He Did Not Have Teeth

 

The King was a very worried man. He had just returned from a cabinet meeting after reviewing the status of finance in his Treasury. The statements submitted by the finance minister showed that the expenditure was increasing by leaps and bounds but the income was dwindling. Despite a half day discussion, they could not find even one item of expenditure that could be deleted or deferred. On the other hand, there were requests for additional funds by almost all the departments. Each department head put forth very convincing arguments as to how cuts in grants would impact the administration and people's welfare. Even after all brain storming and minute analysis, not one additional source of income could be found. Above all, the inflows into the Treasury were getting lower and lower each year. The King was recapitulating in his own mind, the discussion on the income side of the financial statements.

"Why are the inflows from taxes lower this year?"
"There was drought in some areas of the state this year, Sir"
"There was drought in some other areas of the state last year as well"
"Taxes were reduced on some items this year Sir"
"Last year taxes were reduced on some other items. These were assessed before reduction"
"Some additional expenses were incurred on war on the eastern border Sir"
"I am asking about income. Not expenditure. Can someone explain why inflows have dwindled?"

There was no satisfactory answer. The problem could lie elsewhere. The bureaucrats and ministers were not able to grapple with the situation. The King sent for the Royal Consultant. The Consultant was a wise man and had solved many problems earlier, though his fee was quite heavy. King thought of one more item of expenditure; consultant's fee. But that could not be avoided.

The Consultant came, heard the King and smiled. He said he could answer the question in words, but he would like to demonstrate the answer to the problem in the royal court on the next day. The King agreed.

The royal court was in session on the next morning. The King was seated in his place as were the other courtiers. The consultant was sitting near the King. The King asked for the demonstration. The consultant got up and signalled a servant who was stationed at the other end of the royal court. The servant had brought a big ball of butter. He handed over the ball of butter to the person nearest to him and asked the same to be passed on to the next person and so on until it reached the King. Finally the ball of butter reached the King. The King received it and looked at the consultant. The consultant now spoke thus:

"Your Majesty, you have seen the ball of the butter when my servant produced it at the other end of the court. It was of the size of a football. Please see the ball of butter in your hand. It has now reached the size of a cricket ball. Please observe what all the courtiers are doing. They are licking their palms and fingers. As the butter passed each hand, a part of it got stuck in each hand. Same thing is happening to your revenues. Revenue collected from the tax payers is the size of football. But there is some pilferage at each level when it is handled. By the time it reaches the Royal Treasury it is much less than the collections. This shows that corruption has increased tremendously. Your inflows into the treasury can increase only if the pilferage is checked".

It was indeed a very good demonstration and the reason for dwindling revenues was explained perfectly. But the King was not in a position to enjoy the demonstration. He asked the consultant after the day's session as to how this problem could be solved. The consultant suggested that some employees who are highly corrupt should be identified and dealt with firmly to teach a lesson to others. One such tax collector was identified and the King put him in the royal horse stables without giving him any work. The idea was to isolate him from fertile revenue portfolio and remove the very possibility of corruption. But the employee was kept under observation as advised by the consultant.

On the first day of the new assignment, the employee made a full round of the stables and familiarised himself about the working systems there. On the second day he went to the stables with a weighing scale and a ledger. He went to each horse, weighed the horse dung and noted their weight in the ledger. All the stable employees were amused by his strange behaviour, but he continued with his work without any hesitation. After three days, the supervisor of the stable came to him and enquired why he was dirtying his hands by weighing the horse dung. "The King has come to know that there is misuse of the fodder and horse feed in the stables. He has asked me to check the same. I am weighing the output in the form of horse dung. Through that I will calculate the quantity of feed you are giving to each horse. When the aggregate is compared with the amount of feed purchased for the stables, the amount of pilferage will be known". The supervisor told the tax collector to protect him and other employees and in consideration the tax collector would get his cut without doing anything at all. The tax collector now earned much more than his earlier assignment. The modus operandi reached the King.

