Reality Check India

Normally, monsoon time means rains and fog, but it seems like this season it is smoke and mirrors.

Here is Rajeev Chandrashekar’s latest article titled “Connection Errors“. He really takes DoT and TRAI to town while also saying the new age licensees simply found themselves in an “interesting situation”.

Read on.

The protagonists in this tragicomedy — DoT and TRAI — have by now developed a perfect track record of ‘doublespeak’. Phrases like consumer benefit, common man and competition when emanating from them take on an ominous hue. It’s not the first time that the TRAI and DoT (seemingly acting in concert — when the opposite should be true) have used the common man and his benefit to roll out scams.

Source : HT

Tragicomedy ? Hardly a term that fits here.  He says, “TRAI and DOT used the common man and his benefit to roll out scams”.  So, we are to believe that the  TRAI and DOT rolled out the scam and not the Congress led UPA government.

Essentially this whole thing boils down to the death of nuance in Indian public life.  In report after report, the main talking points are along the lines of  “but there was no note from TRAI asking us not to do that”. “The FM and PM did not raise any objection”, “There was no XYZ note asking the government not to do ABC, so we did ABC”. Is it fair to say that in the Congress led UPA government, the absence of a note devoid of any nuance will immediately lead to a massive compromise of a national asset. Its like a 10 year old claiming there was no label on the cookie jar with his name on it telling him not to enjoy its contents.

TRAI and DOT as institutions cannot be expected to issue a consultation paper for every possible avenue of corruption. Look, if the government wants to undersell – it will. If the government had the goodwill to extract fair price for the airwaves, which do not discriminate between Hindu, Muslim, OBC, Dalit, it would not require the DOT and the TRAI acting as schoolteachers exhorting it not to cheat.

What really takes the cake is his recap of the events leading up to the great black swan event in Indian history:

A set of companies gets spectrum and telecom licences at Rs 1,600 crore apiece. The market value for this spectrum is much more — Rs 4,000-9,000 crore — depending on the market transactions of Unitech, Swan, and Datacom and the reserve price for 3G licences).

The DoT requires a lock-in period before the licences can be sold and holds these companies to their network rollout obligations. But the TRAI has come out with a consultation paper to do away with the restriction on sale of licences to allow ‘consolidation and M&As’.

That leaves all the new licensees in an interesting situation — they have licences worth far more than what they paid for and there’s no need to roll out or invest further. They can sell their licences to make a lot of money for doing nothing. Where does that leave the government and people for whom these new licences represented affordability and competition? Basically nowhere. The government loses money from spectrum and the people see the market going back to the same structure as before.

Source : HT

This is a very ambitious maneuver even for an Indian capitalist. He wants to you believe that the new age licensees (most of whom did not even have a website)  just happened to be “left in a interesting situation“.  Well, how many believe that !!  Did these new age licensees know before hand that they would be left in the aforementioned  “interesting situation” ? If not, they would have to be crazies  to pony up 1900 Cr with no telecom experience and a strict policy lock in period of 3 years.

Any idea of a windfall tax is silly because we are talking about a finite natural resource here.  It is highly disappointing that Mr Rajeev Chandrashekar chose to attribute the minus to DOT and TRAI and the huge plus to pure serendipity.

—

On a related note : The CEO of Telenor was on TV a few days back. He was refreshingly candid. He acknowledged the whole allocation process was a bit strange, but he had worked with such countries (markets)  before and was extending full co-operation to the CBI authorities investigating the case.  (Sorry no URL, I saw the show)

Raja alleges 1.6 Lakh Crore scam during NDA rule.

“The NDA Government is responsible for irrational decisions without any legal backing. The scam during the NDA regime could be much more than Rs 1.6 lakh crore.” Mr Raja facing allegations, of a Rs 60,000-crore spectrum scam, from the BJP said that he will not resign. “Ours is a Government that has followed all rules to the letter and spirit by following the regulations of the Telecom Regulatory Authority of India,” he said.

Source  : HBL (Emp added)

1. Obviously there is no story behind it.

2. Raja forgets that the DMK was also part of the NDA government.

3. Were there any letter pad companies that made windfall ?

4. Even if there was a scam, let us finish this investigation first and then get on to the next one.

5. Note the “Ours is a government…” quote.  This is a clear signal that the Congress cant wiggle out and pin blame on Raja alone.  Sachin Pilot in on stage and would agree.

