“Modi will recover black money from abroad,” says Gurumurthy – Shobha Warrier

S. Gurumurthy

Swaminathan GurumurthyShobha Warrier, convener, Swadeshi Jagran Manch, launched his investigation into black money in 1986.

He was a member of the task force created by Bharatiya Janata Party leader L. K. Advani just before the 2009 election. The BJP had promised then and before the 2014 election that it would bring back the black money stashed away in various banks outside India if it were voted to power.

HSBC Bank, Geneva, SwitzerlandWhen the Narendra Modi government informed the Supreme Court that it could not disclose certain details about black money because of the double LGT Group Logotaxation avoidance agreement India had with certain countries, it angered lawyer Ram Jethmalani, on whose plea the Supreme Court had constituted a Special Investigating Team on black money. Jethmalani accused the Modi government of toeing the United Progressive Alliance line.

In this exclusive interview Gurumurthy explains his expectations of the Modi government on the black money issue. – Shobha Warrier

In 2009 when we met before the parliamentary elections, you had just submitted the task force report on black money to Mr Advani. Did you continue with your investigation even after the BJP lost the elections?

• Let me first talk about the initial hurdles in pursuing black money. There was an opinion among many leaders that there was no black money at all. [Former Union minister] Jairam Ramesh openly said it was complete nonsense. First the Congress said there was no black money, then they said there was no black money of this kind. Such opinion was shared even among some in the National Democratic Alliance.

Leaders from the BJP too?

• Yes, there were some BJP leaders. They genuinely felt there was no black money. That is also because some of them could not understand that black money was not kept as currency. So the initial difficulty that had to be crossed after submitting the task force report, was making people agree that there was black money.Sonia-G world's fourth richest politician ! When Advani started talking about it strongly during the elections, it became a public issue. Unless something becomes a public issue, it will never be an issue at all. Because of the elections, it got enough publicity.

Pictet & Cie Bank, Zurich, SwitzerlandWhen it became an issue, even [Congress President] Sonia Gandhi had to come out with a statement that they would bring black money from abroad. Then [then prime minister] Manmohan Singh had to repeat it.

Thus, it became an issue common to the political system. Till then, it was resisted. This was the biggest public hurdle that had to be overcome.

Today, no political party can say that black money is not an issue; it has become a national issue. Who drives it, who is more sincere, who has more commitment, is a different issue.

Was it not a global issue by then?

• At the 2010 G-20 meeting, France and Germany took it up and said that casino capitalism was the product of the Anglo-Saxon economic model. It was the first time in the history of the world that a virtually racial term was used to describe economic behaviour.

They said this model fostered tax havens as respected, accepted and legitimate. France and Germany said, unless you take on the tax havens and the secret banking system, they would walk out of G-20. So America had to cave in.

Unless you understand the functioning of the global financial system and the role of secret money in it, you will never be able to understand the forces that prevent the campaign and exposure of black money.

The global GDP is about $72 trillion and the high net worth individuals’ wealth is $54 trillion out of which $20 trillion is called offshore money. Offshore money is nothing but secret money.

We must understand that this does not mean cash alone; it is in the form of shares, real estate, bonds, yacht, ships, companies, gold, platinum. So this $20 trillion also is in the form of government bonds especially in America.

Much of this $20 trillion black money is from Asia and Africa. This is what drives the American stock market. And 55 per cent of American families are hooked to the stock market and nearly 60 per cent of retirement benefits and pension funds are invested in the stock market. It was less than 10 per cent in 1980 and gradually all the monies shifted from the bank to the stock market.

This connection of black money with the American stock market was what France and Germany resisted. They wanted the secrecy to be broken open.

International Black MoneyThat was how what we have been trying to do got global recognition. The black money issue can ever be tackled at home. After 2010, the world began to view it as a menace, but only as tax evaded money. But it is not only tax evaded money but it is money taken out of the country.

So the difference between black money in India and the black money out of India is, in India, it is tax evaded money and Indian money outside India is not only tax evaded money, but money which has been taken out of India’s capital resources needed for India.

So it is not only tax evasion, but treason too.

Do you think all political parties are involved in this, and that is why they do not want to pursue this with enthusiasm?

• Not only politicians, but bureaucrats, businessmen, some even in the judiciary are also corrupt. Then there is also drug money, gold smuggling etc. Politicians, who have been in power for too long, can be involved.

