Monday, November 24, 2008

Tibet: How trustworthy is China? -- B. Raman

Tibet: How Trustworthy is China?

B.Raman, C3S Paper No.231 dated November 24, 2008

(To be read in continuation of my article of November 3,2008, titled TIBET: ‘STATUS QUO PLUS’ AS AN OPTION? available at )

How trustworthy is China on Tibet? Do the words, promises and commitments of its leaders have any value? What are the options available to the Tibetan people in dealing with an economic power, which the international community is not prepared to displease because of the perceived dependence on Chinese co-operation for re-stabilising the global economy? Are the Tibetan people condemned to extinction, with neither India nor the West prepared to support their cause for autonomy? What after the Dalai Lama? Will his death also mean the death of the Tibetan cause?

2. These were the questions and concerns that were uppermost in the minds of 560 prominent Tibetan personalities from the Tibetan diaspora in India and the rest of the world, who participated in a Special General Meeting convened by His Holiness the Dalai Lama at Dharamsala in Himachal Pradesh ” to hold an extensive discussion and debate with regard to the Tibetan cause in the light of recent emergency events in Tibet and the international scenario.”

3. His Holiness himself did not attend the meeting, which was held from November 17 to 22,2008.The meeting was held against the background of the ruthless crushing of the uprising in the Tibetan majority areas of China in March and April last by the Chinese People’s Liberation Army (PLA) and the failure of the resumed dialogue between the Chinese authorities and the representatives of His Holiness to find a way forward for meeting the aspirations of the Tibetan people. The Chinese had agreed to the resumption of the dialogue earlier stalled by them under international pressure after the uprising. The two meetings held in China by visiting representatives of His Holiness made it apparent that the Chinese were merely buying time in order to prevent a boycott of the Olympics by world leaders.

4. Hopes that after the Olympics, the Chinese leaders would adopt a softer line on the future of Tibet have been belied. There was one meeting before the Olympics and one after the Olympics. The meeting held after the Olympics ( 8th round from October 30 to November 5, 2008) made it painfully clear that the Chinese stance has further hardened. During the seventh round of talks in Beijing on July 1 and 2, 2008, the Vice Chairman of the Chinese People’s Political Consultative Conference and the Minister of the Central United Front Work Department, Mr. Du Qinglin, invited suggestions from His Holiness for the stability and development of Tibet. The Executive Vice Minister of the Central United Front Work Department, Mr. Zhu Weiqun, further said they would like to hear the views of the Dalai Lama’s representatives on the degree or form of autonomy they were seeking as well as on all aspects of regional autonomy within the scope of the Constitution of the People’s Republic of China (PRC). In response to the Chinese request, the Dalai Lama’s team, which, as before, consisted of Lodi Gyaltsen Gyari and Kelsang Gyaltsen submitted to their Chinese interlocutors during the 8th round a Memorandum outlining the position of His Holiness on the autonomy issue. To their surprise, the Chinese contemptuously rejected the Memo and refused to discuss the issue of autonomy. A summary of the Memo as released by the Tibetan delegation is annexed.

5.The hardening of the Chinese stance after the Olympics can be attributed to the following reasons:

Firstly, the manner in which France and other Western countries eased their pressure on the human rights issue after the Chinese people threatened to boycott Western goods made Beijing realise the power of the economic card which it now wields against the West.
Secondly, the economic melt-down in the West and its anxiety to secure Chinese co-operation and assistance for re-stabilising the global economy made it even more unlikely than in the past that the West would extend any concrete support to the Tibetan cause apart from pro forma lip sympathy.
Thirdly, speculation about health problems faced by the Dalai Lama made them feel that it was only a question of time before he disappeared from the scene and that once he is dead they can have a Dalai Lama of their choice nominated and sound the death-knell of the Tibetan cause.
6. The Tibetans have been shocked by the Chinese repudiation of a commiment made by Deng Xiao-ping on March 12,1979, that “apart from independence, all other issues can be discussed.” He gave this solemn assurance during a meeting with Kasur Gyalo Thondup, the elder brother of His Holiness. While replying to a Japanese correspondent in Beijing on November 10,2008, Zhu Weiqun asserted that Deng had never made such a statement. He said: “ It is a falsehood made by Gyari and is a complete distortion of Deng Xiaoping’s statement.”
7. Taken aback by this denial which came on the eve of the Special General meeting, Gyalo Thondup addressed the international media, which had assembled at Dharamsala, on November 19,2008, to give his version. To quote him: “I am shocked to hear such a statement from the Chinese officials because it was myself to whom the late paramount leader, Deng Xiaoping, said, “except independence all other issues can be settled through discussions,”.Deng Xiaoping is no longer with us today. But to put the record straight I would like to clarify in front of international media that during my first visit to China in 1979 I met the paramount leader Deng Xiaoping on 12 March 1979. He told me “except independence all other issues can be settled through discussions.”

8. Juchen Thubten Namgyal, who also addressed the press conference, said: “I am totally surprised to learn that Mr Zhu Weiqun recently denied Deng Xiaoping’s statement. As a member of the first Tibetan exploratory mission, we met with Vice-premier Yang Jireng, who was also the head of the Central United Front Work Department and Nationality Affairs Commission and others on 29 April 1982. I sought confirmation from Yang Jireng whether Deng Xiaoping had made such a statement. He did not deny this fact.”

9. According to the advisers of His Holiness,on March 1,1979, Ulanfu, Minister for Nationality Affairs Commission, told Gyalo Thondup: “ The Dalai Lama and the Tibetans in exile are welcome to return to their home and contribute towards the development and progress of the nation. Suitable arrangements could be made for everyone upon their return. The Dalai Lama had not made contacts with the Soviet Union. Therefore, apart from independence, we can solve any problem.”

10. The advisers of His Holiness pointed out that a record of statements made by former Chinese leaders and official documents authenticated the statement made by Deng and Ulanfu. In an interview with the Xinhua News agency on May 19,1991, China’s then Premier Li Peng said: “All matters except Tibetan independence could be discussed”. His statement was later emphasised in a newsletter released by the Embassy of the People’s Republic of China in Washington DC, regarding the “Questions concerning negotiations between the Central Government of China and the Dalai Lama.”

11. According to the advisers, during a state visit to China from May 18 to 23, 1992, the then Indian President R Venkataraman was told by Premier Li Peng that “ … we are willing to talk to him about anything except the issue of the so-called independence of Tibet.” A White Paper released by the Information office of the State Council of the PRC in September 1992 reiterated that “all matters except Tibetan independence can be discussed”.

12. Gyalo Thondup told the media: “Some hardliner communist officials, who hold high up position in the Chinese Government, treat Tibet as a personal belonging in their pocket and deliberately intend to scuttle the dialogue process to resolve the issue of Tibet.
The Tibetan people will continue to demand their legitimate and reasonable rights as given to other minority nationalities entitled in the constitution of the People’s Republic of China.The legitimate rights of Tibetans are rights to freedom, thinking, speech, religion, travel, to promote and preserve Tibet’s culture. We must not lose faith and plead to the Chinese Government for our legitimate rights.As a Tibetan, I’m convinced that we must all live together. Therefore it is very important for the Tibetan people not to lose hope and to keep a good relationship with people in China. We are sandwiched between China and India, both very important countries. I was always critical with the Chinese face to face in Beijing, and now I’m desperate, that’s why I told people in the Chinese Embassy in Delhi that there’s no choice [but to talk]. We must face the reality that we have to deal with China. The people of China will eventually realize that what we are asking is legitimate.”

13.A commentary on Tibet disseminated by the official Xinhua news agency on November 21,2008, coinciding with the meeting, said: ” Its purpose is to set up a ‘half independent’ or ‘covertly independent’ political entity controlled by the Dalai clique on one quarter of the Chinese territory.And when conditions are ripe, they will seek to realise ‘complete Tibet independence’.” Qin Gang, a spokesman of the Chinese Foreign Ministry, was quoted as saying as follows: “Our position on Tibet is clear and resolute. Any attempt to separate Tibet from China is doomed to fail.The so-called Tibetan government-in-exile is not recognised by any government in the world.”

14. In the light of the Chinese repudiation of their past commitments and statements, the Special General Meeting discussed whether any useful purpose would be served by continuing with the dialogue with the Chinese and whether the time had not come to call off the dialogue with the Chinese officials, abandon the Middle Path of autonomy so far followed and start a full-fledged struggle for independence. This view is particularly shared by the younger Tibetans belonging to the Tibetan Youth Congress. A question posed by many during the discussions was: When the Chinese are not even prepared to discuss autonomy, what is the point in continuing the dialogue with them?