This CBI case is dead on arrival. The people of India have lost 60K Cr because their property (airwaves) has been stolen. The only way for this story to make more headway is for the media to latch on to this. In the 90’s the media would stay put on corruption stories and that was in no small way for the downfall of the Congress. What happened “post liberalization” ?

Its great to see Sunil Jain with more :

But there’s a far more serious problem the CBI has to deal with. Let’s assume the CBI gets all the proof it needs — where does it go after this to check how solid its legal case is? To Attorney General (AG) GE Vahanvati, India’s highest law officer. Well, when he was Solicitor General (SG), Vahanvati had opined in favour of much of what Raja’s done — how is the AG going to say that what he said as SG was incorrect?

Source : Can Manmohan ditch Raja

Why is the government of India risking becoming a laughing stock with the following defence of the billion dollar companies created ?

* As for the windfall profits made by companies like Swan, “this is a completely mistaken analysis”.

What they really mean is that the money paid by Telenor and Etisalat are only ‘capital infusion’ and not going directly to the bank accounts of the zoo creatures (zebra, swan, tiger, parrot, etc).

What is the difference, Sir ? The newly minted billionaires have many ways to achieve liquidity. Here is a quick list in the hope that the government will atleast drop this weak line of defence.

• In the long term : Selling their newly inflated holdings
• In the short term : Loans against their inflated holdings
• Any auditor will tell you dozens of more ways.

The question is not only whether someone became rich. The bigger question is : Did the actions of the government result in the Indian people losing about $10Bn ? I do not see anyone disputing this. So, address this first.

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In other news :

CBI in Chennai (Karunanidhi fumes at probe)

Prime Minister says nothing wrong when India’s poor lose $10 bn

Prime Minister Manmohan Singh said on Sunday that allegations about a scam in the spectrum allocation were incorrect but refused to answer a question about the Opposition’s demand that Telecom Minister A. Raja resign following last week’s CBI raids on the offices of the Department of Telecom.

…

“It is normal in a democracy to have differences of opinion and arguments,” he said, using the Hindi word ‘naunk-jhaunk,’ when asked about the Opposition’s allegations against Mr. Raja. “But that doesn’t mean that what the Opposition says is always correct.”

Source : The Hindu

I have no idea what “Naunk – Jaunk” means, but no one is claiming the opposition is always correct. We only want to know if the opposition is correct in this specific instance.

Bonus :

There is a lot of blogtalk about Kashmiris and Naxals. For arguments sake consider the following. What really happens if scams of this size time and again go unsatisfactorily handled. At least in the past they took place in the darkness of government media.

What effect would it have on the legitimacy of their claims and their challenge to states claim over monopoly over violence. What if they say that ” We dont want our stuff to be looted, maybe the north Indian plains guys dont care, maybe the south Indians dont care, but we dont want to be looted.” Any group whether Naxals or Jihadis with military resources can point to such corruption and advance their own agenda as morally better.  The only response of the Indian state would have to be to increase the military force by y% to compensate for the decrease in its own moral legitimacy by the corresponding y%.

Such negative energy never leaves the system.

The CBI raided some offices of the DoT seeking evidence about the 2G spectrum allocation irregularities.

The Central Bureau of Investigation on Thursday raided top Department of Telecommunications (DoT) officials on allegations that they had colluded with private companies in issuing licences and allotting spectrum to new players on a first come, first served basis last year.

CBI officials searched the offices of, among others, deputy director general (access services-I) A.K. Srivastava and wireless adviser Ashok Chandra.

“The searches were done to collect incriminating documents linked to the irregular award of the licences,” said a CBI official who did not want to be named.

Source : HT

It would be helpful to recall the media’s complete unwillingness to follow the story when it broke. I know what you are thinking, “Gotcha RC, How can you link to stories in the media and then claim the medias deliberate silence ?” The answer is that there is a big difference between reporting a story and following a story.  The media coverage, with the notable exception of the Daily Pioneer,  was nothing more than repeating the newswire. We never had any interviews with the guys behind Dynamix Balwas, Tiger Trustees, Zebra and Parrot Holdings, Genex Exim (allocated 300Cr of Swan with only 1 lakh share capital) – who exactly are these guys who became billionaires overnight. Not one question was put in front of the then Finance Minister Mr P Chidambaram and the Prime Minister Dr Manmohan Singh. Mr Raja claims that the entire process was approved by them.  Reality Check had covered the attitude of Mr Prabhu Chawla who wanted ‘clinching evidence‘ before following the story. Did you have clinching evidence before you followed Bofors in the 90’s ? Does the media have clinching evidence against Modi ? There is immense public interest in getting to the bottom of it as evidenced by the reactions blogs and other alternate media are getting for these corruption allegations.

