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An UNDEMOCRATIC step for a DEMOCRATIC future

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For years now, the state of Jammu and Kashmir has been a point of contention and conflict in South East Asia. In fact, while it has long been a part of the country, it can also be looked at as a contractual gem to India. In 1846, Jammu and Kashmir was integrated as a part of India through a financial deal between Raja Gulab Singh and the East India. This integration made the valley a part of the Sikh territories. However, in 1947, when Maharaja Hari Singh succumbed to anti-Hindu forces in the valley, he demanded assistance from Nehru against the transfer of Kashmir to India as described in the “Instrument of Accession to India.” As a result, in 1947, the state of Kashmir was made a part of India and has been one ever since.

 

Division of Kashmir

          Over the last two weeks, the conversation regarding Kashmir’s security status has been an agenda for international discussions amidst US President Donald Trump’s controversial statement on the path to resolution of safety in the valley. All discussions were put tocame to a stand-still when, on Monday, the President of India, Ram Nath Kovind, passed a decree to remove article 370 and 35A from the Indian constitution.The path to the omission of Article 370 and Article 35A from the constitution wasn’t an easy one, it had to be one filled with political and strategic planning. With the presidency of Trump, the United States has slowly shifted focus from Pakistan towards hailing India as an integral ally in its struggles against China. This rebuff in America coupled with Pakistan’s financial troubles put it in an unfavorable position to launch an attack or formal diplomatic opposition to India. Secondly, no country other than Pakistan, including countries of the middle east or Pakistan’s neighbor, China, have launched diplomatic attacks at India. While there have been some that have condemned attacks, UAE’s ambassador stated that the removal of Article 370 would “reduce regional disparity”

Another point of contention is Imran Khan’s statement that India violated its own laws as well as international laws to uphold their ideology. This statement isn’t completely valid because the nature of a presidential decree supersedes all regulations binding the country and hence, holds legal strength.

 

           The Government of India (GOI) was aware of the possible backlash in the valley. Starting in late July, the Center began deploying military forces into the valley and attempted to establish a state of curfew and perhaps, establish situations similar to those described under Criminal Procedure Code Article 144 – which legally abolishes the right to conduct public gatherings of four or more people. While the deployment continues, the situation in the valley continues to remain tense.

           When the decree was placed in front of the Parliament, the upper house, that is the Rajya Sabha, was taken by surprise. While political parties protested the decree and walked out of the parliament, political parties like the Bahujan Samaj Party (BSP) and Aam Aadmi Party (AAP) that typically tend to stand at odds with the BJP supported the decree and allowed for its smooth passing. In the Lok Sabha, the BJP dominated the lower house and passed the decree without breaking a sweat. While the climate in which this decree was passed may be contentious, in the short run, it is hard to believe that it will be challenged in the courts of India. However, while the move could be challenged at the UN, it is still unproven that the move was unconstitutional.

           This decree will have a myriad of impact on the state of Kashmir, both in the short run as well as in the long run. With the removal of Article 370 and 35A, the special status of Kashmir has been repealed and this means  that centrally established regulations will be applied to the Union territory of Jammu and Kashmir and the Union Territory of Ladakh. It also means that the aforementioned Union Territories will be controlled and administered through a liaison of the government operating in that region. He/She/They will be elected by the President, thereby ensuring central control or direct oversight for situations in the valley. While this could have counter-intuitive effects (like misleading leadership in the valley clubbed with instigation of anti-muslim or anti-Hindu Pandit sentiments through or from the Central government) if the central government does not conduct appropriate oversight; The possibilities of such a thing happening amidst Kashmir being a hot debate topic for elections are unlikely. At the same time, the status of Jammu and Kashmir is debatable as they have been granted a with-legislative status. This means that the union territory, like New Delhi, will have its legislative assembly but the power to make a decision or veto a decision made by the assembly rests in the hands of Lieutenant Governor. The possibility of difference of opinion makes the UT vulnerable to difficult decision making that is inclined in the interests of the people of the valley.

