Rajat Gupta is currently being tried in a New York court on charges of leaking corporate secrets to Raj Rajaratnam, founder of the Galleon Group, when he was on the board of Goldman Sachs and Proctor and Gamble. Gupta, former global head of the management consulting firm McKinsey and Company has denied all charges of wrong-doing, and on www.friendsofrajat.com his friends -mostly Indians – have expressed unequivocal support, vouching for his integrity as a global business leader, a visionary, a philanthropist and a generous friend of India committed to the country’s intellectual and business growth. They hope justice will take its course allowing Gupta to walk away a free man at the end of the trial. Whatever be the verdict, it is quite likely that the ‘we don’t know’ space will spread, not shrink. Recent history, especially corporate history is replete with examples of people who have failed – for reasons we don’t know – to institutionalise their vision and courage. Is it because institutional change is slower and less spectacular than personal career paths? If that be the case what use is a spectacular CV that goes from debris to debris? Worse, what is the example we are setting?
Called corporate America’s biggest trial to date, this affair raises more questions than it answers and underscores a deeper issue that binds us all as individuals and institutions – an issue we all recognise as all-pervasive. There is something frightening in what we know, but there is something even more frightening in what we will never know. What is one to make of McKinsey’s duck-like attitude -remain calm on the surface and paddle furiously below – towards Gupta? What did they not know and when did they decide that they didn’t know? Some of America’s top CEO’s are testifying about how decisions are taken in boardrooms, the fiduciary responsibilities of members etc. We all know how far that will take us. newslaundry’sresearch shows that Gupta was a senior partner emeritus even after he retired in 2007. He still had an office in McKinsey’s New York, an executive assistant, email address and phone lines, a BB, an India number and a European number. They unceremoniously dropped him once the charges were filed and went out of their way to call partners and clients in India to say they have nothing to do with him.
White collar crime, IT companies leaking information to rivals for a fee, boardroom leaks and traders passing on tips have changed the way we look at some domains in the service sector of our economies. I live in Switzerland and interact often with money managers. To save the country’s premier bank, the United Bank of Switzerland (UBS), Swiss taxpayers recently ploughed in six billion Swiss Francs in addition to the 60 billion Swiss Francs that was paid by the Swiss National Bank tosave UBS from drowning under the weight of what was interestingly called “toxic investments.” Recently a 31-year-old London-based trader working for UBS “lost” two billion Swiss Francs. While the CEO resigned, he stuck publicly to the “lost” theory and said he didn’t know where the money had disappeared. There is new language in these sectors and the media follows fanciful words, false arguments explained in good English in awe. “Health is traded in the markets just like environment – both are very politically sensitive commodities”, said a financial expert in Zurich.
Language is critical – it influences thinking. Context is critical – it influences policy. Experts tell us it has to do with the sub-prime crisis in the United States and money managers freshly out of college sell financial products like eggs – no risk, then no omelettes. If it is competitive it must be good, seems to be their mantra. In a world of mounting ambitions and run-away bonuses, they sell what does not exist, risk other people’s monies and produce power-point presentations (PPP, not to be confused with the other PPP as in public-private partnerships) to justify their calculations. We have moved from artificial intelligence to natural stupidity.
Behind a nuclear bomb or nuclear energy lies the same equation. When you make a choice, you know exactly what you are doing. “Many young people in the IT and investment banking space live in ivory towers with little connection to reality”,said a global business leader speaking on conditions of anonymity. “For instance if they were selling soap or powder, they would be closer to the reality of their brands, something you can touch and feel to ensure customer satisfaction.” Similar sentiments are echoed by David Brooks in a recent New York Times op-ed (May 24, 2012) where he says today’s job market almost expects young graduates to ride the language of entrepreneurism whether it is the business sector or a social one. He has tagged on a Facebook conversation initiated by Robert Reich, a professor of political science at Stanford University,who asked if liberal arts is to blame for students entering finance or management consulting http://www.stanford.edu/group/reichresearch/cgi-bin/site/2012/02/20/is-the-liberal-arts-to-blame-for-sending-so-many-stanford-students-into-finance-consulting/
The Facebook conversation is predictable and worrisome. Brooks advises young graduates by saying, “In whatever field you go into, you will face greed, frustration and failure. You may find your life challenged by depression, alcoholism, infidelity, your own stupidity and self-indulgence. Simply working at Amnesty International instead of McKinsey is not necessarily going to help you with these primal character tests… People are less good at using the vocabulary of moral evaluation, which is less about what sort of career path you choose than what sort of person you are”.In other words, young money managers and IT whiz kids aided by cub reporters, literally out on a prowl,know at what price to dump or buy precious food grain, oil or iron-ore as ships trundle their wares around the world on the high seas,with one eye on a computer screen and the other on the Baltic Dry Index (a market benchmark for sea trades) in a posh Geneva office without realizing the damage they may be creating. There will be others who will be heading to a village in India or Africa as it will look good on their CV.
