Conflict of Interest A case study of N Srinivasan’s conflict of interests in IPL controversy

10-10-2015

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Contents

What is Conflict of Interest? 2

Types of conflicts of interests 3

Financial Interests 4

Case Study – N Srinivasan’s IPL Controversy 5

i. Introduction 5

ii. Timeline of Controversies 5

iii. Instances of N Srinivasan’s Conflict of Interests 8

Conclusion 11

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What is Conflict of Interest?

A conflict of interest (COI) is a situation in which a person or

organization is involved in multiple interests, financial interest, or

otherwise, one of which could possibly corrupt the motivation of the

individual or organization.

The presence of a conflict of interest is independent of the occurrence

of impropriety. Therefore, a conflict of interest can be discovered and

voluntarily defused before any corruption occurs. A widely used

definition is: "A conflict of interest is a set of circumstances that creates

a risk that professional judgement or actions regarding a primary

interest will be unduly influenced by a secondary interest."

Primary interest refers to the principal goals of the profession or

activity, such as the protection of clients, the health of patients, the

integrity of research, and the duties of public office.

Secondary interest includes not only financial gain but also such

motives as the desire for professional advancement and the wish to do

favours for family and friends, but conflict of interest rules usually focus

on financial relationships because they are relatively more objective,

fungible, and quantifiable. The secondary interests are not treated as

wrong in themselves, but become objectionable when they are

believed to have greater weight than the primary interests.

The conflict in a conflict of interest exists whether or not a particular

individual is actually influenced by the secondary interest. It exists if the

circumstances are reasonably believed (on the basis of past experience

and objective evidence) to create a risk that decisions may be unduly

influenced by secondary interests.

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Types of conflicts of interests

The following are the most common forms of conflicts of interests:

Self-dealing, in which an official who controls an organization

causes it to enter into a transaction with the official, or with

another organization that benefits the official only. The official is

on both sides of the "deal."

Outside employment, in which the interests of one job conflict

with another.

Nepotism, in which a spouse, child, or other close relative is

employed (or applies for employment) by an individual, or where

goods or services are purchased from a relative or from a firm

controlled by a relative. To avoid nepotism in hiring, many

employment applications ask if the applicant is related to a

current employee of the company. This allows recusal if the

employed relative has a role in the hiring process. If this is the

case, the relative could then recuse from any hiring decisions.

Gifts from friends who also do business with the person receiving

the gifts or from individuals or corporations who do business with

the organization in which the gift recipient is employed. Such gifts

may include non-tangible things of value such as transportation

and lodging.

Pump and dump, in which a stock broker who owns a security

artificially inflates the price by "upgrading" it or spreading rumors,

sells the security and adds short position, then "downgrades" the

security or spreads negative rumors to push the price down.

Other improper acts that are sometimes classified as conflicts of

interests are probably better classified elsewhere. Accepting bribes can

be classified as corruption. Use of government or corporate property or

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assets for personal use is fraud. Nor should unauthorized distribution of

confidential information, in itself, be considered a conflict of interest.

For these improper acts, there is no inherent conflict of roles.

Financial Interests

The paradigm conflict of interest is financial interest.

Non-financial (or only indirectly financial) forms of bias can pose serious risks to research and to human safety and dignity.

Significant financial interests must be disclosed to institutional officials and be appropriately managed.

A “significant financial interest,” according to the PHS, is one that that could directly and significantly affect the design, conduct, or publication of research and thus bear on issues of human subject’s protection.

Financial interests include, but are not limited to:

Compensation from employment (by other than grantee institution)

Paid consultancy, advisory board service, etc.

Stock ownership or options

Intellectual property rights (patents, copyrights, trademarks, licensing agreements, and royalty arrangements)

Paid expert testimony

Honoraria, speakers’ fees

Gifts

Trips

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Case Study – N Srinivasan’s IPL Controversy

Introduction: Narayanaswami Srinivasan (born 3 January 1945) is an Indian

industrialist. He is the current Chairman of the International Cricket

Council (ICC) and former President of the BCCI, the governing body for

cricket in India. He is also the managing director of India Cements

Limited.

Srinivasan is being investigated in several scams, including one involving

betting on IPL cricket matches, where his son-in-law Gurunath

Meiyappan has been indicted for passing inside information to bookies

and is in jail. He is also being investigated as a in the corruption

involving politician Jagan Mohan Reddy. In March 2014, the Supreme

Court of India ordered him to quit as BCCI president to facilitate

investigations into the IPL betting scam.

Timeline of Controversies:

The BCCI regulation, Clause 6.2.4 stated that "no administrator of

BCCI could have had, directly or indirectly, any commercial interest in

the matches or events conducted by the cricket board". Later, after the

start of IPL in 2008, the clause was amended to give unfavorable

benefit to BCCI members such that they can own stakes in the IPL

franchise. N. Srinivasan became the owner of Chennai Super Kings. The

case against N. Srinivasan on the grounds of conflict of interest is still

pending in the Supreme Court of India.

In 2013, under the massive Indian Premier League Spot fixing

controversy, N.Srinivasan's son-in-law and CSK team principal

Gurunath Meiyappan was arrested by Mumbai Police under the

involvement in heavy betting and trading of inside information to

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bookies. Despite media and national outrage asking for his

resignation, he remained defiant. But ultimately, he stepped aside

on 2 June 2013 and appointed Jagmohan Dalmiya as the interim

president. On 27 September, Supreme Court restrained him from

holding the post of BCCI President until its further orders. On 8

October 2013 Supreme Court allows N. Srinivasan to take charge

as BCCI President.

