conflict of interest
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Conflict of Interest A case study of N Srinivasan’s conflict of interests in IPL controversy
10-10-2015
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Contents
What is Conflict of Interest? 2
Types of conflicts of interests 3
Financial Interests 4
Case Study – N Srinivasan’s IPL Controversy 5
i. Introduction 5
ii. Timeline of Controversies 5
iii. Instances of N Srinivasan’s Conflict of Interests 8
Conclusion 11
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What is Conflict of Interest?
A conflict of interest (COI) is a situation in which a person or
organization is involved in multiple interests, financial interest, or
otherwise, one of which could possibly corrupt the motivation of the
individual or organization.
The presence of a conflict of interest is independent of the occurrence
of impropriety. Therefore, a conflict of interest can be discovered and
voluntarily defused before any corruption occurs. A widely used
definition is: "A conflict of interest is a set of circumstances that creates
a risk that professional judgement or actions regarding a primary
interest will be unduly influenced by a secondary interest."
Primary interest refers to the principal goals of the profession or
activity, such as the protection of clients, the health of patients, the
integrity of research, and the duties of public office.
Secondary interest includes not only financial gain but also such
motives as the desire for professional advancement and the wish to do
favours for family and friends, but conflict of interest rules usually focus
on financial relationships because they are relatively more objective,
fungible, and quantifiable. The secondary interests are not treated as
wrong in themselves, but become objectionable when they are
believed to have greater weight than the primary interests.
The conflict in a conflict of interest exists whether or not a particular
individual is actually influenced by the secondary interest. It exists if the
circumstances are reasonably believed (on the basis of past experience
and objective evidence) to create a risk that decisions may be unduly
influenced by secondary interests.
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Types of conflicts of interests
The following are the most common forms of conflicts of interests:
Self-dealing, in which an official who controls an organization
causes it to enter into a transaction with the official, or with
another organization that benefits the official only. The official is
on both sides of the "deal."
Outside employment, in which the interests of one job conflict
with another.
Nepotism, in which a spouse, child, or other close relative is
employed (or applies for employment) by an individual, or where
goods or services are purchased from a relative or from a firm
controlled by a relative. To avoid nepotism in hiring, many
employment applications ask if the applicant is related to a
current employee of the company. This allows recusal if the
employed relative has a role in the hiring process. If this is the
case, the relative could then recuse from any hiring decisions.
Gifts from friends who also do business with the person receiving
the gifts or from individuals or corporations who do business with
the organization in which the gift recipient is employed. Such gifts
may include non-tangible things of value such as transportation
and lodging.
Pump and dump, in which a stock broker who owns a security
artificially inflates the price by "upgrading" it or spreading rumors,
sells the security and adds short position, then "downgrades" the
security or spreads negative rumors to push the price down.
Other improper acts that are sometimes classified as conflicts of
interests are probably better classified elsewhere. Accepting bribes can
be classified as corruption. Use of government or corporate property or
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assets for personal use is fraud. Nor should unauthorized distribution of
confidential information, in itself, be considered a conflict of interest.
For these improper acts, there is no inherent conflict of roles.
Financial Interests
The paradigm conflict of interest is financial interest.
Non-financial (or only indirectly financial) forms of bias can pose serious risks to research and to human safety and dignity.
Significant financial interests must be disclosed to institutional officials and be appropriately managed.
A “significant financial interest,” according to the PHS, is one that that could directly and significantly affect the design, conduct, or publication of research and thus bear on issues of human subject’s protection.
Financial interests include, but are not limited to:
Compensation from employment (by other than grantee institution)
Paid consultancy, advisory board service, etc.
Stock ownership or options
Intellectual property rights (patents, copyrights, trademarks, licensing agreements, and royalty arrangements)
Paid expert testimony
Honoraria, speakers’ fees
Gifts
Trips
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Case Study – N Srinivasan’s IPL Controversy
Introduction: Narayanaswami Srinivasan (born 3 January 1945) is an Indian
industrialist. He is the current Chairman of the International Cricket
Council (ICC) and former President of the BCCI, the governing body for
cricket in India. He is also the managing director of India Cements
Limited.
Srinivasan is being investigated in several scams, including one involving
betting on IPL cricket matches, where his son-in-law Gurunath
Meiyappan has been indicted for passing inside information to bookies
and is in jail. He is also being investigated as a in the corruption
involving politician Jagan Mohan Reddy. In March 2014, the Supreme
Court of India ordered him to quit as BCCI president to facilitate
investigations into the IPL betting scam.
Timeline of Controversies:
The BCCI regulation, Clause 6.2.4 stated that "no administrator of
BCCI could have had, directly or indirectly, any commercial interest in
the matches or events conducted by the cricket board". Later, after the
start of IPL in 2008, the clause was amended to give unfavorable
benefit to BCCI members such that they can own stakes in the IPL
franchise. N. Srinivasan became the owner of Chennai Super Kings. The
case against N. Srinivasan on the grounds of conflict of interest is still
pending in the Supreme Court of India.
In 2013, under the massive Indian Premier League Spot fixing
controversy, N.Srinivasan's son-in-law and CSK team principal
Gurunath Meiyappan was arrested by Mumbai Police under the
involvement in heavy betting and trading of inside information to
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bookies. Despite media and national outrage asking for his
resignation, he remained defiant. But ultimately, he stepped aside
on 2 June 2013 and appointed Jagmohan Dalmiya as the interim
president. On 27 September, Supreme Court restrained him from
holding the post of BCCI President until its further orders. On 8
October 2013 Supreme Court allows N. Srinivasan to take charge
as BCCI President.