Back to the CBI, are they serious about investigating the scam or are they forced to conduct raids as a formality following the complaints received by the CVC (Vigilance Commission) ?

To really answer this, we need to take a step back and lay out the facts as we know it.

1.  Swan, Unitech, Shyam became overnight billionaires. Holding nothing more than just a piece of paper, they were able to parlay their Rs 1650 Cr into 6 or 8 times their value in a matter of weeks. Telenor and Etisalat paid what most consider to be fair price for the spectrum (owned by the poor people of India, but social justice champions of dissent will not tell you that). Till date no one disputes that these companies made it big and that a national resource was compromised to make it happen. However, this does not alone mean there was a scam. It could have just been incompetence.

2. The allocation of licenses was messy, the dates were moved around, and at the time of actual allocation there was a melee at the Sanchar Bhawan. No one disputes the process was messy, maybe this is how first-come-first-served licenses are issued in India. However, this does not alone mean there was a scam. It could have just been incompetence.

3. So, there are only two possibilities. Either there was a massive scam or massive incompetence. The net result is a national resource was used to make some private parties very rich (billion dollar rich).

4. The media did not follow this smoking gun because the scam occurred so close to the elections. The BJPs tepid response to this is even scarier. As Mr Swapan Dasgupta says, were they managed ?  In the early 1990’s, the BJP could have rode this all the way to political victory. Of course, the media back then would pounce on every corruption story.

By raiding the DoT and prodding Mr Raja, the Congress party is up to its old tricks. The policy is “Tease but dont tickle”. Recall 1993 when the Congress party (Mr PV Narasimha Rao led) went to great lengths to defend a judge accused of corruption and defeated his impeachment motion.  Mr Kapil Sibal was instrumental in that historic episode too.

The Congress wants this to be seen as a DMK issue and not a UPA issue. They are also making the vaccine scam a Ramadoss issue (Azad Vs Ramadoss : PSU closure to be probed).  Both A Raja and Dr A Ramadoss have clearly stated that the Prime Minister and the cabinet was fully appraised of the activities and modalities.

What surprises me is the BJP’s statement.

BJP spokesman Ravi Shankar Prasad said, “For a fair investigation into the matter, it is important that the Union Minister should immediately be removed from office.” Responding to a query that Raja had said that the allocation was made with approval of Prime Minister Manmohan Singh, Prasad said that in that case the Prime Minister should clarify his position in the matter.

Source : Express Buzz

Mr Prasad makes the same mistake our confused educated elite make.

Exhibit 1 : After the terror attacks. At that time,  the cacophony included “Shivraj Patil has to go”, “PM should sack Shivraj”, “Sonia should ask Shivraj to resign”.

Exhibit 2 : After the farm crisis and farmers suicides. The cacophony turns into “Sharad Pawar must go”, “Pawar spending more time in BCCI than at Agriculture”

Exhibit 3 : After the quota -without -data episode. Arjun must go. Light up Arjuns effigy.

Exhibit Now : Raja must go. The PM should take action. PM should rein in xyz.

These people have no idea how little they are asking for.  “We like you but just make this tweak please” will get you nothing in a democracy (voting based selection).  The only way to ask for tweaking your favorite party in a democracy is by voting them out, even if another evil gets in, so the next time around they will come back tweaked. Mr Ravi Shankar Prasad is asking for a tweak instead of going for the kill.

Say, the PM persuades Raja to go. Does that solve anything ? What happens  to the beneficiaries ? Do they get to keep their Bentleys ?  Recall the cabinet just approved Telenors hike in its share of Unitech Wireless.   The Wall Street Journal reported the purchase value to be 37 billion rupees (about USD 800m).  Raiding these companies is not enough.  Under the Congress’s eyes, there  is another one in the making- the WiMax controversy.