15. There was unanimity against accepting the status quo. The meeting reiterated its faith in the continuing leadership of His Holiness and decided to continue with the present objective of a Middle Path. It also stressed that the Tibetans would continue to adhere to non-violence. The relevant portions from the final summary of conclusions of the meeting are given below:

(a). “The Central Tibetan Administration is the sole and legitimate representative of the Tibetans in and outside Tibet, which the CTA has inherited from many centuries. This historical experience of the Tibetan people proves the baselessness of the recent rhetoric and propaganda of the Chinese Government, which says that His Holiness the Dalai Lama and the Central Tibetan Administration have no right to represent Tibet and the Tibetan people. The Tibetans in and outside Tibet strongly oppose such remarks.”

(b).”Based on the suggestions received to this Special General Meeting from in and outside Tibet and after frank and candid discussions held by the delegates in regard to the future policy of Tibet, it came to an unanimous decision to straightly follow the guidance of His Holiness the Dalai Lama based on the prevailing situation from time to time. Majority decision was to continue the policy of Middle-Way-Approach. Besides that, looking at the Chinese Government’s behavior in the past, views to stop sending envoys and to pursue complete independence or self-determination if no result comes out in the near future, were also strongly expressed.”

(c).”The Middle-Way-Approach, independence or self-determination, whatever is pursued in the Tibetan struggle, we shall not deviate from the path of non-violence to achieve our aims.”

(d).”His Holiness the Dalai Lama and the Central Tibetan Administration in an effort to resolve the Sino-Tibetan problem, by adopting the Middle-Way-Approach, a memorandum on genuine autonomy for the Tibetan people, within the framework of the constitution of the PRC, was recently presented to the Chinese Government. Leave alone giving positive response, the PRC Government rejected every single clause of the memorandum and accused the CTA of seeking independence, semi-independence or independence in disguised form. Therefore, the dialogue process did not produce any substantive result to the Sino-Tibetan problem and the whole responsibility of this failure is solely with the PRC government.”

(e). “Because the PRC had alleged that they have evidence to prove that the recent unrest in Tibet had been ‘triggered, instigated, planned and orchestrated’ by the ‘Dalai clique’, His Holiness the Dalai Lama and the Central Tibetan Administration insisted that an international investigating body be allowed to travel to Tibet to verify the PRC’s claims. And that delegates from China can also visit Dharamsala to investigate and validate their allegation. However, the PRC did not have the gumption to accept both these suggestions. Moreover, the PRC could not even bring forth one single evidence in support of their claims before the world audience. This has clearly pointed to the fact that demonstrations and protests in Tibet since March this year are because of the repressive policies adopted by the PRC towards Tibet and Tibetans since its occupation. Therefore, the PRC government should accept responsibilities for their mistakes.”

(f).”This is to reiterate, through this Special General Meeting, that the cause of the Tibetan struggle is a struggle for the rights of Tibetans. It is a struggle against the wrong policies of the PRC towards Tibet and Tibetans. The Tibetan struggle is in no way against the Chinese people, as it is being portrayed by the PRC.”

(g).”In order to destroy Tibetan Buddhism, the PRC instituted new regulations on measures for the recognition of incarnate lamas or ‘Living Buddhas’. We totally oppose any interference by a Government which is avowedly atheist in spiritual affairs for political advantage. We strongly oppose the ‘Patriotic Education’ campaign that is being increasingly forced down in various monasteries in Tibet.”

16. It is not clear whether His Holiness would take the initiative for another round of talks with the Chinese. The position seems to be that while the doors are open for more talks, the initiative has to come from the Chinese. It needs to be noted that the post-Olympics hardening of the Chinese stand on Tibet has been accompanied by what seems to be a post-Olympics hardening of the Chinese position on the Sino-Indian border talks during which the Chinese continue to insist on the transfer of at least Tawang in Arunachal Pradesh to China. It is understood that the Dalai Lama proposes to hold a meeting of the international well-wishers of the Tibetan cause to brief them on the deliberations of the Special General Meeting, which was restricted to Tibetans and seek their views.

(The writer, Mr B.Raman, is Additional Secretary (retd), Cabinet Secretariat, Govt of India, New Delhi, and, presently, Director, Institute For Topical Studies, Chennai. He is also associated with the Chennai Centre For China Studies. E-mail: )



The Constitution of the PRC contains fundamental principles on autonomy and self-government whose objectives are compatible with the needs and aspirations of the Tibetans. Regional national autonomy is aimed at opposing both the oppression and the separation of nationalities by rejecting both Han chauvinism and local nationalism. It is intended to ensure the protection of the culture and the identity of minority nationalities by empowering them to become masters of their own affairs.

To a very considerable extent Tibetan needs can be met within the constitutional principles on autonomy. On several points, the Constitution gives significant discretionary powers to state organs in decision-making and on the operation of the system of autonomy. These discretionary powers can be exercised to facilitate genuine autonomy for Tibetans in ways that would respond to the uniqueness of the Tibetan situation. Given good will on both sides, outstanding problems can be resolved within the constitutional principles on autonomy. In this way national unity and stability and harmonious relations between the Tibetan and other nationalities will be established.


Tibetans have a rich and distinct history, culture and spiritual tradition all of which form valuable parts of the heritage of humanity. Not only do Tibetans wish to preserve their own heritage, which they cherish, but equally they wish to further develop their culture and spiritual life and knowledge in ways that are particularly suited to the needs and conditions of humanity in the 21st century.

As a part of the multi-national state of the PRC, Tibetans can benefit greatly from the rapid economic and scientific development the country is experiencing. While wanting to actively participate and contribute to this development, we want to ensure that this happens without the people losing their Tibetan identity, culture and core values and without putting the distinct and fragile environment of the Tibetan plateau, to which Tibetans are indigenous, at risk.

His Holiness the Dalai Lama’s commitment to seek a solution for the Tibetan people within the PRC is clear and unambiguous. This position is in full compliance and agreement with paramount leader Deng Xiaoping’s statement in which he emphasised that except for independence all other issues could be resolved through dialogue. Whereas, we are committed, therefore, to fully respect the territorial integrity of the PRC, we expect the Central Government to recognise and fully respect the integrity of the Tibetan nationality and its right to exercise genuine autonomy within the PRC. We believe that this is the basis for resolving the differences between us and promoting unity, stability and harmony among nationalities.


Subject Matters of Self-government
1) Language
2) Culture
3) Religion
4) Education
5) Environmental Protection
6) Utilisation of Natural Resources
7) Economic Development and Trade
Public health
9) Public Security
10) Regulation on population migration
11) Cultural, educational and religious exchanges with other countries


Tibetans belong to one minority nationality regardless of the current administrative divisions. The integrity of the Tibetan nationality must be respected. That is the spirit, the intent and the principle underlying the constitutional concept of national regional autonomy as well as the principle of equality of nationalities.

There is no dispute about the fact that Tibetans share the same language, culture, spiritual tradition, core values and customs, that they belong to the same ethnic group and that they have a strong sense of common identity. Tibetans share a common history and despite periods of political or administrative divisions, Tibetans continuously remained united by their religion, culture, education, language, way of life and by their unique high plateau environment.

The Tibetan nationality lives in one contiguous area on the Tibetan plateau, which they have inhabited for millennia and to which they are therefore indigenous. For purposes of the constitutional principles of national regional autonomy Tibetans in the PRC in fact live as a single nationality all over the Tibetan plateau.

In order for the Tibetan nationality to develop and flourish with its distinct identity, culture and spiritual tradition through the exercise of self-government on the above mentioned basic Tibetan needs, the entire community, comprising all the areas currently designated by the PRC as Tibetan autonomous areas, should be under one single administrative entity. The current administrative divisions, by which Tibetan communities are ruled and administered under different provinces and regions of the PRC, foments fragmentation, promotes unequal development, and weakens the ability of the Tibetan nationality to protect and promote its common cultural, spiritual and ethnic identity. Rather than respecting the integrity of the nationality, this policy promotes its fragmentation and disregards the spirit of autonomy.


The exercise of genuine autonomy would include the right of Tibetans to create their own regional government and government institutions and processes that are best suited to their needs and characteristics. It would require that the People’s Congress of the autonomous region have the power to legislate on all matters within the competencies of the region and that other organs of the autonomous government have the power to execute and administer decisions autonomously. Autonomy also entails representation and meaningful participation in national decision-making in the Central Government. Processes for effective consultation and close cooperation or joint decision-making between the Central Government and the regional government on areas of common interest also need to be in place for the autonomy to be effective.

