The Week
Syed Nazakat & Soni Mishra

Come elections and black money pours in. Here is the how and why of it

On March 6, the results of the Assembly polls in Uttar Pradesh, Punjab, Uttarakhand, Goa and Manipur will be announced. But the victors and the vanquished cannot sleep in peace, as financial sleuths are working overtime to uncover the trail of black money in these polls. In the last two years, the Central Board of Direct Taxes (CBDT) has seized 018,750 crore as black money, and a big chunk of this could have poll connections.
The Election Commission is helped by the elite Financial Intelligence Unit (FIU) to sift through candidates' records for instances of the use of black money. The help was sought after the FIU and the Income Tax department together unearthed concealed income of ∃3,014 crore between March and August 2011.
Investigators are now combing through 30,700 domestic transactions and 9,000 foreign transactions that could be related to the five Assembly elections. The EC estimates that over 03,500 crore was paid in bribes during these elections. Some trails led to havens like Switzerland, which has Indian deposits worth around ∃72,80,000 crore.
“The play of black money is terribly high in our country,” Election Commissioner H.S. Brahma told THE WEEK in an exclusive interview. “Take Parliament, Assembly, municipality or gram panchayat elections, the play of black money is universal.” He said an Assembly candidate from a prosperous state like Tamil Nadu, Andhra Pradesh, Karnataka or Maharashtra, in a standard constituency of 3.5 to 5 lakh people, would spend roughly around ∃1.5 to 3 crore. “In richer areas, where the contest is very tough and the candidates are equally poised and financially very solid, the sky is the limit,” he said.
Candidates usually circulate money six to eight months ahead of elections. As per EC sources, some candidates ask a friend or supporter to spend on their behalf and reimburse them after the elections, with 10 per cent interest. Centre for Media Studies, a Delhi-based think-tank, said that in the 2008 and 2009 polls, 33.6 per cent of voters in Tamil Nadu were offered money, while the figure was 13.4 per cent in Kerala and 4.4 per cent in West Bengal. The Association for Democratic Reforms said that election expenses were anywhere between ∃35,000 crore and ∃81,000 crore in a five-year period.
In the 2009 Lok Sabha polls, 
∃10,000 crore was spent, one-fourth of it being black money. Major spends are as paid news and advertisement, hiring vehicles and aircraft, printing publicity material and salaries of party workers. A Congress party insider said an MLA in Punjab spent ∃35 lakh on a single piece of paid news. There are also instances of candidates paying off rebels or other candidates. “This has happened in at least two places in Punjab,” said the insider.
The EC first monitored election expenses in Bihar in 2010. With polls in five states now, its HQ, Nirvachan Sadan in Delhi, remains open even late at night, with officials wading through calls, letters, emails and envelopes offering evidence of malpractice and the use of black money. Banks in every constituency report individual withdrawals in excess of ∃1 lakh. Then there is the hundreds of hours of video footage.
The investigation is run by a seven-member group, headed by P.K. Dash, director-general, election expenditure. Created in 2010, the directorate is staffed by senior officers from the income tax division. The directorate liaises with the FIU, IT department, revenue service, customs and Central excise, drug enforcement administration and the Intelligence Bureau.
It receives suspicious transaction reports and cash transaction reports from banks, insurers, intermediaries and air intelligence units posted at airports in poll-bound states.
At a recent seminar on election reforms, Congress spokesman Manish Tewari said: “In my constituency [Ludhiana, Punjab], a candidate spent ∃15 crore to ∃20 crore in the poll campaign.” BJP spokesman Rajiv Pratap Rudy said every parliamentarian starts his career with a lie—the declaration of assets and electoral expenditure. He said many candidates in Goa had spent crore of rupees campaigning.
As per law, political parties do not have to declare the source of a contribution under ∃20,000. This loophole is used liberally by almost all parties. Between 2007 and 2009 the Bahujan Samaj Party got ∃200 crore; not one rupee came in by cheque. In the same period, the Samajwadi Party received ∃55 crore, of which 050 lakh was by cheque. The BJP received ∃297 crore, of which 055 crore was by cheque, and the Congress got ∃72 crore, of which ∃35 crore by cheque.
Anil Bairwal, national coordinator, ADR, said 19 Union ministers had not disclosed their assets. And, in many cases, the value of assets had jumped in two years. The DMK's S. Jagathrakshakan showed an increase of ∃64.5 crore in two years. In the same period, the NCP's Praful Patel showed an increase of ∃42 crore and the Congress's Kamal Nath's assets went up by ∃26 crore. “We had sought the income details of 20 MPs whose assets had soared during 2004-2009,” said Anil. “All of them refused.” The matter is now with the Central Information Commissioner.
The week before polling day and the day itself see a huge flow of cash, liquor and drugs. This time, in Punjab alone the EC seized ∃12 crore, heroin worth 0200 crore and 36 lakh litres of illicit liquor. Till February 5, in UP alone, the EC nabbed ∃32 crore unaccounted cash. A Congress leader said bottles of alcohol were kept in small batches in various houses to prevent the EC from raiding the hoard in one go.
In Jalandhar Central, an FIR has been lodged against the Congress candidate Rajinder Beri for allegedly distributing coupons for free liquor. During the 2011 Assembly elections in Tamil Nadu, Dr S. Sangeetha, returning officer, Tiruchirappalli, was tipped off about black money on a bus. She searched the bus and found nothing. On a hunch, she climbed on to the roof and found ∃25 crore in five sacks.
Money is sometimes attached to the daily newspaper and delivered; amounts range from 0500 to ∃1,000. In UP, voters received money orders from unknown senders, and, in Tamil Nadu, during the 2011 Assembly polls, envelopes stuffed with cash were pushed under doors at night. Speedpost, courier services, NGOs, pawn brokers, self-help groups and even students have been used to distribute money.
EC surveillance teams have found cash hidden under car bonnets and inside doors of vehicles. A senior EC official said he had seen everything from currency bundles in sacks to bundles of half-burnt currency notes, perhaps burnt by couriers when they realised the agencies were on their tail.
AICC general secretary B.K. Hariprasad said: “Whenever money plays a major role, it is a threat to democracy. The EC should increase the expenditure limit and there should be electoral reforms, and some mechanism should be worked out to deal with the problem.” Candidates across party lines support Hariprasad and say the current expenditure ceiling is too low.
But the expenditure figures are confusing. National Election Watch studied the affidavits of 6,753 candidates in the 2009 Lok Sabha elections and found that only four had gone over the limit. While 30 had used 90 per cent of the permitted amount, 6,719 said they had spent only 45 to 50 per cent of the amount. “If 99 per cent candidates spent only 45-50 per cent of the limit, why this hue and cry over the limit being too low?” asked Prof. Jagdeep Chhokar of National Election Watch.
Under the new EC guidelines, all candidates have to open a bank account specifically to transact election expenses and contributions. A candidate can be disqualified for hiding campaign expenditure or overshooting the limit. The EC was surprised to find candidates with assets worth crores of rupees who have never filed IT returns. Many do not have a PAN card. The EC found 191 such candidates in Punjab and Uttarakhand alone.
The IB has informed the EC about hawala money bankrolling the campaigns of some politicians. Former home secretary G.K. Pillai was not surprised by the hawala links. “Usually the money comes ahead of the election,” said Pillai. “But I think there is a lot of black money inside the country, which politicians use during the elections.”
Politicians facing EC investigation include former Maharashtra chief minister Ashok Chavan. He had said that he spent only ∃5,379 on newspaper ads during the 2009 Maharashtra assembly polls. A complainant informed the EC that the actual spend was in excess of ∃2 crore. Former Jharkhand chief minister Madhu Koda is facing charges of not filing his election expenditure account properly.
P.C. Thomas, former Union minister, was found guilty of soliciting votes on religious grounds and hiring vehicles to ferry voters in his constituency in Kerala. He has been barred from contesting for three years.
Earlier, in an unprecedented step, the EC disqualified Umlesh Yadav, MLA from Bisauli, UP, for concealing her electoral expenses. She had contested the 2007 Assembly polls as a BJP candidate. Wife of liqour baron and politican D.P. Yadav, she is the mother of Bharti and Vikas Yadav, who was convicted in the Nitish Katara murder case. Nitish was Bharti's boyfriend; Vikas murdered him and burnt the body.
In many states, politics and corruption are directly linked to criminals and their patrons in the government. Said EC legal adviser S.K. Mendiratta: “If we get evidence, almost 60 per cent of them [candidates] will find themselves disqualified and in prison.”
In the 2007 Assembly elections in UP, 143 candidates with pending criminal cases won. This year 218 such candidates have contested elections there. Mendiratta said that the filing of tax returns and submission of proper affidavits would not stem the flow of black money in elections.
Some analysts believe that state funding of elections will curb corruption. The idea was first pushed in 1998, through the Indrajit Gupta committee on state funding of elections. Prime Minister Manmohan Singh was a member of that committee. Currently a Group of Ministers is looking into it. Critics argue that unless the executive is separated from the legislative, elections cannot be clean.

