http://kbforyou.blogspot.com/2011/03/manmohan-singhs-public-private.html

Manmohan Singh’s public-private partnership with Rajat Gupta

How the PM has been actively supporting Gupta's campaign to influence public policy and expand his

business empire

A special investigation by Kapil Bajaj

How Manmohan used the PMO, Planning Commission, various ministries, and public funds to promote

former Mckinsey boss Gupta’s Indian ventures

How Manmohan turned Gupta’s private network into a powerful body influencing public health policy,

with zero accountability to the public

How Manmohan helped Gupta’s business and health education network to con the states into parting

with hundreds of crore of public funds and parcels of free land

How Manmohan helped create the ‘non-profit’ smokescreen that Gupta used to expand his illegal private

equity business in education

How Manmohan’s support contributed to Gupta’s clout, compromising regulatory oversight of his

dubious dealings

How Manmohan’s support blinded the government to national security implications of Gupta’s fast

growing PE investments, particularly his links with Pakistan

New Delhi, 14 March 2011: Neither coalition dharma nor plain ignorance explain why Prime Minister

Manmohan Singh has been actively promoting Rajat Gupta’s various ventures in India, particularly ex-

Mckinsey boss’s bid to recast India’s healthcare and education.

Why would the Prime Minister of a country be so shockingly indulgent with a man who represents the

heart of corporate America and is a globally-connected private equity investor?

So indulgent that Manmohan’s principal secretary (MoS rank) works under Gupta in an organization that

gives the wily businessman a free run of India’s public health administration.

Manmohan’s PS might soon be working under a man convicted of fraud!

Here’s a blow-by-blow account of how Manmohan used his office to promote Gupta’s ventures at a

huge cost to the public, disregarding the law, rules, regulations, proprieties, and anything else that came

in the way.

PMO at Rajat Gupta’s disposal

Manmohan Singh not only blessed American PE investor Rajat Gupta’s various ventures in India, most

notably Public Health Foundation of India (PHFI) and Indian School of Business (ISB), but also put at

Gupta’s disposal the services of the PMO, Planning Commission, and the ministries of health and HRD.

Manmohan had the finance ministry sanction a grant of Rs 65 crore to PHFI’s initial corpus and approved

the appointment of four senior bureaucrats, including his principal secretary TKA Nair, to the governing

board of PHFI, which is chaired by Gupta.

Describing itself as an ‘independent foundation’ and a ‘public-private partnership’ (PPP), PHFI has so far

received over Rs 100 crore in budgetary support from the Centre.

There is no information in the public domain on how this money is being spent. Since the launch of PHFI

in March 2006, neither the private partners nor the government have published any report on the

organisation’s finances.

Even the PPP agreement signed between the two sides for creating PHFI has not been made public.

Despite receiving hundreds of crores of rupees in grants, subsidies and large parcels of prime land from

the central and state governments, PHFI does not submit itself to the RTI Act, 2005, or an audit by the

CAG.

PHFI’s corpus of funds reportedly holds over Rs 400 crore.

Manmohan’s blessings and active support has enabled Gupta’s PHFI to open four ‘Indian institutes of

public health (IIPHs)’, which get a steady stream of government-funded students despite having no

recognition or accreditation from any statutory authority in India for any of its courses.

For an organization whose governing board is dominated by people representing big business,

Manmohan has set a sweeping public policy agenda of “building new world-class institutions of public

health, strengthening existing institutions, both within the government and outside, and conducting

research to enable appropriate policy formulation”.

Manmohan’s support has helped PHFI insinuate itself into India’s public health administration as a

powerful policy-influencing body.

Manmohan has been equally supportive of Hyderabad-based Indian School of Business (ISB), where

Gupta is founder-chairman and managing director emeritus.

Manmohan played the key role in bringing ISB promoters and the Punjab government together for

building a new campus of the B-school at Mohali, where the super-rich promoters of the project have

been given 70 acres of prime land, whose market price is estimated to be Rs 105 crore, on a 99-year

lease for Rs one per acre!

PM admits Gupta’s corporate network into public policy!

Manmohan Singh launched and blessed PHFI at a gala function in Delhi on March 28, 2006.

Rajat Gupta, a Harvard alumnus, had reportedly conceived PHFI over a decade ago along with Barry R.

Bloom and Peter Berman of Harvard School of Public Health (HSPH).

Bloom is the dean of HSPH and Berman now works for the World Bank.

PHFI is seeking to set up 8-10 institutes of public health in India and to introduce public-private

partnership (PPP) in formulation of public health policy, education/training, and service delivery.

On 06 July 2006, three months after the launch of PHFI, the Cabinet Committee on Economic Affairs

(CCEA), chaired by Manmohan, approved “one time contribution” of Rs 65 crores to the PHFI initial

corpus of Rs 200 crore.