A crucial element of genuine autonomy is the guarantee the Constitution or other laws provide that powers and responsibilities allocated to the autonomous region cannot be unilaterally abrogated or changed. This means that neither the Central Government nor the autonomous region’s government should be able, without the consent of the other, to change the basic features of the autonomy.

Implementation of genuine autonomy, for example, requires clear divisions of powers and responsibilities between the Central Government and the government of the autonomous region with respect to subject matter competency. Currently there is no such clarity and the scope of legislative powers of autonomous regions is both uncertain and severely restricted. Thus, whereas the Constitution intends to recognise the special need for autonomous regions to legislate on many matters that affect them, the requirements of Article 116 for prior approval at the highest level of the Central Government - by the Standing Committee of National People’s Congress (NPC) - inhibit the implementation of this principle of autonomy. In reality, it is only autonomous regional congresses that expressly require such approval, while the congresses of ordinary (not autonomous) provinces of the PRC do not need prior permission and merely report the passage of regulations to the Standing Committee of the NPC “for the record” (Article 100).

The exercise of autonomy is further subject to a considerable number of laws and regulations, according to Article 115 of the Constitution. Certain laws effectively restrict the autonomy of the autonomous region, while others are not always consistent with one another. The result is that the exact scope of the autonomy is unclear and is not fixed, since it is unilaterally changed with the enactment of laws and regulations at higher levels of the state, and even by changes in policy. There is also no adequate process for consultation or for settling differences that arise between the organs of the Central Government and of the regional government with respect to the scope and exercise of autonomy. In practice, the resulting uncertainty limits the initiative of regional authorities and impedes the exercise of genuine autonomy by Tibetans today.

Friday, November 21, 2008

Arrest demanded of ATS officers for human rights violation: VHP

Lawyers' body to provide legal help to Malegaon accused

PTI | November 21, 2008 | 15:30 IST
Throwing its weight behind the Malegaon blast accused, including sadhvi Pragya Singh Thakur, a group of advocates in Sonepat have set up a 17-member lawyers committee to provide legal assistance to them.

The Hindu Unification Movement Legal and Welfare Association will provide legal assistance to the sadhvi and other accused, according to Bhupeshwar Dayal Gaur, a founder-member of the association.

He said the Anti-Terrorist Squad of the Maharashtra police, which is conducting a probe into the September 29 blast, has already collected information about the association and he, too, was interrogated in Delhi recently.

Dayal alleged that he was pressurised by the ATS officials to not provide any legal assistance to Pragya and other accused.

He said that the members of the association were committed to providing free legal assistance to any Hindu who was harassed by police and falsely implicated in the criminal cases.

---------- Forwarded message ----------
From: TCG Menon
Date: Fri, Nov 21, 2008 at 12:26 PM
Subject: A Study of Newspaper Reports on the Malegaon Blasts.

A study of newspaper reports on the Malegaon Bomb blast.

When ever there is a bomb blast, the Govt used to come out with a
theory of the ISI hand behind the blast. But in this particular
case it is directed to Hindu activists and the Indian Army. After
the Malegaon blast, many other bomb blasts took place in India. The
recent blasts in Assam are several times powerful and a number of
lives were lost. Recently two infiltrators had been shot dead by the
security personnel in Jammu & Kashmir. After searching their dead
bodies, it was revealed that they were from Kerala. The Kerala ATS
have arrested a number of persons recently in connection with the
above- reported incident The English TV news channels and the news
papers have not been giving any importance to these cases. The Kerala
ATS is not revealing any details and the media is also not interested
to publicize it. The Times Of India is using their news paper and TV
channel to spear- head the attack on Hindutva and publicize the day
to day 'progress' of the 'investigation' into the Malegaon bomb blast
case since the arrest of Sadhvi Pragya Singh Thakur.

The Sadhvi has been arrested as the motor cycle used for planting
the bomb is registered in her name. This has been found from the last
four digits (0303) of the frame number of the motor cycle. It is also
reported that the remaining numbers are not legible. It seems
somebody purposely tried to disfigure the number plate beyond
recognition. These are punched numbers and they can be wiped out
easily if anyone wants to do so. In most of the cases the illegibility
is due to rusting/corrosion. Perhaps a few numbers got disfigured
due to the impact of the blast . Sadhvi Pragya Singh Thakur has
clearly stated in her affidavit that she had sold her motor cycle to
one Sunil Joshi of MP, with proper records. Particular details of the
affidavit is given below:-
. "I say that in Surat during the course of my interrogation with Mr
Sawant, I mentioned to him that the LML Freedom two wheeler once owned
by me was subsequently sold to one Sunil Joshi of Madhya Pradesh way
back in October, 2004 and that Mr Joshi had paid me Rs 24,000/- for
the same. I had also signed the necessary TT Form for RTO transfer in
October, 2004 itself. I categorically asserted to Mr Sawant that since
October, 2004 I had no control over the vehicle or its movements and

There is a report published in Times of India dt Nov 5th, which is
given below:-
"that Sunil Joshi to whom Sadhvi Pragya had given her LML Freedom
motor cycle that was subsequently used in the Malegaon blast, was
killed by suspected SIMI activist at Dewas in Madhya Pradesh in
December last year. The vehicle subsequently passed on to Ramji, who
used this it to trigger the attack in the weavers town last month."

ATS reported that Ramji is absconding. In that case, what about his
identity. Why is the ATS not publishing his photo or giving other
details of the person in the papers? Who gave the motor bike to him,
and when? Unless he is an imaginary figure, he will have a family,
relatives and friends. Since no such details have come out, in all
probability this Ramji is an imaginary character used to implicate
the arrested Army officers & Hindu spiritual leaders. It seems 'some
one' has seen the Sadhvi talking to Ramji. She was under illegal
detention, and then arrested and kept under police custody more than
13 days before producing her in the court As per the rule a woman
should not be arrested or kept under custody without women police. In
this case all rules have been violated.

In the case of Sister Abhaya murder case, recently CBI have arrested
two priests and a nun. After producing the accused before the Judicial
Magistrate and getting permission from the court they remanded them
for 14 days custody. The Court heard the argument of the Advocates
appearing for the accused. This did not happen in the Malegaon Blast
case, where Hindus were arrested and kept under illegal detention.
Why is it so? Is the Law different for Hindu accused persons?

I am quoting below what CBI said when the reporters asked many
questions. "Sharing the dias with DIG Kanthaswamy, SP Rajeevakshan and
DySP Nandakumar Nair, the joint director did not answer any queries
in detail or give details of the involvement of each of the accused in
Abhaya's killing. ""Wait for a month, we will give you all the
details," he repeated.
Whereas Mumbai ATS has been giving day to day report about Malegaon blast.
They are trying to implicate Lt Col Shri kant Purohit in all the
blasts which took place in this country, of which ATS have not got
any clue. First they told Lt Col Purohit got the RDX from Army. Army
is not a production unit to keep stock of RDX or any other
ingredients of the bomb.
"In Bengaluru, last week, the Army man categorically denied having
taken RDX from any source during his J&K stint. Questions in this
regard were repeated to him but each time he strongly denied that he
had any links to the RDX. He was cooperative and answered with
clarity, said sources.
Sources in the Army also said a Military Intelligence officer has no
access to explosives. "He is in mufti and his brief is to collect
intelligence on insurgency and anti-national activities. Also, the
Army does not use or store RDX," an official source said.

I am also furnishing below a few published reports -
" Purohit used to collect money for his activities and financial
transactions were through banks and hawala agencies. Police suspect
that some money was routed through Bangladesh, where Abhinav Bharat
sympathizers are active."

'Purohit fits into the description of bomb trainer.'

'The Maharastra police are now examining whether Lt Col Shrikant
Prasad Purohit arrested in connection with Malegaon blast was
involved in blasts in Parbhani, Jalna and Purna, as Sanjay Chaudhari
an accused in April 2006 Nanded blast case has referred to a person
called Mithun Chakravarthy. During narco- analysis test Chaudhari
said Chakravarthy who trained Nandel blast accused Himanshu
Vyankatesh Panse in bomb – making , had a beard, was tall and stoutly
built." The training programe was held in Shivagad in Pune , Purohit
's home town.
There are so many Army officers and others having beard, and are tall
and stout. If the ATS wanted to clarify this doubt, why did they not
conduct the identification parade before coming out with a story?
Their only aim is to damage the image of a patriotic Army officer.
Before coming out with such report they should have verified where he
was at the time of the bomb blast. Moreover, narco-analysis test is
not a valid proof in the court of law. ATS could not get any proof
after completing forensic test , psychological profile test and
polygraph test carried out on the Sadhvi and Purohit.