The King removed the tax collector from the stables assignment. He was told to go to the river banks everyday, just sit till evening without any work and go home at sunset. No work was allotted to him. The tax collector went to the riverside on the first day and observed the scenery. On the second day he went with a ledger, sat below the tree and started making some entries in the ledger. After a few days the boats supervisor came to him and asked what he was doing. "The King has asked me to find out how many boats are there, how many trips are done each day and how much money is collected from the passengers when they cross the river. He has a doubt that you are cheating the treasury by under declaring the earnings and paying lower taxes. You will be caught now and punished". The supervisor was startled, had a deal with the tax collector and the employee started earning his cut thereafter. This episode also reached the King.

The King again called the consultant and narrated his predicament. The consultant's face lit up. He told the King not to worry. "My dear King, now you have the perfect candidate for heading your "Anti-corruption Task Force". Designate him as the head of the team as he knows how corruption is possible in every assignment. He will bring things under control. But do not pay him any salary. He can be paid a percentage of the corruption money identified. Then he will work sincerely". The King agreed with the bright idea. So was it done.

The King died shortly thereafter and the Consultant left the job. We do not know what happened after that. 

*****

Even in todays world, in many societies including ours, the position is not different on the expenditure side as well. A former Prime Minister of our country famously conceded that only 15 paise (15 per cent) of each rupee spent by the government on welfare activities reaches the poor. This statement found an echo in one of the landmark judgements of the Supreme Court of the country. Funds meant for developmental spending as well as welfare activities are swallowed all the way by sharks in the administration and their political patrons. Corruption has been institutionalised and its systems are much stronger than the administration systems and their supervisory machinery. 

One of the Chief Ministers in a state ran a very corrupt regime. Everyone including the incumbent agreed with this assessment and nonchalantly blamed the system for the same. To everyone's surprise he and his party got reelected after the first tenure. How was this possible? An analyst summed up the situation very well. The good thing about the reelected regime was that people were able to get their job done quickly once the required extra was given. It was different from the systems where one pays but does not get the job done as well. Further, everyone knew whom to approach, how much to give and how to give. There was also no discrimination. The unauthorised charges were also the same for all. The system was so equitable (!) that everybody was at ease and peace with the happenings. Why disturb the equilibrium and sow the seeds of uncertainties? Better to re-elect the regime and be comfortable! 

Some of the news headlines we came across in the last few months are like this:

• Two Crore false MANREGA cards were identified. These fake card holders were very active and worked regularly for claiming the wages due to them. 
• Some of the beneficiaries of this scheme were citizen of a neighbouring country.
• Six Lac fake midday meals claims were routinely made.
• 20,000 fake NGOs collected donations for their social work!
• 80,000 fake teachers were paid salaries regularly. One lady teacher was getting salaries from three schools in three different districts without visiting any of those schools.
• Five Crore fake ration card holders drew subsidised rations every month.
• 43,000 dead people were drawing pensions even after reaching the other world.
• 4,00,000 shell companies existed on record and aided wholesale money laundering.
• Many schools paid scholarships to students much more than their recorded strength. Even the school headmasters and the students that were paid did not know that they were receiving scholarships.

These are only specimen of wholesale pilferage of public funds on the expenditure side. The amounts siphoned off and laundered are running to several thousand crores in many cases. The records maintained in all these cases are more perfect than other genuine projects and they are regularly audited and examined as well. The stories of money diverted from bank loans is even more painful. A three digit loan scam is considered as a disgrace and laughed at as a incompetent job. These scams are shaking the very foundations of the financial sector. Many well-known names that were even decorated with awards suddenly surface in such scams.

*****

During my childhood days I had heard a Sanskrit verse about corrupt revenue officials who would eat and swallow anything from iron and stones to garbage. There was also a case of a stolen well from the agricultural lands of a farmer. All the documents were perfect and the money was spent for digging a very beautiful well in the farmer's land. Money spent was accurately accounted. The only problem was that the farmer did not have a well in his lands. He was forced to give a complaint that his well was stolen by somebody.

