Bureaucracy and the Race for Information

JUSTIFYING CORRUPTION

Part 2

Indeed ― corruption often finds a comfortable seat at the forefront of the democratic machine, when a widespread capitalist economy can be disguised as a market benefitting the socialist needs of the state. Other major areas of developments, entirely initiated by the state, can boost markets worth thousands of crores, and thus call for its own respective profit-oriented economic actors. The discourse of modernization, again very western in origin, with technocratic undertones of industrialization and technical progress, can become this kind of incentive for the inception of enormous markets. One field, in particular, tends to concentrate such discourses, primarily because it combines at once an object of nationalist fantasy and of profound paranoia: defence. If India is undeniably climbing the ladder of the top nations in the world in terms of economy, the higher it gets, the more vulnerable it becomes and the more its defence becomes an area of primordial preoccupation. But India, which, in parallel, undergoes a ‘sluggish defence modernization process,” 1 produces no indigenous arms. Since 2007, India has become the number one importer of arms and ammunitions in the world, attracting 12 percent of all defence items sold around the globe. With the 8th largest defence budget, a budget that is entirely oriented towards international buyers, India has become an object of obsession for a number of major companies: “India has quickly become the hottest and most competitive market for major defence firms from Israel, Russia, France, Italy and the United States.” 2 As we will see, in this potentially very profitable new business, it is not moves of aggressive market acquisition as in Chadha’s alcohol distribution deals, which will be the centre of corrupt practices, but rather the market’s reaction to the increasing complexity of the bureaucratic procedure leading to the completion of a defence deal. In the case of the international economy of the defence sector, corruption acquires one more layer of complexity and its main commodity becomes information.

guill top left

In spite of such institutional procedures and their legal counterparts (the UCM being one of them), Indian courts have laid their hands on no major arms agents or cases. Almost as a symbol, the Bofors scandal could be exposed only through the initial investigations of foreign courts of law. The corresponding process of intensification of the bureaucratic procedures, has only proven counter-productive regarding arms agents: with more bureaucratic complexity, a connected businessman or an ex-Defence employee is even more useful for industrial competitors.

guill bottom right

Defence corruption scandals and the Indian democracy have grown hand-in-hand. 1948 would see its first major corruption case with VK Krishna Menon’s “jeep scandal,” while the 1980s marked the heights of illegal practices in this area, with the 1987 Bofors scandal. After years of investigation, the Swedish company admitted having paid nearly 10 million dollars of bribes to defence officials and major politicians, including Rajiv Gandhi, to secure a major deal of Haubits FH 77 artillery. Accountable for its deficiencies, the Indian state had to prepare a reaction. Recently, the Central Bureau for Information (CBI) came up with a list of ‘Undesirable Contact Men’ (UCM), gathering information on blacklisted agents who illegally pocketed commissions while facilitating deals between international defence companies and the Indian government. Before that, the Defence Procurement Procedure (DPP), first drafted in 1992 to regulate foreign acquisitions, underwent a major revision in 2002 in relation to recent scandals. Since 2002, the DPP went through seven processes of update, in the hope of ensuring the solidity of the legal procedure, and to make the role of the agents more difficult. The entry of a national figure of anti-corruption, previously Chief Minister of Kerala, AK Anthony, to the Defence Ministry in 2006, only amplified the labyrinthine tendency of Indian bureaucracy in defence. In spite of such institutional procedures and their legal counterparts (the UCM being one of them), Indian courts have laid their hands on no major arms agents or cases. Almost as a symbol, the Bofors scandal could be exposed only through the initial investigations of foreign courts of law. The corresponding process of intensification of the bureaucratic procedures, has only proven counter-productive regarding arms agents: with more bureaucratic complexity, a connected businessman or an ex-Defence employee is even more useful for industrial competitors. In “Boomtown,” an article by Toral Varia Deshpande, the author quotes Rahul Bedi, the India correspondent to the industry’s premier trade magazine:

“In the past seven or eight years, the number of Indian faces that you see at events like the Air Show or Defexpo”—where arms companies assemble to show off and sell their wares—“has grown exponentially, because an outsider can’t understand these very, very complex rules and procurement procedures, and all the bureaucracy that is involved. The more complicated the procedures, the more the scope [for agents] to make money.” 3

line 1

To avoid the old cliché of a nepotistic rule of one authority and its connections, the Indian governments have engendered a diametrically opposite system: through the years, an excessive number of intermediaries and authorities have been added for the validation of any decision. While files pile up on offices and meetings get delayed months after months, the industry adapts and operates always faster.

line 2

This situation shows how the question of corruption is in depth a matter always located, always changing forms to adapt the ‘style’ of the particular legal system it will try to bypass, and its corresponding government. The extraordinary complexity of Indian bureaucracy, due to remnants of the British rule, but also the state’s duty to propose public jobs to an incredibly vast population, as well as other factors, has added one more locus of vulnerability, perhaps mostly absent in other economies, for profit-oriented agents to operate. Deshpande gives a hint of this complexity by detailing the first of the 11 mandatory steps for the acquisition of a new defence equipment. Each step contains sub-steps, requiring the approval of multiple authorities in a bureau, a tendency that AK Anthony’s ministry has only increased. To avoid the old cliché of a nepotistic rule of one authority and its connections, the Indian governments have engendered a diametrically opposite system: through the years, an excessive number of intermediaries and authorities have been added for the validation of any decision. While files pile up on offices and meetings get delayed months after months, the industry adapts and operates always faster. The time lag is thus a promising terrain of activity for the industry, but nonetheless the maze of Indian bureaucracy cannot do without its own interpreters:

“… a closer look at the DPP, whose guidelines define the rules of the game for agents and officials alike, shows how the proliferation of new procedures, committees and approvals has multiplied the avenues for intervention. It has also, therefore arguably increased the incentive for companies—especially foreign firms—to employ agents to navigate (or manipulate) the unfriendly Indian bureaucracy.” 4

While Ponty Chadha was only an efficient and connected businessman, figures like Sudhir Choudhrie, Suresh Nanda or Mohinder Pal Sahni represent an authentically new face of corruption: Indian bureaucratic corruption, a sort of corruption organized so centrally around the particular intricacies of Indian bureaucracy that ‘only an Indian could understand it.’ While any major corrupt agent around the globe can work only if she has a sound understanding of the legal rules it tries to bypass, the complexity of Indian bureaucracy seems to open the doors to an entirely new form of corruption altogether.

Under the new DPP procedure, each step of the acquisition of an arm material, from the constitution of a request for a new item, all the way to the conclusion of the deal, is carefully double-checked. In such a system, corruption can still operate at the level of influence: the slightest hint suggesting one particular arms gadget, or favouring one company over another, can have wide implications for a deal. After all, a company competing for, say, a ₹ 200 crore deal, has all the necessary reasons to spare 3% for an agent that would facilitate the acquisition. But in the Indian context, corruption also changes forms, and influencing is not anymore the major role of the agent. The international arms business marks the dawn of a new kind of illegal business: information. The race for this kind of new commodity starts early on in the process: “Even the smallest and most basic facts—about the military’s equipment needs, the preferences of senior officers, or the movements of a file—are precious assets for the middleman, who must advertise his superior knowledge of the inner workings of the system to pitch his services to clients.” 5 Such information can help the company to send proposals matching exactly what the Ministry of Defence would be looking for. But the business of information also takes more unsuspected forms. While the processes of selection take months, in an industry where business pressures are a daily matter, each company is led to pay, moreover, to get nothing more than information on the progression of a file. A retired arms manufacturer explained in all transparency why this was a legitimate, and even potentially legal business practice: “Nothing illegal. For me to know where my project is, there’s nothing illegal about it.” 6 The underlying libertarian tones of this ex-businessman is made explicit when he claims:

““Everywhere in the world, in every country, agents are used … There is no country where agents are barred. Even the Indian government-owned defence companies use agents for their sales abroad. The problem here is the fact that you don’t want to recognise the agent. If you legalise the agents, 99 percent of the scandals are gone. It’s a very simple fact.” 7

guill top right

This discourse is particularly insightful, as it reveals the inner justificatory arguments of arms businessmen. They know that if facing current laws, their deeds are illegal and they are perceived as ‘corrupt’ agents. But they come to justify their role by insisting on how the economy cannot survive without such intermediaries. The problem, in such eyes, is not that what they do is corrupt, but that Indian law and the prevalent popular understanding of corruption are passé, that they are based on the remnants of moralistic discourses, which are simply irrelevant in the practices of contemporary international business.