Despite the absence of any evidence to frame the accused, the ATS
told the press that Purohit is the master mind of Samjhauta Express
train blast. This was contradictory to the revelation from the
Forensic test that no RDX was used in the above bomb blast. When this
attempt also failed, ATS came up with a report that Purohit, has
arranged a revolver licence for his friend, Milind Datye from the
army quota with forged documents. The Pune ATS told the court they
received a complaint about this from Datye himself when he got
suspicion about the licence after Purohit's arrest in the blast.
Sudhakar Chaturvedi, national co-ordinator for Abhinav Bharat, was
arrested by the Matunga police on Nov 4 on charges of carrying an
illegal revolver and possessing a fake identity card of the Deolali
military cantonment.

In brief what do we understand from these reports?

This is a conspiracy by unscrupulous, anti- national elements to
damage the image of the Hindu organizations and Indian Army, by
implicating Hindu spiritual leaders and Army officers. Otherwise why
has the ATS not done any further investigation on how the motor cycle
got into the hands of one Ramji before arresting Sadhvi Pragya?
There is every possibility the conspirators killed Sunil Joshi to
implicate Sadhvi Pragya. How come ATS is silent on the reason for
killing Sunil Joshi? For investigating the above details, Ramji's
presence is not required. Sadhvi Pragya is said to be a great orator
. She must be having so many devotees . There is no rule that Army
people cannot keep in touch with any spiritual leader. The arrested
Major Ramesh Upadhyay(retd) said that he was very much impressed with
Sadhvi Pragya's speech. When they failed to establish any link with
RDX used in explosion, they are implicating the Army officer with
forgery of the documents and also questioning the working of Army
establishments. The last two reports are clearly indicating this.
Some how the Govt wants keep alive the case till the next general
election to please the 'minorities'. The imposition of the Maharashtra
Control of Organized Crime Act(MCOCA)on the accused persons without
any solid evidence, is proof enough of the Govt's active participation
in this conspiracy, which seems to have the involvement of the ISI


Arrest demanded of ATS officers for human rights violation: VHP

VHP demands arrest of ATS officers for human rights violation

Express News Service Posted: Nov 19, 2008 at 0155 hrs

Ahmedabad, November 18 The Vishwa Hindu Parishad in Gujarat on Tuesday demanded the arrest of the Anti-Terror Squad (ATS) officers interrogating Sadhvi Pragya Singh and eight other people in connection with the Malegaon blast, for “human rights violations.”

VHP General Secretary Praveen Togadia said in a statement that the ATS was torturing the sadhu-sadhvis and targeting Hindu religion. He also urged the judiciary to protect the human rights of all citizens.

The statement said that one of the Malegoan blast accused had told the Nasik court on November 17 that he was not allowed to meet either his lawyer or his family. Besides, the ATS was preventing three letters that he had written, to be sent out.
The statement added that Sadhvi Pragya Singh Thakur had told the court that she was tortured by the police.

Togadia threatened a nationwide stir if the Maharashtra government failed to address the human rights concerns of the accused.

NSA to brief Advani on Malegaon blast probe
21 Nov 2008, 0904 hrs IST, TIMES NEWS NETWORK & AGENCIES

NEW DELHI: Two days after Prime Minister Manmohan Singh called up BJP leader L K Advani in regard to his allegations about torture of Sadhvi Pragya Singh Thakur, a key accused in the Malegaon blast case, National Security Advisor M K Naryanan will meet the BJP leader on Friday to discuss the ongoing ATS probe. ( Watch )

Intelligence Bureau Chief P C Haldar will also be present at the meeting, highly placed BJP sources said.

According to BJP sources, Advani forcefully took up the sadhvi's case on Tuesday when the PM called him up to offer to share details of the investigations into the Malegaon blast leading to the arrests of the sadhvi and Lt Colonel Shrikant Purohit.

"Have you gone through the affidavit filed by Pragya in the Nashik court where she has given details of how she was tortured and was kept in illegal detention for 16 days? I was outraged when I read the account and I am sure that you would feel the same," Advani is learnt to have told the PM.

The Leader of Opposition also strongly objected to the Malegaon case being called a case of Hindu terror.

"Before that, I had only objected to the expression `Hindu terror' for the Malegaon blast. My point was simple, we never used descriptions like Muslim terror or Sikh terror. Then why are we describing the Malegaon case as an act of Hindu terror," Advani is learnt to have told the PM, according to sources close to Advani.

Advani also used the conversation to rebut any suggestion that the BJP had reversed its stand on terrorism because of the "faith" of Malegaon suspects. "A terrorist is a terrorist. He has no religion. He is a criminal and should be treated as one," he told the PM.

Singh had called Advani just after he issued a strongly-worded statement attacking the "barbaric treatment" of the sadhvi by Maharashtra's anti-terrorism squad and against the backdrop BJP ratcheting up its protest against Malegaon arrests.

Singh had offered to send national security advisor M K Narayanan over to Advani to explain the details of the case, in what is seen as reflecting recognition on the government's part of the fallout that BJP's protests can have for the investigations into Malegaon and other suspected cases of `Hindu terror'.,prtpage-1.cms

Stavan Desai, Hindustan Times
Email Author
Mumbai, November 21, 2008
First Published: 00:26 IST(21/11/2008)
Last Updated: 09:57 IST(21/11/2008)
Hindu terror targets RSS
Members of Hindu right-wing organisation Abhinav Bharat, accused of carrying out the Malegaon blast, plotted to kill senior Rashtriya Swayamsevak Sangh (RSS) leaders who they thought weren’t doing enough for Hindutva, show investigation reports accessed exclusively by Hindustan Times.
At a time when the Bharatiya Janata Party has declared its support for the accused, who are being investigated by the Anti-Terrorism Squad (ATS), the probe report reveals a plan to kill RSS general secretary Mohan Bhagwat and senior leader Indraeesh, who manages the Rashtriya Muslim Manch, which attracts Muslims with a “nationalistic outlook”. The report is with the state Home Department, which has shared it with the Union Home Ministry and central intelligence agencies.
Data found on the laptop of Dayanand Pandey, alias Shankaracharya Sudhakar Dwivedi, who was arrested in Lucknow on November 12, verifies the report. Experts at the Forensic Science Laboratory in Kalina are examining the laptop.
The planned killings, the report said, were masterminded by S. Apte, a 70-year-old Pune-based RSS worker who was unhappy with the organisation’s functioning, along with Pandey, Major (retd) Ramesh Upadhyay and a leading Delhi-based doctor identified only as ‘Dr Singh’.
The ATS found that Apte and Pandey, the son of a retired sub-inspector of the Uttar Pradesh police, approached Lieutenant-Colonel Prasad Purohit for help in executing the plan. Apte also paid him Rs 10 lakh, said the report.
Purohit introduced a close aide, whose identity HT has withheld so as not to hinder investigations, to Apte to assist him.
In August, when the group learnt that Bhagwat and Indraeesh would be visiting Pune, “Apte showed [Purohit’s aide] around the various spots [suitable for the killings] in Pune” and they zeroed in on a couple.
Investigations also showed that “[Pandey] had arranged for a weapon”, a 9 mm foreign-made pistol, which was delivered to one of his followers “in Faridabad” when he and Apte first hatched the plot.
The ATS is investigating Apte, who is currently in Pune.

Saffron unity: BJP, RSS, VHP join hands for elections
Divyamanu Chaudhry

FOR OR AGAINST: It is still not clear if LK Advani is in favour of Sadhvi or not.

New Delhi: Adversity seems to have brought the squabbling cousins in the Parivar together. The Bhartiya Janata Party (BJP) president Rajnath Singh is sharing dias with the rabble rousing sadhus and sants (priests).

In Panipat, the Rashtriya Swayamsevak Sangh (RSS) also known as the Sangh made it clear that it will make allegations of ‘Hindu terror’ an election issue. The RSS is planning an Amarnath type agitation on the Malegaon blasts investigations and the BJP will be lending support to it.

“There is a strong undercurrent and we need to mobilize especially after the Malegaon episode,” says RSS spokesperson Ram Madhav.

But it is still not clear if the BJP united on its support to the movement. The party president Rajnath Singh has been the most vociferous and visible face in support of the Sadhvi while National Democratic Alliance (NDA)’s prime ministerial candidate LK Advani for once seems to be playing second fiddle.

“If someone is not sharing the dias it doesn’t make him any less Hindu,’ says BJP spokesperson Rajiv Pratap Rudy.
But the NDA allies don’t seem to be following them. It is an open secret that some like the Janata Dal-United (JD-U) and Bharitya Janata Dal (BJD) don’t seem toeing the RSS line on this issue. They are restless and disassociating themselves from the campaign.