Do you expect much from these raids, Mr Raja has already claimed that the cabinet and the Prime Minister (of the Congress party) were being fully updated about the going-ons. Mr Karunanidhi has already hinted at Congress’ involvement.

DMK sources in Chennai said Karunanidhi impressed upon the PM that he felt Raja was being unnecessarily humiliated, as he had consulted the PM on the spectrum allocation issue all along. The DMK stalwart also argued that the PM’s decision to retain Raja in the communications ministry was clear evidence of his innocence. He also pointed out that Congress had defended the communications minister all along both in Parliament and in public, and even campaigned for him in the Lok Sabha elections.

Source : TOI

That is his ticket to immunity.

The poor Indian people continue to watch billionaires emerge from their money. Of course, negative energy of this magnitude will never leave the system.

Earlier coverage on Reality Check

I wished other topical Indian blogs covered it in addition to their coverage of big ticket items like how to deal with China, Pakistan, and United States. We need to deal with the basics in the same way we cant really run a 100m sprint without taking that much required dump first.  Territory is just another national resource.

I really need to dump all the ideas buzzing in my head into a coherent post later this week. The central question is : What impact does our system of benefit protection impact whatever we have by the name of democracy ?

My opinions on some events.

1) The PMK loss : 

This is an example of getting punished for working for a larger interest. There is no question that it was Dr A. Ramadoss who was instrumental in the OBC quota. Is anyone amazed they were rejected ? Even R. Velu who was arguably the real performer in the Railways lost to Mr Jadadhratchagan.  According to the theory of this blog, Mr Ramadoss’s work was commendable – but for the OBC group, not for the MBC group. There is really nothing by way of benefits for his voters. Result : His voters were picked the next larger group or were turned into free agents (either vote on issues or vote for cash) Repeat lesson for Laloo and Mulayam.

2. The Congress sweep of urban India :

Barring Bangalore, the Congress swept all urban areas by a huge margin. What happened here ? Do these people really want more power cuts, pathetic living conditions, zero municipal development. Do not believe the pundits. Our word is that urban India responded very favourably to the divisive quota policy. The reason is simple, they are the most equipped to take advantage of it. The media did a commendable job by completely suppressing any discussion of this issue.  Again, many of skeptical about this theory. Arent ‘middle class’ people supposed to vote on issues ?   No they arent we say. If you dont believe us please poll the student body of DU and their parents this year.

3. The hero – the media

The recent sickening coverage of the ‘racist australia’ make people wonder whether they are really subject to any checks. Hello, seven guys are accused of raping an American girl in the Congress paradise of Mumbai. Can you imagine what hell would have broke loose if something like this (god forbid) happened in Oz? 

If you accuse them of hopeless bias, exagerration, dramatization, and working up a frenzy, the perplexing defence the media will offer you is : “Hey let us go, only 1% of 3% watch English electronic media”. The fact is, the media still sets the table at dinner. What they dont like isnt even on the menu. Competition is laughable as they are mostly from the same gene pool.  For example : they could have easily pursued the spectrum scam as vigorously as Varun. This would have dramatically changed the colour and the mood of the free agent voters.

4. The BJP

The BJP cannot hope to be a Congress-lite. It does not work that way. Did they wheel-deal on various scams ? Why are they completely silent on the SEZ issue ? I do not remember them raising the corruption issue seriously on even one occassion. The Swiss bank stuff was funny : someone remarked that the BJP’s swiss bank plans made the other guys get their cash out and defeat them soundly.

I agree with the must-read Indian blogger Barbarindian that the BJP cannot move closer to the Congress on key issues and hope to be relevant.  No one is going to be nicer to them for doing that.

Now the Congress is really consolidating by these schames (scam schemes). The vote marshals are motivated. There is a lot of cash moving around. Good times.

Firstly, this was an issueless election. Please,  nobody won on any issue.  You cannot invent issues after the fact.

There is understandable elation at the Congress camp.  I respect those who cheer the fact that Advani led BJP lost, at least they are honest about it.  Then there are the social justice (the no data version) champions.  They too are happy, the same way  crooks are happy after a heist. Well, everyone arrives at the party with their own bottle of booze.  No hard feelings.