           From an economic standpoint, I believe that this decree will benefit the valley in the long run. With the right to ownership open to all, the two Union territories will likely see an influx of financial resources coupled with an expansion of the transportation sector. This will help people in attaining a higher quality of life, greater financial wealth and access to benefits of social services like but not limited to, private hospitals and education.

           Socially, the people from the valley are bound to prosper. With the opportunity to private hospitals and education units to step into the Kashmir valley, the general health and welfare of the Kashmiris are bound to improve. The influx of new ownership and capital would also guarantee jobs. Similarly, the jobs created in this process could lead to lower amounts of extremist activities through appropriate utilization of unemployed youth – majority of extremists in the valley. Additionally, the concept of reservation will apply to the region. The main reason why BSP (Bahujan Samaj Party) voted in favor of the decree was that the omission of 370 and 35A would guarantee people from minority classes a right to obtain higher education through the reservation quota described in the constitution under the ninety-fifth amendment.

           These things sound extremely good for the valley. But I would be naïve to ignore the situation that the government has effectively caused in the valley. The GOI has caused the imprisonment of tens of politicians on the grounds of instigation of violence, kept multiple politicians under house arrest, caused a curfew-like situation in the valley and used the Presidential decree to strip the status and rights of a state. Along with all the efforts to curb democrary in the valley, the government has established an all out internet black out and opposition to press initiated interrogations. This has caused the government to reach new heights of undemocratic behavior. What worries me, even more, is that the government can strip down Article 351 – article granting special status to the Eastern states of India – on similar grounds as used in the Kashmir valley.

           The decision to unroot the fundamentals of the statehood of Kashmir was a landmark decision and could prove to be otherwise in the years to come. I am deeply concerned about the local reaction that is currently being suppressed, the possibility of protests in the near future, and the democratic rights of the people of Kashmir. Meanwhile, I am a strong believer of the fact that the process deployed to strip the state of kashmir of its guaranteed rights continues to be worrisome. Subsequently, the inability to judge what the future holds for Kashmir is something that I hope the GOI has already figured out. What holds in the future for Kashmir is something that only the future can tell. Until then, I hope that the decree plays its course and establishes the two union territories as described.

 

Your credit card, my money

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Caller: Hello! How are you doing today?

Recipient: Hey! I’m good…

Caller: I have called to tell you that your credit card has been reported as blocked and hence, I would need you to tell me your credit card details to unblock it

Recipient: But, I used my card a while ago and nothing popped up. Are you sure?

Caller: Yes, sir I am sure. I am speaking from PNX Bank and I can see it on my computer

Recipient: Alright! Here’s my card number XXXX-XXXX-XXXX-XXXX and Year of expiration XX/YY and CVV code XYZ

Caller: Thank you for the details. You will receive a message of unblocking soon. Thanks

15 minutes later…

Recipient receives a message stating that US $600 has been credited from his account for a transaction in Zimbabwe.

Over 140,000 reports of identity theft are reported every year in the United States and the recipient, in this case, is required to pay his due of US $600 as he shared his identity with an unknown entity. This enormous number stems with the ease at which these fraudulent transactions can be done. In majority of the cases, details of the caller are wired through various network points, and hence, catching identity thieves is very time consuming.

Parallelly, since transactions in most predominantly capitalist countries do not require an OTP (One-time password), the prevalence of such cases is a lot more in these countries. The ease of transactions and card usage causes these cards to be unbelievably unsafe and untrustworthy with respect to safety of usage.

When the question arises why people do these crimes, the answer is simple – greed. However, when we ask how do we protect ourselves, the answer is complicated. Apart from not giving personal details to unknown persons, and not responding to any-such fraudulent call, we can’t really do anything. The banking industry often offers credit card insurance to protect one against such frauds, but, these insurance policies are typically useless. The government, too, supports the banking propaganda – once the card is given, it is the users responsibility to protect it.

