KING'S RANSOM- INDIA TODAY

I

This story is three years old. It grabs your attention for the sheer audacity of Raja and the deafening silence of the prime minister. On January 3, 2008, just a week before Raja went ahead and collected cheques from these operators on a first come, first served basis, the prime minister gave his virtual assent to this loot. By acknowledging Raja's letter of December 26, 2007 he gave his stamp of approval, saying: "I have received your letter of December 26, 2007 regarding developments in the telecom sector."

Former Telecom Minister A. Raja

Singh had turned a blind eye to Raja's carefully orchestrated hijack through 7, Race Course Road. What Raja managed to do in that week beginning January 3 and ending January 10, 2008 continues to reverberate in the corridors of power in Delhi. In his letter to the prime minister dated December 26, 2007, Raja pretty much laid down the action plan. It was a brilliant stratagem. He wrote, "My efforts in this sector are intended to give lower tariffs to the consumer and to bring higher teledensity... more specifically in rural areas.

In these circumstances, the discussions with the external affairs minister and solicitor general have further enlightened me to take pre-emptive and pro-active decisions on these issues as per the guidelines and the rules framed thereunder to avoid any further confusion and delay." Strong-arm tactics that the prime minister was unable to resist.

Forget that the Cabinet was never brought into this loop, and the Government of India's Business Rules were contravened. For instance, when you disinvest in a public sector company which is government property, you first seek Cabinet approval. Similarly, spectrum is a scarce national resource and thus government property.

Raja's genius is that he conjured billions out of thin air. After all, what is spectrum? It is a section of the electromagnetic frequency scale, a lode of natural channels used by cellphones.

Raja nearly got away till he was singed due to the Government's 3G auction conducted through a price discovery mechanism which queered the pitch for him. As the CAG report says, "The Honourable Minister of Communications and IT for no apparent logical or valid reasons ignored the advice of Ministry of Law, Ministry of Finance, avoided the deliberations of the Telecom Commission to allocate 2G spectrum, a scarce finite national asset, at less than its true value on flexible criteria and procedures adopted to benefit a few operators. TRAI, the regulator, also stood by as a helpless spectator when its recommendations were being either ignored or misused."

The prime minister has much to answer for. Why hasn't he ever asked for the file on 2G and shown his displeasure? How did he allow this unfortunate decision to go through? Why didn't the terms of reference (TOR) for the GOM on spectrum availability not include spectrum pricing? It is learnt that 22 in the original TOR, this was very much there, but was dropped under DMK pressure at the last moment. Why were the companies which won licences allowed to sell significant equity shortly after being given Letters of Intent (LoI) resulting in trading of spectrum, an illegal act? If on November 2, 2007 Singh told Raja to use the transparent mechanism of auction to ensure discovery of the correct price of spectrum, why is it that on January 3, he looked the other way? What happened between November 2, 2007 and January 3, 2008? Was the DMK pressure too much? It's a question the Supreme Court is vexed by. As Justices G.S. Singhvi and A.K. Ganguly said: "The sanctioning authority can say I am not inclined to give sanction. But we find the alleged inaction and silence troubling." Says senior Supreme Court advocate Dushyant Dave: "The Supreme Court will see through this and take action."

Why is it that key members of the executive failed to take any action whatsoever on a loss that is eight times India's total health budget and three times the education budget? Equivalent to 3 per cent of our GDP, equal to our defence budget and a third of our annual tax revenues? Former BPL Mobile chairman and Rajya Sabha MP Rajeev Chandrasekhar says, "Almost 16 years after telecom was liberalised in India, we haven't managed to evolve a policy on how to licence spectrum." Then law minister H.R. Bhardwaj and his secretary T.K. Viswanathan passed the buck, asking for the setting up of an EGoM and obtaining legal opinion from the Attorney General (see box). Raja blocked; he complained to Singh about the law minister, calling his suggestion out of context. TRAI wrote three letters on October 15, 2007, October 19, 2007 and January 14, 2008, all before the licences were given and the first two before the LOIS were issued, requesting Raja not to cherry-pick their recommendations and ensure that legal implementation of statutory recommendations was kept intact. Raja brazened it out yet again. He snubbed TRAI and went ahead to issue LOIS and subsequently issued licences without referring the matter back to TRAI. DOT secretary D.S. Mathur and Member (finance) Manju Madhavan wrote a four-page note, strongly recommending auction. Raja once again ignored the note.

Mathur refused to sign the LoIs but ultimately retired on December 31, 2007. LoIs were issued within 10 days after getting signatures of new DoT Secretary Siddhartha Behura on January 10, 2008. Behura was brought in from Raja's erstwhile Ministry of Environment and Forests. Finally, the then finance secretary D. Subba Rao wrote to secretary DOT questioning the pricing for licensing. He instructed an immediate halt of processing of LoIs, but again Raja went ahead and issued the LoIs and collected the cheques on January 10, 2008.