Personally, I am not too disappointed.  I think the current winning combination is better than the last. The BJP has not expanded its base, which must worry them. They have nowhere to recoup losses in their base states.  The Congress simply swallowed up the Left and Fourth Front.  I have said that the left will die out in West Bengal simply because the Muslims will desert it, thanks to the Sachar report.  The communists do have a narrow window to attach the poor bengali muslims to quota benefits, but they do not seem to get it.   Mulayam simply forgot to take care of the narrow interest in his custody and paid the price.

The Congress is sure to choke the country and further pursue its divisive agenda.  Gasp ! If I were on TV now, the anchors would have turned red. Divisive agenda based on caste is apparently not only kosher but necessary. 

I am exasperated at the BJP for three reasons,

1. It lets others define it. This is a recipe for political disaster. I remember the political commentator John Carville years ago in the US repeatedly stress this point. In interview after interview, the BJP guests let the words like “communal force” go by unchallenged even while being aware of the connotations. 

2. It does not define itself. If the BJP is for Hindu rights, where was it in Malaysia or Sri Lanka ? It did not make a big deal about the Spectrum scam (which I think is a hidden factor in this election). Either it did some adjustments on the scam or was unable to make an issue out of it.  Both scenarios are disturbing.   Still its work on the Ram Sethu is appreciated.

3. The quota issue completely caught the BJP by surprise. It went along with the Congress. No one can beat the Congress unless it changes the terrain in which social justice wars happen in this country. It was unable to explain the Kandhamal happenings in terms of the quota system, which was its root cause.  It did not realize that the middle class is orthogonal to backwardness. The quota system permanently gifted a large chunk of middle class voters to the Congress. Try holding a poll among Delhi University students and families if you want to see the impact of the quota system.

I still support the BJP because it still presents the best challenge to the Congress. I can never reconcile with the Congress party’s policies which are nothing but naked corruption and greed with presentable facades such as social justice and concern for the poor.  We have had this for decades now. While the world has marched forward we still live largely in filth and misery. This version of socialism and truth do not go together.

I happened to read this post on the Retributions blog.

http://retributions.nationalinterest.in/bjps-dangerous-game/

Unfortunately, the retributions blog software refused to take my comment saying something like “Your comment is too long or too short – split it into multiple comments”

So I am posting my comment here, this way I wont lose it. I will retry posting it later on his blog when I have some time.

Wow !

If Varun is in jail today for not controlling his emotions, we Indians also need to be in locked up for voting on the emotional issue of Varun and not on policy.

A political kid bursts out emotionally in front of a huge crowd who came to hear exactly what he said. As distasteful as his speech was, this cannot be allowed to become the dominant election issue in India. It only shows how much growing up we have left to do. If the BJP throws Varun out of the party, who is going to bring in substitute headcount to replace those who were cheering for him. 

Who is going to balance the strain in society created by Manmohan Singh by his “first claim on resources” speech ?  By throwing Varun out of the party, the BJP would have automatically relegated itself to a trash can because they have officially accepted a title of “MUTANT” vis-a-vis other parties like the CPI-M ( Madhani) and the DMK (called Hindus = Thieves). 

 Varuns *speech* may have been divisive, but the Congress Party led UPA governments *actions* have been no less divisive. What do they say : Actions speak louder than words.

Does anyone recall that five years back we did not have a Religion column in any of the bank forms ? I dont think Varun created these forms.

I call upon the Indian voter to punish divisive policy (ie action) first.  This will allow Indian society to evolve to a level where divisive words automatically create nausea. You cannot pursue divisive policy and forcefully bottle up reactions to it using the media.

Does anyone even care that the PM and the former FM refused a probe into the spectrum scam ?

Here is an interview with Mr Jairam Ramesh, the brains behind the Congress Party’s manifesto.

I am going to cut right to the meat.

As mentioned ad nauseum in this blog, the defining characteristic of India is the Quota Without Data system.  Big ticket issues such as farmer suicides, economy, education, infrastructure, security are all electorally irrelevant as long as this distorted perversion of social justice remains.

Read how Mr Jairam Ramesh lays out the future of India if his party is elected.

Q: Too much of reservation — minorities, women, poor…?

But ours is a quota society. Reservation has become a permanent feature even if founding fathers did not see it last beyond a few years. There is a case for quota for poor among non-SC/ ST/OBCs. Ultimately, baggage of 3,000 years (read discrimination) can’t go away with 60 years of development.

