CBI needs skill, not just speed

For years I have demanded faster, stronger action against crooked politicians and businessmen. But I stand abashed after the CBI fiasco on the allotment of a coal block to the Birlas.

The aim was to nab crooks. Instead the CBI fingered a retired bureaucrat of reputed integrity (Parakh), a businessman of high repute (Kumar Birla), a minister known for his honesty (Manmohan Singh), and a chief minister (Naveen Patnaik) re-elected twice for running a clean government.

With this, the CBI’s credibility lies shredded. It seems not to know the difference between crime and bona fide use of ministerial discretion; between policy decisions and corruption; or between good governance and wooden adherence to bureaucratic norms. It has produced no evidence of bribe or other favours in return for the coal block allocation. So, its accusations sound more a hurried witch hunt than a search for justice.

Maybe the CBI feels pressured to do something quickly by the Supreme Court’s activism. Recently, the court accused the government of turning the CBI into a “caged parrot” in the Coalgate scam. Many people, including me, cheered the court’s determination to prevent cover-ups for which the CBI has in the past been notorious. In August, a bench headed by Justice Lodha said, “You (CBI) have to pick up some speed. The pace of inquiry is not good. You are still driving in the first gear.” The court wanted investigations in the scam completed by the year end.

Possibly the CBI took refuge in a hurried, misconceived FIR. This is a sorry mess. The CBI’s competence should be measured not just by speed but soundness of investigation, and of evidence that can withstand the heaviest legal scrutiny. The recent flinging of accusations by several sources has led to bureaucratic paralysis. Fingering officials without clear evidence of corruption means both injustice and dysfunctional governance.

The Chief Vigilance Commissioner recently said that the conviction rate in CBI prosecutions over 26 years was just 4%. In part this reflects deliberately weak prosecutions to let favoured people off the hook. Sometimes the CBI has opted for shoddy speed over thoroughness. The biggest CBI problems are lack of training, forensic tools and perseverance. The skills of foreign agencies are illustrated in The Billionaire’s Apprentice, Anita Raghavan’s book on insider trading in Wall Street. It covers the conviction of hedge fund star Raj Rajaratnam and Indian management guru Rajat Gupta.

The Securities and Exchange Commission (which regulates Wall Street) spent four full years gathering clinching evidence. It started by looking into the affairs of Sedna, a small hedge fund that had made money through suspiciously wellinformed stock market bets. It was run by a little-known person called Rengan. But he turned out to be the brother of Raj Rajaratnam, head of the $5 billion Galleon Fund.

Starting in 2006, the SEC ran routine examinations on Sedna and then Galleon. Following a subpoena, Galleon dumped four million documents on the SEC to drown out investigations.

The SEC combed through these and thousands of pages of emails. It found 8,000 interesting phone numbers. One frequent caller of Rajaratnam turned out to be Rajat Gupta of McKinsey. But the SEC found it difficult to establish criminality despite years of effort.

Eventually the SEC tracked down clear evidence of information being given to Galleon by corporate informers, some of who confessed on interrogation. Not even the confessions were considered clinching evidence. Galleon traded millions of shares daily, so proving that a specific trade was based on specific information was tough.

The SEC was not authorized to seek wiretaps for evidence. But the New York attorney’s office could do so. It decided Galleon could be accused of mail order fraud, a criminal offence. On this basis, it obtained court permission to wiretap Galleon. Even so it took over a year of wiretapping to clinch the case. Only then could Rajaratnam and Gupta be prosecuted and convicted. Gupta was acquitted on the charges unbacked by wiretaps — circumstantial evidence alone was not enough.

The investigations were kept secret for years, something unthinkable in India. The case showed how backward the CBI was in skills, tools and patience. Had the SEC moved faster, the big fish would have wriggled free.

Understandably, Indian courts want speed; want the CBI to wrap up the Coalgate investigation by the end of 2013. Yet the Kumar Birla case shows how counterproductive speed can be.

The Rajaratnam case highlights the need for the CBI to develop skills and perseverance. Huge institutional reforms are required to create competence. Without that, an uncaged parrot can be as bad as a caged one.