It is a beautiful verse and even after sixty years it still lingers in the memory. It runs like this:

ग्रामाधिकारी गर्भस्तः मात्रु मांसम् न खादति |

पापभीत्या न मन्तव्यम् दन्ताभवत्व हेतुना ||

Gramaadhikari Garbhastaha Maatru Maamsam na Khadati

Paapabheetya Na Mantavyaha Dantaabhavatva Hetuna!

The word "Grama" means village in Sanskrit and many other Indian Languages. Adhikari means an official or officer. Gramadhikari represents a government official at the village level. He is born to eat things (meaning he has a cut on anything he comes across). He is born with a mission to swallow things around him. The only thing he did not eat in his life is the meat in the mothers womb, when he was there. That he did not eat it was not because of any fear of committing a sin, for eating mother's womb would be the worst kind of sin one can imagine. The real reason for not eating it was because he did not have teeth then. Had he got teeth in the womb, he would have eaten her womb itself!

*****

It is often said that only two have "Vishwaroopa" or are "Omnipresent". The Supreme Lord and Corruption. The first we can understand and feel with dedicated efforts and higher learning. The second is felt without any difficulty, even if we do not want the same.

LADY Macduff and Anna HAZARE

The movement against “Corruption” and fight for a strong Lokpal bill often reminds me of Lady Macduff and her Son.  When he wrote Macbeth, William Shakespeare did not know about this movement or several other such movements, in various parts of the world over the years.  For those who have not read or seen the play “Macbeth”,  I recall the exchange between Lady Macduff and her Son.  It is in Act IV, Scene II, in Macduff’s castle in Fife, a part of Scotland.  Macduff has gone away to England to seek help to come back and fight Macbeth.  Macbeth has been assured by the three witches that “Macbeth shall never vanquish’d be until Great Birnam Wood to high Dunsinane Hill shall come against him”. Macbeth is secure in the feeling that this could never happen.  Just like Hiranyakashipu was safe until Narasimha appeared.

Lady Macduff, her Son and Ross enter the stage and there is some discussion about the events unfolding then, between Lady Macduff and Ross.  Lady Macduff says,  “When our actions do not, our fears make us traitors”.  Ross replies: “But cruel are the times when we are traitors, And we do not know ourselves”.   She bids farewell to her pretty cousin and exits.  The few lines exchanged between the lady and her son are worth recalling:

LM: Sirrah, Your father is dead. And what will you do now? How will you live?

Son: As birds do, mother.

LM: What, with worms and flies?

Son: With what I get, I mean; and so do they.

LM: How will you do for a father?

Son: Nay, How will you do for a husband?

LM: Why, I can buy me twenty at the market.

Son: Then you’ll buy'em to sell again.

LM: Thou speak’st with all they wit, and yet,  I’faith, with  wit enough for thee.

Son: Was my father a traitor, Mother?

LM: Ay, that he was.

Son: What is a traitor?

LM: Why, one that swears and lies.

Son: And be all traitors that do so.

LM : Everyone that does so is a traitor and must be hanged.

Son: And must they all be hanged that swear and lie.

LM: Everyone.

Son: Who must hang them?

LM: Why, the honest men.

Son: Then the liars and swearers are fools, for there are liars and swearers  enough to beat the honest men and hand them up.

At the end of the scene the Son is stabbed to death by Macbeth’s men and Lady Macbeth runs for her life. It is made known in the next scene that everyone of Macduff’s people – Wife, children, servants, all that could be found were brutally butchered.

Macduff’s  young son was wise enough to know that the traitors outnumbered the honest men and would hang them well before the honest move a step.  This applies equally to the corrupt.

******

Anna Hazare started the movement against corruption.  It naturally attracted wide support from the general public and within a short time became a mass movement.  A mass movement requires many volunteers and at least some middle level leaders to act as the link between the main protagonist and the masses as he cannot be seen everywhere.  Some noted personalities with some track record of social service and leading reformist movements at a much smaller scale joined the movement and became its public face.  Along with such people many shady characters also publicly expressed support to the movement.  Today everything is a source for marketing and making money.  Dozens of round the clock media channels need something to telecast and this movement gave them an excellent opportunity.  There was endless debate and every single person with some standing or sitting was invited to the media rooms for their reactions and opinions.  Marketing wizards seized the initiative and came up with “I am Anna Hazare” caps.  Umpteen forums for support of movement against corruption were launched.  Baba Ramdev episode gave its own twist and turns to the saga. What should have been a very serious and organised movement became mired in controversies and lost direction.