For reference purposes, 3000 years is the age of the earliest Harappan and Mohenjodaro excavations. Jairam Ramesh might think he is very clever, after all he has put the entire policy of quota beyond rational scrutiny and under the firm control of life stories. Mr Chidambaram put the number at 5000 to 10000 years, so maybe you should thank Jairam Ramesh.

Q: So much, but you could not clinch private sector quota promised in 2004?

Yes, we have not been able to get it. But the good thing is that it has sensitised industrialists to talk about Affirmative Action. Now, there is a CII committee under J J Irani to look into it. AA means many steps and quota is one of it. The manifesto for 2009 promises ’supply quota’. It is a forward-looking measure, on the lines of what is done in the US, to stimulate entrepreneurship among SC/STs.

Source : TOI

We must understand the purpose of this item in the manifesto. What they are really doing is promising more benefits down the pipe as a reward for voting for your narrowest interest !

This is how it works.

Once benefits are secured to a narrow interest group, the population becomes complacent. Thereby undermining the political setup.

There  are two tendencies that can work against the political forces :

(a) To defect : If the benefits reach a dead end – then members might defect. In this case vote for a larger interest. (Two examples : Hindutva is a larger interest than Yadavtva or Brahmantva,  Voting your displeasure on the SEZ policy is a larger interest than voting to thank  for your central government employee hike in DA )

(b) To not participate : If the benefits are secure with nothing new on the horizon. The population might not participate in voting, secure in the belief that their benefits are entrenched and placed beyond scrutiny.

The Congress Party has made it clear in its manifesto where it wants to take the country. Schemes like NREGA are just giant sponges placating various groups and sundry officials. There is of course no mention of the spectacular Spectrum Scam, the numskull Nuclear Deal, the SEZ free for all.

If all goes well, the Congress will have divided India into ad hoc groups and tied them to various benefits. If you are lucky you might have your group benefiting too – without the burden of measurement or data. Then it would of course be extremely hypocritical of us free agents to ask you to defect.

As far as free agent voters are concerned , think very carefully before you vote. Do not get swayed by bollywood or by the media hyping up a kid’s outbursts out of all proportion. Here is a mini question for you.

The question is :

Do you want the population of free agents to be further compacted and big ticket issues made even more irrelevant at the polls (if that were possible).

Lets try that again :

Is Varun Gandhis outburst enough to overwhelm your stand on the free agent population being compacted ?

This is the logic :

• the USA had an Enron, we have Satyam
• the USA tax payer bailed-out Fannie-May, so let the Indian tax payer bail out Satyam

But the USA did not bail out Enron.

But India is not the USA.Our farmers commit suicide and we dont have roads for example.

The Central Government has decided to take direct action to remis looking at a salary bailout for the 53,000 Satyam Computer Services employees.

A Rs 2,000 crore package is under consideration to ensure that Satyam employees get their salary on time after it the new board said that they are looking for funds.

CNN-IBN has learnt that the government is looking at giving three instalments of Rs 500 crore to Satyam for the next three months and is planning another infusion of about Rs 400 crore.

Prime Minister Manmohan Singh met senior Cabinet ministers and officials at his residence to discuss the over Rs 7,000 Satyam scandal where the bailout package was finalised.

Source : IBN Live

Manmohan Singh and P. Chidambaram who are completely silent on the Rs 60,000 Crore spectrum scam can hardly be expected to represent the hapless tax payer.

Kiran Karnik says this is a loan and not a ‘bail-out’.

Of course, Sir. A bail out is nothing but a tax payer loan given to a company that has zero chance of getting a loan from anywhere else.

Reasons why the bailout is a bad idea

• You have not completed the investigations and therefore have no idea about the true books of Satyam. Any bailout must be patient and wait for this to complete.
• Raju has claimed in his letter that he has personal money of > 1600 Cr in Satyam. Your bailout will mean his money is safe
• We are sick of hearing about the ‘brand’ (must be an Indian B-School thing). The Satyam brand is finished. No amount of taxpayer money can save it. The only thing that can save the brand is a clean chit from the court leading to the acquittal of Mr Raju
• The employees can be saved by splitting up the company and selling it in parts. Satyam needs to be taken into bankruptcy. This blog has an idea about how this could be handled.
• Take into account the legal troubles faced by Satyam in the UPAID case. Satyam might very well lose that case considering the admission of large scale forgery by Mr Raju himself. The claims are upward of USD 1 Bn. The Indian common-mans bail out money will be exposed to this huge risk.
• The class action lawsuits in the US courts might also well win considering the deliberate defrauding of shareholders, as admitted by Mr Raju himself. The Indian tax payer will be exposed to this risk as well.