Many CEOs do not hire CVs anymore. One European banker told me recently when he asks job seekers to write 500 words on why they deserve the job and what added-value they bring, they are lost. Devoid of such life support systems like laptops and phones, they are stumped beyond any media training or public speaking qualifications. I have sat in meetings where we have discussed compliance issues (post-Enron and the enacting of the Sarbanes-Oxley law in the US) where CEOs can no longer say, “I don’t know.” I have studied and contributed to the development of induction manuals that list what you can and cannot do. I never thought a day will come when you actually have to develop an idiot’s guide for good business practice. The compass of corruption will always point in one direction. North for no.
No amount of coaching and mentoring will help you tell right from wrong. Honesty (personal) that translates into ethics (work space) is a personal visiting card – it is printed in your soul.We all encounter grey areas in our work, but they have to be identified as such and not brushed off as a ‘challenge’ and certainly not an intellectual one. Corruption – financial, ethical, moral or intellectual – is a no brainer. It appears complicated because we have managed through semantic jugglery, creative mathematics, technology and greed to shift some basic questions into the “I don’t know space” as a way of shirking our responsibilities. An entire generation of fence-sitters cutting across sectors – finance, public health, media, politics and civil society – is the collective contribution of our selfish knowledge-driven society to some of the most critical issues we face. Untied we stand, divided, we fall.
One area I study closely is public health. Over the past 20 years, billions of dollars have been poured into this sector for all the right reasons and many with indifferent outcomes. Unfortunately, the health sector has wrapped itself in the service-provider language normally reserved for telecom companies and contributed to a manufactured misunderstanding about health as a public service. Mishandled, money and technology can be a deadly mix – in the health sector both have become status symbols. The more money my malaria attracts as opposed to yourmalaria, I win. We do need billions of dollars before we can even begin to declare ourselves healthy, but money is only part of the solution. It has to be lead with good old honesty at the international, national and local levels. Gupta’s CV says he co-founded the New Delhi-based Public Health Foundation of India (PHFI) inaugurated by Indian Prime Minister, Manmohan Singh in March 2006. He raised $50 million to establish the foundation – including a $20 million grant from the Bill and Melinda Gates Foundation – and recruited Dr Srinath Reddy to serve as president. There is no reason to doubt any of this. The PHFI’s roster reads like an international who’s who of people from the field of pubic health, IT, economics, to name a few. The Who’s Who is remarkably silent on their support for Gupta. As an institution that owes its existence to Gupta, the PHFI’s silencein not mounting a swift and robust international defenseis as deafening as that of McKinsey. The lone voice is that of India’s former health secretary, Sujatha Rao who has worked both for the PFHI and the Geneva-based Global Fund to Fight AIDS, Tuberculosis and Malaria, also called The Fund in this health capital of the world with which Gupta was associated from the very beginning. Gupta stepped down from the PHFI as he did as Chair of the Paris-based International Chamber of Commerce (ICC), a powerful industry body that serves as an industry advocate with governments and NGOs.
Geneva is the European capital of the United Nations (UN) and its agencies. The city is cramped with organisations working on health – three each on AIDS, Malaria and TB, four on nutrition, three on mother and child health in addition to several hundred associations and NGOs all committed to improving global health. Since they compete for resources from the same pool of funds, distrust runs deep and creative math is rather pervasive. In most cases, the buck stops with health ministries in countries -some comfortably poised between the giver and the greedy -and accountability is lost somewhere in transmission. Many health ministries are corrupt, many of them are not. In several countries including developing ones, health is seen as an investment, in others it is seen as a cost resulting in health budgets that barely cover salaries. The temptation to dip into the jar is great.