Most politicians are locally corrupt and they keep the money here itself. There was a politician in Jharkhand who said, when questioned about corruption, “Did I put the money in a Swiss bank? I only invested here.” He implicitly claimed to be a nationalist in corruption.

The Global Financial Integrity organisation came out with a calculation that between 1948 and 2008, $500 billion [about 30 lakh crore] has gone out of India. And between 2003 and 2011, $350 billion [about 21 lakh crore] has gone out of India. Most of it had gone out of India after India liberalised the economy.

Are you connecting black money with liberalisation?

• I am not saying the economy should not be liberalised. But there is a connection. It allows people to have more opportunities to spirit away money. There is no safeguard.

The Foreign Exchange Regulation Act is not there. The money laundering law, not in effective form, came too late. The threat of arrest is not there.

What I want to say is, it is now certain that funds have gone out of India and what has gone out of India is not a very small amount, but very large.

Also, it is not a one nation’s problem, but a global issue. It means we can form global partnership and pursue this money.

Is it possible for countries to take black money back?

• By legal action, money siphoned off by Ferdinand Marcos of the Philippines has been recovered. African dictators’ money has been recovered. It is possible to recover. But I don’t think our income tax department and Enforcement Directorate can do it because it consists of people who have colluded with these things.

The only possibility is that our intelligence agencies must be used for this purpose.

First, you must get clues, vital leads, names of the account holders and bank names. Only then you can start legal action.

When you were with the task force, could you get all these details, like the names of people and banks?

• We could get information, but only in respect of businessmen and not those of corrupt politicians.

Narendra ModiIn my view, this government must act and it has the opportunity to act. They have got to put together a set of very committed people with passion who will go about with this task.

I am sure Narendra Modi is quite keen about it. I have absolutely no doubt on that aspect.

At present, he has too many things to handle and I am sure he must be thinking about how to handle this. The matter is also with the Supreme Court.

The Supreme Court had constituted a SIT on black money on Ram Jethmalani’s plea. He accuses the Modi government of protecting the culprits. He said the Modi government is following the UPA path when it refused to divulge the names to the Supreme Court citing the treaty….

• There are two sets of names. In Liechtenstein Bank accounts, the German government announced that anybody could take the information, but the Government of India asked them to give it under the direct taxation avoidance agreement under which it is a secret. That’s why the Supreme Court asked why did they obtain it under a secret clause what is available in the open?

Ram JethmalaniBut the most important thing is the HSBC account particulars which we got from France. France got it from records stolen by a disgruntled employee in the HSBC bank in Switzerland. But the bank is in the Swiss jurisdiction. We got reportedly about 600 Indian names from France under the double taxation avoidance agreement.

The government view is that under terms of the bilateral the details can be disclosed it only after prosecution is launched. This is the claim of the government saying this is the international practice.

The other view is, with which I agree, is that in public court proceedings, the government can disclose the names. The government seems to say that the Supreme Court cannot over-rule the DTAA. But my view is no over-ruling is needed because the DTAA itself says that it can be disclosed in public court proceedings.

My view is when the court says the government has to disclose, it must disclose.

Yes, there are two views in this. Obviously, the bureaucrats will take a view which is very defensive and conservative. The more serious thing is they have filed an application saying the original order the Supreme Court had passed must be modified.

The original judgement says the government should not enter into any agreement with any country which says the information must be kept confidential and it is prohibiting the government from entering into inter-government agreement with the US for automatic and mutual sharing of financial information which is due in December

According to me, the government is wrong in filing this application because the DTAA with America specifically says you can disclose this information in public court proceedings. In my view, signing the inter-governmental agreement with America will not violate the Supreme Court judgment.

The perception among people is that the Modi government is not very enthusiastic about the black money issue and going slow like the UPA….

• I won’t take that view. Action to recover black money abroad will be in any way a slow process. It needs the world’s cooperation. The government has to create an atmosphere in which the world sees that the Indian government is keen on fast action.

Till the UPA was in power, the world had had a feeling that India was not keen to recover black money. This has to be reversed.

The first thing the government can do today is to expeditiously file prosecutions against people who have concealed the money in HSBC and disclose their names.

Recovering black money is a very strategic issue as the Indian government has to make alliances with many countries for which we took no efforts at all so far. This government can take these efforts because it has high level of influence with most of the countries. The credibility of this government is high.