The number one reason why the bailout must not happen is

The precedent being set.

For years we had a Solidaire black and white TV. The one with shutters and a lock. Occasionally, it would conk off and a bright straight line would appear on the tube. Once that happened, we had a trick. We would close the shutter (I know) and give it a little whack on the side then a big whack on top. For a long time, this would do the trick the picture would jump back to life. Everyone in the family knew it. It served us well, until one day..

I could not help but think of our family trick while reading about Satyams asset building exercise. Has this trick been used in the past ?

This is what I understand. For a deeper analysis Check out this analysis, which is the best I have read or heard so far.

Step 1 : You need to find a company willing to make a book entry receipt of a huge amount without actually receiving anything or far lesser. This company would have to then take on the task of cooking the books until the payment arrives. This is the delayed payments that Raju mentions in his letter.

Step 2 : Satyam would then show this investment as an asset while transferring the burden of continuing the fraud to the friendly company. As time goes by in a bull market – they can slowly make the books of the friendly company look better, for example by offering equity. Maytas plays in India and is well connected with politicians, so it is much easier for them to carry the burder of the scam. Satyam is watched by SEC and the pesky foreigners.

We ought to investigate all past purchases of Satyam like the famed 2000 Indiaworld deal ( Rs 500 Cr buy for a company making Rs 25 Lk profit and a bunch of web pages ). I know the founder Mr Jain is highly respected in India. But we cant fall prey to hero worship of entrepreneurs which got us into trouble in the first place. I do hope that nothing is found there but we must look. Also look at the SIFY sale and the way Satyam let go of an opportunity in a rights issue to the enormous benefit of a family member.

There is another trick that has worked in the past. Mr Raju started a textile company and suddenly declared it dead leaving a lot of people in the lurch. This is the quick exit trick. The Raju family is reported to be among the top 10 landlords in India today. Via Maytas they hold 7000 Acres and each member personally owns hundreds of acres in Southern and Western India. This does not come cheap. If Satyam goes under and the cash is missing, can we assume that the cash is in the land bank ?

I agree with what Mr Narayan Murthy said last night on various TV channels.

What is important is to see how the regulatory agencies handle this ?

If Mr Raju gets away with a fine of Rs 25 Crore and/or a jail term while keeping the land bank, then the world would derive its own conclusions.

Again quoting from the excellent analysis by Digitizing Thoughts. Raju might have confessed so his personal money in Satyam is secure. He would be out on bail in no time while Jethmalani, Jaitely and Singhvi can take over for a decade or so.

2. He has already introduced Rs.10 billion of own money into the Company. With increased shareholder activism, it had almost become certain that he will get out of the Company sooner than later. In case he had to go out, how to get back the Rs.10 billion of personal money left with the Company? Make a confession and repeat multiple times in the open letter that there is an unaccounted liability of Rs.10 billion so that that amount is secured for him, irrespective any legal tangles he gets into by the confession. This again, is a master stroke from Mr. Raju, in my view. Because, he is fully aware of the speed of legal process in India and so while the legal battles are fought with intelligent lawyers for 10 or 15 years, he can continue to enjoy the money and comforts.

Source : Digitizing Thoughts Blog

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As Reason, a long time commenter said – maybe it is time we stopped pretending like we have institutions left in India.

This past year alone various institutions (Supreme Court, TRAI, COAI, CVC, etc) have been asked to prove their mettle. All have fallen woefully short. The CVC is being exposed in the way it deals with the magnificent spectrum scam. All have sulked into submission to the political class after making initial noises. The worst being the Supreme Court which seems to have voluntarily waived its right of US-style-strict scrutiny. Neither did it say what its own standards of scrutiny are. Where do we go from here ? No one knows. Now it is the turn of SEBI, ICAI, to step up and show us if they have any clothes on.

The complex interconnection of politics + landlords + entrepreneurs dominate the political landscape in India today. (Political clout might save the day ) Cash changes hands freely while the media is paid off in cash or in secular money.

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I say we hold off on asking our soldiers to make the supreme sacrifice until we fix the house. Do you agree ? Dont we owe them that much ?