Bill & Melinda Gates Foundation (or BMGF whose ‘global development programme advisory panel’ is

chaired by Rajat Gupta) would contribute an equal amount, and Rs 80-90 crores were being generated

from some high net worth Indians, a government notification had then said.

Ten of the 28 members of the PHFI governing board, including the chairman, represent

business/corporate entities (Mukesh Ambani, Shiv Nadar, Punendu Chatterjee, Harpal Singh, Uday

Khemka, Rajat Gupta, Raj Mitta, RA Mashelkar, Gautam Kumra and Kiran Malhotra).

Seven members represent non-profit/voluntary organizations, some of which like BMGF have roots in

business/corporate entities (Ashok Alexander, Kathy Cahill, David Lynn, Lincoln Chen, Mirai Chatterjee,

Ravi Narayan and Rohini Nilekani), four academia (AK Shivakumar, Amartya Sen, Anil Seal and James

Curran), two multilateral institutions (Tim Evans and JVR Prasada Rao), and one has come from a central

government-run medical institute (K Srinath Reddy).

The central government is represented by four bureaucrats whose clear mandate is to act as

‘facilitators’ (TKA Nair, Montek Singh Ahluwalia, Sujatha Rao and RK Srivastava).

At least 10 members of the PHFI board are either foreigners or NRIs, including chairman Rajat Gupta, a

US citizen since 1984.

Twelve of the 28 members of PHFI board belong primarily to an organization that is not Indian or is

headquartered abroad. While three foreign universities have been represented on PHFI board, no Indian

university has been given a place.

Nor is there representation on PHFI board of National Institute of Health and Family Welfare or All India

Institute of Hygiene and Public Health or any of the public institutions under Indian Council of Medical

Research (ICMR) and Council of Scientific and Industrial Research (CSIR).

PHFI lists 36 foreign universities/institutions as its ‘partners.’ Of the Indian institutions, ‘partnership’ has

been conferred on only three.

Can’t you even smell the sleaze, Mr. PM?

Manmohan nominated TKA Nair, his principal secretary (MoS rank), to the PHFI board, so that he could

directly intervene in sorting out the problems that the foundation might face.

So much has been Manmohan’s liking for Gupta that his PS continued to be on PHFI’s board under the

chairmanship of Gupta even after it was reported in April 2010 that the US Securities and Exchange

Commission was examining the possible role of the former Mckinsey boss in causing insider trading of

Goldman Sachs stock.

Nor has Manmohan voiced, since then, the need for Gupta to step down from PHFI board.

Notably, Gupta’s exit from various organizations had begun as far back as 19 March 2010 when he had

to resign his Goldman Sachs directorship after learning that the US government prosecutors suspected

him of complicity in insider trading of Goldman shares allegedly committed by his old friend and Galleon

Group founder Raj Rajaratnam.

The prime ministerial faith in Gupta has remained intact even after the former Mckinsey boss was

formally charged on 01 March 2011.

Since then up to 10 March, Gupta has had to resign from five more organizations, including P&G,

another American company whose stock was traded on the tips allegedly leaked by Gupta, and EMRI, a

PPP that provides ambulances for medical emergencies in several Indian states.

(On 12 March 2011, Gupta felt compelled to take a leave of absence from his own baby –New Silk Route

Partners, the $1.4 billion private equity firm, where he is founding general partner and chairman.)

Companies that dumped Gupta may have been sensitive to their public image; the Prime Minister of

India, however, does not seem to think that Gupta’s alleged involvement in one of the largest insider

trading cases in US history is enough of a reason for him to distance himself from the accused!

Manmohan’s PS continues to work under the ‘able’ guidance of Gupta to recast India’s healthcare

system. Gupta continues to be a member of the Prime Minister’s global advisory council for overseas

Indians.

Manmohan’s steadfast support is the most important reason why Gupta continues to hold on to the

boards of Public Health Foundation of India (PHFI) and Indian School of Business (ISB).

Doctor’s orders

Manmohan Singh also approved the appointment of K. Srinath Reddy, the head of his medical team, on

a five-year secondment from AIIMS, as PHFI president.

It’s most unlikely that Reddy’s secondment from an ‘institution of national importance’ to PHFI was ever

duly approved by the AIIMS governing body and was in compliance with AIIMS Act, 1956.

Reddy is Gupta’s right hand man whose AIIMS background is used by the wily businessman to build

credibility and legitimacy for PHFI.

Plan panel, ministries at Gupta’s service

In order to lend Planning Commission’s long-term policy-formulation support to PHFI’s PPP agenda,

Manmohan nominated on the PHFI board Montek Singh Ahluwalia, plan panel’s deputy chair (MoS rank)

who is a well-known PPP evangelist.

The ministry of health and family welfare was told to nominate its Secretary as well as the Director

General Health Services on the PHFI board and provide smooth ‘facilitation’ to the PHFI’s objectives.