The scam started coming together in May 2007 with a palace coup: communications minister Dayanidhi Maran was ousted and environment minister Raja, a Karunanidhi family loyalist, was crowned. Along with him came his personal secretary R.K. Chandolia. Assisted by DDG (Access Services) A.K. Srivastava within DoT, they crafted a scam to make Harshad Mehta look amateurish. Raja announced closure on the applications for spectrum even though TRAI had recommended 'no cap' in the number of licences. Even though 575 applications were received, the Government had spectrum for 150-odd licences. Anybody else would have resorted to a market-based auction process knowing that companies would give an arm and leg for precious spectrum.

But Raja did the opposite. He carefully designed a public relations campaign and sent out multiple press releases, posturing to implement TRAI recommendations on 'no cap'. Instead, he surreptitiously imposed a definitive cap by issuing only 122 licences on a first come, first served basis to companies using an arbitrary cut-off date, leaving over 300 entities in the lurch and benefiting nine (see box). Telecom analyst Mahesh Uppal says, "Of course it was a loot, but it can be easily reversed. You just need to take back the spectrum from these operators and reverse the process. Agreed there will be litigation and consequential losses, but you need to be prepared." Uppal gave the analogy of getting a DDA flat in the Capital through a public auction. He said, "If it is proved that I got this by misrepresenting facts and the allocation was mala fide, then the flat may be taken away from me."

As Raja's ouster hung in the air, an SMS campaign rode spectrum across the nation: A narco test is in order for Raja… He would sing: "One for my master, one for my dame and one for the Singh boy whose government is now lame." Raja, who may yet cost it an arm, is exultant, an embattled Singh is struggling to retain an image of integrity, and the Opposition senses a kill. Will there be blood?

The Unitech puzzle

SUNDAY GUARDIAN

Even as the Nira Radia phone tapping expose continues to dominate thepolitical and media mindspace, disturbing news concerning one ofIndia's top realtors forms one of the key components of the DG ITInvestigation Milap Jain's findings. In his report to Sudhir ChandraMember - Investigation, CBDT dated August 25, 2009, Jain cites thetapping on lobbyist Nira Radia's phone and lays bare the collusionbetween the realty firm Unitech and lobbyist Nira Radia. Thisconfluence of big business and a high profile lobbyist in salvagingthe group's image and financial health during a full blown corporatecrisis is shocking.
Interestingly these findings pulled out from raw conversations betweenvarious Radia associates come against the backdrop of the LehmanBrothers collapse in the US. Apparently, Unitech had sold shares inits Mumbai joint venture to Lehman Brothers before the dramaticcollapse of the iconic investment bank for Rs 750 crore.The firsttranche of Rs 740 crore was paid towards 50 per cent of Unitech'sholdings in Shivalik Ventures. The report suggests that a short termcapital gains of Rs 240 crore was realised on this sale which havebeen reported as a Capital Account adjustment rather than atransaction as income.
There is a suspicion on the part of DIT that the Group has taken bogusloan entries through entry operators. The entry operator, worried bythe then recession wanted to reverse the loan entries. Theconversations show the paranoia on the part of Unitech on the collapseof Lehman in the US. The concern is magnified due to the likelihood oftwo further tranches of investment which were to come from Lehmanthrough third party investors. Even more damaging are conversationspertaining to damage control measures including the bogus claim thatTelecom Italia is all set to invest in the Group's telecom venture.
In this hour of crisis, intercepted conversations show that Radia wasusing her influence to bail out Unitech by roping in Tata Realty withan advance, of which an outstanding of Rs 650 crore is spoken of. Evenmore damaging is the information that cheques given by Unitech have'bounced.' Radia is also shown as mediating on behalf of Unitech for atelecom license with Radia advising Unitech on bringing the Telenorinvestment into telecom venture in calibrated tranches in order togive a general impression to all and sundry that there is no windfallgain for Unitech's promoters, but that the investment is coming intothe body corporate. Incidentally Unitech which was in the throes of adeep rooted financial crisis turned itself around on the back of this22 circle license for which it forked out Rs 1651 crore. Subsequentlyit brought in Telenor as an investor with a corpus of Rs 6200 crorewhich helped retire some of the mountain of debt.