Do you have confidence in this government that it would pursue the issue honestly?

• A hundred percent. This is going to be a very important agenda for Modi. He has made his intention clear to me many times before and after coming to power.

Modi may want to pursue it, but what about the others?

• There is no one in the government who can think otherwise if the most powerful person, the PM, wants action to recover black money.

In my view, Modi is the person who will do it. Others will fall in line, even if they genuinely doubt whether there is so much money.

• Finance Minister Arun Jaitley hinted that the name of a certain UPA minister is there. Is the issue only about UPA ministers and the Congress party? Is it not much bigger and deeper than that?

• He was talking about the 600 names in the HSBC list; he was not talking about the entire gamut of black money. He was actually answering the Congress which was taunting the NDA government for not acting on black money.

It was a political statement and that was needed because the Congress was trying to take advantage of the secrecy. That is why Jaitley said, be careful, you are likely to be embarrassed.

Do you think the Modi government will pursue the matter as seriously if there are names of politicians from the BJP?

• As yet, there is not even a suspicion of anybody from the BJP in it. So this is a hypothetical question. Even if somebody from the NDA is involved, public opinion and judicial opinion will force the disclosure.

L. K. AdvaniThe media must pursue it relentlessly. The problem is that some powerful sections of the media in India are also corrupt. If public opinion is generated, it will have its effect.

In spite of most media underplaying the black money issue and toeing the Congress, it has become an issue because it was made into an election issue by Advani. The credit for making it a huge public issue must go to Advani.

I am confident that the government will pursue the matter seriously. If not, people like us will not keep quiet. It is not to see the issue goes unattended that I have spent 30 years of my life on this. There are many people like me within and outside the system.

Have you got any startling revelations while pursuing the issue?

• There are many leads, but to give startling revelations, you need facts.

Without facts, you will be making allegations. I do not make allegations without facts. We can only go to a certain extent and after that, we have no powers to probe them. – Rediff, 27 October 2014

Supreme Court demands foreign account holder names

Legalism and Government Stand in Black Money Case – S. Gurumurthy – The New Indian Express – 30 October 2014

S. Gurumurthy“The government has concealed nothing from the SIT or the court. But the court rapped the government despite the government’s affidavit day before saying it has given all the names months ago. Neither the court nor the media is going to take back the strong comments. The damage is done. But morally, the Modi Government has won.” – S. Gurumurthy

Mukul RohatgiThe way the Supreme Court slammed the government on October 28 for not disclosing the names of black money holders given by the French government is like the classic case of both eating 100 onions and taking 100 lashes when the option was given to a person to do either of the two.

The short story of this paradox is this. The Supreme Court, moved by a public interest petition filed by Ram Jethmalani in 2009, delivered its judgment in July 2011, directing the government to appoint a Special Investigation Team (SIT). It was to be headed by two former Judges of the Supreme Court and consisted of the enforcement and intelligence agencies to probe the issue and recovery of huge black money suspected to be stashed away by Indians abroad.

The estimate of the rogue money, according to Global Financial Integrity (GFI), was $500 billion till 2008 and still counting. The UPA government, which had received information from Germany about black money account holders in Liechtenstein Bank and from France about such account holders in HSBC Bank in Geneva, was dodging the court’s insistence to disclose the details. It was taking refuge in some provisions of the Double Taxation Avoidance Agreement (DTAA) under which it said it had received the information. This forced the court to direct and get the government to disclose the Liechtenstein Bank details to the SIT. But before the court could direct the government to give details of HSBC account holders, the government filed a review petition asking the court to take back the judgment. After that the matter went into hibernation till it came back alive when the new government took over. The very first act of  Modi Government was to appoint the SIT – which the UPA was stalling – to which all investigations of black money stood transferred under the court’s orders. When everything seemed to be going well, the Finance Ministry filed an application on October 15, asking the court to vary its judgment of July 2011 since the government was advised that the direction of the court to disclose names overriding the DTAA was impeding the government’s efforts to secure an Inter Governmental Agreement (IGA) with the US for exchange of banking information. The IGA had the same provisions regarding disclosure as the DTAA with the US and most other nations.