(The health ministry has also been generous with money, spending crores of rupees of funds available

under National Rural Health Mission on supporting PHFI’s various programmes.)

Since turning up at the PHFI launch function, HRD minister Kapil Sabil too has been providing his

enthusiastic support to the foundation’s objective of promoting PPPs in education.

‘Health policy? It’s all yours’

Launching PHFI in March 2006, Manmohan gave PHFI virtual carte blanche to recast the entire public

health system in the country. He called on PHFI to develop a “new cadre” of “public health managers”

and “invest in capacity-building in existing public health institutions across the country.”

He encouraged PHFI to influence public health policy at the state level, saying: “We also hope that our

state governments will find it beneficial to partner your initiative to introduce greater levels of expertise

into their public health system.”

Manmohan told PHFI “to develop an Indian agenda both in academics and research,” and wished that

the foundation will become a template for forming PPPs in other social-sector programmes run by the

government.

“The setting up of the PHFI presents a unique opportunity to develop innovative models of public-

private partnership in major social-sector programmes,” he said.

Such prime ministerial faith in an organization chaired by an American private equity investor and

dominated by foreigners and corporate honchos!!

Manmohan’s links with Gupta

Manmohan’s association with and liking for Rajat Gupta goes back several years. “He (Gupta) had an

open door to Prime Minister Manmohan Singh’s office,” wrote Financial Times on 08 March, 2011.

On 16 August 2005, Manmohan gave Gupta, then a director in McKinsey's Stamford (Connecticut) office,

a wide-ranging, heart-to-heart interview in which he talked about the need to attract about $150 billion

of investments in infrastructure through privatization and PPPs.

On 27 September 2006, six months after he launched PHFI, Manmohan, on a visit to Mohali to lay the

foundation of a government institute, expressed his “delight” at the signing of an MoU between PHFI

and the state government for building the first of the few planned Indian institutes of public health

(IIPHs).

(The project has been in limbo after the Supreme Court set aside acquisition of land at the project site

by the state government.)

Visiting the ISB campus in Hyderabad on 05 December 2006, Manmohan praised Gupta, other

promoters and the state government for building the B-school as “a fine example of public-private

partnership.”

On 23 October 2007, Manmohan delivered the keynote address at Mckinsey’s board meeting, praising

Gupta “for the initiative he took to set up a business school in Hyderabad, a centre of excellence, and

more recently to create the PHFI”.

He also praised Mckinsey “for the initiatives it has taken in India to work with state governments” and

stressed the need to form PPPs for “the successful implementation of our social and human

development initiatives.”

On 01 June 2007, Manmohan received from Gupta and some CII representatives a Mckinsey report on

Bharat Nirman, the centrally-sponsored scheme for rural India, which recommended sweeping changes

in power and irrigation policies.

Manmohan nominated Gupta to his ‘global advisory council on overseas Indians,’ which was notified on

02 January 2009. On 24 November 2009, Gupta was one of the guests invited to President Obama’s first

state dinner to welcome Manmohan Singh in Washington.

Education as a bridgehead, as a market

Gupta-led PHFI sees education and training as its entry into India’s healthcare sector and a strategy to

influence all levels of institutional decision making. In fact, corporate groups like Fortis, whose Harpal

Singh sits on the board of PHFI, have long been lobbying for an unfettered access to medical education

‘market’.

PHFI conducted a study, led by World Bank’s Peter Berman, on human resource needs of India’s

healthcare sector. The study prescribes for the government a framework for formulation of HR policy in

healthcare.

Rather than slog over training of grassroots health workers, Gupta wants PHFI and Indian institutes of

public health (IIPHs) to target the lucrative end of the training market, i.e. conducting ‘public health

management’ courses – in line with the Prime Minister’s advice – to create ‘public health managers’.

“We can’t train six lakh ASHAs (Accredited Social Health Activists who work at the grassroots) required

under NRHM, but we can train people who will train ASHAs,” Gupta had told this writer in 2007.

Gupta’s ‘world class’ schools con the public!

IIPHs’ one-year post-graduate diplomas (public health management; biostatistics and data management;

clinical research, etc.), short-term programmes and workshops run on public funds.

It admits to its flagship post-graduate diploma courses primarily ‘in-service candidates nominated by the

government’ – and charges the government a fee of Rs 2.5 lakhs per candidate. ‘Self-sponsored

candidates’ are also welcome as long as they can pay a fee of Rs two lakhs for the one-year post-

graduate diplomas.

Being a ‘world-class’ institution of Manmohan’s dreams, PHFI does all admissions on the basis of

“recommendation letters,” not tests.

Similarly ‘credible’ methods are employed in hiring people.

PHFI admits that none of its courses has been recognized or accredited by MCI, AICTE or any other

statutory regulator, but are “recognized by the health ministry under NRHM.”