“Our main concern is the national agenda for governance and that is being followed by all in the NDA,” says BJP leader BJ Pande.

This open show of unity by the BJP, RSS and Vishwa Hindu Parishad (VHP) especially before the elections is a big thumbs up for the saffron brigade. After all the Ram Janmabhoomi movement played a big role in the party's success in the 1990's, now what really needs to be seen is that how much of all this actually translates into votes in the impending elections.§ion_id=3

- Hindu vigilante versus jihadi terrorist
Mukul Kesavan (Kolkata, The Telegraph, 20 Nov. 2008)
After the Bharatiya Janata Party’s denunciation of the authorities at Jamia Millia Islamia University for their decision to extend legal aid to two students arrested for suspected involvement in terrorist conspiracy, it is good to see the party belatedly embrace that civilized republican principle, the presumption of innocence. The arrest of Sadhvi Pragya Singh Thakur and Lieutenant Colonel Shrikant Purohit for their alleged involvement in the explosions in Malegaon has, after some initial hesitation, spurred the party to affirm their innocence and offer the sadhvi the best legal representation available in the country. The anti-terrorist squad and its investigations of Thakur and Purohit for terrorist activity have been condemned by the spokespersons of the sangh parivar as politically motivated and unsound.
None of this is unreasonable. The accused are entitled to a fair trial and good lawyers are an indispensable part of due process; moreover, the tendency of the Indian police and its investigative agencies to feed newspapers and news channels with unreliable information and spurious breakthroughs in cases that are never resolved, leads to an understandable scepticism about their claims. The BJP is also right in taking exception to the term ‘Hindu terrorism’; even if Thakur and Purohit were to be found guilty, no connection between being Hindu and being terrorist would follow from their guilt. In the event of their conviction, the proper term for their activities would be ‘Hindutva-vaditerror’: to assimilate a large and law-abiding community to the violence of bigots would be unjust.
The BJP is also right in arguing that members of India’s armed forces should not be carelessly implicated by police agencies in something as serious as terrorism. Not because soldiers should be seen to be above the law or be privileged by it, but because the political neutrality of the army is a precious asset and charging an officer with political extremism is a serious business, not to be lightly undertaken. The Indian army is a curious institution, built on pluralist ideas that are colonial rather than republican in their provenance. But in times of sectarian violence, it is often summoned to establish order because unlike the police, it is seen as a secular, apolitical force. So if the BJP’s affirmation of Purohit’s innocence ensures a thorough investigation and a fair trial, the party will have done all Indians a favour.
Equally, L.K. Advani’s condemnation of the ‘narco’ tests administered to the sadhvi (and the colonel) is consistent with the long-held position of human rights activists that forcing suspects to endure potentially dangerous chemical injections to induce legally worthless confessions is both barbaric and illegal. ‘Brain mapping’ and ‘narco testing’ are good examples of the ways in which Indian policemen use pseudo-scientific gimcrackery as a substitute for real police work.
So on these issues, every Indian who believes in the rule of law should endorse the BJP’s criticism of the ATS. The sadhvi’s allegations that she was beaten and tortured in police custody should be taken seriously. Advani’s demand that Thakur and Purohit be investigated by a judicial probe, and not by the ATS, ought to be given fair consideration. The fact that the BJP and its allies were pleased with the rough ‘justice’ meted out to the two men shot by the police in the Batla House ‘encounter’ and subsequently wanted Jamia’s students left indefinitely in police custody, unaided by the university to which they were affiliated, doesn’t in itself invalidate the importance of human rights and due process.
The real difficulty with the sangh parivar’s defence of Pragya Singh Thakur and Shrikant Purohit lies in the reasons its spokespersons adduce for their innocence. Praveen Togadia, the chief of the Vishwa Hindu Parishad, made the Hindutva-vadi case without qualifications: “No Hindu can be a terrorist,” he declared. Asked if he knew the sadhvi, he said, “I do not know Pragya Singh at all. But I know she is not a terrorist.” For Togadia, Thakur’s birth identity was all the evidence he needed to know that the allegations against her were false. He told The Hindu as much: “Hindus will not forget this. They [the police and the Congress] are committing the sin of describing a Hindu, a ‘sadhvi’, as a terrorist… I warn that there will be a political backlash and the government will be swept out.”
Chandan Mitra, MP and editor of The Pioneer, made the same point more circumspectly. “Let the courts pronounce the ‘Hindu terrorists’ guilty,” he wrote in the Economic Times, “and, if so, let the verdicts be executed. But they cannot be pilloried on the basis of specious ‘confessions’, which could well be figments of a beleaguered ATS’s shaky imagination.” Aware that this might seem inconsistent with the sangh parivar’s enthusiasm for pillorying Muslims accused of terrorist conspiracy by anti-terrorist squads elsewhere, Mitra argued that Muslims accused of terrorism were a different matter. Muslims had form in the matter of terrorist conspiracy whereas Hindus didn’t. “Many SIMI and other jihadi terror mongers have already been brought to book and are being tried in courts. The most celebrated of the lot, Afzal Guru, has been found guilty by the Supreme Court and sentenced to death.”
One SIMI member, Yasin Patel, has been successfully prosecuted under a terrorism law. Three others were recently jailed for a year, not for terrorism but for stoking communal hatred. Even if there were to be a string of successful terror prosecutions against the SIMI, are we to understand that Mitra would have the police and the public withhold the presumption of innocence from Muslims in cases of terrorist conspiracy?
This is rather like arguing that once Hindus are convicted of terrorizing and murdering Muslims during the Gujarat pogroms, or slaughtering Sikhs in the Delhi pogrom of 1984, any Hindu accused of communal killing afterwards can be legitimately treated as guilty unless proven innocent, whereas Muslims and Sikhs charged with communal violence ought to continue to be given the benefit of the doubt.
In essence, there is no difference between Mitra’s position and Togadia’s. They both believe that Hindu violence can’t be described as terror because Hindus are victims. Victims can’t be perpetrators. So even if the ATS case against Thakur and Purohit is successfully prosecuted, even if they are guilty of organizing the explosions in Malegaon, they aren’t terrorists because all they’re doing is retaliating against jihadi violence. “Even if for a moment we accept that some Hindus have indulged in copycat acts,” writes Mitra, “it must be borne in mind that the majority of Indians are shocked, outraged, angry and even vengeful because of relentless terrorist depredations. Nearly 10,000 innocent people have died at the hands of bloodthirsty jihadi terrorists over the past 15 years.
“If some people, howsoever misguided, attempt to avenge this because the state fails to provide security or succour should it come as a big surprise? This is not to justify vigilante action, but only try and explain it.”
I’m not sure what form of words would constitute a watertight justification of vigilantism, but that last paragraph comes close. Then, in a remarkable move, Mitra holds out ‘Hindu’ involvement in the Malegaon blasts as a sinister portent: “If the state does not shed its hypocrisy the alleged Malegaon plot may only be the beginning.” So from the illegitimacy of the notion of “Hindu terror” we’ve arrived at the prospect of continuous ‘Hindu’ violence if the State dares to apply to Hindus the police methods it routinely uses against Muslims.
The difference between Indians who respect the republic’s Constitution and the majoritarian Right is this: constitutional democrats speak out against the police treatment of the sadhvi and the colonel because, as citizens of this republic, this nation of laws, they deserve every protection the law has to offer. The sangh parivar demands these protections because Thakur and Purohit are Hindu. This is not a small difference: it’s the difference between a civilized nation and a sectarian country, the difference, if you like, between India and Pakistan.

Wednesday, November 19, 2008

Spit-and-scoot ATS: political victimisation of an MI officer.

Thursday, November 20, 2008 (Pioneer)

A Hindu Dreyfus Affair?

Ashok Malik

Has a rogue operation by the Maharashtra Anti-Terrorism Squad ended up undermining a Military Intelligence network and thus severely discomfited the Army? The implications of the 'Hindu terror' fiasco could be far-reaching

Depending on political positions, the so-called 'Hindu terrorism' issue has divided the political class and analysts into two. One section believes this is a concocted case, and the Maharashtra Anti-Terrorism Squad is simply arresting people on the basis of the fact that they socially knew or called the mobile number of the previous suspect. The other argues that this is final and incontrovertible proof that a secret army of 'Hindu fascists' is bent upon destroying India.