ISIS Equity Partners is suitor for Kings XI

Sunday Guardian

Yes, the first IPL franchise is ready to bite the dust. A top of theline Delhi based legal firm has been mandated by the Kings XI Punjabpromoters KPH Dream Cricket Pvt Ltd to find a buyer for the embattledIPL Mohali franchise which is facing queries on the tax and routing ofinvestments front. While it is cooperating with BCCI and Department ofIncome Tax to resolve all issues, it is parallely driving its saleprocess forward. Sources close to developments have revealed to SundayGuardian that the deal price has been finalised at approximately $300million, which is four times the price at which the franchise waspruchased in 2008 by Dabur's Mohit Burman, Bombay Dyeing's Ness Wadia,Apeejay Surendra's Karan Paul and actress Preity Zinta. A duediligence process is underway and the sale is likely to be concludedshortly.
It is believed that ISIS Equity Partners which is one of the UK’sleading mid-market private equity investors is the suitor for thefranchise. ISIS is reportedly partnering a corporate in thisacquisition. Typically, ISIS invests in transactions of between £5mand £75m in value in companies with profits in excess of £1m. Fundsare investedon behalf of both retail (Baronsmead VCTs) and institutional clients.Mohit Burman who is the majority shareholder in Kings XI confirmedthat ISIS Equity is someone with whom Kings is in anadvanced stage of dialogue. He refused to confirm the other entity dueto a confidentiality agreement.
Co owner Mohit Burman categorically told Sunday Guardian that thebuyer is neither Hero Honda's Pawan Munjal or Videocon's VenugopalDhoot who to his chargin found that his bid was trumped by Rendezvousand Sahara in the two teamauction held recently. While the modalities of the sale are still notknown, it iscertain that the price may be a consideration now that the fur isflying after the investigation being conducted by ED and IT sleuths.Earlier it was reported that Pawan Munjal was paying $260 million forthe city based franchise but this was vehemently denied by bothparties.
The exact shareholding of KPH Dream Cricket Pvt Ltd is:
MB Finmart (new name of Dabur Investment Corp) 2,23,850 sharesNess Wadia JMD Bombay Dyeing 4,47,700 sharesPreity Zinta4,47,700 sharesKaran Paul Chm Apeejay Surendra Group 77,861 sharesWindy Investment2,23,850 sharesRoot Investment 79,600 sharesColway Investments4,47,700 shares
Since both Windy and Colway share office space with MB Finmart andother Dabur group promoter owned entities. It is clear from theshareholding pattern that Mohit Burman is the majority shareholder inthe franchise. At a purchase price of $76 million, the selling priceof $300 million offers a huge premium, the valuation being 4x. Eachone of the four promoters is expected to make handsome returns ontheiroriginal investment. Burman is known as an investor who flips hisinvestments for a good profit - he did this with some like PunjabTractors and reportedly Vishal Mega Mart while in others like Aviva,Centurion Bank, Bongrain, Amforge Industries he remains invested.Earlier this year, he was part of a Burman family initiative to launcha $200 million healthcare and life sciences fund. Asia Healthcare Fundhas the Burmans as anchor investors. Some of Mohit Burman'sinvestments have been through vehicles like Elephant Capital listed onLSE AIM and in the past have been wide and varied:
*Aviva India, one of the leading life insurance players in India withits products available at over 370 locations and a sales force of over9,500 individuals. Following the liberalisation of the insurancesector in 2000, Mohit and his team gained one of a limited number oflicences and entered into a joint venture in 2002 with the AvivaGroup, one of the world’s largest insurance groups. The Burman familyhave invested over $75 million in the venture and own approximately 74per cent. of the business.• Vishal Retail, one of India’s leading retailers with a chain of 26stores and strategically positioned as a “value for money” destinationtargeting the fast growing middle class consumer.• Fidelity Fund Management India Private Limited (“Fidelity India”).Fidelity established its direct presence in the Indian market bysetting up Fidelity India in 2004 as a joint venture with the Burmanfamily. Fidelity India now has multiple funds. India is now the secondlargest country for Fidelity in terms of numbers of employees. Thecompany has offices in Mumbai and Delhi, with investment professionalsbased in each. The Burman family holds 25 per cent. of FidelityIndia. This investment was brought to the Burman family through theircontacts in Fidelity UK.• The Lord Krishna Bank (“LKB”) was started in 1940 in Kerala by agroup of entrepreneurs. Today it has grown rapidly in size and scope,from a local to a national bank and a network of 111 branches across11 states. TheBurman family has invested Rs.48.3 million in LKB, resulting in a 6.6per cent. holding.• ABN AMRO Securities (India) Private Limited, a joint venture betweenthe Burman family and ABN AMRO Bank, providing equity and debtsecurities services.
There is likely to be some debt on the books as well, but since thefinancials of IPL teams are not very transparent, this figure cannotbe quantified. As per the IPL conditionalities, none of the eightoriginal franchise owners could exit from their clubs - effectively 51per cent - till the end of season 3. While Kings XI reached the semifinals in season 1 losing to Chennai Super Kings, season two saw themwinning seven and losing seven. However, season 3 was anunmitigated disaster with the club losing six of its first seven games.
Mired in controversy from the beginning, Kings XI has been more famousfor its off field news flow - a racism row over two of thecheerleaders, followed by an unsavoury dispute between Ness Wadia andPunjab Police, then the infamous slapgate involving Sreesanth andfinally this year the use of the Bhagat Singh's name in anadvertisement created a huge controversy. With Bhagat Singh's kinthreatening to sue Kings XI for use of the freedom struggle martyr'sname in an advertisement, it created a furore in Punjab.