(PHFI may not have been accredited itself but it intends to accredit all other public health institutions in

India. PHFI’s “charter”, given on its website, includes the objective, “Establishing an independent

accreditation body for degrees in public health which are awarded by training institutions across India”.)

Ironically, PHFI itself only admits candidates with “a relevant post-graduate degree from an accredited

institution” in its studentship programme for preparing its ‘future faculty’!

Under this programme, candidates “with substantial work experience” are usually sent to study for a

year at one of the “30 eminent schools of public health in the USA, the UK, Europe, Canada and

Australia,” and, upon completion of the studies, are “expected” to work with PHFI for three years.

Doctoral programmes prescribe five years of compulsorily working with PHFI with one programme

requiring the signing of a “bond”.

Such is the kind of ‘public-private partnership’ that Manmohan Singh and his blue-eyed boy have been

promoting! It involves assuming the airs and graces of a “world-class” institution while using the power

wielders in the government to corner public resources – both financial and human.

It’s not excellence and fair play that is nurturing Rajat Gupta’s public health baby; it’s his connections,

vast public resources, “recommendations letters” and “bonds”.

In case you wonder about the professional value of the courses offered by PHFI’s foreign partners, rest

assured; the health ministry conveniently issued a notification on 07 March 2008 recognizing “all post

graduate medical qualifications” awarded in USA, the UK, Canada, Australia and New Zealand by

including them in Schedule 3 of the MCI Act, 1956.

With five years of glorious history behind it, PHFI has recently approached the government with a draft

bill to try to get a “central university status,” which will give it an unchallenged right to access public

funds to set up campuses across India and recast the country’s healthcare system to suit its agenda.

Manmohan helps Gupta siphon off public resources

While the July 2006 approval of the Prime Minister-chaired CCEA had been for a “one-time

contribution” of Rs 65 crore to PHFI’s initial corpus, the government allocated additional money to the

foundation – Rs 36.15 crore in annual plan for 2007-08 – without an explanation.

It’s not clear if more money was allocated in subsequent years.

There is no information in the public domain on how Rs 65 crore and subsequent allocation of Rs 36.15

crore have been spent.

For an organization almost entirely supported by public funds, which are being spent on government

employees made to study its unaccredited courses, PHFI has been receiving lavish grants and free land

from state governments for setting up IIPHs under ‘PPP’ – thanks to Manmohan’s open encouragement.

The ‘PPP’ model usually employed by PHFI is to get the state government to provide about 40 acres of

land free of cost and also bear 20-50 per cent of project cost of Rs 140 crore per institute (excluding the

cost of land).

Andhra Pradesh government reportedly provided PHFI with 43 acres of land in Rajendra Nagar area of

Hyderabad free of cost and Rs 30 crore in financial grant for setting up IIPH (Indian institute of public

health).

Gujarat government provided 50 acres in Gandhinagar and Rs 25 crore in grant. Orissa government

provided 40 acres near Bhubaneswar, though it’s not publicly known whether it also made a financial

grant.

Delhi government reportedly spent Rs 13.82 crore on acquiring 51.19 acres of Gram Sabha land in

Kanjhawala village, which is home to an ongoing farmers’ movement against arbitrary land acquisition;

its financial grant, if any, for the IIPH project is not publicly known.

For IIPH-Mohali, which Manmohan Singh personally blessed but is currently stuck after a land dispute,

Punjab government had agreed in September 2006 to share 50 per cent of the project cost of Rs 140

crore and provide 35 acres of land free.

If the project had gone through as planned, the state government’s contribution would have been over

Rs 100 crore, taking into account the market price of Rs one crore per acre of land at the Mohali project

site prevailing then.

Gupta’s ‘philanthropy’ gives Punjab a kick in the belly

With Manmohan’s intermediation, another of Gupta’s educational enterprises planned in Mohali is

progressing at a huge cost to the state and its people.

The debt-ridden Punjab government gave 70 acres of prime land in Mohali, whose market price was Rs

105 crore, at a token rate of Re one an acre on 99 years’ lease to the cash-rich ISB and the wealthy

promoters of its second campus – Sunil Mittal (Bharti Enterprises), Sunil Kant Munjal (Hero group),

Analjit Singh (Max), and Atul Punj (Punj Lloyd).

While the state government reportedly acquired the land at Rs 63 lakh an acre, its market value was Rs

1.50 crore per acre at the time of acquisition.

Around the time Punjab government approved Rs 105 crore largesse to the corporate coterie behind

ISB, it also decided to exact property tax from educational institutions outside municipal limits by

enacting the Punjab (Institutions and other Buildings) Tax Act, 2010.

