COLUMNISTS
DIARY
SPECIALS
INTERVIEWS
ELECTIONS
CAPITAL BUZZ
REDIFF POLL
THE STATES
ARCHIVES
SEARCH REDIFF

Search the Internet          Tips

Recent Columns

The abduction of     Daniel Pearl The limitations of a     General Let there be war The eve of another war No war on our cards

Gone Enron

Indian politicians across the spectrum have paid lip-service to enacting a 'Freedom of Information Bill' on the lines of its American counterpart. This is pure farce -- something on the lines of that sister legislation, the 'Women's Reservation Bill'. There is nothing that politicians and, even more so, bureaucrats would abhor as unhindered public access to information. And recent events in the United States have underlined that gut instinct.

Dana Milbank and Alan Sipress of The Washington Post used their nation's 'Freedom of Information Act' to gain access to the government-funded Overseas Private Investment Corporation. Their aim was Enron, specifically to see what the fallen giant had been doing abroad. In the process, the two reporters came across an attempt at a shotgun wedding, which American officials were trying to arrange between Enron and some of the most powerful men today in the Government of India.

The documents reveal a couple of amazing facts. First, the attempted negotiation was carried out by the US National Security Council, one of the highest policy-making bodies in that country. Second, the American side took the Enron issue so seriously that it continued with the work even after the World Trade Centre attacks when terrorism was, supposedly, the overriding issue.

Here is a small sample of the documents published by The Washington Post. In an email message sent on June 26, 2001, the US National Security Council said: "He would also be willing to meet with Mr Lay [the then chairman of Enron] and the bankers, but only at the residence [of the Indian ambassador]." It is, I think, unfair to name the Indian official concerned as there is no indication of whether such a meeting actually went through.

However, these things cannot remain under wraps forever. My friends, both in Delhi and in Washington, tell me that the Bush administration put almost unheard-of pressure on India to accommodate Enron's requests. This attempt was at its peak between September 14, 2001, and November 9, 2001.

That last date is significant, being the day that Prime Minister Vajpayee met President Bush. According to the record, there was a move to raise the Enron issue even at that conference, an attempt that was given up almost literally at the last minute. Later, as Enron began to unravel in public, the pressure began to ease.

Dealing with the bankruptcy of Enron and the larger issues of corporate governance is, of course, an American headache. But the cursory references to India intrigued me enough to poke around a bit on my own. Very briefly, I submit that there was a strong pro-Enron group in the Government of India as there was in the US federal government.

This group -- I don't believe it was all the work of an individual -- was powerful enough to make a concerted attempt to hoodwink the Government of India. It did, in fact, get both the prime minister's office and the Union Ministry of Finance to see things Enron's way. At the end, it was only the watchfulness of the prime minister himself and the Union power ministry which kept India from suffering a loss of roughly Rs 6,000 crore. (Some say it could have been more.)

That was the amount -- over a billion US dollars -- that Kenneth Lay demanded as "compensation" for buying out Enron's share in Dabhol. He did not specify how he had arrived at that sum. Nor, as far as I know, did the pro-Enron Indian officials arrange for any audit of their own. Yet, seemingly in an attempt to make the White House happy, there was a push to give Enron whatever it desired. If this was carelessness, then it almost amounts to criminal negligence.

Enron's bankruptcy was not exactly a bolt from the blue. As early as January 2001, the attorney general of California publicly stated that he would try to have Kenneth Lay jailed. The investment house Moody's had downgraded Enron's shares, calling them just average even if they belonged to a Fortune 500 firm.

Given these straws in the wind, how did Indian officials decide to accept Enron's valuation? How did officers in both the prime minister's office and the finance ministry try to rush through the money that Enron was seeking?

The tale gets even more shocking. After the prime minister and the Union power minister squelched the initial demand for US $1.2 billion, the pro-Enron group in Delhi refused to give up. Enron came back asking for US $800 million. (Apparently, Dabhol had lost one-third of its value overnight!)

Yet again, there was no explanation of how this figure was reached. Yet again, there was no attempt by India to have an independent audit. So riddle me this: which bureaucrats in the Government of India are so arrogant in their own power that they tried to overturn a decision made by the prime minister and the power minister? Equally important: who were so powerful that they could rush a proposal through the Union finance ministry without going through approved procedures of valuation?

I suspect this is one scandal that cuts across parties. The original Dabhol deal was struck with Enron by a Congress ministry in Maharashtra, and that at a very suspicious time. (The votes had been cast, but not yet counted in the assembly polls that would bring the Shiv Sena-BJP coalition to power.) And it seems the Enron issue came up even when a Congress leader met the American vice-president last year. (Again, I name no names.)

I am happy Prime Minister Vajpayee and Power Minister Suresh Prabhu squelched the pro-Enron group in Delhi and saved over a billion dollars. But should the errant officials be permitted to rest in anonymity, or should all the facts come out into the open after investigation? It may be better to air the matter before the American media does so, will it not!

T V R Shenoy