Sucheta Dalal :Sacking Tirodkar (22 April 02)
Sucheta Dalal

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Sacking Tirodkar (22 April 02)  

On Friday, the Bombay Stock Exchange (BSE) governing board terminated the services of A.A. Tirodkar (who had headed its finance and surveillance departments) even though he had been fully exonerated in a special inquiry by a retired judge of the Mumbai High Court. As this paper wrote earlier, Tirodkar is being hounded out for doing his duty and protecting audio-taped evidence of former BSE president Anand Rathi who was seeking sensitive market information from surveillance officials in a blatant transgression of rules. This led to the sacking of all broker-directors of the BSE by Sebi. They in turn sought to sack Tirodkar for exposing them and the bourse to embarrassment and regulatory action. Tirodkar would probably continue his fight for justice, but Sebi’s silence over the sordid episode is curious. Sebi has been in possession of Justice B.V. Chavan’s report for several weeks. Its own inquiry into the Rathi episode also indicted the former BSE president. Both these reports revealed that BSE’s executive director A.N. Joshi did not think Rathi’s transgression was serious and had failed to report Rathi’s conduct to the regulator. At the very least, this calls into question his ability to understand the seriousness of surveillance rules. While Sebi, the regulator has perversely allowed the BSE to sack whistle-blower Tirodkar, its silence about the role of the BSE’s executive director is equally curious.

Beating the taxman For those who like to compare the US corporate tax rates with those in India, here is something interesting. Tax lawyer Richard E. Andersen, of Arnold & Porter and author of ‘Income-Tax Treaties of the US’ says that creating a tax triangle out of the United States, Bermuda and maybe Barbados or Luxembourg, and pushing every rule to the limit, allows companies to legally pay as little as 11 per cent of their American profits in taxes. Congress imposes a 35 per cent tax on profits of large US companies, but the top 10,000 companies or so have found loopholes and deductions that already let them pay a tax of only 21.5 per cent. The technique is as follows. A company transfers American profits to a paper company in a country like Barbados or Luxembourg that has a tax treaty with the US. This accounting sleight of hand allows companies to transform taxable profits into expenses that they can deduct on their American tax return. The paper company then sends the money to the US company’s worldwide headquarters in Bermuda, which has no income-tax and is the tax haven of choice for many companies. And voilà, what were once taxable profits have been turned into virtually untaxed dollars for use anywhere in the world. Needless to say, top US accounting firms have been advising clients on how to work this neat little trick to their advantage. So much for banal comparisons of prescribed tax rates.

Hardly a Fairgrowth When Fairgrowth Financial Services (notorious for its involvement in the 1992 securities scam) was taken over by K.K. Patel and others, it was considered one of the few cases where the fate of a scam-tainted entity was successful resolved. Patel was to revive and run the company without touching properties and assets that were already attached by the custodian and were under litigation. The new management was allowed to open a bank account for fresh business. Five years later, the Fairgrowth issue is back in the Special Court, with the Custodian filing a contempt petition against the K.K. Patel management and seeking their imprisonment. It alleges that Patel and company had no new business to speak of, but had instead transferred staff provident fund money and various dividends receivable by Fairgrowth into the new account. In short, Scam 1992 remains an on-going saga of new and continuing scams and endless litigation.

Mobile marketing Although cellphone charges have dropped considerably, thrifty Indian consumers still resent having to pay for incoming calls on mobile phones. Imagine their fury then at having to pay for unsolicited telemarketing calls, especially when the widespread use of roaming facilities often causes subscribers to pay expensive long distance charges on these calls. Angry consumers are seeking two possible actions. The plan to seek the service provider’s support for action against telemarketers. At the very least, they want telemarketers to be warned against harassing subscribers. Secondly, they want the telecom regulator to find a way to block such marketing calls. This is not exactly impossible. In the USA, the Federal Trade Commission plans to create a national list of ‘do not call’ households who never want to be badgered by unsolicited marketing calls. Telemarketing companies who call this list would then be slapped with hefty fines. A similar set up maybe technologically feasible and would act as in effective deterrent in India too.
-- Sucheta Dalal