“Their intention is clear. Hundreds of crores of subsidy for the outsiders will be paid out of the pockets

of the local educational institutions,” J.S. Dhaliwal, president of Punjab Unaided Technical Institutions’

Association (PUTIA), which represents AICTE-approved, private management, engineering and other

institutions, was quoted as saying in an IANS report of 14 August 2010.

“Other (private) institutions in Punjab purchase land at commercial rates. Why is ISB an exception?”

Dhaliwal demanded to know.

The PUTIA members must comply with the state government guidelines that cap the fees they can

charge students at Rs 1.25 lakh per annum. No such rule can even be imagined to be applied to ISB,

which charged Rs 18 lakh and 70 thousand for its one-year post graduate programme in management

(PGP) for 2010-11 (including compulsory items like accommodation and meals).

In the academic year 2010-11, ISB’s Hyderabad campus collected about Rs 100 crore from about 560

students enrolled in PGP; then there were bagfuls of more money to be collected from those enrolled in

short-duration executive education programmes whose annual enrollment runs into several hundreds

and one-year post graduate programme in management for senior executives (PGPMAX), which has a

fee of Rs 25 lakh 20 thousand (payable over a 14-month period in five instalments).

For academic year 2011-12, ISB Hyderabad campus will charge Rs 21 lakh per PGP student.

If 2011-12 fee per student (Rs 21 lakh) were to be collected from 280 PGP students that ISB website says

it plans to enroll at Mohali branch in 2012, it will rake in Rs 58 crore and 80 lakh from the new campus in

the first year.

More fees will be collected from 750 people ISB expects to enroll in executive education programmes at

Mohali campus.

Interestingly, ISB, which Rajat Gupta counts among his “philanthropic” activities in India, controls 260

acres in Hyderabad of which it has utilized no more than 80 acres in its decade-long existence!

In a column titled, ‘Essential principles for successful philanthropy,’ which he wrote for Mint of 06 March

2011, Gupta explains his philanthropic philosophy: “Very often, people ask me how I am able to raise

such significant philanthropic donations for a variety of initiatives (such as ISB, American India

Foundation, PHFI, Urban Development Institute, and so on) when these projects are not single-donor led

and governed with their name on the initiative. I firmly believe in the Gandhian philosophy that says, “If

the cause is just, means will come”.

Since Punjab government also believes in the same Gandhian philosophy, it used the Land Acquisition

Act (which is meant to be used only for a public purpose) to drive farmers out of their land to make way

for Gupta’s ‘humanitarian project’.

Having had the first hand experience of Gupta’s ‘philanthropy,’ “several farmers’ organisations have

begun consulting legal experts to ascertain whether allotting government-acquired land to a privately

managed institution is a violation of the Land Acquisition Act; the farmers insist that the government

could not allot the land to a private body,” writes Vikas Kahol in Mail Today of 17 August 2010.

“ISB is being established at the cost of farmers. Did Punjab chief minister think of investing money in

improving government schools? What will the common man gain from an ISB in Mohali?” Balbir Singh

Rajewal, president, Bharatiya Kisan Union (Rajewal), was quoted as saying.

“The public deserves to know how the land acquired from farmers was later given to a private

organization. ISB is a rich organization. Why did it need charity from the state?” HC Arora, a Chandigarh-

based social activist, who also belongs to Punjab RTI Activists’ Federation, was quoted as saying.

Manmohan creates ‘revolving door’ for Rajat Gupta & Co

With Manmohan’s blessings and approval, the government has used a host of measures to lend

legitimacy and prestige to PHFI, boost its authority in the country’s health administration, and allocate

public funds to serve its interests.

One of these measures is the well known ‘revolving door’ tactic – appointing Gupta, K. Srinath Reddy,

other board members and PHFI-sponsored-or-sympathising people on important government

committees and encouraging key government officials to work for PHFI on secondment.

For example, Rajat Gupta and Ashok Alexander, who sits on PHFI board as the director of Bill and

Melinda Gates Foundation’s (BMGF’s) India AIDS Initiative, were appointed on the ‘international

advisory panel on NRHM’ chaired by the health minister.

PHFI president K Srinath Reddy alone now sits, as a member or chair, on at least seven crucial

committees of the government, seeking to shape policies that will suit the PHFI’s network of private

interests.

Reddy and AK Shivakumar, a member of PHFI board, have been appointed on ‘mission steering group’ as

well as ‘empowered programme committee,’ the highest policy making and steering panels,

respectively, under National Rural Health Mission (NRHM), the scheme that is the primary means of

supporting PHFI with public funds.

From the government side, Tarun Seem, who worked for five years as Director NRHM, joined PHFI.

Reddy and Shivakumar (who is also a visiting professor at Gupta’s ISB) are also present in the Central

Council of Health and Family Welfare as well as the governing body of National Health Systems Resource

Centre, which has been described as a ‘technical support institution’ for NRHM.