Air rules

Election Commission rules stipulate that air traffic control must inform the commission at least 24 hours before a 
chartered or other private aircraft fly into a poll-bound state. Chopper charter fees range from ∃80,000 to ∃1.5 lakh per hour. In Punjab, the Congress made 75 helicopter landings, followed by the Shiromani Akali Dal (31) and the BJP (13).

Poll treasury
The Election Commission has seized black money of over 
Rs 120 crore since 2011. This year, it has seized Rs47.02 crore so far—Rs32.71 crore from UP, Rs12.13 crore from Punjab, Rs1.35 crore from Uttarakhand, Rs 47 lakh from Manipur and Rs36 lakh from Goa.
Additional raids yielded, in Punjab, heroin worth Rs200 crore, 2,696kg poppy husk, 99.9kg opium, 3,793gm smack, 88,296 drug capsules and 9,94,075 
tablets. In UP, the EC 
confiscated 2,23,120 litres of illicit liquor, 4,050 firearms and 6,290 cartridges.

Goa's moneybags
By Charul Bajaj & 
Sharmista Chaudhury
In Goa, money rules, 
especially during elections, and, to some, winnability is just a euphemism. “Is 
winnability distribution of laptops, mobiles and cars?” asks Matanhy Saldanha, a BJP candidate, taking a dig at the moneybags.
A Goa-based portal reported that the French government had informed New Delhi about 23 Goan politicians and four mining companies having deposits totalling rs 49,000 crore in French banks.
“Black money in Goa comes from three sources: Regional Plan 2021, illegal mining and casino gambling,” said Yatish Naik, founder of the activist Zagrut Goenkaracho Ekvott. Regional Plan 2011 was scrapped after it was proved that kickbacks had been paid for land conversion. Congress candidate Atanasio Monseratte, the Goan 
posterboy for development, allegedly received kickbacks worth Rs 26.75 crore.
Illegal mining is another source of money laundering and most of the mining
families have a significant stake in Goan politics. According to the Public Accounts Committee, illegal iron ore worth Rs4,000 crore was mined in the last five years.

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