Enron

Vivek Kaul 
News of the World was a British newspaper, owned by media moghul Rupert Murdoch, which published its last edition on July 10, 2011. The newspaper shutdown after it came to light that the employees of the newspaper had been hacking phones, using private investigators and even bribing the police to acquire confidential information, which could be turned into sensational news stories.
On July 19, 2011, nine days after News of the World shutdown, Rupert Murdoch and his son James, gave oral evidence to the Select Committee on Culture, Media and Sport of the British Parliament. The Committee asked a stream of questions to the Murdochs.
Adrian Sanders, a member of the committee, asked the question number 269, which put the Murdochs in a lot of bother. This is how the brief conversation that followed the question went:
Q269 Mr Sanders: Finally, are you familiar with the term “wilful blindness”?
James Murdoch: Mr Sanders, would you care to elaborate?
Q270 Mr Sanders: It is a term that came up in the Enron scandal. Wilful blindness is a legal term. It states that if there is knowledge that you could have had and should have had, but chose not to have, you are still responsible.
James Murdoch: Mr Sanders, do you have a question? Respectfully, I just do not know what you would like me to say.
Q271 Mr Sanders: The question was whether you were aware—
James Murdoch: I am not aware of that particular phrase.
Q272 Mr Sanders: But now you are familiar with the term, because I have explained it to you.
James Murdoch: Thank you, Mr Sanders.
Rupert Murdoch: I have heard the phrase before, and we were not ever guilty of that.
In the days the discussion was picked up by the media and there was a lot of discussion around the topic. The Select Committee finally concluded that “If at all relevant times Rupert Murdoch did not take steps to become fully informed about phone hacking, he turned a blind eye and exhibited wilful blindness to what was going on in his companies and publications.”
Before Murdochs were accused of ‘wilful blindness’ the term was used even for the Enron debacle by Judge Simeon Lake. Enron was an American company which went bust more than 10 years back after it came to light that it had been growing by simply fudging its numbers. Jeffrey Skilling and Kenneth Lay, the CEO and Chairman of Enron, pleaded that they just did not know what was going on in the company and hence could not be held responsible for it.
In his summary of the trial, Judge Lake told the jury that “You may find that a defendant had knowledge of a fact if you find that the defendant deliberately closed his eyes to what would otherwise have been obvious to him. Knowledge can be inferred if the defendant deliberately blinded himself to the existence of a fact.” 
As Margaret Heffernan writes in Wilful Blindness- Why we ignore the obvious at our peril “Judge Lake was applying the legal principal of wilful blindness: you are responsible if you could have known, and should have known, something which instead you strove not to see. Skilling and Lay could have known, and had the opportunity to know, just how rotten their company was. Their claim not to know was no excuse under the law. Since they could have known, they were responsible…The law does not care why you remain ignorant, only that you do.”
The concept of ‘wilful blindness’ first appeared in the English courts in 1861. “A judge in Regina v. Sleep ruled that an accused could not be convicted for possession of government property unless the jury found that he either knew the goods came from government stores or had ‘wilfully shut his eyes to the fact’,” writes Hefferman. “Over time, a lot of other phrases came into play – deliberate or wilful ignorance, conscious avoidance and deliberate indifference. What they have all in common is the idea that there is an opportunity for knowledge and a responsibility to be informed, but it is shirked.”
In fact, the current case where three players of the Indian Premier League (IPL) team Rajasthan Royals have been accused of spot fixing, fits excellently into the concept of ‘wilful blindness’. The Board of Control for Cricket in India (BCCI) which runs the IPL has been trying to underplay the scandal and at the same time trying to distance itself from it. N Srinivasan, the President of BCCI, had this to say after the scandal broke out “We will do whatever is necessary. The sport is clean and we are running it clean. We have taken all the steps (to keep it clean). One or two bad eggs here and there cannot sully the entire game.”
The BCCI has taken pains to elucidate that the scandal concerns just one team i.e. the Rajashtan Royals and they have nothing to do it. That possibly also explains why the Rajasthan Royals have filed a first information report (FIR) against the three players and the BCCI has been doing nothing, except for holding meetings and appearing to talk tough.
The few bad eggs explanation has now ended up as an egg on the face of President Srinivasan as Mumbai Police gets ready to question Gurunath Meiyappan, who other than being the Team Principal of the best performing IPL team Chennai Super Kings (CSK) also happens to be married to Srinivsan’s daugther Rupa.
Srinivasan other than being the President of BCCI, happens to own the CSK team. Talk about conflict of interest. Gurunath, more popularly known as Prince Gurunath, is in trouble because of his close links to small time actor turned bookie Vindoo Dara Singh (more popularly known as Jack in betting circles).
While just knowing another person does not amount to guilt, but the fact that Singh had access to the inner echelons of CSK and was even seen watching a match seated next to Sakshi Dhoni (wife of Mahendra Singh Dhoni, who also happens to be the captain of CSK ) does muddle the waters. Even within IPL circles Singh’s role as Jack was pretty well known (a senior functionary of an IPL team has said so clearly on Facebook). So wasn’t this an act of wilful blindness on the part of Srinivasan? Shouldn’t he have wondered what was a bookie doing inside the VIP section, sitting next to the wife of the captain of his cricket team?
The BCCI was also wilfully blind given that last year in a sting operation India TV, had shown that various fringe players in the IPL were ready to be bought for money. There were also allegations of spot fixing. The BCCI suspended some players, but beyond that nothing happened. Of course Srinivasan did make a strong statement. “We will not tolerate this nonsense. We have zero tolerance on corruption and you will not be disappointed by the action we take,” he said.
What makes all this even more interesting is the fact that BCCI is run by politicians from across parties. Sharad Pawar, Arun Jaitley, Rajeev Shukla, Anurag Thakur, Jyotiraditya Scindia, Narendra Modi, etc, are all a part of it. It is difficult to believe that they were totally unaware of what was going on in the league. In face of all this the explanation of there being only a ‘few rotten eggs’ doesn’t really hold.
Margaret Heffernan wrote a very interesting column for the Huffington Post in the aftermath of the Murdoch owned New of the World being shutdown. In this she pointed out that “After every institutional debacle, the arguments are the same: it was just a few bad apples. Nobody at the top is to blame. A few rogue, or over-zealous employees just went off piste. Then the full scale of the debacle emerges and another face-saving fiction emerges: no one could possibly have seen this coming. Both arguments were wrong in Abu Ghraib, at Enron, WorldCom, BP, Countrywide and Lehman Brothers and both are wrong today at News International.”
When the credibility of big institutions like BCCI is damaged, they tend to react in a very similar sort of way. They tend to blame it on a few rotten eggs, even though the entire institution has been wilfully blind.
As Heffernan wrote in another column for the Guardian: “Richard Fuld, the Lehman Brothers CEO, was also wilfully blind. He organised his life to ensure that he never encountered employees unexpectedly. The chief executive of Bear Stearns (a big Wall Street investment bank that went bust a few years back) chose not to implement a form of risk analysis that might actually have revealed how much debt the bank carried. And the Catholic church, when first confronted with the fact of child-abusing priests, chose first of all to take out insurance. All these institutions were blindsided by their choices – that is, they can’t blame their blindness on others.”
The same now stands true for the BCCI as well.
The article was originally published on www.firstpost.com on May 23, 2013
(Vivek Kaul is a writer. He tweets @kaul_vivek)