Modi's fattened friends and family circle

Sunday Guardian

If suspended IPL Commissioner Lalit Modi is keeping quiet,it is not without reason. Apparently when he came to Delhi to mount alegal challenge, he was told by city based senior counsels that it isbest at this juncture to prepare an adequate defence to the showcauseissued by the BCCI instead of going directly to court. In any caseformer president A C Muthiah's petition against N Srinivasan hasalready been admitted in the apex court. Moreover, it is Modi'sfriends and family enterprises which was a wide and varied networkwhere his tentacles were omnipresent. By slicing and dicing the rightspie, Modi made money hand over fist for the BCCI and doubled thecentral revenue pool for the franchisees, butbeneficiaries of his largesse were also his tightly knit circle offriends and family. Now when the BCCI wonders where the concludedcontracts are, some of these murky relationships are beinginvestigated. Sportzpower tried to track down some of these deals toexamine the extent of crony capitalism that Modi and Co indulged in.When Modi sold the theatrical rights of IPL to Entertainment andSports Direct (ESD) for Rs 330 crore for ten years, these samedistribution rights were transferred to Crown Infotainment and UFOMoviez. ESD is a wholly owned subsidiary of Dubai based investmentadvisory and private equity firm Dar Capital Group, headed by ArunRangachary.
Now guess who owned Crown Infotainment? Yes, Kunal Dasgupta, theformer CEO of MSM/Sony Entertainment Television. The technologypartner remained UFO Moviez and in another coincidence both UFO Moviezand Crown are owned in turn by Valuable Media. And who was the CEO ofUFO Moviez? Rendezvous investor Sanjay Gaikwad. This complicated webgets even more complex when it is discovered that ESD has another Modiloyalist - Chris McDonald as partner along with Dasgupta and one KapilAgarwal. Agarwal, Joint MD of UFO Moviez is reported to be related toModi from his mother's (Bina) side, but this remains unsubstantiated.
Chris McDonald incidentally was the CEO of Ten Sports. Ten Sports wasfirst brought into India by Lalit Modi owned Modi EntertainmentNetwork. McDonald now wears many hats, he also doubles up as the CEOof Red Partners. Which has an ominous linkage with the IPL. It wasnamed the one year on ground food concessionaire for the IPL thisyear. Red Partners was centrally responsible for the entire food andbeverage experience of IPL. On getting the contract earlier this yearMcDonald said, "We will work towards ensuring that IPL fans attendingthe 45 day cricketing carnival across India will now be privy to atruly world-class food and beverage experience akin to what sportingfans around the world have become accustomed to. Our standardizedmenus will cater to the unique fan base of each region enhancing theinstadia experience for IPL fans.”
Last year McDonald had stepped down as CEO of Taj TV's Ten Sports, acompany which he founded in late 2000. McDonald and Modi have knownone another for years. Modi's earlier venture Modi EntertainmentNetwork specialised in handholding foreign channels and broadcastersin their quest to grab a slice of the still closely controlled Indianmarket. Modi got Walt Disney, ESPN, Ten Sports and FTV in to Indiathis way. But most of these relationships soured very quickly, withsome ending up in arbitration proceedings. Pioneer Diagsys, anotherfirm floated by the same Kunal Dasgupta who architected the multipleyear multi million IPL broadcast deal with Lalit Modi, has the rightsto hawking the advertising in between the 20:20 matches. The mid over150 second advertising rights deal was sealed by Dasgupta and Modijust days before season 3 kicked off. It is believed that Pioneerwould have made Rs 54 crore from this deal itself. These 150 secondswere retained by Modi and IPL despite protests from Sony formonetising through this process at a subsequent date.
Similarly, another allegedly dubious and quickly concluded deal wasthe one with Yog Sports, a marketing and distribution company whichIPL and Modi tied up with for merchandising of IPL products for aperiod of 10 years. Yog's job was to set up IPL match stores atvarious IPL venues, malls, high street destinations, multiplexes,airports et al and a total of 200 stores across 12 cities. Theyappeared virtually out of the blue with one Saumitra Srivastava namedas director of the company.

What is Modi's plan of action?

NAKED EYE

Why is Modi quiet?