In October 2009, the health ministry appointed Reddy as the president of National Board of Examination

(NBE), which conducts post-graduate and post-doctoral medical examinations and awards degrees

(equivalent to university degrees) in existing and upcoming specialties.

The NBE accredits medical institutions for the award of its postgraduate degrees (such as DNB) and

conducts screening tests for foreign medical graduates.

(So Reddy is in a great position to not only help private healthcare providers like Fortis, which is

represented on PHFI board, in getting their hospitals recognized for award of post graduate degrees, but

can also endorse the qualifications of the students returning from PHFI’s 36 foreign partnering

institutions. As long as Manmohan is behind him, a serious conflict of interest in such an appointment is

a trivial matter.)

In June 2009, the health ministry appointed Reddy on the ‘Task force for setting up of the National

Council for Human Resources in Health,’ which has since drafted a bill to set up such a council.

Manmohan approved the October 2010 formation of Planning Commission’s high-level expert group on

universal health coverage, to be chaired by Reddy and with Shivakumar as one of the 15 members.

Earlier, in May 2006, Shivakumar and Analjit Singh of Max group, who is partnering with ISB in setting up

Max India Institute of Healthcare at the upcoming ISB campus in Mohali, were appointed on Planning

Commission’s ‘taskforce on planning for human resources in the health sector’.

To lend an appearance of legitimacy to PHFI’s various projects, public institutions like AIIMS, National

Institute of Health and Family Welfare, All India Institute of Hygiene and Public Health, and Mahatma

Gandhi Institute of Medical Sciences-Wardha are being commandeered to support and partner with

PHFI.

AIIMS, for example, was made a partner in ‘centre of excellence for the prevention and control of

cardio-metabolic diseases in South Asia,’ which PHFI launched in April 2010.

Grave conflicts of interest

PHFI’s business lineage makes its formation and activities riddled with fundamental conflicts of interest.

For instance, its governing board has Harpal Singh of the Fortis group, which used to own pharma giant

Ranbaxy and now runs hospitals across India. Fortis also wants to be a big medical and nursing

education provider. It has direct interest in shaping government’s health policy.

PHFI does not think it problematic to be forming relationships in crucial public health matters with

pharmaceutical companies.

In October 2009, PHFI tied up with Pfizer, US-based pharma company, “to work together in the areas of

public health, medical research and education”.

In February 2011, PHFI signed an MoU with Confederation of Indian Industry (CII) “for policy and

advocacy initiatives on key public health issues where India Inc can play a major role”.

Given PHFI’s genetic makeup, it’s naive to ask questions like: (a) How is the presence of corporate

representatives on PHFI board affecting its priorities and decisions? (b) How will industry

representatives on PHFI board, like Mukesh Ambani, view industrial pollution, particularly where they

share the blame?

The answers are well known.

Private deals behind ‘philanthropy’

With Manmohan Singh helping to create an aura of “philanthropy” behind him, Rajat Gupta is seeking to

turn education into a huge profit-yielding business, in violation of the law of land which does not allow

commercial organizations, let alone private equity (PE) firms, to run educational institutions.

Apart from running and expanding his “non-profit”, money-spinning ISB and PHFI with generous cash-

and-kind help from the government, Gupta has been using New Silk Route Partners (NSR), his $1.4

billion (Rs 6,300 crore) private equity firm, to look to control various kinds of educational institutions in

the country.

He is reportedly close to invest $70 million (Rs 315 crore) in Hyderabad-based Sri Chaitanya educational

group, which is one of the largest networks of private schools and colleges in India.

Sri Chaitanya runs about 160 institutions, mostly in Andhra Pradesh.

Gupta and other corporate investors flout the regulations by getting the non-profit managements of the

educational institutions to outsource most of the work to their profit-making companies; the trusts or

societies thus pay fees to the corporate investors for providing various services.

This ‘two-tier arrangement’ invariably results in violations of laws governing public trusts/societies and

the Income Tax Act, which mostly go unpunished due to the connivance of the regulatory authorities.

Gupta has violated the law by founding and investing in Vienova, a Gurgaon-based company that runs a

chain of five schools in western Uttar Pradesh and is aiming to expand its operation to over 50 schools in

the next three years. Vienova also provides online tutoring services.

It does not occur to the innocent Prime Minister, who is providing unstinted support and

encouragement to Gupta, that all PE investments seeking a backdoor entry into education are

essentially illegal and should be discouraged.

Nor does it occur to the unsuspecting ‘Caesar’s wife’ that there is a glaring and grave conflict of interest

between Rajat Gupta’s government-supported-and-subsidized educational enterprises, namely ISB and

PHFI, and his outright illegal PE activities in the education sector.

Gupta’ liaison with a man in trouble

Gupta has been named by a US prosecutor as a “co-conspirator” with Raj Rajaratnam in Galleon hedge

fund insider trading case.