Toward the end of the last century and the dawn of this one, there was renewed vigour to mount what can only be called a Marshall Plan to deal with the global burden of disease. Or as cynics said, everybody was looking for the health google. We were looking for new models that would include all stakeholders (how I hate that opaque word)in search of a magic wand to wish diseases away. What the public sector could not do – presumably count without cheating – the private sector offered. Hence, was born the term public-private partnerships and its corollary stakeholder. The health sector was not prepared – and still isn’t – to handle this type of attention which on the one hand promised money for eradicating diseases, while on the other called for transparency, accountability, economies of scale, return-on-investments(ROI) and real results on the ground. Many of these organisations saw a threat and an opportunity when the new rich kid – The Fund – arrived on the scene. Everybody wanted to be The Fund’s new best friend and hoped to house it. A special session of the UN General Assembly on AIDS in June 2001 laid the foundation stone of what Kofi Annan hoped would be a war chest to fight the three diseases. Dr Gro Harlem Brundtland, former Norwegian Prime Minister and head of the World Health Organisation (WHO) matched him in step and word. The G8 endorsed the establishment of The Fund at its summit in Genoa, Italy. The Breton Woods organisations joined in this massive effort which in the run-up to the creation of The Fund included a coming together of some 200 organisations in the Swiss city of Winterthur to hear all voices. I participated in that meeting as a student of public health and an international civil servant at the WHO. The Fund held out the promise of transparency and financial accountability and above all showed us how investments in health backed by strong leadership and a steady hand could contribute to eliminating AIDS, tuberculosis and malaria. Zero tolerance for corruption was the buzz word.
The US government led, and the Bill and Melinda Gates Foundation provided seed money to, The Fund which became officially operational in 2002. Such was the combined strength of advocacy, trust and commitment of global leadersthat The Fund had $1.9 billion to disburse even before it went official. Internationally renowned public health figure, Lord Richard Feacham- former dean of the London School of Hygiene and Tropical Medicine, director of the World Bank’s health programs, and founder of the Institute for Global Health at the University of California-San Francisco – was appointed the first Executive Director of The Fund which aimed to introduce a new paradigm based on partner country leadership, donor alignment with partner countries’ development strategy and harmonisation of donor actions. All elementary, you’d say. Nothing is simple where big money is concerned.Math had to meet new mantras. In addition to words like multilateral, bilateral, surveillance and monitoring, reporting mechanisms, budgetary, extra-budgetary, the business-as-usual health sectors added stakeholders, public-private partnerships, benchmarks, economies of scale, EBITDA, ROI and business plans to their language. Language mutated, as did the malaria-causing mosquito.
The Fund is the world’s largest financier of AIDS, TB and Malaria programmesand to date has disbursed over $22 billion in 150 countries. In his note, “A Lifetime of Service – Global and Public Health” Gupta notes that he was a founding member of The Fund, the sole private sector representative, and helped develop The Fund’s strategy and set up its governance system. He served The Fund for more than 10 years and was elected its fourth Chairman (2007–2009). Under his leadership, the website says, the Fund raised more than $10 billion, streamlined its system of governance and expanded its public-private partnership. Todd Summer, an international health consultant and Chair of The Fund’s Strategy, Investment and Impact Committee (as per available details) describes Gupta’s contribution as follows. “Ten years ago, the Global Fund to Fight AIDS, TB, and Malaria was established to raise funding to control three of the world’s most deadly pandemics. Rajat Gupta was there from the start, and for the next decade played a leading role in guiding the Global Fund to its position as the world’s largest and most innovative multinational health funder. In the early days, Rajat engaged by bringing his consulting firm (McKinsey) to help with the chores involved in starting a new international organization: governance, recruiting,strategic planning. In addition, Rajat joined the board to represent the private sector, a key function given that the Global Fund was to be a public-private partnership. For the last two years of his tenure, Rajat served as the chair of the Global Fund board, a reflection of the esteem with which he was held by his colleagues on the board and their confidence in his ability to help the Global Fund continue and accelerate its impact in some of the poorest and most challenged countries.” The dictionary describes chores as a routine or minor duty. Synonym – task. Are governance and strategic planning, chores?
The Fund did not wish to comment on any issues because of the trial, but conflict of interest issues including the role of stakeholders had already been raised in the April 20, 2002 issue of The Lancet, the world’s leading general medical journal which said, “…It is unclear whether these stakeholders include the management consultancy firm who might eventually be charged with overseeing the Fund’s disbursement, McKinsey and Company, whose Managing Director Rajat Gupta is the private sector member of the Fund’s board”. Declaring conflict of interest is a way of building transparency in any sector, but most importantly in health. Tobacco control leaders including researchers, for example, often have one or two shares in tobacco companies as it permits them to access critical documents and represent the public in AGMs. The Indian media should take some lessons on the subject.