Every single political party declared their intention to fight corruption and support Lokpal Bill, but did their best to do just the opposite.  A government which was swept off its feet by the unprecedented public support promised everything.  Simultaneously a two pronged strategy was adapted to dilute the movement.  “Shoot the Messenger” was the first.  Old cases or issues of middle level leaders were reopened and given wide publicity.  Anna Hazare himself was attacked by some quarters.  Dissent was sown within Team Anna and fissures in the ambitious team ensured killing the movement from inside.   The second level attack was to bring in the question of supremacy of the Parliament.  Whether people are supreme or a Parliament which is the creation of these very people was superior, was endlessly debated.  The vital fact that the “Supreme Parliament” was not doing anything for decades which gave birth to this movement was successfully pushed to the background.  Promises of a strong Lokpal Bill enactment were made to Anna Hazare  and his breaking fast was ensured.  With the onset of winter the movement was certain to be frozen, which is what finally happened.  Shifting of fast scene from Delhi to Mumbai successfully ensured that the heat at the seat of power was withdrawn well before the onset of the cold weather.

Some people egged on Anna Hazare not to break fast and continue fast till the bill was enacted.  They were right; he was on fast and not them!  Quota and reservation in the composition of Lokpal was the final nail in the coffin for the movement. Every sensible person knows the fate of bills when these parameters are brought in.  With half the electorate in the country being women, we know the fate of “Women’s Reservation Bill”.  Lokpal bill was nothing more special to get special treatment. Bill was passed in Lok Sabha without statutory status.  What happened in the Rajya Sabha baffled everybody except the “Supreme Parliament”.

Gandhi led the "Freedom movement".  Then came the “Socialist movement” led by Ram Manohar Lohia and Acharya Narendra Dev.  We also had the “Nav Nirman Movement” led by Jaya Prakash Narayan and Acharya Krupalani.  All of them had many followers and one shudders to think what the followers later did and are doing to the country.  The “Supreme Parliament” even paid its debt to Jaya Prakash Narayan by passing a condolence resolution on his death, even before he actually died!  Citizens wonder about the fate of fight against corruption while the corrupt are relaxing and celebrating.  Will Narasimha appear at all?

Mohandas Karamchand Gandhi became a Mahatma not because he did not make any mistakes in his life, but because he had the courage of his convictions to own them and atone for them.  If the first stone is to be cast by those who have never sinned, then none can throw the first stone.  Leaders of the movement ought to show that courage and atone for the weaknesses they have, if any, and pursue the movement.  And be reasonable in their approach and also appear to be reasonable.  Or else any slightest deviation will provide an opportunity for the establishment to swallow the movement;  lock, stock and barrel. Past failures do not deter the determined; they only have lessons for posterity.

White Money, Black Money and Dirty Money

The recent debate over corruption and money hoarded in secret accounts of Swiss Banks has made it necessary to take a look at different colours of Money.

What is the colour of Money? It may be Greenback as US dollar is called and well known. It may be Red-back as an Indian 20 rupee note is. But any Money can be broadly classified into three categories;  White, Black and Dirty.

This classification arises from two important factors - Whether the money is accounted for? And whether the money is obtained by Legal means? Or in other words, whether the money attracts Civil action or Criminal action by competent authority?

Any money generated by legitimate economic activity or earned by selling goods or services etc. and also properly accounted and reported to the respective authorities is White Money. Or Simply called money, as nobody refers to it as White Money. White money is properly accounted in the books of accounts of the holder and duly declared to the respective authorities like Income Tax in India and Bureau of internal Revenue in France or IRS in USA etc. Similarly, amounts declared to Border Security authorities when carried to another sovereign country or territory. Nothing to hide. Any person or organisation holding such money need not be afraid of either civil action or criminal action from any authority. This is the expectation of any civilised and law abiding society.

