EDITORIAL : THE HINDU, INDIA

Will finance get the message?

The conviction of Raj Rajaratnam, a billionaire financier and founder of the Galleon Group, one of the world's largest hedge fund management firms, by a New York federal court jury on five counts of securities fraud and nine of conspiracy to commit fraud between 2003 and 2009 sends a clear message to the financial markets. It is that they are not above the law and that white-collar crime is still crime. The New York jury, which deliberated for 12 days, rejected Mr. Rajaratnam's defence that the detailed “mosaic” of information given him by high-level contacts within companies amounted to a legitimate strategy. Mr. Rajaratnam faces a minimum of 15 years and a half in prison; he will appeal, but under a $100 million bail arrangement he is electronically tagged and remains under house arrest until his sentencing on July 29. Out of 47 people charged with insider trading in the last 18 months, he is the 35th to be convicted. In Galleon-related cases, 21 out of 26 defendants have pleaded guilty, including Danielle Chiesi, formerly of Bear Stearns, Intel's ex-staffer Rajiv Goel, and IBM's former executive Robert Moffat. The question is whether prosecutors will now go after other big fish who went to the edge of the law in dealing with Mr. Rajaratnam.

As for insider trading, it is significant that the Federal Bureau of Investigation has used anti-mafia techniques like wiretaps to good effect. Corporate lawyers may be right that the biggest successful Wall Street prosecution since the Milken and Boesky scandals of the 1980s will have a “chilling” effect on the way financial trading is done but that by itself will not address the wider issues. The fact that many of those convicted were, at the time of their crimes, working in some of the world's most powerful financial companies will only serve to deepen public distrust of the financial sector. Suspicion is already widespread as a result of the 2007-08 global crash and the failure of the massive state-funded bank bailouts to deliver the promised economic revival. Furthermore, criminal investigation, by its very nature, takes place ex post facto, and its deterrent effects are uncertain, depending on the perceptions of risk under the circumstances. That, together with the complexity of the financial sector, means that the moral effects of high-profile convictions may fade under the relentless pressure to make big bucks quickly. Criminal prosecutions in this area cannot replace well-designed and resolutely implemented regulatory legislation. That, however, will require political will of a kind few countries seem to have in the current climate, however much the public supports such action.

The Bhopal buck stops here

The Supreme Court's decision to reject as “wrong and fallacious” the curative plea filed by the Central Bureau of Investigation in the Bhopal case has led to a lot of unnecessary hand-wringing by NGOs and activists. The government sought to enhance the culpability of those responsible for the December 1984 gas disaster from mere “criminal negligence” — for which they were convicted last year — to “culpable homicide not amounting to murder.” In dismissing the government's petition, the Supreme Court concluded that its 1996 verdict, which threw out the culpable homicide accusation, was the product of evidence presented at the time charges were framed. But it also told the CBI that if there were additional facts to conclude that a more serious offence had been committed, nothing would stand in the way of the sessions court framing graver charges. Should the sessions judge have reservations, especially given the passage of time, the Supreme Court has indicated that its 1996 verdict would not be a “fetter” against delivering justice to the victims of the calamitous gas leak. If the Chief Judicial Magistrate misread its earlier judgment as constraining, the revisional court “can certainly correct” that error, the highest court in the land has noted.

The CBI's inability to credibly explain why it moved the Supreme Court so many years after 1996 – or after 2002, when the instrumentality of curative petitions was created – hides an open secret that continues to shock all partisans of justice round the world. The truth is that successive administrations at the Centre, whether headed by the Congress, the Bharatiya Janata Party or the United Front, have not been interested in the guilty being punished. Equally damningly, they have cared little about justice being done to the victims. Once again, the ball is back in the government's hands. It is too early to say whether the beginning of the end to a long wait for justice has been set in motion for the victims of the Bhopal tragedy through the Supreme Court's verdict. All eyes will now be on the CBI: will it push for enhanced charges at the sessions court now that the legal picture has become clearer? It is up to the Madhya Pradesh and central governments to ensure that this matter is argued expeditiously and that any appeals which follow are fast-tracked. Later this summer, the petition seeking enhancement of compensation for the victims will be heard. Although the Supreme Court cannot easily conjure up a remedy for the manifest failure of the executive to protect the rights of the gas victims, it needs to remain engaged with the case until justice is finally delivered.