Spat between Abraham, Sebi, finance ministry gets murkier

Spat between Abraham, Sebi, finance ministry gets murkier

New Delhi: The controversy surrounding the complaint made by former Securities and Exchange Board of India (Sebi) member K.M. Abraham about the finance ministry’s growing influence over the stock market regulator has taken a fresh turn, with the revelation that an official in the Prime Minister’s Office (PMO) tried to get him to meet the very people against whom he was complaining.

Details of Abraham’s letter to the Prime Minister, alleging the interest of the finance minister’s officer on special duty Omita Paul in several high-profile cases being looked into by Sebi, were first published in The Economic Times in early August, along with a response from Sebi chairman U.K. Sinha saying Abraham’s allegations had no substance in them.

On Tuesday, The Indian Express published a report on the basis of a subsequent letter by Abraham to the Prime Minister, where he said his family was at risk because the first letter had been shared with the finance ministry.

In an elaborate response, the ministry reiterated its denial of allegations made by Abraham and sought to make accusations of its own against the former Sebi member.

Mint has reviewed the two letters of Abraham and also Sinha’s reply. It emerges that these were not his only letters to the Prime Minister and that the first on the same issue was sent on 16 May (and received by the PMO on 19 May), according to a government official. Mint hasn’t reviewed the contents of this letter, though the PMO, while responding to a Right to Information application from Mint regarding Abraham’s second letter, admitted there had been an earlier one in May.

On 1 June, Abraham sent a second letter to the Prime Minister (with a copy to the Central Vigilance Commission, or CVC, that looks into improprieties in government departments) making the allegations about Sinha, Paul, and, more seriously, finance minister Pranab Mukherjee. This letter was forwarded to the finance ministry by the PMO on 15 June, a move legal experts say is against the existing as well as the proposed whistleblower protection Act, although there is some debate over whether Abraham qualifies as a whistleblower.

In his third letter, dated 24 June, Abraham said that he was advised by T.K.A. Nair, adviser to Prime Minister Manmohan Singh, to meet Paul.

According to this letter, on 6 May, when Abraham met K.M. Chandrasekhar, the then cabinet secretary, and apprised him of the alleged misuse of power by Paul, he was told: “We are aware of this and have information on this. More information that you have given is welcome and useful."

Chandrasekhar said in a phone call: “I told him if there is any disagreement, it should be put in writing. Abraham spoke about two-three cases in which he was allegedly forced to make compromises and I told him to put it in writing."

A week later, on 13 May, Abraham met Nair, who, he said, told him to meet Paul.

Nair declined to comment on this.

In an 11 August meeting, Paul said she had never met Abraham. Paul didn’t respond to calls on Tuesday. Her office said she was busy in cabinet meetings.

Abraham wrote to the Prime Minister in his third letter dated 24 June: “The frightening realization that dawned on me from all this was that at the highest levels in government, there seemed to be an awareness of misuse of power by the office of the finance minister. But there was a clear unwillingness or reluctance to prevent it or take any remedial action. It was then I decided to address (the Prime Minister)… because I knew that I had nowhere else to go."

Two senior government officials, who did not want to be named, independently told Mint that in late June, after receiving the third letter, the Prime Minister had the Intelligence Bureau and the Maharashtra government provide protection to Abraham. This was confirmed by a PMO official. (Security is still being provided covertly, although Abraham had declined the offer of protection, this official said.)

But by late June, Abraham’s letter had already reached the finance minister.

The PMO “should have been discreet. (If) the whistleblower is a senior government functionary who was giving tangible information on corruption, then he should have been protected. There is certainly a legal impropriety", said R.S. Sodhi, a retired high court judge.

The PMO official cited above, however, pointed out that the day Abraham’s letter reached the PMO, it was leaked to the media.

On 15 June, Amit Agrawal, director (PMO), forwarded Abraham’s letter to R. Gopalan, secretary, department of economic affairs, for “appropriate action".

In his second letter, Abraham mentioned four cases—Sahara group, Reliance Industries Ltd, Bank of Rajasthan and MCX Stock Exchange—handled by him, in which he was asked by Sinha to be lenient since these cases were of interest to the finance ministry. Mint quoted, in a story on 12 August, a finance ministry official who did not want to be named as saying that the ministry had actually taken the regulator’s side in these cases and acted against the interests of the companies named.

The finance ministry forwarded Abraham’s second letter received from the PMO to Sinha on 21 June.

Sinha responded to this on 8 July and, according to The Economic Times, wrote that Abraham “appears to be in a deeply disturbed state of mind, suffering from a persecution complex and delusions that everybody is out to harm him", adding that his behaviour had become “erratic" because of the income-tax probe against him.

Tuesday’s story in The Indian Express also quoted an unnamed officer in the finance ministry as saying that Abraham could have raised the allegations as a way to deflect allegations against him. The Indian Express added: “These relate to the purchase of a flat in Mumbai built by Kohinoor Planet Constructions Pvt. Ltd. The flat is in the same complex where the National Stock Exchange, an entity regulated by Sebi, bought commercial space, raising questions of conflict of interest."

Abraham declined to comment for this story.

He told The Indian Express that he had used a loan from his provident fund to pay for the flat and that there are “thousands of entities regulated by Sebi and each of them may have commercial space in Mumbai".

Interestingly, The Indian Express report said CVC has asked the finance ministry and its vigilance wing to respond to allegations made by Abraham as well as against him. However, responding to Mint’s 12 August story that the allegations made by Abraham were being looked into by CVC, the ministry clarified that its only communication with CVC had to do with “allegations made against Abraham", not allegations made by him.

The ministry called allegations made by Abraham “defamatory, devoid of any truth and a complete distortion of facts", in its three-page release issued late on Tuesday. “In fact, numerous complaints (have been) received against Abraham from several sources," the release said.

A CVC official, who did not want to be named, said the agency had received three separate letters from Abraham. “He wrote to the vigilance commissioner asking not to hand over his case to the finance ministry for investigation as he believes it would be unfair and biased. He also cited some changes in the administrative set-up in the finance ministry that he thinks will thwart the investigation," this person said. “We’ll take a call on whether to rope in the Central Bureau of Investigation once we’re done with our primary investigation."

Sebi declined to comment on the issue.