The government said that since court orders seemed to prevent the government from signing the IGA with restrictions on disclosure, the judgment needed to be recast. Many, particularly Ram Jethmalani and others, who had worked on the black money issue for years, saw in this effort the same stonewalling which the UPA Government was doing to block the black money probe. The government’s October application lacked a sense of timing and ran contrary to the sentiments of its supporters on black money recovery agenda. Hell broke loose. Critics and friends alike began drawing parallels between the UPA and the NDA regimes, and sceptics began to feel that one was not different from the other. The ill-conceived and ill-timed application made everyone feel that this government too wanted to protect the black money holders.

But the facts were the other way round, as the clarification affidavit filed by the Finance Ministry on October 27 revealed. The affidavit unfolded how the government had not only been transparent with the SIT appointed by the court but also had been following its directions. The affidavit asserted that a complete list of cases where information had been obtained from the German and French governments, with the status of the action taken by the government was submitted by the Central Board of Direct Taxes on June 27. It added that the CBDT officials also met and briefed the SIT on the status of the cases, background of the information received, non-sharing of information by Swiss authorities, and constraints faced by the government and alternative methods of securing account details.

Arun JaitleyShockingly, his disclosure of how transparent the government had been and how it had parted with the details to the SIT was not mentioned when the Finance Minister briefed the media two days later on October 17, when already its critics and some friends had begun saying that the present government was no different from the UPA.

The Finance Minister’s briefing took the position that the DTAA prohibited the disclosure of information received under its provisions till the prosecution proceedings were started. This was precisely the argument of the UPA, which the Supreme Court in its judgment of July 2009 had overruled. This coupled with not mentioning that the government had already parted with the details to the SIT proved to be a disaster. In the huge negative publicity, the further affidavit of the government, which claimed that the list of names had been given to the SIT was not noticed at all.

In this situation came the application filed by the government asking for modification of the July 2011 judgment. The Attorney General did not sense the mood of the court and the nation, of course, and set out on legalism to justify the application, which the AG himself had personally approved. The fact that the government had already given the details was lost in the din. The court ordered the government to give the details in a sealed envelope to the court on October 29.

Did the AG tell the court that the details are already with the SIT? Even if he had, it was lost in the legalistic arguments on how justified the application for modification was. The result was bad imaging of the government in the court and in the public domain. Result, the government, which had already disclosed the details to the SIT, got a drubbing for not disclosing it – precisely like eating 100 onions and taking 100 lashes instead of either.

But even the AG’s legalism seems to be wrong. The hard fact is that the DTAA with France does not prohibit disclosure of information on the account holders in HSBC received from France in public court proceedings. The DTAA with France disciplines the disclosure of information received by India under it thus: One, the information shall have the same confidentiality as under India’s domestic law, that is the Income Tax Act and the Right To Information Act read together.

Two, if originally the information was secret in the hands of France (the sender) it shall be kept secret by India (the receiver). Apply the two norms now. First, the Income Tax and the RTI law permit disclosure and so no secrecy attaches to the HSBC details under the Indian law.

Next, the French got stolen information about bank account holders in HSBC in Switzerland. It is therefore not a secret in sender France’s hands. It is secret only in Switzerland. So under both the norms disclosure of HSBC information cannot be denied. And there is an overriding third norm.

The DTAA with France permits disclosure in public court proceedings in addition to disclosure in tax proceedings. It means when a court – the highest court in this case – directs the disclosure the government is empowered to disclose under the DTAA. Move further. The DTAA with the US is on identical terms as with France and the proposed IGA with the US is identical to the DTAA with the US on the disclosure of information. Consequently, the application of the government to the Supreme Court that the judgment prohibits disclosure of information is clearly misconceived, if not unnecessary. It is all confusion compounded at every stage.

How then should the government move forward now? The government should consult the SIT appointed by the Supreme Court whenever it has any doubt on how to go forward. It is the SIT that should ask the court for directions. The Supreme Court has already made it clear: the SIT will handle the investigation on black money. Will the government heed?

Narendra ModiPost Script: After all the strong words from the Supreme Court, which ordered the government forthwith to give to it the list of black money holders and critics saying that this government is no different from its predecessor, the SIT chief quietly confirmed last evening(on Tuesday) that the list handed to the court yesterday morning(on Tuesday) was the same as the list given to the SIT by the government four months ago, on June 27, 2014! Means what? The government has concealed nothing from the SIT or the court. But the court rapped the government despite the government’s affidavit day before saying it has given all the names months ago. Neither the court nor the media is going to take back the strong comments. The damage is done. But morally, the Modi Government has won. – The New Indian Express, 30 October 2014