When Crime Pays

by Milan Vaishnav

  For instance, the ECI had for years been pursuing a case against former Maharashtra chief minister Ashok Chavan for filing false election expenditure paperwork. According to the ECI’s allegations, Chavan’s disclosures omitted the fact that he paid journalists to write positive news articles about him during his 2009 election campaign. Rallying behind one of its own, the Congress Party government openly challenged the commission’s power to disqualify a candidate for falsifying election finance filings.80 The government instead contended that the ECI can disqualify candidates only for a failure to file their expenses but that it has no legal basis upon which to sanction candidates on the “correctness” of election accounts.81 In July 2014, the ECI ruled against Chavan, recommending that he forfeit his seat in Parliament and face judicial prosecution, but the Delhi High Court later exonerated Chavan.82 In its ruling, the court stated that the advertisements taken out were not reported to Chavan, and thus he had no knowledge of them when filing his election expenditure statement.83 The court’s ruling in this high-profile case was widely interpreted as a setback for the ECI’s enforcement powers.84

  Beyond expenditures made by the candidates themselves, for many years candidates did not have to declare any spending carried out by their party or by third-party supporters on behalf of their campaigns. A 2003 amendment to the law changed this, compelling candidates to report these expenditures as well. Although a step in the right direction, the legal changes were shot through with loopholes, limiting their effectiveness. For instance, a new amendment exempted all party and supporter expenditure meant for propagating the general “party program,” as opposed to highlighting the candidate him-or herself, from reporting requirements. Drawing a fine distinction between the two is difficult, and so this major loophole renders the entire disclosure regime futile.85

  Party Finances

  Beyond the personal finances of candidates, the finances of political parties themselves require greater scrutiny. Under the RTI Act, all citizens have the right to petition any “public authority” and request information about the operations undertaken by those public authorities if it is deemed to be in the public interest. The relevant authorities must consequently respond within thirty days to a citizen’s request or risk incurring financial penalties for the failure to respond expeditiously.

  Citizen groups have successfully used this provision to gain some visibility into party finances. In 2008, ADR successfully petitioned the Central Information Commission (CIC), the agency that regulates the RTI Act, to publicly release the income tax returns of parties dating back to 2004. Unfortunately, few parties regularly file their tax returns each year, even though their tax-exempt status is supposedly conditional on compliance with these requirements.86

  More recently, the CIC ruled that parties should be considered “public authorities” for the purposes of the RTI Act. This ruling was highly controversial because, if implemented, it could crack open the opaque functioning of parties. But not all opponents of the present system support this change; indeed, many critics of the status quo have objected to the notion that parties are public, rather than private, entities.87 Lawmakers seem to agree with them. Before departing office, the Congress-led UPA government introduced a bill that would amend the original RTI Act to explicitly stipulate that parties are private entities, thus freeing them from complying with information requests.

  The BJP, which came to power in May 2014, has also dismissed the CIC’s ruling. Indeed, all six major national parties steadfastly refused to even meet with the CIC in the wake of its order.88 Unable to compel the parties to comply with its ruling, the CIC eventually gave up, stating that “in cases such as this, the Commission is bereft of the tools to get its orders complied with.”89 On the heels of this unprecedented act of noncompliance, the Supreme Court stepped in, asking the ECI, the central government, and the six parties to make their case as to why parties should or should not be exempt from RTI.90

  The issue has yet to be resolved, but assuming the government and the major parties reverse course, there are reasons to be skeptical that the ground realities will change as significantly as some RTI proponents suggest. The primary reason for skepticism is that party financial statements are not independently audited by a third party, much less one selected by a neutral authority. They are instead blessed by an internal auditor who has been carefully handpicked and, hence, widely perceived by outsiders to be quite unreliable. There are all sorts of ways in which party accounts could be doctored or fabricated.

  Going forward, there are several options for resolving this impasse. For starters, the ECI mandates that parties file election expenditure statements within a prescribed window of time, yet many parties regularly ignore this requirement. Indeed, as of January 2015 many political parties had not submitted expenditure statements for the 2014 Lok Sabha election even though the deadline was late August 2014. The ECI must be empowered to sanction parties that fail to comply.

  Furthermore, in 2014 the ECI drew up guidelines for how parties should maintain and report their accounts, soliciting technical inputs from the Institute of Chartered Accountants of India.91 Parties have argued against these new guidelines on legal and technical grounds. Enforcing these requirements and making them mandatory would greatly assist in establishing a common reporting format and in ensuring that parties do not omit key financial details. But the commission should take further steps and seek authorization from Parliament to demand that parties be subject to third-party audits by a private firm or public agency, such as the CAG (or by a firm the CAG verifies to be credible). Given the opacity of political finance flows and the repeated opportunities parties have been given to reform themselves, not to mention the fact that political parties avail themselves of considerable tax benefits given by the state, demanding that parties submit to independent audits of their books is hardly a draconian measure. Those parties that refuse to comply with ECI orders should be scrutinized by income tax authorities.

