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Does Yadav arrest signal a new era for India?

The conviction of an important Indian politician has some commentators speaking breathlessly of a renewed commitment to fight graft in India. If only it were true. In the land that invented chess, however, the only thing that has changed is the cost to play the game.

While the tale is a little twisted, these are exactly the tea leaves foreign businesses need to discern to assess India’s economic prospects in the coming years.

Lalu Prasad Yadav, above, the former chief minister (top state government official) in the perpetually benighted state of Bihar in Eastern India, has been facing corruption charges since 1996. Mr. Yadav was alleged to have helped siphon off more than $331 million in food, drugs and other items meant to feed and support what turned out to be entirely fictitious herds of cattle. He has been sentenced to five years imprisonment and a fine, along with a number of other members of his administration and another former chief minister of the state.

The convictions are potentially a watershed in Indian politics. Mr. Yadav has been a colorful and flamboyant representative of the lower castes in a state renowned for mineral wealth and exploitation. But his conviction is more about conventional political calculation than any new-found probity.

Mr. Yadav’s regional party the RJD is a potential coalition partner for either the ruling Congress Party or the Bhartiya Janta Party (“BJP”) who are positioning for elections expected by next May. Prosecutions for corruption are usually driven by charges brought by the Central Bureau of Investigation (India’s FBI) and are commonly thought to be politically motivated in many cases. When elections approach, charges can be pushed, dropped or held in abeyance. Mr. Yadav’s case had been on the backburner since 1996, for instance.

This typical game was upended when the Supreme Court recently struck down provisions of a law that allowed sitting members of parliament or candidates for elections to retain their seats or contest for candidacy if their criminal convictions were on appeal. An unusually large number of Indian parliamentarians have been convicted of crimes; the clogged court system means that appeals effectively never are resolved. To prevent potential political partners from being knocked out by this development, the ruling Congress coalition pushed an ordinance that would effectively overrule the Supreme Court decision and allow convicted criminals to retain their seats or contest elections.

This was all bad enough for a coalition government beset by corruption. However, when Rahul Gandhi, the otherwise media-wary scion of the ruling Gandhi family, burst into a press conference and criticized the new ordinance, the situation descended into farce. Prime Minister Manmohan Singh was in the U.S. to enjoy what was expected to be his valedictory lap before elections. Instead, the son of his political boss cut him off at the legs in the most embarrassing manner possible.

The upshot: the Supreme Court prohibition on criminals keeping their parliament seats stands, for now. Lalu Prasad Yadav now faces the lost of his parliament seat, five years in prison and an uncertain political future.
Have things changed, then? While Yadav’s conviction is a promising development, there is little reason to think it motivated by anything more than election-year realpolitik. 

Optimists should look South to see if this is really a new game. A regional strongman in the state of Andhra Pradesh (where Hyderabad is located) was released despite charges of significant corruption involving natural resource allocation. He is the son of a Congress leader who expired, like so many other Congress members, in an aircraft accident. In Tamil Nadu a powerful businessman with telecom and broadcasting interests was finally charged by the CBI. Whether these charges are pursued vigorously before the next election, or allowed to linger for nearly 20 years like the charges against Lalu Prasad Yadav, will probably depend as much on the polls as it does the evidence.


Russell Stamets is a Contributing Editor of the FCPA Blog. He was the first non-Indian general counsel of a publicly traded Indian company and was general counsel for a satellite broadcasting joint venture of a large Indian business house. He can be contacted here.

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