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Reliance retainers raise questions in India
From the Financial Times of Thu, 18 Dec 2014 14:29:45 GMT
Reliance Industries Chairman Mukesh Ambani Speaks at Ajay Mushran Memorial Lecture...Mukesh D. Ambani, chairman of Reliance Industries Ltd., attends the Ajay Mushran Memorial Lecture in New Delhi, India, on Sunday, July 10, 2011. Ambani said India needs a unique development model for equitable economic growth©Bloomberg

Mukesh Ambani: the businessman has helped build a $75bn empire that stretches from oil refining to cricket

Reliance Industries, the Indian conglomerate owned by billionaire Mukesh Ambani, paid undisclosed monthly legal consultancy retainers to Manish Tewari, a senior politician, before his being appointed broadcasting minister in India’s previous Congress-led government, documents seen by the Financial Times show.

Ravi Shankar Prasad, a senior figure in Prime Minister Narendra Modi’s Bharitya Janata party, also invoiced a Reliance affiliate company for monthly legal retainers before he became telecoms minister, separate documents reveal.

Neither Reliance nor the two politicians publicly disclosed the monthly payments, which in most cases were worth more than $100,000 a year.

Accepting paid retainers from companies is not forbidden by India’s parliamentary rules, and commercial arrangements do not always have to be disclosed. There is no suggestion that any party broke Indian laws.

Both politicians are lawyers by profession, and it is relatively common for parliamentarians with legal backgrounds to continue legal practice, including appearing in court for corporate clients. All parties deny wrongdoing.

Nonetheless the existence of undisclosed retainer contracts between a company run by India’s pre-eminent tycoon and senior parliamentarians raises questions about political transparency and the perception of potential conflicts of interest, analysts say.

“This is a very serious problem,” says Professor Jagdeep Chhokar, former dean of the Indian Institute of Management, Ahmedabad and co-founder of the Association for Democratic Reforms, a campaign group.

“If these contracts are not disclosed, how do we decide whether any person is taking decisions in the public interest, or in the interest of a particular company?”

Mr Ambani has long been reputed to wield formidable influence in New Delhi, helping to build a $75bn business empire that stretches from oil refining and energy exploration to retail and cricket.

His business interests include a broadcasting arm and a planned $12bn investment in a new mobile telecoms business, which is due to launch next year.

Mr Ambani is also one of India’s most controversial public figures, known for his $20bn personal fortune as well as his family’s luxurious Mumbai home, a 27-storey residential skyscraper often described as the world’s most expensive private dwelling. In 2013, India granted him the country’s highest level of government security protection, following threats to his life.

The nature of any financial relationships between Reliance and senior Indian politicians have until now remained largely a matter of speculation.

But documents seen by the FT show that Mr Shankar Prasad, a former BJP spokesman, sent an invoice for Rs8.4m ($135,506) for legal services provided between April 2013 and March 2014 to Fine Tech Corporate Private, a Reliance affiliate.

This is a very serious problem. If these contracts are not disclosed, how do we decide whether any person is taking decisions in the public interest, or in the interest of a particular company?

- Professor Jagdeep Chhokar, former dean of the Indian Institute of Management

He was appointed as India’s telecoms minister by Mr Modi in May 2014, following the BJP’s victory in national elections.

Manish Tewari, a senior figure in the Congress party, also received payments from Reliance for a number of years before becoming broadcasting minister in 2012.

In June 2010, Reliance agreed to a monthly retainer paying Mr Tewari, then a backbench MP, a total of Rs12m ($193,580) over the next two years. In June 2012, Mr Tewari wrote to Reliance asking for his contract to be renewed. Reliance agreed to pay a total of Rs14.4m ($232,295) for two further years.

Both politicians say they ceased all commercial legal work upon taking ministerial office, as required by India’s ministerial code.

Mr Shankar Prasad said in a statement that any legal work undertaken as an MP “has been purely in professional capacity, only like a lawyer and client and nothing else”. He denied invoicing Reliance Industries but did not respond to a request for comment on whether he invoiced Fine Tech Corporate Private.

Mr Tewari told the FT that he also had acted within the rules, although he said in an interview that India’s rules should be changed so that such retainers ought to be declared in future “to keep everything above board”.

The existence of similar commercial arrangements with parliamentarians would prove controversial in other advanced democracies, according to Milan Vaishnav of the US-based Carnegie Endowment for International Peace.

In the US, members of Congress are not allowed to accept commercial payments. In the UK, such payments are allowed under certain circumstances but must be disclosed.

“The idea of senior politicians accepting undisclosed lucrative retainer contracts with big companies would cause a major scandal,” Mr Vaishnav says. “Conflict-of-interest standards in Indian politics are pathetically weak.”

Reliance and the two politicians declined to provide any details of the nature of legal advice provided during the period of the retainers, citing confidentiality.

In a statement Reliance noted that India’s rules allow hiring parliamentarians for legal advice and stressed that any “engagement discontinues” if an MP becomes a minister.

“RIL [Reliance] has large and varied demands for legal assistance,” the company said. “Our selection of lawyers is based on our needs and their expertise and that has nothing to do with their being in politics or being an MP.”

Mr Ambani has drawn criticism from political campaigners, including the opposition Aam Aadmi (Common Man) party, which criticised Reliance over various allegations of “crony capitalism” during India’s election campaign this year — allegations the company fiercely denied.

More generally, Mr Ambani’s political ties remain a controversial subject in India. The tycoon inherited Reliance from his father Dhirubhai Ambani, whose rise in industries such as textiles and petrochemicals was one of India’s most celebrated rags-to-riches stories and who built a reputation as a formidable political operator.

The company’s relationships in New Delhi also played a part in the battle between Mr Ambani and his younger brother Anil Ambani for control of their father’s empire — a legal and media feud that divided the country’s political and business establishment and ultimately saw the two men split the conglomerate in 2005.

Reliance’s response in full

Reliance on Thursday said: “RIL has large and varied demands for legal assistance. We work with various lawyers from time to time for such legal assistance. The details of such engagement are contained in our accounts and are available with tax authorities. Several eminent lawyers in India are and have historically been in active politics and have been rendering legal services to leading corporates in India. There is no bar against an elected representative to continue his or her practice while being an MP or MLA. Our selection of lawyers is basis [sic] our needs and their expertise and that has nothing to do with their being in politics or being MP/MLA. As is the common practice and legal requirement, when such an MP/MLA has joined as a Minister in the Union Cabinet, the engagement discontinues. Communication with lawyers are privileged and are protected by the law.”

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