty and
is also mortgaged to the lenders, it would require prior approval from
the Customs and Excise authorities or attract penal provisions under Indian
laws.
-
- But these written threats are hardly good enough. The
lenders must initiate swift legal proceedings against DPCís top
executives and stop them from leaving the country until the parts and
manuals
are brought back to the country. Instead, DPC is dictating the terms of
the dialogue! It promises to restore the equipment and manuals only as
part of ëpreparatory stepsí before restarting the plant.
-
- Interestingly, included in these steps is the signing
of a new operating and maintenance contract, hiring of new staff, purchase
and delivery of fuel to the site and a complete evaluation of the
plant.
-
- Is DPC trying to gain another bargaining chip in its
negotiations for the sale of its equity? And what are the financial
institutions
doing about it? So far, they are only bleating before the central
government
for a rescue package, including tax concessions, duty waivers, government
guarantees, tax free bonds, creation of unworkable distribution circles
and central loans in order to make the project viable. This only means
that in granting mega power status to DPC, the ordinary taxpayer will again
be paying for the follies of policy makers and Indian financial
institutions
in a bailout that will rival that of the Unit Trust of Indiaís US
64 scheme.
-
- http://www.indian-express.com
|