Rajaratnam, who founded and headed hedge fund management firm Galleon Group, is accused of using

his network of contacts, including Gupta and Anil Kumar (another Mckinsey executive), to track down

non-public information which he then used for trading in securities, raking in profits worth $45m.

Many of Rajaratnam’s erstwhile friends and associates, including Kumar, have already confessed to

wrongdoing. Of the 26 people that the US Attorney’s office has charged in connection with Galleon, 19

have pleaded guilty. Gupta is charged with passing confidential information to Rajaratnam on

companies including Goldman Sachs and P&G.

Gupta has had a long association with Rajaratnam. Their business partnership goes back to 2006, when

Gupta joined Rajaratnam and two other partners, including former Goldman Sachs Asia chairman Mark

Schwartz, to form Taj Capital Partners. The PE firm aimed to put $2 billion, primarily into India and other

South Asian investments, half of it through a hedge fund run by Rajaratnam.

Subsequently, Rajaratnam withdrew from the deal when the other principals of the firm, now called

New Silk Route Partners (NSR), decided against being a hedge fund. However, Rajaratnam continues to

have an investment in the fund managed by NSR, according to media reports.

Rajaratnam had also served on the council of trustees of American India Foundation, which Gupta had

founded. Both socialized together and attended parties hosted by AIF along with their wives.

Gupta and Rajaratnam are also said be close to US’ Democratic Party, counting friends among the high

and mighty.

Gupta’s Mckinsey and ISB pal pleads guilty

Gupta has also had a long association with Anil Kumar, who pleaded guilty in January 2010 in Manhattan

federal court to securities fraud and conspiracy in the Galleon case.

Kumar, who worked for Mckinsey under Gupta’s leadership and later joined his former boss in setting

up ISB, confessed to receiving $1.75 million from Rajaratnam in exchange for illegally providing tips on

Mckinsey’s client companies.

Prosecutors told the court how Kumar arranged to have an overseas entity receive payments from

Rajaratnam through a Swiss bank account. The money was then invested in Galleon under the name of a

worker in Kumar’s household.

Kumar made $2.6 million in illicit profits from this arrangement, including the $1.75 million paid by

Rajaratnam.

During Gupta’s time at McKinsey, Kumar headed an operation to outsource high-level McKinsey

research to India.

“They (critics) say Mr Gupta worked with Mr Kumar to corner private and government business and gain

favour in Asia’s third-largest economy. The two operated as a forceful double-act to secure business for

McKinsey, win access in Washington and build a brotherhood of donors around the Hyderabad-based

ISB and a handful of social initiatives,” wrote Financial Times on 08 March 2011.

Kumar had to resign from ISB board in January 2010 after pleading guilty in the Galleon case. Kumar’s

wrongdoing and now Gupta’s alleged involvement in corporate corruption have been described as part

of “ignominious hat-trick” for ISB by BS Raghavan, writing in The Hindu Business Line of 07 March 2011.

The first to deal a blow to the reputation of the elite B-school was M. Ram Mohan Rao, the ISB Dean, no

less, who had to resign in January 2009 from his post after details emerged about his role in the Rs 7,500

crore Satyam fraud as an independent director of the IT company and chairman of its audit committee.

ISB also has the dubious distinction of B. Ramalinga Raju, Satyam Computer chairman and the prime

accused in one of the biggest corporate frauds in India’s history, once serving on its executive board.

Rajat Gupta’s “centre of excellence” – Manmohan Singh’s 23 October 2007 description of ISB – has

consistently been getting linked to corruption and fraud.

And the Prime Minister of India has consistently been promoting Gupta’s bid to set up more such

centres of excellence with huge amounts of public money and resources – be it his personal intervention

in getting ISB-Mohali project off the ground or his open and active support to turn a private association

put together by Gupta into a central policy-making authority in public health.

Gupta’s PE firm to buy big into India

After stepping down from Mckinsey in 2007, Gupta has been spending most of his time striking private

equity deals in India.

He has so far invested in about 15-20 companies, including Coffee Day Resorts, Ascend Telecom

Infrastructure, Reliance Infratel, INX Media, KS Oils, Destimoney, Rolex Rings, Aster, and Ortel

Communications.

Gupta has also invested in a pharma company, Chandigarh-based Nectar Lifesciences – another instance

of direct conflict of interest between his business ventures and his Prime Minister-supported campaign

to control India’s public health policy.

New Silk Route Partners (NSR), Gupta’s $1.4-billion private equity firm, has let it be known that the 01

March charge-sheeting of their boss will have no impact on its operations.

Sure enough, the day US SEC brought charges against Gupta, NSR announced the merger of Ascend

Telecom Infrastructure, an NSR-owned telecom tower operator, and India Telecom Infra Ltd (ITIL). With

about 4,000 towers across India, the merged entity will have a nationwide footprint.