On 10 February 2014, a report submitted by the retired High

Court Chief Justice Mukul Mudgal-led committee, indicted Mr.

Srinivasan's son-in-law, Gurunath Meiyappan of illegal betting and

passing on sensitive match-related information to bookies during

IPL 2013. The 170-page report also stated that Srinivasan's

company, India Cements was liable for Meiyappan's actions and

that the Chennai Super Kings franchise was in violation of the

franchise agreement, which may result in the termination of the

Indian Premier League franchise. On 21 March, Meiyappan's voice

was found to match a tapped phone conversation discussing

match fixing activities

On 25 March 2014 the Supreme Court of India told N. Srinivasan

to step down as BCCI president so that a fair investigation may be

conducted. The court found it "nauseating" that he should hold

on to the post despite various courts censuring him.

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On 27 November 2014 the Supreme Court said that N Srinivasan’s

conflict of interest was “obvious” as he also owned a team i.e. CSK

in the IPL. The court also asked BCCI if it was open to have a fresh

poll for a new board without N Srinivasan. On 29 March 2015,

Srinivasan gave away the Cricket World Cup trophy to the winning

Australian team - an act that should have been performed by the

ICC President Mustafa Kamal. Prior to the final, Kamal had made

controversial statements regarding umpiring in the India-

Bangladesh quarterfinals. In light of these comments, ICC

reportedly had a meeting, and decided that Kamal would not be

allowed to hand over the trophy. Srinivasan had also expressed

his extreme unhappiness over Kamal's comments in the same

meeting, causing an embarrassed Kamal to walk out of the final

before the match even finished. He later quit his position as the

President, and vowed to expose the people behind the

"mischievousness".

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Three instances of N Srinivasan's conflict of interest:

Conflict of interest, the Court said, has no place in cricket.

Srinivasan must choose between the BCCI and CSK. In their order, the

two Justices provided detailed reasoning to support their conclusion,

listing three instances that demonstrated how Srinivasan could use his

position to his own benefit.

Those instances are quoted from the order below:

Three real life situations that have arisen in the past, qua India Cements

owned by Mr. Srinivasan’s family and captained by him, simply

demonstrate how such conflicts have arisen between the duty which

Mr. Srinivasan owes to BCCI and through the BCCI to the cricketing

world at large and his commercial if not personal interest in the events

which BCCI organizes.

1. The first instance arose when the BCCI awarded compensation of a

sum of Rs.10.40 crores to Chennai Super Kings – on account of the

cancellation of the Champions League Tournament 2008. It is not in

dispute that Mr. Srinivasan was one of those who contributed to the

taking of the decision to award that amount towards compensation to

his own team.

True it is that a similar amount was awarded to Rajasthan Royals the

other finalist also, but that does not, mean that to the extent Mr.

Srinivasan, participated and deliberated in the proceedings leading to

the award of a hefty amount of compensation, he was not privy to a

self-serving decision that benefited India Cements Ltd. a company

promoted by Mr. Srinivasan. The fact that some others also

participated in the decision-making process as members of IPL

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Governing Council does not cure the legal flaw arising out of the

benefactor also being the beneficiary of the decision.

The situation is analogous to Naqishbund participating in the selection

proceedings even when he was himself a candidate for selection as in

Kraipak’s case (supra). As a matter of fact, Naqishbund had recused

himself from the proceedings when his own case was taken up for

consideration.

But this Court remained unimpressed and took the view that any such

recusal did not make any material difference, as bias in such like

situations operates in a subtle manner. In the case at hand Mr.

Srinivasan had not even done that much no matter it would have made

little or no difference even if he had done so. At any rate, the test is not

whether bias was actually at work when the decision was taken. It is

the reasonable likelihood of bias that determines whether the action

can be faulted.

A reasonable likelihood of bias is what can be seen even in the case at

hand when the decision to award compensation was taken by the

governing council of IPL with Mr. Srinivasan, present and participating

as a member.

2. A similar award of a sum of rupees 13.10 crores came in the year

2009 which too fell foul of his duty on the one hand and interest on the

other. Mr. Sibal, no doubt, argued that this amount was returned by ICL

subsequently, but such return, does not improve the matters. The

decision to award an amount higher than the one awarded earlier

appears to have led to public criticism raising the pitch further for Mr.

Srinivasan’s removal from the BCCI on the principles of conflict of

interest.

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Return of the amount because of a public outcry may no doubt mean

that Mr. Srinivasan tried to come clean on the subject even when his

company may have suffered a loss, but it may as well mean that the

return of the amount came only under public pressure and in

recognition of the fact that the amount was not actually due and

payable and yet was paid to the detriment of BCCI who is a trustee of

general public interest in the sport of cricket and everything that goes

with it.

3. The third instance where Mr. Srinivasan’s commercial interest came

in direct conflict with his duty as President of BCCI is when allegations

of betting were leveled against his son-in-law Mr. Gurunath Meiyappan.

Even ignoring for a moment the argument that Mr. Srinivasan had

made a deliberate attempt to cover up the betting racket that came to

light, facts now prove that Mr. Gurunath Meiyappan was involved in

betting in IPL matches even when he was a team official of CSK. We

have, while dealing with question No.3, held that the misconduct of Mr.

Gurunath Meiyappan and Raj Kundra can result in award of punishment

not only to the said two persons but even to the franchisees

themselves.

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Conclusion

Hence that being so, a clear conflict of interest has arisen between what is Mr.

Srinivasan’s duty as President of BCCI on the one hand and his interest as father-

in-law of Mr. Gurunath Meiyappan and owner of team CSK on the other.