It is one of the defining developments in recent times. Why isdiscredited IPL commissioner Lalit Modi keeping quiet? This, despitemaking pronouncements that he will unmask BCCI office bearers fortheir collusive intent. He even hired a top Delhi based publicrelations agency to strike back at his detractors. But that operationtoo has been maintaining a stoic silence lately. I have spoken twice to Modiin the last couple of days - immediately after his suspension late onSunday night and yesterday as well - both times his response has been acryptic - wait and watch. He is not willing to say anything else. Hisclose associates have been telling me that Modi is planning to mount alegal challenge. Talk has also been doing the rounds that he is jawjawing with senior counsels. But I checked with one of the seniorcounsels as well and he clearly articulated that Modi has notapproached him yet. So, why is Modi not revealing his hand? Is it primarilybecause Modi is waiting for the Supreme Court's direction on A CMuthiah's petition in the apex court filed on Friday?
People who understand BCCI politics which is essentially based on theedifice of a vote bank reckon that Muthiah's plea is significant tothe fortunes of Modi. How? Muthiah's challenge is based on questionspertaining to board secretary N Srinivasan's 'conflict of interest'.Remember that not only is he an office bearer of the BCCI but one ofits beneficiaries too as Chennai Super Kings owner. The Times of Indiareported, "Muthiah, a known Jagmohan Dalmiya camp member and rival ofthe present dispensation, has alleged that the rule was suspended inthe 2008 AGM of the BCCI ostensibly to benefit present Board secretaryN Srinivasan, who is also the managing director of India Cements thatowns Chennai Super Kings team. Muthiah's petition filed throughadvocate Vikas Mehta alleged that suspension of clause 6.2 rule 4 inthe 2008 AGM of BCCI was illegal as it allowed its administrators totake business interest in the most commercial events organised by theBoard -- IPL and Champions League T20.
"Clause 6.2 rule 4 of BCCI applying to players, team officials,managers, umpires and administrators, says: "No administrator shallhave, directly or indirectly, any commercial interest in the matchesor events conducted by the Board." Though Muthiah had cited thisconflict of interest pertaining to Srinivasan in a letter to SharadPawar on September 5, 2008, a two-member committee of Shashank Manoharand Niranjan Shah had recommended a change in the clause during theAGM, which suspended the rule "for events like IPL or Champions LeagueT20". Coincidentally, it was the erudite lawyer in Manohar, who haddrafted clause 6.2.4 when Muthiah was the BCCI president, the petitionsaid.
"The petition challenged a March 24 verdict of the Madras High Court,which had refused to entertain Muthiah's plea. At that time, IPL wasgoing great guns. On the other hand, Srinivasan was expecting Muthiahto move theSupreme Court and has already filed a caveat in the SC through counselHari Shankar to prevent the former BCCI president from pressing forany ex-parte order against him on the issue."
The plank of Modi's legal challenge working in conjunction with theoutcome of the Muthiah petition will form the bulwark of the futurecourse of battle. Under the ambit of conflict of interest, Modihimself can be trapped by his rivals in the BCCI. For his linkageswith RR, Kings XI Punjab and even KKR leave room for doubt. Contractsgiven to Global Cricket Ventures's Gaurav Burman who is related to himthrough marriage are also under the microscope. So, Modi too can getembroiled in the 'conflict of interest' loop. Modi clearly hassomething up his sleeve,he will need to establish that the IPL Governing Council is culpableand it cannot shy away from the responsibility of collective decisionmaking. Will he then file a petition against BCCI for unlawfulsuspension? What kind of data is he likely to share with his legalcounsels?
Lots of questions, but no answers forthcoming. Is Modi worried thatthe Muthiah challenge can impact him adversely as well? Or does hebelieve that the moment he opens his mouth, skeletons peratining tohis political masters in and outside the BCCI will come tumbling out.His proximity to Sharad Pawar is well known. We suffer from temporaryamnesia for one of the best stories in the Modi saga has clearly beenthe one written by Business Standard which implicated two Unionministers, both from the same regional party, who pressurised theRendezvous management into giving up the franchise. Somehow that is atthe kernel of this dispute which has dragged a lot of people includingModi and Tharoor down. Conflict of interest can pull some more holycows down, including top former cricketers. Will operation cover upsucceed with the sacrifice of Modi or will it ensure that dominoescontinue to collapse in a heap. Too many people have too much to loseand too much at stake in the BCCI whirligig. Everyone is compromisedand they would want to step out of the turkish bath exposed andunclothed.
All eyes on Modi. Can't believe for a moment that this combativecharacter will walk away into the sunset without a murmur. It is notin his DNA. Also a final input - two other top BCCI office bearers,presidents at that - Jagmohan Dalmiya and I S Bindra have beensuspended and humiliated in the past. But after serving their threeyear suspensions bounced back and are once again part of the cricketboard.