guill bottom left

This discourse is particularly insightful, as it reveals the inner justificatory arguments of arms businessmen. They know that if facing current laws, their deeds are illegal and they are perceived as ‘corrupt’ agents. But they come to justify their role by insisting on how the economy cannot survive without such intermediaries. The problem, in such eyes, is not that what they do is corrupt, but that Indian law and the prevalent popular understanding of corruption are passé, that they are based on the remnants of moralistic discourses, which are simply irrelevant in the practices of contemporary international business. In front of the condemning judgments of the media or of a court of law, the so-called ‘corrupt’ agent can claim for his defence his deeper understanding of the ‘necessary evils’ of his industry. Undeniably, the most sophisticated, the most critical, and perhaps the most ‘advanced’ interpretations of the notion of ‘corruption’ are certainly to be located in the minds of the very ‘corrupt’ actors of today’s international economy.

When the CBI or other authorities actually get hold of an incriminating case, the industry still maintains a step ahead. In spite of overwhelming documents proving the several instances of Sudhir Choudhrie’ multi-crore agent ‘fees,’ he is still not under custody, having fled to London once aware that a condemnation was awaiting him. At a national level, the courts of law can hardly manage to build strong cases. The delay observed at the bureaucratic level is carried forward on the tribunals: a former CBI director confessed that “It doesn’t really help to investigate [major arms agents], because they are all back in the business within six months.” 8 Accusations await confirmations from multiple authorities, in the lack of which the charge is dropped after one or two years. Evidences, the very core of the judiciary metaphysics, is also by definition generally a lacking component when deals are made orally and cash moves silently to tax havens. Indeed, national judiciary difficulties are only the first level of the problem of major arms agents: the cases soon become international. In the UK, where Choudrie is presented as a philanthropist, the arms agent reserves large donations for the Liberal Democrats. Undeniably, it helps him avoiding the Indian courts. Multiplying his activities, Choudrie was also involved with major businesses in Israel, where he invested $ 30 million in the company Aeronautics Defence Systems. Avi Leumi, the ex-CEO of the company, pocketed the commission of a major international purchase without telling Choudrie, who sued him in an Israeli court. When Leumi threatened to reveal information on Choudrie’s lobbying activities in India, it is the Israeli Ministry of Defence that stopped the case, claiming the protection of “state secrets” that could be “damaging to Israeli-Indian relations.” 9 The compensatory transaction was conducted out of court. Thus, when the activities of a major player become wide enough to bypass the scale of a single country, national and international laws are powerless, as the agents can pressurize entire governments for the information they hold. More problematic than the profits of the single agent, therefore, is the governments’ compliance with them. But the culprits could hardly be designated: the problem is systemic. This corruption is, without much simplification, the bigoted son of bureaucracy with international capitalism. The profoundly democratic and democratizing character of this new form of corruption is perhaps best illustrated when Deshpande discusses the fall of Abhishek Verma’s small-scale activities:

“Though Verma enjoyed a misleadingly high profile, he also exemplifies what one might call the “democratisation” of defence corruption. A minor player … he was one of the crowd of small operators attempting to capitalise on the new landscape for defence dealmaking: tighter rules and more complex procedures that multiplied the “human interfaces” involved in the process; increased competition and ballooning import contracts that led more and more foreign firms to set up shop in India; and a subtle shift from the era in which influence was the primary asset for a middleman to one where information, classified or otherwise, is of equal value.” 10

The corrupted agent has, once again, changed suits.

[placenotes]
References

Image courtesy: Erik Sigerud

Share!

Footnotes

  1. Toral Varia Deshpande, “Boomtown,” The Caravan, September 2013, 35.
  2. Deshpande, “Boomtown,” 35.
  3. Ibid.
  4. Ibid., 36.
  5. Ibid., 38.
  6. Ibid., 40.
  7. Ibid., 40.
  8. Ibid., 46.
  9. Ibid., 47.
  10. Ibid., 43.