On 10 February 2014, a report submitted by the retired High
Court Chief Justice Mukul Mudgal-led committee, indicted Mr.
Srinivasan's son-in-law, Gurunath Meiyappan of illegal betting and
passing on sensitive match-related information to bookies during
IPL 2013. The 170-page report also stated that Srinivasan's
company, India Cements was liable for Meiyappan's actions and
that the Chennai Super Kings franchise was in violation of the
franchise agreement, which may result in the termination of the
Indian Premier League franchise. On 21 March, Meiyappan's voice
was found to match a tapped phone conversation discussing
match fixing activities
On 25 March 2014 the Supreme Court of India told N. Srinivasan
to step down as BCCI president so that a fair investigation may be
conducted. The court found it "nauseating" that he should hold
on to the post despite various courts censuring him.
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On 27 November 2014 the Supreme Court said that N Srinivasan’s
conflict of interest was “obvious” as he also owned a team i.e. CSK
in the IPL. The court also asked BCCI if it was open to have a fresh
poll for a new board without N Srinivasan. On 29 March 2015,
Srinivasan gave away the Cricket World Cup trophy to the winning
Australian team - an act that should have been performed by the
ICC President Mustafa Kamal. Prior to the final, Kamal had made
controversial statements regarding umpiring in the India-
Bangladesh quarterfinals. In light of these comments, ICC
reportedly had a meeting, and decided that Kamal would not be
allowed to hand over the trophy. Srinivasan had also expressed
his extreme unhappiness over Kamal's comments in the same
meeting, causing an embarrassed Kamal to walk out of the final
before the match even finished. He later quit his position as the
President, and vowed to expose the people behind the
"mischievousness".
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Three instances of N Srinivasan's conflict of interest:
Conflict of interest, the Court said, has no place in cricket.
Srinivasan must choose between the BCCI and CSK. In their order, the
two Justices provided detailed reasoning to support their conclusion,
listing three instances that demonstrated how Srinivasan could use his
position to his own benefit.
Those instances are quoted from the order below:
Three real life situations that have arisen in the past, qua India Cements
owned by Mr. Srinivasan’s family and captained by him, simply
demonstrate how such conflicts have arisen between the duty which
Mr. Srinivasan owes to BCCI and through the BCCI to the cricketing
world at large and his commercial if not personal interest in the events
which BCCI organizes.
1. The first instance arose when the BCCI awarded compensation of a
sum of Rs.10.40 crores to Chennai Super Kings – on account of the
cancellation of the Champions League Tournament 2008. It is not in
dispute that Mr. Srinivasan was one of those who contributed to the
taking of the decision to award that amount towards compensation to
his own team.
True it is that a similar amount was awarded to Rajasthan Royals the
other finalist also, but that does not, mean that to the extent Mr.
Srinivasan, participated and deliberated in the proceedings leading to
the award of a hefty amount of compensation, he was not privy to a
self-serving decision that benefited India Cements Ltd. a company
promoted by Mr. Srinivasan. The fact that some others also
participated in the decision-making process as members of IPL
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Governing Council does not cure the legal flaw arising out of the
benefactor also being the beneficiary of the decision.
The situation is analogous to Naqishbund participating in the selection
proceedings even when he was himself a candidate for selection as in
Kraipak’s case (supra). As a matter of fact, Naqishbund had recused
himself from the proceedings when his own case was taken up for
consideration.
But this Court remained unimpressed and took the view that any such
recusal did not make any material difference, as bias in such like
situations operates in a subtle manner. In the case at hand Mr.
Srinivasan had not even done that much no matter it would have made
little or no difference even if he had done so. At any rate, the test is not
whether bias was actually at work when the decision was taken. It is
the reasonable likelihood of bias that determines whether the action
can be faulted.
A reasonable likelihood of bias is what can be seen even in the case at
hand when the decision to award compensation was taken by the
governing council of IPL with Mr. Srinivasan, present and participating
as a member.
2. A similar award of a sum of rupees 13.10 crores came in the year
2009 which too fell foul of his duty on the one hand and interest on the
other. Mr. Sibal, no doubt, argued that this amount was returned by ICL
subsequently, but such return, does not improve the matters. The
decision to award an amount higher than the one awarded earlier
appears to have led to public criticism raising the pitch further for Mr.
Srinivasan’s removal from the BCCI on the principles of conflict of
interest.
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Return of the amount because of a public outcry may no doubt mean
that Mr. Srinivasan tried to come clean on the subject even when his
company may have suffered a loss, but it may as well mean that the
return of the amount came only under public pressure and in
recognition of the fact that the amount was not actually due and
payable and yet was paid to the detriment of BCCI who is a trustee of
general public interest in the sport of cricket and everything that goes
with it.
3. The third instance where Mr. Srinivasan’s commercial interest came
in direct conflict with his duty as President of BCCI is when allegations
of betting were leveled against his son-in-law Mr. Gurunath Meiyappan.
Even ignoring for a moment the argument that Mr. Srinivasan had
made a deliberate attempt to cover up the betting racket that came to
light, facts now prove that Mr. Gurunath Meiyappan was involved in
betting in IPL matches even when he was a team official of CSK. We
have, while dealing with question No.3, held that the misconduct of Mr.
Gurunath Meiyappan and Raj Kundra can result in award of punishment
not only to the said two persons but even to the franchisees
themselves.
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Conclusion
Hence that being so, a clear conflict of interest has arisen between what is Mr.
Srinivasan’s duty as President of BCCI on the one hand and his interest as father-
in-law of Mr. Gurunath Meiyappan and owner of team CSK on the other.
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