Money generated by legitimate economic activity or selling of goods and services etc, but not accounted in the books of accounts of the holder and withheld from reporting to the competent authority like Income tax or IRS is called Black Money. The Mens Rea (Mens Rea in Latin means "Guilty of Mind") here is to withhold payment of prescribed tax to the Government and increase one's income or wealth to that extent. Non-payment of prescribed taxes is an offence under the Tax laws of any country and attracts civil liability in the form of demand made for payment of amount of tax evaded and also an additional amount levied as fine or penalty. However, persistent or repeated violation of declaring the income or wealth properly may also lead to criminal liability as per the laws of respective countries. However, it should be appreciated that such provisions are basically to deter the citizens from concealing income, but not a revenue raising measure as with levy of regular taxes.

Money generated by illegal activity per se is Dirty Money. Examples of such money can be money generated by Drug peddling, Arms dealing (excluding dealing in arms as per licence obtained from an authority established by law like Fire Arms Control Authority), Bribe Money, funds raised for terrorist activities etc. In creating or dealing with Dirty money, law of the land are violated at every stage and each of such actions at every stage attracts criminal liability and punishable as a criminal offence. Persons or Organisations generating or dealing in such Money have to be in perennial fear of law enforcement authorities. 

Holders of Dirty Money make efforts to convert such money into White money, but it is not a simple issue. Holders of Black Money may declare the quantum of concealed income or wealth well before detection by the competent authority and get away from the sin by paying the prescribed taxes and penalty and breath easy. Not so in the case of Dirty Money. Just as dirty clothes are to be laundered and changed to clean clothes for re-use, Dirty Money requires laundering and hence the term "Money Laundering". Money laundering means disguising illegal sources of money so that it would appear having received from legal sources. By the process of Money Laundering taint attached to such money is sought to be removed so that the money can be utilised like legal money.

Methods used for "Money Laundering" make an interesting study. There are many methods of  Money Laundering but all of them consist of three major steps. The first step is called Structuring or Placement which involves introducing Dirty Money into financial system by some method or combinations of various methods explained below. The second step is to carry out complex financial transactions in order to camouflage the illegal sources. The third step is to retrieve the money and acquire wealth generated from such transactions. The second and third step involves transfer of funds to different accounts in a series of transactions so that tracing of the source becomes almost impossible.

Some of the interesting methods adopted for Money Laundering are as under:

• Smuggling of bulk amounts in cash to another jurisdiction or country or a country with higher secrecy laws.
• Purchasing bearer instruments/securities in small amounts and later depositing them elsewhere again in small amounts.
• Breaking funds into small lots of deposits (below reporting levels) to defeat the provisions of Anti Money Laundering reporting.
• Transfer of money to shell companies or entities in Tax havens like Mauritius, Bahamas, Cayman islands, Liechtenstein etc.
• Carrying on cash intensive business and adding illegal money to increase volume.
• Over invoicing goods or services and meeting the extra charged through illegal money.
• Converting Dirty money to white money by using Casinos.

It is interesting to note that cash intensive business can be used for generating black money as well as Money Laundering. Under reporting of proceeds received by sale of goods results in unaccounted or Black Money. Over reporting of receipts and adding illegal money to meet the deficit becomes Money Laundering. Similarly, under invoicing and receiving the difference in value overseas or in another territory creates black money whereas over invoicing and meeting the deficit through dirty money results in Money Laundering.

Conversions through Casinos and Real Estate makes interesting study. A person having Dirty Money can go to a Casino and buy chips or gamble using it and then seek refund of the remaining chips or credit. The payment for such amounts can be obtained by means of a cheque and the same can be later deposited in a bank account as genuine winnings from gambling. Purchase of Real Estate with part of illegal money and later realising the amount by sale of Real Estate also provides a source for Money Laundering.

