India’s Telecom Scandal: Titans of Industry Implicated

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What to make of the charges filed over the weekend in India’s multi-billion telecom scandal? Andimuthu Raja, India’s former telecommunications minister and a leader of one of the Congress Party’s key regional allies, was among those named. The Wall Street Journal reports that he was charged with cheating, forgery, conspiracy, criminal misconduct and abusing an official position.

That’s no surprise. The charges are only the latest ignominy for Raja, who is already under arrest and had resigned his ministerial post months ago, on Nov. 14, shortly after India’s top auditing agency released a report detailing irregularities in the government allocation of the 2G spectrum to private companies. Raja was in charge of that process, which the auditor genered called “arbitrary, unfair and inequitable.” Raja was also at the center of a notorious set of leaked phone conversations between a well-connected lobbyist, Niira Radia, and several of India’s rich and powerful, in which Radia pushes to help Raja keep his telecom post in 2009 despite criticism of the way he had handled the 2008 telecom spectrum bids.

More surprising are the three names on the chargesheet connected to Anil Ambani’s Reliance ADA Group. The chargesheet includes a group managing director and two senior vice presidents of Reliance ADAG, a spokesman for the CBI confirmed. That’s an embarrassment for Ambani, who will be called before a parliamentary committee today to answer questions related to the scandal. Ambani has not been accused of any wrongdoing, but the charges are a blow for his company, which was formed when the Reliance conglomerate split in two to satisfy the competing ambitions of Anil and his older brother, Mukesh Ambani, India’s richest man.

Prosecutors will attempt to show that Reliance Telecom effectively controlled Swan Telecom, one of the beneficiaries of the telecom spectrum process, and will then establish a money trail between the two companies and Raja, who is accused of accepting bribes for favorable treatment. If that case is brought successfully, it will be a loud wake-up call for the Indian business world, where corruption is often rumored but seldom proved and almost never prosecuted.

Another titan of Indian business, Ratan Tata, will also appear before the parliamentary committee today. Tata’s role in this scandal has been unusually visible but is still unclear. Neither he nor his company have been accused of any wrongdoing, but this is surely not what Tata had in mind when he announced, with much fanfare, that he would personally lead the Tata Group’s push to become a leader in India’s fast-growing mobile phone market.

These charges are unlikely to resolve the ongoing doubts about doing business in India. A recent survey by KPMG on bribery and corruption in India makes for dismaying reading. A full 100% of the survey respondents said that “Corruption skews the level playing field and tends to attract organisations with lesser capability to execute projects.”

Only real transparency and swift, effective prosecution of corruption charges will change that, and India has a long to go. For every well-publicized set of arrests, there is another behind-closed-door session and another round of rumors. In this case, the “final report” of the CBI will be submitted to the Supreme Court but will not be made public.