  Political Contributions

  One area of particular concern is political contributions. Recall that between 1969 and 1985, corporate funding of politics was banned, effectively pushing political finance underground. When the ban was lifted, firms had become inured to the prevailing system, which allowed them to give in excess of legislated limits while protecting their anonymity. This anonymity was—and is—prized in a highly regulated economy where the state retained the discretionary power to punish firms that fell out of favor with the ruling dispensation.

  The rules governing contributions slowly evolved in the 1990s and 2000s, but in 2003 two legislative changes were enacted. First, donations to political parties were made tax deductible, and, second, parties (as receiver) and businesses (as sender) were required to declare all contributions in excess of 20,000 rupees (now, $300). While both tweaks incentivized public disclosure, the latter stipulation still proved problematic. Savvy contributors who wanted to shield their identity could simply make an unlimited number of payments below the threshold without having to declare their giving.

  As it stands, the sources of the vast majority of funds collected by parties remain highly opaque. One analysis of the income and expenditure statements of India’s six national parties between 2004–5 (the first year they were made available) and 2012–13 demonstrates that roughly 75 percent of party income arrives in increments below 20,000 rupees. As a consequence, the sources of these contributions are unknown.92

  To address this loophole, Parliament should amend the law to strip the 20,000-rupee threshold and make all donations (of any size) subject to public disclosure.93 The fixed-rupee threshold serves as a fig leaf for illicit fundraising; politicians and parties can always claim that they raised massive amounts of money through small donations from well-wishers. Under the current regime, there is no way for any authority to call their bluff. Indeed, Mayawati’s BSP has claimed to have raised the overwhelming majority of its funds in such small, opaque increments; therefore, it has not had to disclose the
name of even a single contributor in eight years.94

  Is Public Funding the Answer?

  One perennial reform proposal discussed at policy roundtables is public funding of elections. Many advanced democracies implemented some form of public sector funding of elections in the late 1950s and 1960s. Many pro-reform voices have suggested that India do the same in order to move beyond the corrupt and inefficient status quo.

  Unfortunately, there are two problems with creating a system of public financing. On the one hand, parties in India already receive various forms of direct and indirect funding from the state; indeed, this was a central part of the argument watchdog groups made when petitioning the CIC to recognize parties as public authorities under the RTI law. For instance, parties can access land for party offices at concessional rates, are exempt from paying income tax, and receive free airtime on public television and radio.

  On the other hand, it is not clear that providing parties with additional funds—to subsidize campaign costs, for example—would address the issue of corruption, criminality, or illicit finance. After all, there is nothing to stop parties from taking funds from the exchequer while continuing to reach under the table for funds. Without fundamentally reforming the present system, introducing public funds would not address the underlying problem. Until candidates and parties subject themselves to much greater scrutiny, election authorities receive greater authority to punish wrongdoers, and legal loopholes are closed, introducing state funding of elections would allow the political class to have their cake and eat it too.

  CLEANING UP POLITICAL PARTIES

  Reforming political party finances is a critical step toward cleansing politics, but reform of political parties should not be reduced to their financial accounts alone. Across virtually all parties, the complete absence of internal party democracy has concentrated power in the hands of a formidable clique. It has had a pernicious effect on two important aspects of party operations: information transmission and political selection. Oligarchic leadership has limited the ability of parties to transmit information about policy positions and principles downward and has simultaneously guaranteed that very little information about party member preferences percolates upwards through the ranks. Similarly, when it comes to political selection, elite control has both stymied the upward mobility rank-and-file members can experience within the party hierarchy and facilitated the influx of opportunistic candidates who have questionable allegiance to the party but the money, reputation, or connections to win party tickets.

  To reverse this trend, one possible solution is to grant the ECI expanded authority to regulate the activities of political parties. However, here reformers must tread carefully. There is an ongoing debate about whether political parties can be considered “public authorities” for the purposes of the RTI Act, but even if one believes that they qualify, parties must be given sufficient space to operate outside of the ambit of state control. For instance, the ECI and some civil society activists have suggested that the commission be entrusted with ensuring that parties adhere to a modicum of intraparty democracy. Proponents would like to see election authorities given the power to disqualify parties that do not hold internal party elections or fail to conduct their internal deliberations transparently.

  While such regulations have their appeal, they also risk perpetuating the worst tendencies of the mai-baap sarkar (nanny state) in India. One could easily imagine such powers being abused for purposes of political vendetta in the hands of the wrong leaders. The truth is that there is relatively little outsiders can do to reform the inner workings of political parties. But there are at least two basic proposals reformers could coalesce around.

