Sucheta Dalal :The Spy vs Spy game
Sucheta Dalal

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The Spy vs Spy game  

Feb 12, 2007

Allegations of corporate espionage obviously do not get the Indian media all a-twitter, although far less significant events get their day under the media spotlight. That is why, although every newspaper reported the arrest of one Prashant Indulkar, an employee of Tata-owned VSNL and published his allegation that a Reliance Infocomm executive had paid him Rs 40,000 for crucial information related to VSNL's board meeting, the reports were bereft of hype. In this case, the Reliance executive, who has denied the allegation, had worked closely with the Tatas as an employee of a public relations firm that it employs.

The reason why espionage in its various forms rarely makes news is the paucity of official complainants and difficulty in getting concrete proof. That is because companies simply don't want their dirt splashed across the media. For instance, the Tatas themselves took no public action in a case, where this paper provided clear evidence that a company was supplying inferior raw material by forging bills and invoices of a better-known company. Instead, they buried the fraud angle and said they were satisfied with the quality of raw material supplied. Interestingly, the company whose bills and invoices were forged, did not take up the issue either. The guiding factor may have been -- 'we are like that only'.

Indian business, especially those connected with the capital market often take pride in "breaking" (phodna) a key person in an organisation to obtain a steady leak of information. They are constantly on the lookout for weak-links or susceptible employees who will be willing to trade/leak information for a price. Such businessmen especially target those employed at regulatory agencies, or in systems and surveillance departments of stock exchanges, at central banks, and in corporate finance departments. Several years ago, National Stock Exchange had asked three employees to quit for leaking sensitive information to dubious brokers. But it did not sack them or file a police complaint for want of adequate proof.

Even today, the market grapevine says that some leading market operators are able get confidential information on trading positions through internal sources. As for the capital market regulator, it not only leaks like a sieve, but some disgruntled employees have been posting a steady stream of letters alleging the worst kind of corruption on the part of their senior most surveillance officials. I have over 20 such letters, each making specific charges of corruption, deliberate bungling of investigations or refusal to check rampant price rigging in certain stocks. Each letter bears a name and address and Securities and Exchange Board of India (Sebi) officials spend considerable time and effort in establishing that the letters are fake or mischievous.

Unfortunately, Sebi still does not have a handle over price manipulation despite access to a powerful, inter-market surveillance system. Tracking and wooing chief finance officers of leading companies used to be an art in itself in the 1980s. Brokers considered themselves extraordinarily lucky if these officials deigned to trade through them, because their transactions were watched carefully for a clue into the company's performance. Automation of capital markets and insider trading regulations have ended this happy situation, but it has been replaced by select CFO clubs that meet at 5 star venues to discuss forthcoming corporate results.

Over the years, we have seen cabinet minutes, confidential reports and important decisions of key ministries leak out with alarming regularity to powerful corporate houses. These again are photocopied and sent out routinely as part of a retainer paid to some powerful "confidential" secretaries or under secretaries of important Union Ministers. The trade in Parliamentary questions and rates quoted for starred and unstarred questions has now been thoroughly exposed through media sting operations.

Many politicians also convert their membership at Joint Parliamentary Committees (JPC) into a money spinning opportunity. In both JPCs that investigated the scams of 1992 and 2001, certain members did not even bother to hide their 'affiliation' to specific groups.

The spy v/s spy game really comes into its own during times of intense corporate rivalry or in takeover battles. In the mid-1980s as a rookie reporter, I was startled when the chairman of a construction company coolly told me he had hired a detective agency to find out the sources of a colleague from a rival newspaper.

Twenty years later one has seen a whole set of battle strategies, from investors who grab the front row at general body meetings to embarrass or support management; or Special Purpose Investor Groups that spring up only during vicious corporate wars. Their job is to strive for a semblance of credibility while circulating dirt on one of the warring groups.

KPMG has even mapped the profile of this susceptible group as being male, between 26-40 years of age and with an annual income of upto Rs 2.5 lakh. But this profiling is unfair. The very fact of doing business in India sorely challenges the ethical moorings of every employee who has to deal with government departments or revenue agencies to get innumerable licences, permits and clearances or simply pay up statutory dues. After that, it is just another small step to accepting bribes to leak information about your own company.

Automation has added an entirely new dimension to corporate espionage. You no longer need to worry about photocopying bulky documents, since a nifty pen drive and some basic IT savvy will do the trick. Although large companies are now spending a great deal of time and money on systems to track possible leaks, most fast growing small and medium companies are reluctant to invest in security systems until they are actually confronted with espionage in the form of information on crucial bids.


-- Sucheta Dalal