The Satyam Computers scandal

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This week we will talk about Satyam Scandal – the largest corporate scam of India and the 10th largest in the world

Satyam Computers, the organization that was involved in the scam, was the brain child of two brothers – Ramalingam Raju and Rama Raju. The company was started in 1987 in a city called Hyderabad in India as an IT and computing consultancy agency. During it’s entire life, Satyam computers rose as the largest IT firm in India, followed by accreditation by World Bank organization, followed by its eventual downfall in 2009 when it saw its share prices fall from Rs. 410(approximately US$7) to Rs. 25(approximately US$0.3) within 3 days.

On 7th of January 2009, Satyam Computers’ owners – Ramalingam and Rama – wrote a letter to the board of directors, explaining the manipulations they had done with the company’s balance sheets. In this letter they explained the degree to which this scam was done and the entire process that led up to their confession.

Former Chairman, Satyam Computer Services (India)

What could have caused Satyam computers, a US $2.1 billion company to perish is a very interesting story

                The two brothers established the pillars of the company in 1987 to explore the newfound field of technology – computers. Satyam computers was amongst the first few IT related companies that were established in the east and hence, it had business partners across India, Japan, China, and several south east Asian countries. It was also amongst the few successful IT companies that were able to provide dynamic and customer friendly services and hence, by 2003, its business operations expanded to the United States, Germany, France and several prominent economies across the globe. In 2004, Satyam computers was handling IT operations for World Bank and multiple multinational organizations.

THEN THE SCAM BEGAN…

                Ramalingam Raju along with his brother tried to reap personal benefits by taking advantage of the company’s esteemed reputation. In the process of doing so, he would show non-existent profits in his company’s balance sheets, eventually causing the stock prices to rise. Between 2003 and 2008, the company’s average operating profit was shown as 21% and the average compounding profit was shown as 35%. To explain the ever-rising profit margin, Satyam computers would divert the ‘fake profit’ to an asset that never existed. This would lead to an increased share-holder trust, causing them to invest more. This would drive stock prices up. At the end, Mastermind Raju and his brother in crime would realize the profits that they gained from the rise in stock prices.

                While I found certain things too complicated to understand and explain, I was able to understand that their act of financial manipulation had the potential to lead the company to an irrevocable disaster. And so, it did. In his letter to the board of directors, Mastermind Raju claimed that the assets had been overstated by US$ 150 million; interest that was being paid factiously on an annual basis was US$ 77.46 million, for a credit that never existed; the companies liabilities were understated by US$ 300 million; and the revenue which was shown as US$36.60 million was actually US$28 million.

                Raju, however, realized by late 2007 that his attempt to inflate share prices was about to counter react and hence he proposed to his shareholders to invest in a company called ‘MYTAS’. MYTAS was partly (35%) owned by Raju’s family members and thus, he wanted to merge Satyam Computers and MYTAS’s assets to fill up the financial gaps. While the board of directors accepted the proposal, the shareholders rejected the proposal, fearing diversion of money from Satyam computers to MYTAS.

Have you ever had this feeling of being successful in un-screwing up a problem that you created and later realizing that in the due course you may have aggravated the problem? The remorse is real. This is how Raju was feeling after realizing that the deal had been turned down. But things were about to get messier for Raju and Satyam computers and he had no idea about it.

On 28th December 2008 a lawsuit was filed in the United States against Satyam Computers for manipulating financial documents. When reports of the lawsuit reached the Indian stock market, their stock crashed. In retaliation and maybe, in fear of being harshly prosecuted, Raju came out clear to his board of directors with his ‘confession letter’ on 7th of January 2009 stating that a fraud worth Rs. 7,800 crore(approximately US$ 100 million) had been done.

The stock prices fell by 40% in a day, eventually causing Satyam computers to appeal for a bailout. The company was then taken over by Mahindra.

Let’s talk about my favorite question… why did this happen?