Todd’s statement suggests that McKinsey was not selected on the basis of a Request for Proposals (RFP), a basic requirement to allow for free and fair bidding and recruiting. McKinsey’s Copenhagen site has a carefully worded one-pager on this work which was done probono. There is no information on the terms of reference of the work or the process involved. It is common knowledge that what cannot be monetised immediately is handsomely compensated by the amount of knowledge, access and future contracts in the health sector such pro bono work brings. That may or may not have been the case with McKinsey – we simply don’t know.
Gupta’s appointment as Chair in 2007 was widely welcomed by The Fund. In its own press release, Carol Jacobs – the outgoing Chair of The Fund – said his election meant they had taken a significant step towards consolidating private-public partnerships. “By choosing representatives from the private sector and civil society to lead a multi-billion dollar international financial institution, the Board shows the high-level of trust and collaboration that has been developed during the five-year life of the Global Fund”.Elizabeth Mataka who was head of a Zambian AIDS organisation was elected Vice-Chair. The Amnesty versus McKinsey heart-wrencher described by Brooks in his NYT op-ed was doing well.
All seemed well for The Fund too. Pledges came through, they took quick decisions and everything was on the business plan till reality kicked in when they turned nine. A minority staff report prepared for the use of the Committee on Foreign Relations of The United States Senate entitled “Fraud and Abuse of Global Fund Investment at Risk Without Greater Transparency,” www.gpoaccess.gov/congress/index.html said that as initially set up in 2002, The Fund did not include any independent oversight mechanism even as the US representative on the board continued to press for greater transparency. Under mounting pressure, it was only in July 2005 that The Fund established an Independent Office of Inspector General (OIG) to ensure the integrity and effectiveness of the programmes of The Fund and its internal operations. Guidelines were also established on how the report of the OIG would be made public.
On February 7, 2007, a month after he was knighted by Queen Elisabeth II for his leadership of The Fund, The Boston Globe reported that Feacham had made extensive use of a private bank account in Geneva, spending hundreds of thousands of dollars on limousines, expensive meals and cruises. The information had come from the OIG’s enquiry. The newspaper said Feacham, “often dipped into the office’s petty cash, once spending $225.86 to rent a suit for a wedding involving the Dutch royal family…and then double-billed the organisationfor the suit”. The report said Feacham’s spending habits created “potential risks” including loss of donor confidence because of “inadequate internal control over funds”. Pilfering at the top is no different from the cookie jar. In Sweden, a minister lost her job because she accidentally swiped her official credit card for a pittance. If we are talking of standards, let us strive uniformly and not selectively for the best. I understand why petty corruption should not be criminalised,but in a country where the majority pays konjum something – go figure it out – for a simple blood test and the poor go to the hospital to die, one dollar is big money.
In an interview to Boston Globe, The Fund’s spokesperson Jon Liden disputed the tone, context and several facts in the report calling it, “extraordinarilypoor quality”, in terms of accuracy, context and fairness and quibbled about global rates for hiring limousines without disputing the practice. A separate investigation by the WHO also raised questions about the private bank account. “Senior management failed to convey and reinforce the need for careful and prudent use of donor funds”, the newspaper said, adding that The Fund’s leaders went to great lengths to keep both reports secret. The full board was not even given copies – they were given the WHO report for just a few hours in a room and were not allowed to make copies. Ibrahim Zeekeh, a veteran UN auditor who had worked on the report resigned citing health reasons. The Fund said the reports had to be kept secret to protect people’s dignity and their right to reply. Fair enough. Earlier there were media stories that said Feacham was also being investigated because of his wife, Neelam Sekri Feacham’s involvement in The Fund’s business. She owns a California-based health consultancy Health Redesign Group and health officials in Kampala, Uganda – themselves under the radar – werequoted as saying there were, “attempts to arm-twist the country into doing business with Neelam”. The Fund did not comment. In a statement posted on their then-website, Feacham said, “In July this year (2007), I will have served four years as Executive Director of the Global Fund. After careful consideration, I have decided not to seek a full further term”.
In January 2011, the Associated Press reported vast corruption in programmes financed by The Fund as documented by the OIG. The article said up to two-thirds of funds in some cases reviewed was lost to fraud. The report showed that systematic fraud patterns were used across countries. The Fund responded to the AP story with a press release on January 24, 2011 stating that it had, “…zero tolerance for corruption and actively seeks to uncover any evidence of misuse of its funds. It deploys some of the most rigorous procedures to detect fraud and fight corruption or any organisation financing development”. Further enquiry showed massive abuse of funds, corruption and mismanagement of grants in Uganda, Zimbabwe, Philippines and Ukraine being the largest of these grants – more than $100 million each. In February 2011, the Financial Times reiterated that The Fund’s board had failed to act on earlier concerns over accountability, adding that its own investigations revealed that neither The Fund’s staff nor its representatives in the field had noted the problems raised by the internal audit. Key donors – which included foundations as well as countries – suspended funding pending an enquiry.