  First, while the ECI has the potential to register political parties, it has no power to de-register them. Giving election authorities carefully delimited powers here could have several benefits. If new rules are imposed to compel parties to disclose their finances, the threat of de-registration could give such rules credible teeth. In addition, there is evidence that many registered parties are “parties” in name only. Of the 1,600 parties registered with the ECI as of 2014, only 464 fielded at least one candidate in the 2014 national election. Top election officials have openly voiced their concern that many of these dormant parties exist solely to serve as tax havens (since parties’ income is tax deductible).95 Given the serious political fragmentation in India, parties could be required to meet some minimal threshold of support (a fixed number of validated signatures, for instance) or risk deregistration. Any new powers in this regard must be highly circumscribed because, if construed broadly, they could be ripe for abuse.

  A second proposal is to insist parties respect some basic principles of democracy and transparency. For instance, parties could be required to make public their list of key officeholders, their party constitution, or their by-laws. Forcing parties to adhere to such limited requirements may not have much impact on the quality of party democracy in the short run, but they would represent a small shift in that direction. Pushing for more sweeping restrictions risks overreach, which could be counterproductive.

  WEEDING OUT THE RASCALS

  Reforming political finance and the internal functioning of political parties are two indirect ways of reducing the role of criminality in politics. But there are also more direct measures that reformers could consider to more frontally address the issue, such as placing restrictions on the candidate pool eligible for elected office. These restrictions could be imposed in advance on all candidates or, in the aftermath of elections, only on the victors. Regulating who can and cannot contest elections or ultimately hold office is an area fraught with controversy since there are many ways in which well-intentioned rules can be manipulated for political effect.

  Pre-Election Remedies

  The most direct way of reducing the number of criminal politicians in India is to prohibit candidates with criminal credentials from contesting elections. There are a host of potential objections to this idea, not least of which is the contention that banning candidates with criminal cases, as opposed to convictions, violates one’s “presumption of innocence” (or the legal notion that the accused is innocent until proven guilty).

  The difficulty inherent in the Indian system is that, since the judicial system operates at a snail’s pace, it can take decades for a criminal case to reach its logical conclusion. This process can take even longer when one of the parties involved is a politician with considerable political and financial resources at his disposal. As of 2009, according to one civil society analysis of MPs with declared cases, the average case against a suspected politician had been pending for seven years. Of this group, 50 MPs had a total of 136 criminal cases pending against them for at least a decade.96 In at least one case, an MP from West Bengal faced a case involving rioting and theft that was first filed 28 years prior.97

  These statistics demonstrate just how thorny the issue of keeping criminals out of politics truly is. The solution is, in a fundamental way, internal to the problem: enacting measures to keep candidates associated with criminality out of politics is potentially problematic if such individuals have not been pronounced guilty by a court of law. At the same time, individuals named in serious criminal cases only rarely face the long arm of the law due to the grave weaknesses of the justice system. From a narrow legal perspective, candidates charged with crimes are legally innocent until proven guilty. Indeed, an analysis by ADR found that, of the more than 47,000 candidates who contested state and national elections between 2009 and 2013, only 0.3 percent had ever been convicted by a court of law,98 a remarkable finding given that 17 percent of these candidates faced criminal cases at the time of their nomination, with 8 percent facing serious cases.99

  In 2013, the Supreme Court ruled that any individual who was in jail or in police custody at the time of elections could be barred from contesting elections, even if that person had not been formally charged. The court’s reasoning was that a jailed person is prohibited from voting, so allowin
g a jailed person to contest elections would be treating politicians differently from the common man. Although the court’s ruling may have been well intentioned, it was deeply problematic because it created strong incentives for politically motivated arrest and detention. Given the temptation of Indian politicians to misuse the police to punish political rivals, without clear safeguards, the ruling could easily be misused. Parliament moved quickly, amending the law to negate the court’s ruling.

  This example illustrates the moral and practical issues that prevent strong action to restrict candidate entry. One compromise solution that has been mooted is to narrow the scope of potential candidates who would be subject to disqualification on the basis of their criminal record. For instance, a recent ECI proposal stipulates that only candidates who face criminal charges of a serious nature would be disqualified from contesting office. To guard against politically motivated charges, the commission has suggested a number of additional safeguards: charges must be framed by a judge (that is, charges must meet a certain threshold of prima facie credibility); they must carry a potential sentence, upon conviction, of at least five years in prison; and they must be brought at least one year prior to elections.100

  One could go even further by amending electoral laws so that any candidates whose cases satisfy all three criteria would be automatically eligible for an expedited judicial process. The problem with this last fix, as discussed above, is that fast-track courts are akin to a Band-Aid when what is needed is a lasting solution. Indians must have this important policy debate, but there is at least a good case to be made that, at the very least, there should be timely justice for those who are in charge of making the laws.