Culpability of the collective

RETROFIT

BCCI cannot wash its hands of present crisis

Individual versus collective? That is the question I am asking today.Whose responsibility is it when the fur starts flying in anyenterprise engaged in commerce. Who takes the rap? Who carries the canfor financial defalcation or other misdemeanours? For the BCCI'scurrent travails, onedoesn't need to rewind too far back into the past. Take the Satyamcase. It is the best analogous refrence point for the BCCI set ofproblems. One man and those in cahoots with him - B Ramalinga Raju -brought shame upon the company and in the process India's tech sector.Yes, the individual was guilty, but so was the collective which inthis case was the board of directors comprising many eminents. Theywere guilty because there was collusive intent. They turned a blindeye to Raju's misdeeds and brazen appropriation of shareholder wealth.Prof. M Rammohan Rao, dean of Indian School of Business, managementprofessor from the Harvard Business School (HBS), Prof. KrishnaPalepu; a former Director of two IITs, Prof. V.S. Raju; a former UnionCabinet Secretary, T.R. Prasad, and the father of Pentium chip, VinodDham were on the board of Satyam and they failed to protectshareholder wealth from being destroyed. They enjoyed the benefits andperks of independent directorship, but they failed to oversee thecompany going on skid row. Ergo, they were equally responsiblefor Satyam's demolition. The government however, stepped in and proactively tried its best to salvage the beleaguered company. Acommittee consisting of Deepak Parekh, Kiran Karnik and C Achutan madeup the transition team till such time as Tech Mahindra bought itoutright. It was an efficiently managed operation without jeopardisingthe careers of its many thousands of employees or its businessinterests. The fact that a squeaky clean Anand Mahindra stepped in toarrest the decline worked in its favour. The faith in the tenets of corporategovernance had been restored and a company virtually on life supporthad been saved. And now turned around.
Cut to Indian Premier League, a sub committee of the Board of Controlfor Cricket in India, for long a commercial enterprise masquerading asa not for profit and non transparent organisation. The Governing Councilhad several members of the BCCI, all ex officio office bearers andhence above suspicion like Casear's wife. The GC also had three topIndian cricketers - Sunil Gavaskar, Ravi Shastri and Mansur Ali KhanPataudi. All of them reportedly did not have a clue as to what brothchairman and commssioner Lalit Modi was cooking. BCCI presidentShashank Manohar is an honourable man, completely clean, but hisexplanation that Modi did pretty much as he pleased does not wash.All 13 GC members are equally culpable. If you know that there was afiddle in the Rajasthan Royals and Kings XI Punjab shareholding andthat Jai Mehta surfaced as an investor in KKR in 2009, then what wereyou doing when IPL was being architected? Were you deep in the arms ofMorpheus or did you choose to ignore Modi's unilateralism because hewas making money in spades for the BCCI? This shocking apathy tofollow transparency and corporate governance norms has been doggingBCCI for years. Now it has blwon up in their faces.
From the time that the IPL came into being, the BCCI's character andhue has undergone a radical metamorphosis. It is now being viewed asan association of persons by the finance ministry's revenue departmentand not a non profit organisation registered under the Tamil NaduSocieties Act. As a BCCI sub committee, it is nothing more than awholly owned subsidiary of the body corporate called BCCI. IPL haschanged the underlying credo with which BCCI was formed and functionedtill 2008. It is now a purely commercial enterprise engaged inbusiness and commerce. It has dealings with broadcasters, advertisers,sponsors and can be hauled over hot coals for non payment of tax deductedat source for players, referees, coaches and support staff; servicetax and entertainment tax.
ET reported on April 27: "Sportspersons, umpires, referees, coaches,trainers, team physicians and physiotherapists, event managers,commentators, anchors, and sports columnists have been categorised as“professionals” and their services have been brought under the TDS netin 2008 by the Central Board of Direct Taxes (CBDT). BCCI iscontesting a contention by the income-tax authorities that the boardnot be categorised a not for profit organisation tag that allows it toavail a tax exemption. The Budget 2009-10 had also made changes in thedefinition of “charitable purpose” to ensure that entities operatingon commercial lines do not claim income-tax exemption. The Section2(15) of the Income Tax Act defines “charitable purpose” to includerelief for poor, education, medical relief, and the advancement of anyother object of general public utility. The board has appealed to theIncome-Tax Appellate Tribunal against the decision of Mumbai taxauthorities and is yet to make a fresh application to the local taxauthority for the tax exemption."
BCCI has been trying to hide behind the fig leaf of a non profit,charitable organisation. But this status is definitely a page inhistory now. The individual Modi is taking the rap. Yes, he wasarrogant. Yes, he rode roughshod over everyone and conducted businessin an extremely secretive manner. Equally important is the fact that acabal consisting Manohar, secretary N Srinivasan, IPL GC vice chairmanNiranjan Shahand GC member Rajiv Shukla had been trying to oust Modi from the IPLor at least reduce his clout, but Modi had smartly ringfenced himselfby keeping his benefactor Sharad Pawar in his corner. But when theheat got to Pawar and his 2-i-c Praful Patel, it got uncomfortable. Thesecret society called IPL functioned like an old boy's club. Everymember of the family was taken care of. N Srinivasan who was boardtreasurer in 2008 actually got a franchise, Sunny Gavaskar and RaviShastri who were employed by ESPN Star Sports got hefty $one millioncontracts from the BCCI, Rajiv Shukla is a beneficiary of equity fromKKR franchise owners Shahrukh Khan in his company Bag Films and so itcarried on. You scratch my back, I will scratch yours as cronycapitalism or in this case crony sportism took a garrotte like grip onthe enterprise.
The opacity in IPL was even more severe than Satyam. Nothing andnobody was allowed in. Now when Manohar says contracts were signed andthen presented to the GC in a fait accompli sort of manner, why didn'tanyone blow the whistle? Well, you can guess why? Comfort level. Yes,everyone was sanguine. Now that the can of worms has been thrown openfro the world to see and examine, the BCCI chooses to distance itselffrom the mess. Sorry, the hoi polloi are not willing to buy thisargument. Even if they were to accept that Modi was a flamboyantcrook, they reckon that the BCCI is equally guilty. In the dock is theBCCI and its so called autnomous nature. But the nature of the beasthas change and the government has got its toe in the door. As the doorlies ajar and the Government's roving inquiry opens it that much moreeasily, everyone of us is looking for some sort of accountability fromthe body that runs cricket. My fear is that now that Modi has beensacrifced as part of the eye for eye pact with the Government, thewolves should not be called off and the BCCI should not be allowed tocarry on as it wishes. The BCCI needs to be accountable and Modishould be made a victim. All eyes are on fornmer BCCI president A CMuthiah's challenge in the Supreme Court on 'conflict of interest'which essentially targets Srinivasan. The apex court should also lookat the larger issue of governance within the BCCI.
THREE FAUX PAS
*ET's screaming lead that home minister P Chidambaram has been askedby the PM to head the roving investigation into IPL. Response camefrom the venerable finance minister Pranab Mukherjee in his parliamenthouse office where he shouted at journos to get out of his room - allyou need is a pen and paper to carry out your scurrilous writings, didanyone check with the PM, HM or me before writing this nonsense? Thatis as conclusive a denial as any.
*ToI's big bang exclusive on page 1 saying that WSG MD Venu Nair hadbroken down during interrogation and accepted that a facilitation fee,sorry a bribe of $80 million had been paid at the time ofrenegotiating the IPL broadcast contract. The story had three bylines.Meanwhile, ET the same day had a diametrically different story on thesame WSG-Venu Nair affair. The following day WSG sent in a very strongdenial saying that the ToI story was hogwash.
*Finally, a bellicose Times Now went to town saying that as many as 27players had been indicted for match fixing by IT authorities in the2009 season. This was a bombshell and everyone covering the IPLimbroglio including this writer was in a state of shock. Minutes latercame a strong government denial that there was no truth in this.