In the days that followed, several opinions were expressed in the media on perspectives on corruption adding to the health lexicon. Journalists informed us that the $34 million in fraud that had been exposed represented only three-tenths of one percent of the several billion dollars that had been correctly used and the cases were the exceptions. To support The Fund’s work on AIDS, Bono and Bobby Shriver had launched Product Red, a label on coffee and clothes widely consumed by adolescents. How do you explain to a 15 year old that $34 million lost in transmission is actually not that bad?
In countries where it had no presence, The Fund relied on the United Nations Development Programme(UNDP) to manage and superviseits spending. The UNDP claimed diplomatic immunity to block access to its internal audits and books of investigated programmes in more than 24 countries. Cases of corruption have been found in Mali, Mauritania, Djibouti and Zambia. The Executive Director of The Fund, Michel Kazatchkine, a French AIDS specialist who helped set up The Fund 10 years ago and had overseen its working for several years resigned in January 2012 just as the world’s leaders and donors, preoccupied with health issues, were gathering in Davos for their annual meeting. Kazatchkine said he was leaving because the Fund’s board had announced in November 2011that it would appoint a General Manager to oversee day-to-day operations and a new transition plan. “The messenger is being shot to some extent. We would contend that we do not have any corruption problems that are significantly different in scale or nature to any other international financing organisation”, said Jon Liden who had to step down not long after.
Gabriel Jaramillo, an internationally renowned banker from Brazil who was on the panel that looked into The Fund’s auditing controls is now the General Manager. All eyes are riveted on him. He comes across as a worker-bee without the buzz. He has not made any bombastic statements about achieving goals, meeting targets, time running out, etc – statements that cause needless panic in populations stricken with disease and in many cases, certain death. Donor confidence in The Fund has returned as it rebuilds itself. It is also seeking to recover $43.3 million in funds from 11 countries. Of that amount, $11.2 million was stolen, predominantly in Mali and Mauritania, The Fund says. The remaining $32.1 million was either not properly accounted for, or was spent on programme activities that were not in the original grant agreements according to The Fund.
Gupta is not linked to any of The Fund’s corruption issues. So, what has all this got to do with the Gupta trial, you may ask. Either plenty, or nothing, but I believe for a start that the world of business, global health and the media (worlds I straddle) is also on trial, not the least for the brazenness with which we go around the world telling others what to do but also for the stupidity with which we think no one will find out. It takes more than a few individuals to overturn an organisation with strong foundations, whatever spin-doctors may say. Ever wondered why we say spin doctors and not spin engineers? Because medical doctors are saviours. Since tax payers’ money is at stake in public health, we are entitled to ask The Fund the same questions posed to McKinsey – if they didn’t know what was going on, were caught off guard, trusted the untrustworthy – what are they doing in this field (not business)? Did The Fund’s original architects flag these issues? If not, why not?And if they did, were the loopholes plugged? If yes, why has The Fund embarked on a root-and-branch process of re-organisation? In a paper entitled,“Righting the Global Fund” co-authored by J Stephen Morrison and Todd Summers for the Washington-based Centre for Strategic and International Studies the first chapter entitled “2011–Innocence Lost” seeks to explain what happened. Nice try.
I tell you this story – collated from publicly available information – in the hope that we give public health the vast space it deserves created by knowledge and not “knowledge management, thought leaders and network enablers”. Corruption in the health sector is competing with the growing investments it attracts with the active or passive participation of all managers, leaders, enablers whose combined might is yet to slay mosquitoes. I feel ashamed when cabin attendants spray aircrafts before we leave India.
Gupta may or may not walk out a free man – that is for the courts to decide. Something may come out in the wash. What will we do with the laundry? Perhaps we could add a separate column in our Excel sheet as a ‘don’t know’ area or pose it as a problem on Facebook. The Gupta case speaks to all of us if we cared to stop and listen.
PS- There is a lot in common between business and the media. Both have a lot of power, both can be dangerously irresponsible and both have moved away from their basic responsibilities in pursuit of profits and TRPs. The new avatar of The Fund has an opportunity to write a new script and hold everyone to their role.
PPS – Post Bill Gates’ recent visit to India, where he stressed the importance of hygiene and sanitation, a newspaper headline says clean public toilets in India will help Bill Gates realise his ‘ultimate’ dream. Watch this space.
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