An inter-governmental organisation by name FATF (The Financial Action Task Force) or GAFF (Groupe d'action Financiere - in French) has been set up as early as in 1989 as a part of G-7 countries initiative for the purpose of developing policies to combat Money Laundering and terrorist financing. The FAFT functions from the secretariat of OECD (Organisation for Economic Co-operation and Development) headquarters in Paris, France. One of the directions given by the FAFT to all Commercial Banks is to report any suspicious transaction as well as big transactions beyond a cut-off limit to the designated authority (usually a cell in the Central Bank of the country like RBI in India or FED in USA). Once the transaction is reported, the designated authority takes up the next stages of tracing and monitoring the money. Anti Money Laundering Acts have been enacted by many governments.

Money laundering has come to sharp focus after 9/11 terrorist attacks on World Trade Centre in New York, USA. There is a close connection between Dirty Money and terrorist activities even though Money Laundering has much wider ramifications than terrorism alone. FAFT does not give any estimate of Money Laundering and admits that it is impossible to estimate it. However, IMF estimates it to be 2% to 5% of worldwide global economy, an estimate which could be disputed as definite methodology for estimating the same are not available due to the very nature of the money involved. However, it can be safely assumed that the volumes of Money Laundered is an undisputed threat to World economy.


Another term used in dealing with Money is Hawala. Hawala is an informal value transfer system based on a huge networks of brokers and is over 1000 years old. It is said that the hawala system was used in Middle East and parts of India and China as early as 8th Century AD. Hawala by itself is not illegal unless it is banned by the governmental authorities. It is used many times to defeat the payment of commission to banks. In this system money is paid to a hawala operator in one place and his counterpart pays the equivalent value in another place. There will be a series of such transactions and the two hawala operators settle the difference between the sum of transactions over a period of time in a mutually acceptable manner. This method is attractive due to its simple nature and no paper work involved, especially for small amounts and for illiterate persons due to avoidance of regulations. But growth of a strong formal banking system and regulators insistence for routing all financial transactions through approved banking channels has rendered hawala system now being used mostly for illegal transfer of funds, by defeating provisions of various laws.

In a nutshell the nut is in the shell - if you want peace of mind have only one type of Money. The Money or (White) Money. Earn legally, account properly and pay your due taxes. And be Happy! 

They also fought corruption, in their own way!

Top news in India nowadays is the support Anna Hazare is receiving from the general public for his crusade against corruption. The campaign is going from strength to strength.

Was there any corruption long time ago? When did corruption actually start? Was there any fight against corruption in olden days? Can it ever be eradicated?

Answer to the last question appears to be an emphetic NO. It may be at the best made to lie low for sometime. But it will rear its head again, the multi headed serpet of corruption.

I recall two stories on fight on corruption. The stories were told to me by my father when I was a child. The first one may be well known. The second one may not be that well known.

The first one is about a wise man who was living in severe poverty. Even though every one in his village recognised his wisdom and respected him, he was not known outside his village. He would not use his wisdom to earn money for the maintainance of his family. But his wife one day firmly told him to go to the King, please him with his wisdom and come back with some money. Or else he would not be allowed entry in to the house. Naturally. The Homemaker who runs the home knows the real difficulties of making both ends meet.

The wise man had no alternative. To maintain domestic peace he went to the King's palace.

The Dwarapaalakas (Guards at the door) would not allow him inside the palace. After much pleading they agreed to let him in if he shared his prize with them when he came back. He promised the two guards that the prize he received will be shared equally with the two guards and he himself would not take anything home.

Once inside the palace, he met the King and pleased him by his wisdom by answering the difficult questions asked in the King's court. The king was about announce a prize to the wise man. The wise man requested the King to give a prize of his choice. Though surprised, the King agreed.

The wise man asked to be given an award of twenty lashes. Everyone including the King were surprised. But as agreed the King called the Lashing-man. At this moment, the wise man requested the king to call the two Dwarapaalas. When they arrived he told the King about the commitment he had made to share the Prize with them and requested the king to reward them with ten lashes each.

No need to say that the corrupt Door-men were punished and the wise man was rewarded by being appointed as the Chief Vigilance Commissioner in the King's court.

This story is attributed by some to Tenali Rama. some to Birbal. and some others to some one else. I would like to simply keep it as The Wise Man.

The other story is for another day.