Column: Koda’s Money Laundering Scam Was Preventable
..of late, happenings suggest that politicians’ ambition to keep corruption alive have begun to backfire. Congress party’s Andhra puzzle, BJP’s Karnataka crisis and this Koda story are the best cases in point. YS Jagan Mohan could blackmail Congress and Reddy Brothers BJP, for they have capacity to buy MLAs out of ill-gotten money…
Saurabh Dharmeshwari
Madhu Koda’s 4000 crore money laundering scam, the biggest yet by any standard, is a model case of study for the corruption rampant in our country, that is, it’s the type standing clearly out among all other scandals in many respects. I view it from two different perspectives: the individual case, one, which involves Koda and his aides and can thus be labeled a case of political corruption; and the corruption at large, two, which exists in entire system that has badly failed in this money laundering case leaving me convinced in toto that the scam was preventable.
Koda has maintained from day one that the money laundering scam against him is politically motivated and even gone to the extent of threatening divulging names of those.Their identity, which Koda has not revealed so far deliberately, is the key to his escape out of the case.
Koda’s rages to riches is one-line story of success: a school dropout is elected MLA, gets plum mining portfolio few years later, and eventually rises to the rank of CM. What Koda did to mint superfast money, as probing agency unfolds, was doled out leases and licenses of mine fields to certain people. It’s a story of political corruption and lack of reforms in sectors like mines, hitherto. Koda was able to make so much money so fast because mining sector follows an outdated, corruption prone procedure of lease and licenses instead of more accountable, transparent system of open auction.
Political and sectoral – departmental, institutional etc – corruptions are inter-related, inter-dependent, as we already know, feeding each-other in perfect symbiosis. Politics need money to grow, and various sectors, departments and institutions are where the money has finally to come from. Even if an individual case, Koda’s money laundering scam, to my mind, is something to which whole political fraternity is a party, theoretically as well as practically. Theoretically because netas have held up political and department reforms out of their avaricity. Practically because Koda minted money and laundered it possibly hobnobbing with many politicians.
Of late, happenings are suggesting that ambitions of politicians to keep corruption alive and kicking have begun to backfire. Congress party’s Andhra puzzle, BJP’s Karnataka crisis and this Koda story are the best cases in point. YS Jagan Mohan, who enjoyed backing of majority of Congress MLAs in Andhra Pradesh, all chosen, financed, and nurtured by his late father YSR and so having their allegiance to Jagan rather than Congress, could blackmail party High Command, for he had adequate money to nurture his supporters further, the ill-gotten money made during YSR regime.
The same was true in BJP’s Karnataka crisis. Bellary’s Reddy brothers, the powerful mining barons, their money gotten by virtue of prolonged monopoly on mine fields, succeeded in making BJP central leadership yield to most of their demands, for they could buy MLAs, destabilize state BJP government and can form one their of own. An identical outcome is predictable in Koda’s case, though here different things have to happen, not just buying of people.
Koda has maintained from day one that the money laundering scam against him is politically motivated and even gone to the extent of threatening divulging names of those behind the scam. As mentioned above, he possibly minted money and laundered it in association with other politicians, who might be in power at present either at state or the Centre. Their identity, which Koda has not revealed so far deliberately, is the key to his escape out of the case.
Obviously, the choice is political fraternity’s. Either they carry on with political and departmental corruption and blackmail each other, paving the way for an unprecedented chaos in which anybody will be able to hold an entire party to ransom heralding jungle raj within organisation; or first bring in political reforms – at all levels: entry, elections, organization etc – then, reform departments, institutions and sectors so that there’s no such thing as plum post or coveted department. Terms like ‘plum’, ‘coveted’ and so on, in fact, indicate that these are the places where more reforms are needed and have to be done at first priority.
I hope some would argue, with regard to political reforms, that it’s finally upto people to keep corrupt persons out of politics no matter political parties reform themselves, for it’s people who elect representatives. The argument is particularly forceful taking in account Koda’s story, who was an independent MLA. His political success shows that even underprivileged people, in addition to moneyed and musclemen, can engineer their way into power without being a card holder of a political party. But, this makes little sense. Public role in the procedure is passive and they can act only if there’s choice between good and bad, corrupt and honest, devoted and selfish.
Corruption in Koda story, as we witness, know no bound. It goes beyond political and departmental domains, presenting a bird’s eye view of corruption prevailing in the entire system. Koda minted money at vast scale and needed to launder gigantic amount. For the purpose, he set up fake companies in the name of his associates whom he had already made mining magnates and carried out huge transactions in accounts of these fictitious companies. This, the corruption at large part of which my second perspective of the case is made, is the most appalling finding of the scam, first because it involves banks and second because procedures followed are old and preventable.
Fake companies are possible in current setup, but not mammoth bank transactions. Not to let fake or mask organization of any sort or individuals of foreign countries transact business, our banks and financial institutions have been strict enough for over a decade to verify the identity of depositor, and in the cases of colossal transactions, to ferret out source of income. The Bank Manager in Koda story pursued neither of the two procedures. Moreover, he didn’t inform his superiors and alert financial intelligence, as well.
Some would argue that it’s finally upto people to keep corrupt persons out of politics no matter political parties reform themselves, for it’s people who elect representatives. The argument is particularly forceful taking in account Koda’s story, who was an independent MLA, not a candidate from a political party.
There might be two theories about this big letup. One, the bank manager did this out of greed to make money himself. Two, Koda’s association with other politicians (suggested by story emerging) who could easily get the Bank Manager out of their way – job – if he declined to cooperate worked. Banks and financial institutions are well organized and corporatized, better reformed, and employees well-paid. This makes employees less prone to risk their whole life – any sensible man shudders at the very thought of being in a scandal, facing a trial or landing up in prison – even if a fortune is offered. Well, whichever be the truth, there’s still need of more accountability and transparency in banking, particularly due to likelihood of terrorists or organizations supporting them depositing money for funding terror, or organizations funding other illegal activities.
The second significant thing in money laundering with regard to banks is that Koda deposited money in bank accounts of his aides who invested on his behalf in organized sectors like Emmar MGF. This is an old method of choice of money laundering, allowed to survive (despite a law to check it) so that people in power can easily launder their money. Koda laundered a bulk of his money by trading in unorganized sector like bullion or commodities market where it is hard to find links and crack source of capital.
In Koda story, system failed at all levels, political, departmental, banking, organised and unorganised sectors until Income Tax department, which has rather turned into scam-expose-department hounded him. A single alert unit can prevent it.
All political parties, in particular Congress and BJP, which have been critical of Koda had no moral locus standi to play god and read riots act to him with corruption of this proportion rampant in the country only due to political inactivity. At least with ill-gotten money backfiring netas, they have to think seriously about stopping all this mess. There’re effective ways for the purpose in every field and at all levels. What’s required is political will.