Muddied waters of IPL

GROUND ZERO

A VIRTUOUS CYCLE CALLED IPL

Empty stands greeted CSK and DC players on Thursday at the D Y Patilstadium. It was a rude shock for the organisers of the marquee semifinal contest between premier sides. Was it also symptomatic of themuddied waters around brand IPL, built so painstakingly andassiduously over the last couple of years? Has the sheen and lustrearound brand IPL worn off due to issues relating to crony sportism?Yes, chairman and commissioner Lalit Modi was a unilateralist and didpretty much as he pleased, without so much as a by your leave from theIPL GoverningCouncil. The moot point here is that the IPL Governing Council and theBCCI allowed him to do so. There were no checks and balances at all.And though a cabal consisting of BCCI president Shashank Manohar andsecretary N Srinivasan tried their best to destabilise him and evencut him to size, Modi's powerful backers amongst whom were formerpresidents Sharad Pawar and I S Bindra and franchise owners MukeshAmbani, Vijay Mallya and Shahrukh Khan who have access to the top ofthe political pyramid in the capital, ensured that he got away scotfree each time he was pinned down on something. Be it the move to SAor the IMG dispute or the broadcast deal renegotiation, Modi was thecat with nine lives.
For a long time, many have suspected and even spelt out the fall ofthis card house called IPL. The sheer size and scale of power vestedin the IPL Commissioner pointed to this fact. He was known to bearrogant and had reportedly appropriated complete and absolute poweras far as IPL decision making was concerned. The question is - shouldhe have been allowed so much power? Why was there no system of checksand balances to curtail this power seeking rush that seemed to haveenveloped Modi? Or was it that they turned a blind eye to Modi'smisdemeanours given that he was making money hand over fist for theBCCI? The culpability of BCCI and the IPL Governing Council in themain is astonishing. Yet, they all chose to keep quiet. Even when Modidecided to declare the ownership patterns of the teams on April 14,the majority kept silent and only a handful refused outright to agreewith his proposal.
These are a series of acts of omission and commission and nobody has aclue about it. The source of funding, the tender process for highvalue contracts, the sheer ad hocism associated with the enterprise.Modi's writ ran large in the IPL. he was akin to a one man executivearm of the BCCI.It has taken a simple tweet to bring down this house. And in theprocess it has shaken the foundation of the IPL economy and itscollaborative eco system. A large extended family enterprisedovetailed with relationships and business associates. There arebroadcasters, sponsors, advertisers, corporates who are involved inthis billion dollar enterprise. Which has now proved to be an empty shellmaking a lot of noise. MSM or Sony Entertainment Television forked outan astronomical $1.63 billion for 9 years as part of a renegotiatedcontract with BCCI. To secure this, it has paid a facilitation fee of$80 million. Advertisers like Vodafone and Videocon have paid Rs 55crore each for this season as presenting sponsors on SET Max. Thisvirtuous circle has big names like Reliance Industries, UB Group,India Cements, Shahrukh Khan involved personally. Their brands arepart of the mothership called IPL. A brand that had till the other dayall the attributes of a mega brand with salience and luminescence.Companies like DLF, Hero Honda, Airtel, Nokia, Idea, Ultratech, Citibank andmany more have pledged big bucks to be associated with this failingenterprise. These are all brands, subsets to a larger brand.
Marketing analysts will tell you that there will be a huge impact onbrand IPL and all the sub brands associated with it. Researchindicates that while people memory is extremely short, probablylasting say a fortnight or so, it is the adverse impact on the motherbrand which is considerable. So, even as people memory will forget,impact on the mother brand will be affected by a contagion. Acontagion that acts as a corroder. This has been proved over time, forinstance in the Tiger Woods case where an individual was involvedunlike a collective like the IPL, Accenture walked away from the brandbecause it saw an erosion on its own brand recall on the dimension oftrust. Accenture spells trust, it works on faith and trust with itsclients. Once that is bunged, then the mother brand's image is ruinedby its association with someone like Tiger who broke his wife's trustby sleeping around. However, Nike which works on the recall of awinning mindset continues with Tiger because the dimension isdifferent. In Nike's case, it is about winning. When it comes to Modiand IPL, a conglomeration of dimensions is at work. And at the momentall of them are negative. Dirty deals, sleaze, misuse of office, cronycapitalism is all very well, but if the needle of betting and matchfixing gets to work, then it attacks the brand in an overtly negativemanner. Fortunately there is no evidence of match fixing yet inIPLgate. Thankfully, this is a relief. The format does not allow amatch to be fixed easily. One man can take the game away in one over.Collusion between a handful of players on both sides would be requiredand hence IPL remains untouched till date from the quagmire of fixingand tanking games.
