National Herald affair: It’s fraud all the way
The bare facts exposed by Dr Subramanian Swamy on the National Herald affair this month are eloquent, needing very little prose. The fraud is explicit without exposition. Here are the basic facts. Financial crisis forced Associated Journals Limited (AJL), the publishers of National Herald newspaper founded by Pandit Nehru, to close down the paper in 2008. To pay off the employees to help the closure, the Congress Party had given interest-free loan of Rs 90 crore plus to AJL, then. With the newspaper shut, AJL had become a mere real estate company in 2008, with property in Delhi, Lucknow and Mumbai worth over Rs 2,000 crore in its balance sheet. Against this, AJL owed just Rs 90-crore plus to the Congress. It had very little liability, besides. The balance real estate of AJL, left after paying off the dues to Congress, legally and morally belonged to AJL’s thousand plus shareholders. Big and small, they had contributed Rs 89 lakh to AJL’s capital, when the Rupee was hundred times more valuable. If AJL’s real estate had been sold and cash distributed to the shareholders, Brahm Dev Narain, a teacher holding just 41 equity shares in AJL, would have got some Rs 84,000. Hundreds of others would have got similar sums.
But, by deep design and defying both law and morals, Sonia Gandhi and Rahul Gandhi appropriated — actually misappropriated — control of AJL’s Rs 2,000-cr real estate without paying a dime to AJL’s shareholders. In just three months, between November 2010 and February 2011 and in three moves, control of thousands of crore worth property passed onto the Gandhi family. Here unfolds the sordid story.
As the first step, in November 2010, a trust company named “Young Indian” was mysteriously formed with a capital of just Rs 5 lakh, in which Sonia Gandhi and Rahul Gandhi owned 38 per cent each (total 76 per cent) and two family retainers, Motilal Vora and Oscar Fernandes, owned the balance 24 per cent, making it cent percent Gandhi family outfit. Second, the very next month, December 2010, the Gandhis got the Congress party to assign the Rs 90-cr plus loan given to AJL in 2008 to Young Indian (read themselves) by paying to the party just Rs 50 lakh. The Congress wrote off the balance Rs 89.75 cr as irrecoverable. This creative — actually criminal — accounting substituted Young Indian for the Congress, entitling Young Indian to recover Rs 90-cr plus due from AJL. Finally, in February 2011, AJL converted the Rs 90-cr plus due to Young Indian into equity shares and allotted them. By this step, Young Indian became almost 99 per cent owner of AJL, and as much of the real estate of AJL. When AJL had assets worth Rs 2,000 cr, why should the Congress write off Rs 89.75 cr due from it as bad debt? Would the Congress have done it for any person outside the Gandhi family? And did the Congress Working Committee or AICC know of, or consent to, donate Rs 89.75 cr to the Gandhis through Young Indian? More. In the founding documents of Young Indian the one word that is totally absent is “Congress”! The design is self-evident. The Congress should be out completely and the Gandhi family should exclusively grab control of the AJL’s lands at Delhi, Lucknow and Mumbai worth thousands of crores for pittance. And it did happen.
The rest of Young Indian’s story stinks even more. With the Gandhi family and loyalists holding its entire capital, the directors of Young Indian — besides Sonia and Rahul, are Vora, Oscar, Suman Dubey and Sam Pitroda — are time-tested friends of the family. But, what is the object of Young Indian? Young Indian says its first annual report (April 27, 2012), “is engaged in activities to inculcate in the minds of India’s youth commitment to the ideals of democratic and secular society”.
See what is the first act of this idealist company, after its birth in November 2010, to “inculcate” such ideals in youth. Its annual report shows that the company forthwith started its “operations in December 2010”, and as its first act in pursuance of “its objects”, it acquired the “loan owed” by AJL “for a consideration of Rs 50 lakh”, by which it became AJL’s 99 per cent owner. So the first act of Young Indian to promote idealism in Indian youth was to defraud the Congress party of Rs 89.75 crore on the one hand and the shareholders of AJL of thousands of crores of money on the other. See how the plot thickens.
Young Indians’ annual report discloses a further design — to alter the character of AJL itself. It says that AJL is recasting “its activities” to align its objects, Young Indian’s “main objects”. Finally to merge AJL into Young Indian? And “as part of the restructuring exercise of” AJL, says the annual report, the “loan was converted into equity”. A joke indeed! Young Indian speaks as if it is helping to restructure AJL. Young Indian is a pauper. Its director’s report shows that, from its inception in November 2010 to March 2012, its total income was — believe it — just Rs 800! Its total expenditure was Rs 69.79 lakh and its loss, after deducting its income (Rs 800) was Rs 69.78 lakh. Does the AJL, with huge real estate, need an asset-less and income-less pauper Young Indian for its restructure?
See the deepening design. Young Indian’s annual report intentionally conceals the crucial fact that the loan of Rs 90-cr plus owed by AJL to it was originally due to the Congress party — the intention being that Young Indian looted the Congress should be concealed. The report also suppresses the fact that AJL with asset base of a couple of thousands of crores had become (almost) its wholly-owned subsidiary. It says, in fine print, that shareholders — who? Sonia, Rahul, Vora, Oscar, Dubey and Pitroda! — will get information regarding the subsidiary on request.
This is a fraud on company law, which mandates that the details of the subsidiary be available to the public. More. Young Indian also totally suppresses its 99 per cent holding in the AJL saying that the shareholding “is treated as application on the object of the company” and so “the same has not been reflected as an investment in shares”. This deceptive accounting jargon means that the payment of `50 lakh for 99 per cent of shares of the AJL worth thousands of crores is shown not as an asset, but as expenditure! Why? Obvious.
To keep the investment out of the balance sheet of Young Indian! The annual report blatantly lies that since the net worth of AJL is negative, its investment in 99 per cent capital of AJL is written off as expenditure.
The balance sheet of AJL as on March 31, 2011, shows a positive net worth Rs 8 crore; of which Young Indian’s 99 per cent share is Rs 7.92 cr. So the negative net worth story is a fabrication. The real net worth of Young Indian is, of course, over Rs 2,000 cr.
And the final lie. After Dr Swamy’s expose, the Congress, with tears in its eyes, told the nation on November 3, 2012, that revival of National Herald, a symbol of Gandhi-Nehru ideals, was an “emotional issue” for the party, as if it has paid Rs 90 cr plus now for Herald’s revival. It had paid the amount in 2008 to help close, not revive, the Herald. Just three weeks before the Congress shed tears to revive National Herald, on October 11, 2012, ‘The Pioneer’ newspaper reported that Rahul Gandhi was emphatic that Young Indian had no intention of relaunching any newspaper. By an email to ‘The Pioneer’, Rahul Gandhi’s office said: “Young Indian is a not-for-profit company and does not have commercial operations.... The company has no intention of starting any newspaper”. Any more evidence needed to prove that the sobbing story of Herald’s revival is fake? A post facto lie?
So. The Gandhi family usurping the AJL’s Rs 2,000 cr real estate, with the funds of the Congress and through Young Indian, is fraud all the way. On the Congress. On the shareholders of AJL. And on the National Herald.
Pandit Nehru said: “I will not let the National Herald close down even if I have to sell (my own house) Anand Bhawan”. And now? The Gandhis have buried the National Herald and looted its real estate.
S. Gurumurthy is a well-known commentator on political and economic issues.