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Corporate Jun 28, 2013

It’s a farce: Nothing comes out of govt probe into Wal-Mart

By Rajesh Pandathil

The US market is not the only one India is dependent on. Its legal system is also as important, at least that is what the one-man committee that probed the Wal-Mart lobbying issue thinks.

According to a report in the Economic Times, the committee has said that to get to the truth of issue the government will have to wait until the company makes full disclosures in the US.

After conducting the investigation, the committee is as undecided as it was at the beginning because it did not have "investigative" or "summoning power", the report said.

The probe by Justice Mukul Mudgal, who has submitted its inconclusive report to the government, was instituted after the retail giant disclosed in the US that it spent Rs 125 crore to lobby to get access to India.



The US Foreign Corruption Practice Act (FCPA) mandates that the US companies should not bribe government officials or political leaders of foreign countries in order to gain business there. In order to comply with this law, the companies are required to make necessary disclosures there. Wal-Mart's disclosure was part of this.

The disclosure had kicked up a storm in India, where lobbying is largely perceived to be bribery. And rightly so, as unlike in the US, there are no mandatory disclosure norms in India. So there is no way for us to know how foreign companies lobby with the authorities here.

[embedalsosee] Coming back to Wal-Mart probe, the committee has not answered the pointed question as to whether Wal-Mart bribed government officials or not.

"Walmart has not furnished the documents and information to the US Congress till date and has not provided this committee with full details sought by it. However, as and when Walmart replies to the queries of the US Congress fully and an adverse report or disclosure indicating violations of Indian laws is made, the investigation should be carried out by the government," the ET quotes from the report submitted by the committee.

Here are the points the report has made to the government:

a) The company refused to disclose money spent on external consultants and this made it difficult for him to conclusively investigate the matter.

b) Wal-Mart Asia CEO Scott Price denied lobbying charges before the committee and the company had only hired "advisors" and not "lobbyists". He also refused to give the expenses incurred on this count.

c) The replies given by the company was "incomprehensible and tends to obfuscate the information provided to the committee".

d) Raj Jain provided "ambiguous" answers. While he said Cedar Support Services was set up only in 2010, his written replies indicated the company could have existed even before that.

The pertinent question here is why is the company not ready to disclose the details? This is why eyebrows are being raised: Has anything fishy happened? The company's actions go against its earlier claims that it will work "to provide the authorities with relevant information".

This doubt becomes more pronounced when you read the probe report along with the recent developments in Wal-Mart India. Rumour mills have been churning out stories that heads are rolling in the company after it started an internal probe to find out whether its executives have violated the US Foreign Corruption Practice Act (FCPA).

If the company is taking action, isn't it because it found something wrong internally? But unfortunately, there is no way we the Indian public will come to know of it now. We have to wait until the company makes more disclosures in the US.

But things would have been different if the committee had more powers. It could have summoned more executives, called them any number of times, asked them pointed questions. But it had no such powers. The stupidity of this exercise so humungous that one can't help ask the government why was such a committee set up at all if it was not given enough powers to conclude the probe meaningfully and logically? Clearly, it was just a half-baked effort by the government. Just an eyewash to silence the sceptics, at least temporarily.

Will such antics from the authorities in India end? There is no reason to believe it will in the near future. For that adequate disclosure norms have to be put in place.

After the Wal-Mart issue sparked controversy, Corporate Affairs Minister Sachin Pilot, who thinks it is wrong to assume lobbying means bribery, spoke about the importance of defining lobbying in India.

"I think that time has come to define what is acceptable and what is not," Pilot had said in an interview to PTI.

"There is no harm in making the disclosures if you are officially calling upon certain official or a minister, MLAs, MPs or even a Sarpanch to say that there is something of their interest and request for facilitating the same," he said.

However, that was just lip service. Nothing has moved beyond that. So we Indians will have to be dependent on laws in other countries to know what lobbyists in India are doing. Do not expect this to be different, even if Narendra Modi or any other third front comes to power at the Centre.

by Rajesh Pandathil

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