The fortunes of Modi and IPL are in a way inextricably linked in theshort term. Media's glory boy has come crashing down to earth. Thosein his corner have turned against him, leaving him with very littlemanoeuvrability. Five years ago nobody had heard of him, his risebegan when he became the super chief minister of Rajasthan. Some of usin media had heard of him obliquely as the managing director of ModiEntertainment Network, but that was just about it. His entry into BCCIas the Rajasthan Cricket Association president changed the equations,courtesy his benefactor chief minister Vasundhra was the firsttentpole. The second and more important building block came when hehandled Sharad Pawar's high voltage campaign to become BCCI boss afterJagmohan Dalmiya had vanquished him a year earlier. Mon won hisbrownie points by getting Pawar the top job. He also earned hisunflinching trust at the same time.His proximity to chief ministerVasundhra Raje pitchforked him into the limelight. As BCCI veep hebegan to do some business deals which realised more value for theboard. But the breakthrough benefit came after Subhash Chandra cockinga snook at the BCCI architected Indian Cricket League. Despite itsunofficial status and rebel tag, Chandra managed to rig up teams andbrought fairly decent international players to India. He even broughtsome big former Indian cricketers on board, none bigger than KapilDev. And by poaching entire Ranji teams, the likes of Ambatti Rayadufirst made a name of themselves in ICL, he had thrown down thegauntlet at the BCCI. It acted as a wake up call for the somnolentboard. That is when Modi found his true calling. His metier. Armedwith a NBA, NFL, EPL, MLB template from the US, the Dukes Universityeducated scion to the Godfrey Philips empire began to widen hishorizons. Modi found an able partner in Andrew Wildblood of IMG andtogether they retrofitted ICL to rig up IPL with many fashionabletwists. In the end came Indian Premier League, a league ofextradordinary gentlemen and a few ladies.
By bringing innovations and wearing a marketer's hat with greataplomb, Modi created an enterprise of substance. Though hollow frominside. The smartest move of course was roping in Mukesh Ambani, VijayMalllya, Shahrukh Khan, Preity Zinta et al, a true blue confluence ofglam quotient and cricket. Auctions of teams and players, a hithertounprecedented concept made it larger than life. Nowhere in the worldin any sport for that matter is a player auctioned, it happened in theIPL. Cassandras like myself thought that the whole enterprise wasdoomed for failure from the start. Why should sub tribal loyaltieswork in a nation high on jingosim was my thinking? But I was provedwrong, Brendon McCullum played the innings of his life and kickstarteda craze which became the new opiate of the masses. An opiate whichshook the foundation of Indian cricket and how it functioned. Revenuesand ratings began to flow from the barrell of this gun. Modi was thedarling of the media and the masses. All the warts and allegationsreceded. All of us knew that his brother in law Suresh Chellaram wasthe majority shareholder in RR, his step son in law Gaurav Burman'sbrother Mohit was similarly co promoter of Kings XI Punjab, that BCCItreasurer then N Srinivasan was owner of a franchise - CSK. Yes, cronycapitalism was rampant, but everyone chose to ignore it as IPL becamebiggger by the day.
Now the same media has turned against its own creation. How has mediadone with IPLgate? The best stories have appeared without a doubt inToI which is strange and I suspect that someone is feeding them. ForModi made many enemies in his time. His arrogance threw a lot ofpeople off, his brash demeanour offending many. There arebroadcasters, sponsors and advertisers in that long list. All of themmaybe feeding media for it is a virtual free for all out there. Of thetelevision channels, Headlines Today is front running everyone withincisive news breaks and opportune analysis. ToI and ET are going forbroke, but the substantive stories are all apearing in ToI. Three ofmy favourites - Poorna Patel commandeering an Air India jet for IPL,Videocon and Adani bid files evaporating into thin air and of coursethe juiciest - facilitation fee paid by WSG - allegedly to Lalit Modion the renegotiated broadcast deal.