Indeed, as one writer put it in a formerly mainstream newspaper this past week, the episode is evidence of the BJP's "specious sophistry" and inability to face up to the radicals in the Hindu Right. He gushingly contrasted this with the response of others, such as "the Deobandis -- who had earlier issued a fatwa against terror -- the Muslim clergy congregated in Hyderabad for a conference to deprive terror of religious sanction".

Truth may not be quite as neat. There is a third possibility that the whole business was an intelligence operation that went horribly wrong -- or, for some people, just perfectly right. As is now coming to be believed, did a section of the intelligence agencies, working on behalf of the Congress, seek to infiltrate the broader Hindu socio-religious leadership, exploit the anger against the Government's inability to counterjihadi terror and then comfortably frame them?

There are many gaps in the story that need to be filled. For instance, it is clear that Lt Col SP Purohit -- whom the Maharashtra ATS has accused of being the 'Hindu terror' mastermind -- was politically supportive of Right-wing political philosophy. Perhaps he knew similarly aligned and active people. There is nothing startling about this. Maharashtra's political tradition since Tilak and Ranade -- if not earlier -- has been alive to such ideas.

However, to see Lt Col Purohit's political views as disagreeable is one thing, to label him a terrorist is another. As a Military Intelligence officer, he was professionally bound to be in touch with a range of people, reputable, dubious or otherwise. Among his 'registered sources' -- sources he was in contact with, and whose identities were reported by him to his superiors in the Army -- were at least two people who have now been called 'Hindu terrorists' by the Maharashtra ATS.

When Lt Col Purohit was transferred from Deolali (a town in Nashik district), he passed on his 'registered contacts' to his successor. As such, two so-called 'Hindu terrorists' were paid informants working on behalf of the Indian Army, introduced by one officer -- who may have shared their electoral preferences -- to another -- who may not have been a political sympathiser.

Intelligence sources don't emerge from thin air. A source and an intelligence gatherer have to share social and other affinities. That is how they learn to trust each other. That is why Muslim police officers and intelligence operatives hold the key to winning the war against jihad .

As such, it was only to be expected that Lt Col Purohit would be asked to use his personal capacities to keep abreast with Hindu social currents. It is understood that he was also in contact with senior officers of the (then) Royal Nepal Army, officers who were Generals and seriously outranked him. Here again, he was using personal contacts for a professional, national purpose.

If his interaction with the Nepal Army was, however, unauthorised, it would be a serious indiscretion. That is for the Indian Army to clarify.

Here one begins treading on dangerous ground. At some point, from being the channel to Hindu activists, Lt Col Purohit became the target of a rogue intelligence operation, with the Maharashtra ATS and the Army working at cross-purposes, probably unknown to each other.

As long as the Maharashtra Police was targeting unknown civilians and little-known religious figures, and alleging they were behind small, localised bombings, the issue was serious in its ramifications but also limited in its context.

Having named Lt Col Purohit as the possible initiator of the Samjhauta Express terrorist attack in early-2007, the Maharashtra police -- despite its subsequent, ham-handed backtracking -- has taken things a trifle too far. What was a standard dirty tricks operation by a politicised police unit has now threatened to become something far, far bigger.

What the ATS has so far implied is this: Lt Col Purohit travelled across the country planning terrorist bombings, from Malegaon to Nanded, Samjhauta Express to Hyderabad's Mecca Masjid. He allegedly stole 60 kg of RDX from the Army and handed it over to a Hindu militia. While he was doing all this, his superiors noticed nothing. They did not find his behaviour out of character; most important, the Army did not miss 60 kg of RDX -- enough to blow up Parliament, Rashtrapati Bhawan, South and North Blocks and still have ammunition to spare.

If this is true, and if the Indian Army is so casual and delinquent, then far from being a stable state, India is the mother of all banana republics. If this is true, India cannot be trusted with nuclear bombs, with sophisticated weapons, perhaps even with a standing Army. It is a rogue state masquerading as a democracy. That is the upshot of the accusation being made by the Maharashtra ATS.

The next time there is a terrorist attack in India, and the Home Ministry points fingers at Pakistani or Bangladeshi involvement, Islamabad and Dhaka could retort that New Delhi had better question the Indian Army first. They could cite the expansive Press briefings of the Maharashtra ATS as corroborative material.

In the 1890s, a Jewish officer serving in the French Army was convicted of spying for Germany and sent to prison. Years later, it was revealed that he had actually been framed, that the documents used to implicate him were fabricated. The real culprit was another officer. In 1906, Alfred Dreyfus, the officer who was a victim of anti-Semitism, was exonerated and went on to serve his country in World War I.

Has modern-day India created a 'Hindu' Dreyfus?
Thursday, November 20, 2008 (Pioneer)

ATS runs out of ammo

TN Raghunatha | Mumbai

But needs 3 cases to book Purohit under MCOCA

Shrikant Shivde, defence counsel for key Malegaon blast accused Lt Col Prasad Purohit, on Wednesday alleged that by seeking custody in different cases, the Anti-Terrorist Squad (ATS) was desperately trying to invoke the provisions of Maharashtra Control of Organised Crime Act (MCOCA) against his client.

On a day when First Class Judicial magistrate (JFMC) GG Itkalkar remanded Purohit to police custody in a forgery and cheating case till November 21, Purohit's counsel charged that by demanding his client's police custody repeatedly, the ATS wanted to show Purohit had committed more than three offences so that it could project him as a member of an organised crime syndicate, a pre-requisite for booking a person under MCOCA.

Purohit's counsel also charged that the ATS was drumming up charges against his client. Given his exceptional credentials as a serving Army officer who had participated in many military operations, including operation Vijay and Operation Rakshak, and had killed many terrorists during his career, it was sad that the ATS was terming Purohit as an anti-national, defence counsel said.

Purohit's counsel also produced a set of commendations and a document showing that he had been invited by the ATS to deliver a lecture on terror combat techniques.

Alluding to a complaint filed by a Pune resident against Purohit that the latter had produced fake documents to help the former obtain an arms licence, Shivde said that Pune resident Shirish Date had with the help of Purohit got an arms licence way back in 2005, why did not the ATS not take action against the complainant assuming that he did not possess a valid arms licence.

Dwelling on the manner in which his client was being harassed by the investigating agencies, Shivde told mediapersons that the CBI and Haryana police had at one stage handed out deaths to Purohit.

Ahead of the production of Purohit before Pune's Shivajinagar court, there were hundreds of activists belonging to various Hindu organisations raising slogans expressing their solidarity with him.

As he was being escorted back to the ATS van after the court remanded him to police custody for two days in forgery and cheating case, the Hindu activists showered rose petals on the officer and raised slogans of ''Jai Bhavani, Jai Shivaji'' and "Purohit Tum Aage Bado Hum Saath Hain". Giving a new twist to the Malegaon blast case, Purohit on Wednesday alleged in a Pune court that he was being victimised for "political reasons" as he was in possession of information pertaining to SIMI and ISI that could embarrass some quarters.

Purohit's counsel Srikant Shivde alleged that the officer was in possession of intelligence data of a "sensitive nature" regarding SIMI and ISI operations and could even be eliminated.

Meanwhile, a Pune court remanded Abhinav Bharat activist Sameer Kulkarni, an accused in the Malegaon blast case, to police custody for a day in a case involving the alleged attack on a Christian leader in 2007.

The remand felicitated the Khadki police to question Kulkarni for a day in question with in connection with a case lodged against him in 2007 for allegedly being a part of the group that assaulted Pastor Peter David Silway of Vineyard Workers' Church.

Like in the case of Purohit, hundreds of activists belonging to Hindu organisations had turned out in a large numbers to express their solidarity with him. They raised vociferous slogans for Kulkarni.

Meanwhile, the probe into how Hindu outfits accused of terrorism had links with some Armymen brought a few business houses under the scanner of Maharashtra's ATS and Central Security agencies investigating the finances of the group allegedly responsible for Malegaon blast. Sources attached with the probe said that a religious leader from Southern Gujarat was one of those who collected funds from the business houses.

Working on the chain of events about finances of the Abhinav Bharat, a little known saffron outfit allegedly involved in the September 29 Malegaon blast that left six people dead, sources said names of some of the business houses in Maharashtra as well as Gujarat cropped up. A check was being done whether the business houses were aware about the end use of funds. "We have questioned some of them and we are working to ascertain as to how much of money had been handed over to the saffron outfit," a senior probe official said on the condition of anonymity. The names of the business houses were not divulged for security reasons, reports PTI.

ATS may arrest Abhinav Bharat leader today
20 Nov 2008, 0354 hrs IST, Mateen Hafeez, TNN

MUMBAI: Sudhakar Chaturvedi, the national coordinator for the Abhinav Bharat organisation, who the police claim has admitted to his role in planning the Malegaon blast, is likely to be arrested by the Anti-Terror squad on Thursday.