It was reported on 04 March 2011 that NSR is expecting to strike deals worth $150 million (Rs 675 crore)

in the coming weeks, including a $70 million (Rs 315 crore) investment in Sri Chaitanya educational

group and $40 million (Rs 180 crore) in restaurant chain Ohri's, both Hyderabad-based.

Gupta colludes with friends to control bank

In an order dated 12 October 2009, RBI found that Rajat Gupta acted illegally and in collusion with other

foreign investors, including Ramesh Vangal, in buying shares in Tamilnad Mercantile Bank, a Tuticorin-

based bank that has traditionally been controlled and patronized by the Nadar community.

(Gupta and Vangal had jointly founded in the mid-1990s IT firm Scandent Group.)

Gupta and other investors acquired a 24.92 percent stake in the bank by buying shares from the four

companies belonging to C. Sivasankaran of the Sterling group.

Banking regulations require prior RBI approval for any trade in five per cent or more of the equity of a

private bank. If the shares change hands without regulatory clearance, RBI has the power to cancel

voting and dividend rights on the bloc of shares.

A complaint from C Kanagaraj, a shareholder, led to an RBI investigation into the share transfer, which

concluded that Gupta and other investors were “acting in concert”.

“The investors had a clear understanding and co-operation among themselves and had a common

purpose of obtaining substantial acquisition of shares/ representation on the bank’s board and thereby

gain control of TMB,” the RBI found.

In its order dated 14 October 2010, the Bombay High Court issued a directive to the RBI to decide on the

transaction in question by February 2011. The court also directed the bank not to take any major policy

decision until the RBI’s decision.

Insider trading again!

Gupta’s another connection with C Sivasankaran is through KS Oils, the Madhya Pradesh-based edible oil

company, which, according to media reports, was being investigated in December 2010 by the

Intelligence Bureau (IB) for share price rigging and insider trading.

NSR is represented on the board of KS Oils by Vivek Sett. Sivasankaran had purchased a block of shares

of from Citi Venture Capital, another PE investor.

Notably, the income tax department had raided KS Oils offices across Madhya Pradesh in March 2010 on

reports of massive tax evasion.

Gupta Pak link: national security issues

Manmohan Singh’s special relationship with Rajat Gupta also has national security implications

considering that New Silk Route Partners (NSR) has Abdul Hafeez Shaikh, Pakistan’s finance minister, as

a founding General Partner, and substantial investments in the neighbouring country.

So far nothing has been heard as to how the government has been treating NSR’s growing investments

in India, such as those in the telecom sector, from national security angle.

In June 2010, Augere Mauritius, in which Gupta’s NSR is one of the investors, won a licence to operate

broadband wireless access (BWA) services in Madhya Pradesh.

Interestingly, there was no report of the home ministry raising national security concerns despite the

fact that Augere operates in Pakistan, providing ‘Qubee’ broadband internet services in Islamabad,

Rawalpindi, Lahore and Karachi. Augere launched the service in Pakistan in July 2009 and in Bangladesh

in October 2009.

The same ministry had objected to UAE-based Etisalat acquiring a majority stake in Swan Telecom on

the ground, among others, that the former had substantial presence in Pakistan.

NSR’s other investments in Pakistan include Beaconhouse School System, which is controlled by Lahore-

based Kasuri family whose most prominent member is former Pakistan foreign minister Khurshid

Mahmud Kasuri.

Beaconhouse claims to be one of the world’s largest primary and secondary education (K-12) chains,

with schools in Pakistan, the UK, Oman, the UAE, Bangladesh, Malaysia, Indonesia, the Philippines and

Thailand.

Aster Private Ltd, another NSR company, has dealings with Huawei, the Chinese telecom company that

had prompted the home ministry to raise national security concerns in the Etisalat and other cases.

Gupta pulls strings in the financial capital

Being Manmohan’s blue-eyed boy, Gupta also has the confidence to influence India’s most important

financial regulators.

In June 2008, Sberbank, Russia's largest state-run bank, inducted Gupta in its supervisory board, making

him the first ever foreigner to be so appointed. Sberbank also made Gupta its highest-paid director with

a $524,700 paycheck for 2009. (The maximum that other directors got was $112,200.)

Reason: Gupta’s connections in India which Sberbank brought to bear on its plan to enter Indian banking

sector in a big way.

Successfully so. In August 2009, Sberbank received clearance from the RBI for opening a full-service

branch in New Delhi.

Mission accomplished, Gupta quit the Sberbank supervisory board in June 2010 but remains a ‘strategic

adviser’ to the bank.

(End of Matter)

(This investigation is based on information available in public domain. All facts and figures cited in this

article can be cross-checked with the information available in public domain. The writer is a Delhi-based

journalist and takes full responsibility for what he has written.)