It was later found out that Mastermind Raju, his brother, the managing director of the company, external auditors – Pricewater house coopers – and government auditors were the main culprits. All the five parties were motivated by the idea of ‘greed’. We can also say that they were motivated by materialistic outsets as they faltered on their morals and ethics for self-gain.

Here, we can also describe the Indian Income Tax department and the investors of Satyam Computers as naïve and ignorant. Both the parties that were directly affected by the performance of Satyam computers continued to ignore the exceptional gains that Satyam Computers was having (possibly because they too, were beneficiaries of the exceptional rise in revenues and stock prices).

All being said and done, this incident tells us one thing about human behavior – Humans will report atrocities and misconducts only and only when they are staged as the disadvantaged party. This is possibly the reason why societal divisions continue to exist in our modern societies.

 

Think: Do you see any similarity in the names of the two companies discussed – MYTAS and SATYAM? If you did, let me know in the comments.

The Mississippi Company case

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The case of the Mississippi company and John Law is considered to be the largest financial fraud of the 18th and the 19th century. The intriguing fact of the entire fraud was that it was based on manipulative and constructive practices of a lone man – John Law. Another reason why this financial fraud is regarded as one of the biggest scam is because this scam was able to shake an entire economy and its fundamentals.

The fraud was the result of subsequent and multiple steps that worked counter-intuitively for the entire economy of France. The basis of the entire situation was the debt crisis that rose after the death of Louis XIV. Louis XIV took loans from the public in order to raise funds for fulfilling his lavish expenses – building a new palace, maintaining his lavish lifestyle, rebuilding the ecology of France, and beautifying the city of Paris. After his death, the new king – Louis XV – was only five years old. Thus, an alternative power took over. In order to fulfill the debt crisis, he issued of IOUs, yet, people were not satisfied. John Law, an economist, came to France while touring western Europe, making people aware of the concept of ‘paper currency’. He realized that France’s financial system was poorly structured and thus, proposed the usage of paper currency and an institution called ‘bank’. Initially, it was difficult for him to explain that to the ministers at the king’s court, however, in the backdrop of the debt crisis, his solutions appeared to be the most feasible solutions.

John Law had the power and the ability to make sure that things went according to his plan and that, people won’t look at his activities suspiciously. For this, he became a bug in the ears of the ruler. He encouraged the ruler to ask its people to exchange their gold coins for currency notes. The ruler then outlawed gold coins and established the currency distributed by John Law as the ‘currency of France’.  In the said process, John started sending gold coins abroad to fill his own chests.

In spite of knowing the fact that by printing more cash, an economy tends to devalue its currency, John asked the printing agency to continue printing currency notes. When a prince went to the bank to exchange his currency notes for solid gold, it was realized that an economic disruption was on its way. John and his associates realized that he had only a fifth of gold reserves against the cash driven out. The news got out, and people became speculative of their deposits.

Things got worse when there was hyperinflation. When the ruler asked John to resolve the problem, John suggested the ruler to devalue gold and abolish exchange of gold. John then issued shares and promised a buyback at par if the shares were to fall. He glorified the state of Louisiana as a state with immense developmental growth potential and his willingness to invest in assets in Louisiana through the money he receives through share contributions. The demand for shares was immense and he purposely kept the supply low to inflate share prices. Though promised, he never purchased any assets in the state of Louisiana and instead purchased gold offshore.

Eventually, even the ruler got suspicious of his activities and further forced him to declare his bank’s financial status. Instead, he secretly fled the country with all the gold reserves. This caused a major financial crisis in France, hereby causing people to lose all their money, businesses to crash and gold to devalue.

 

Let’s think global!

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Thanks for taking a look at my blog.

I will be writing about major financial frauds that have taken place across the world.
Financial Frauds are amongst the most impactful crimes. While they have the potential to impact thousands of people at once, they also have the potential to disrupt an entire country’s financial system.

Feel free to critique my blogs
I look forward to seeing you every Thursday, 10 PM