Chaturvedi (37) was arrested by Matunga police on November 4 on charges of carrying a revolver without licence and possessing a fake ID of Deolali military cantonment. During narco-analysis on Tuesday in Bangalore, he told forensic experts that he had arranged several meetings of Abhinav Bharat members in Maharashtra, Madhya Pradesh, Chhattisgarh and Haryana. The ATS, probing the September 29 Malegaon blast, suspects the blast was planned in these meetings.

Lt-Col Shrikant Prasad Purohit, the alleged mastermind, was on Wednesday subjected to brain mapping and polygraph test at the forensic laboratory in Kalina, Mumbai. The ATS have so far arrested 10 people including Purohit, retired Major Ramesh Upadhay, Sadhvi Pragya Singh Thakur and Mahant Dayanand Pandey for their alleged role in the Malegaon blast that killed six. The ATS has claimed that Purohit masterminded the blast and procured RDX to assemble the bomb.

"Chaturvedi has admitted that Purohit had given him the revolver and also prepared a fake ID for his entry into the Deolali military cantonment. The ATS submitted an application in Kurla court on Saturday seeking his custody in the blast case,'' said senior inspector Sunil Deshmukh of Matunga police station. Deshmukh said Chaturvedi worked for Abhinav Bharat on a monthly salary of Rs 5,000.

"Chaturvedi's basic job was to arrange meetings and inform all the members about the meeting. He used to raise funds for the organisation too,'' said Deshmukh. Police sources said Chaturvedi had visited the restricted military area in Deolali camp near Nashik several times and was in constant touch with Purohit. It is also learned that Purohit had prepared the fake ID for Chaturvedi in 2005, when he was posted at Deolali as a liaison officer.

Chaturvedi hails from Mirzapur in Uttar Pradesh and migrated to Maharashtra 10 years ago. He had been staying in a rented room in a chawl at Deolali. Police said he was aware of the blast conspiracy and his arrest would lead to details of the case. Chaturvedi had also visited the Bhonsale military school in Nashik to attend a personal development camp. It was there Purohit introduced him to Major Upadhay, now retired. The Matunga police may also booked Purohit in its case of keeping illegal firearms and helping Chaturvedi in preparing the fake military ID.

Purohit is currently in the custody of ATS (Pune unit), in a case of forgery. The Sarkar Wada police station in Nashik had registered a case of forgery and cheating against Purohit last Saturday. Yeshwant Date, who lodged the complaint of forgery, told police that Purohit had submitted fake documents to get an arm license for him. Date said he didn't know then that Purohit was cheating him.,prtpage-1.cms

'Purohit oversaw bomb-making'
20 Nov 2008, 0132 hrs IST, Pranati Mehra & Mateen Hafeez, TNN

MUMBAI: Sudhakar Chaturvedi, Abhinav Bharat national coordinator who allegedly participated in the Malegaon blast conspiracy, revealed during a narco-analysis on Tuesday that some Muslim boys had assembled the bomb that was planted in Malegaon on September 29. The blast killed six people.

Lt-Col Shrikant Purohit, Major (Retd) Ramesh Upadhyay and one Sudhakar Dange "inspected" the assembling of the bomb by the Muslim boys, Chaturvedi said during the test in Bangalore, probe officials told TOI on Wednesday.

Purohit and Upadhyay are in ATS custody and Chaturvedi is likely to be in ATS custody by Thursday. The Muslim boys took the bomb to Malegaon along with Ramji — an accused the ATS is yet to find — and planted it near the SIMI office with Ramji’s help, Chaturvedi is learnt to have said. Officials said he also said Ramji had brought the LML Freedom two-wheeler to Malegaon.

The two-wheeler was owned by Sadhvi Pragya Singh Thakur and led the ATS to the sadhvi. The sadhvi claimed in her affidavit before the Nashik court on Monday that she sold it in 2004 to a man named Sunil Joshi for Rs 24,000. So, if the narco tests claims are to be believed, the ATS now has to establish the link between Joshi and Ramji. Purohit had said in his test on November 12 that some Malegaon Muslims had prepared the bomb and that the RDX was sourced from some Kashmiri Muslims in Pune. Chaturvedi was arrested by the Matunga police on November 4 on charges of carrying an illegal revolver and possessing a fake Deolali military cantonment identity card.

He was subjected to narco-analysis on Tuesday in Bangalore and, during the test, told forensic experts that he had arranged several meetings of Abhinav Bharat members at Indore, Panchmarhi and Jabalpur (MP), Faridabad and other places in Haryana and Gujarat as well as Deolali. The ATS, however, suspects that the blast conspiracy was hatched in these meetings.

Chaturvedi has reportedly revealed that some businessmen in Maharashtra were funding Abhinav Bharat. ‘‘But they may not have known what the money was being spent for,’’ Chaturvedi is learnt to have said. Purohit, too, was on Wednesday subjected to brain-mapping and polygraph tests at the Kalina forensic laboratory.

The ATS has so far arrested 10 persons, including Purohit, Major (Retd) Ramesh Upadhay, Sadhvi Pragya Singh Thakur and Mahant Dayanand Pandey, for their alleged role in the blast that killed six persons. The ATS has claimed that Purohit masterminded the Malegaon blast.,prtpage-1.cms

Satyajit Joshi , Hindustan Times
Pune, November 20, 2008
First Published: 01:43 IST(20/11/2008)
Last Updated: 02:07 IST(20/11/2008)
CBI threatened to kill me: Purohit
Lt Col Srikant Prasad Purohit, one of the prime accused in the Malegaon blast case, told a Pune court on Wednesday that the Central Bureau of Investigation (CBI) and Haryana police had threatened to kill him in an encounter.
Purohit was produced before Judicial Magistrate (First Class) G.G. Itkalkar here for allegedly procuring an arms licence for Pune-based Shirish Date by using fake documents. Purohit has been granted two days police custody by the court.
Contesting the forgery case, Purohit also claimed that he was falsely implicated in the Malegaon case, and anti-national elements, like the Students Islamic Movement of India (SIMI), were pleased with his arrest.
In Delhi, a Union home ministry official, who did not wish to be identified, negated a public prosecutor’s charge in a Mumbai court that Purohit was involved in the Samjhauta Express blast. He said, “Investigations are on to gather evidence although news reports are making definitive statements on his involvement.”
Earlier, Purohit’s lawyer Srikant Shivde pointed out that Maharashtra anti-terrorists-squad (ATS) had not followed the Supreme Court guidelines while arresting him. Purohit’s family members, lawyer, friends or relatives were not informed about his arrest, his medical examination was not done and there was no entry of his arrest in any police station.
Shivde also alleged that the forgery case was fabricated as the ATS wanted more time to prepare a charge sheet under the Maharashtra Control of Organised Crime Act.
Earlier, Shirish Date alleged that he had paid Purohit Rs 20,000 to obtain a licence for his revolver. But after learning of Purohit’s involvement in the Malegaon blast case, he decided to check the authenticity of his licence and discovered that fake documents had been submitted. He then voluntarily came forward to file the complaint.
(With inputs from Political Bureau)

Malegaon probe: ‘Purohit could even be eliminated by ATS’
AgenciesPosted online: Nov 19, 2008 at 2048 hrs
Pune, November 19: : Malegaon blast accused Lt Col S P Purohit was on Wednesday remanded in two days of police custody by a magisterial court in Pune in connection with a case of alleged forgery in procuring a gun from the military.
Purohit, who was escorted to Pune from Nashik by the ATS squad, has been charged under various sections of IPC for committing forgery in procuring a gun from Jammu and Kashmir for one Milind Date in 2003.
Opposing the prosecutions' plea for a seven-day remand for further investigations into the case, Srikant Shivde, appearing for the accused told the judge that the ATS was trying to implicate him in a false case by threatening Date.
The counsel alleged that Purohit, who had a distinguished service record in the army, was being victimised for political reasons and he could even be eliminated by ATS because he was in possession of Intelligence data of a sensitive nature pertaining to the SIMI and ISI operations, which could embarrass some quarters.
Public Prosecutor A V Ausekar, appearing on behalf of ATS, argued that police custody for the accused was required to trace his connections in Jammu and Kashmir from where he managed to procure the gun for complainant Date from the military quota under the fake designation of Major Date and for giving bogus address in the application form for securing the weapon.

Purohit alleges victimisation due to 'political reasons'
Pune/Mumbai (PTI): Giving a new twist to the Malegaon blast case, prime accused Lt Col S P Purohit on Wednesday alleged in a Pune court that he was being victimised for "political reasons" as he was in possession of information pertaining to SIMI and ISI that could embarrass some quarters.
Purohit's counsel Srikant Shivde alleged that the officer was in possession of Intelligence data of a "sensitive nature" regarding SIMI and ISI operations and could even be eliminated.
A military intelligence officer, Purohit, 36, who was arrested on November 3 and is one of the 10 accused including Sadhvi Pragya Singh Thakur, was today sent to two days of police remand by a magisterial court in connection with a case of alleged forgery in procuring a gun.
Purohit, who was escorted to Pune from Nashik by the ATS squad, has been charged under various sections of IPC for committing forgery in procuring the gun from Jammu and Kashmir for one Milind Date in 2003.
Opposing the prosecutions' plea for a seven-day remand for further investigations into the case, Shivde told the judge that the ATS was trying to implicate him in a false case by threatening Date.
Public Prosecutor A V Ausekar, appearing on behalf of ATS, argued that police custody for the accused was required to trace his connections in Jammu and Kashmir from where he managed to procure the gun for Date from the military quota under the fake designation of Major Date and for giving bogus address in the application form for securing the weapon.

Tuesday, November 18, 2008 | Email | Print |

ATS charge backfires

The Pioneer Edit Desk

‘Investigation’ descends into witch-hunt

The Anti-Terrorism Squad of Mumbai Police has virtually ended up with egg on its face. After planting stories in those sections of the media which are only too happy to publish and broadcast any cockamamie tale that portrays Hindu spiritual leaders as ogres, denigrates Hindu society and defames Hindu organisations, and claiming in a Nashik court that Lt Col Srikant Prasad Purohit had used RDX stolen from the Army for the terrorist attack on Samjhauta Express in February 2007, it has had to eat humble crow and do an about-turn. What the too-clever-by-half ATS personnel, who have eagerly offered their services to launch what increasingly appears to be a witch-hunt and be party to a political conspiracy of calumny and worse, thus raising questions about their integrity, forgot while hurling their latest startling allegation against Lt Col Purohit is that public memory may be short, but it is not short enough to fail to recall the nature of the terrorist strike on Samjhauta Express. The explosives use on that occasion were improvised incendiary devices and the Forensic Laboratory in Chandigarh had not found any traces of RDX in the debris — for that matter, nor were any traces of RDX found at the site of the Malegaon explosion. These details are on record, as are the findings of the subsequent investigation. No less stunningly crude is the ATS’s allegation that Lt Col Purohit misappropriated 60 kg of RDX from the Army: The charge could have been brushed aside as ridiculous had it not been for the sinister implications of what has been alleged. Sixty kilograms of RDX is not a small amount of explosive material; nobody can just walk away with it from an ammunitions store of the Army. That apart, what the ATS has shockingly alleged is that the Army as an institution is so callous that an officer can pilfer a huge amount of explosive material without the theft being noticed. This is outright slanderous and the ATS must be held accountable for portraying the Army as a rogue institution; to let the calumniators go scote-free would be tantamount to whitewashing their misdeed. This paper has in the past raised the question whether the ATS sees itself as being above the law of the land and answerable to none. Since it is neither, it must be brought to heel right now before its recklessness causes irreparable damage to reputations.

It is by now obvious that the ATS is dancing to the tune of its political masters who are unmoved by the enormity of the damage that is being inflicted by the spit-and-scoot tactics which have been the mainstay of the so-called ‘investigation’ into the explosion at Malegaon that killed six Muslims in September. The feverish pace at which the ATS is pursuing this case, spinning bizarre stories by the minute and planting them by the dozen in the media, is in sharp contrast to the non-response of Maharashtra’s Congress-NCP Government, endorsed by the Congress-led UPA Government at the Centre, to the mass slaughter by jihadis who bombed commuter trains in Mumbai on July 11, 2006. The perpetrators of that crime are sitting pretty, possibly laughing themselves silly over the manner in which the ATS is making a mockery of what it claims is an ‘investigation’ into a ‘terrorist attack’. This paper believes that the law must take its own course and anybody found guilty of indulging in violence should be punished. But what is being witnessed is blatant abuse of law.

Friday, November 14, 2008

Financial tsunami created by fraudulent derivatives

Financial tsunami created by quarks and nerds who won the Nobel Prize in Economics

– Quarks and nerds created models for ‘derivatives’ to manage risk by diversification without managing greed

I am appending two long excerpts:

• First, is an excerpt from Wikipedia explaining a financial derivative called ‘option’.
• Second, is a brilliant expose by F. William Engdahl written in Feb. 2008 about the fraud inherent in financial derivatives.

G-20 may meet, drink and be merry with a lame-duck President of USA, George Bush. But, they will get nowhere near finding a solution to the global financial mess, unless they simply ban all financial derivatives from the financial system.
Let me explain why this is imperative.

Engdahl rightly cites the example of Long-Term Capital Management (LTCM) hedge fund in Greenwich, Connecticut which collapsed in 1998.

With a capital of $4.8 billion, LTCM held derivatives with a notional value of $1,250 billion.
The assumption was that like the fraudulent nobel prize winners in economics LTCM had assumed that life was a bell-curve (subject to the rules of a statistical stochastic model and the random, predictable, walk of a rational drunkard).

The assumption was wrong. Life was NO bell-curve. Economic actors were NOT rational. An ‘impossible event’ occurred (which was not figured out in the model). A non-normal event occurred. Russia declared it was devaluing its rouble currency and defaulting on its Russian state bonds. The risk parameters of the quarks’ and nerds’ risk models were rendered to be fraudulent. LTCM collapsed.

I do not know enough about justice system under international law to bring these quarks and nerds to justice and together with them, hoist on the hall of global shame, the likes of Greenspan and Treasury Secretaries of USA who were instrumental in acquiescing in this global fraud.

The fraud is so gigantic that it has led to the impoverishment of at least 3 billion people all over the world, many of whom are already reeling under oppressive regimes caring little for their welfare. Witness the utter contempt with which the 10-Janpath chamcha-s in India ignore the recurring suicides among farmers, without announcing ‘New Deals’ such as National Water Grid to achieve a new blue revolution in agricultural productivity or setting up an Indian Ocean Community to build trans-asian highway and trans-asian railroad. Instead, the PM and FM of India behave as though they are PM and FM of Dalal Street (Wall Street version in India) and not of the 1 billion people of the nation. Does the Hon’ble PM Manmohan Singh have enough leverage with the other G-20 members and with lame-duck President George Bush to ask for banning of all financial derivatives?

Saving institutions such as IMF or World Bank or commercial banks or investment houses is NOT the solution. Saving the economic system by ensuring full employment and fair compensation for the hard-working citizens IS the solution.

Don’t expect anything but pious declarations from the G-20 summit which is a gathering of chamchas hiding under the skirts of equally fraudulent nerds and quarks producing bogus models.


[quote] Options are a financial instrument giving the holder the right to buy or sell an underlying stock or commodity at a future point in time, at an agreed upon price. The Black-Scholes model, for which Fischer Black, Myron Scholes and Robert Merton were awarded the Nobel Prize in Economics, is a tool for pricing equity options. Prior to its development there was no standard way to price options; in a very real sense, the Black-Scholes model marks the beginning of the modern era of financial derivatives.
There are several assumptions underlying the Black-Scholes model. The most significant is that volatility, a measure of how much a stock can be expected to move in the near-term, is a constant over time. The Black-Scholes model also assumes stocks move in a manner referred to as a random walk; at any given moment, they are as likely to move up as they are to move down. By combining these assumptions with the idea that the cost of an option should provide no immediate gain to either seller or buyer, a set of equations can be formulated to calculate the price of any option.

The Black-Scholes model takes as input current prices, length of time until the option expires worthless, an estimate of future volatility known as implied volatility, and the so-called risk free rate of return, generally defined as the interest rate of short term US treasury notes. The model also works in reverse: instead of calculating a price, an implied volatility for a given price can be calculated.

Options traders often refer to "the greeks", especially Delta, Vega, and Theta. These are mathematical characteristics of the Black-Scholes model named after the greek letters used to represent them in equations. Delta measures how much an option price will move relative to the underlying, Vega is the sensitivity of the option price to changes in implied volatility, and Theta is the expected change in option price due to the passage of time.

There are known problems with the Black-Scholes model; markets often move in ways not consistent with the random walk hypothesis, and volatility is not, in fact, constant. ABlack-Scholes variant known as ARCH, Autoregressive Conditional Heteroskedasticity, was developed to deal with these limitations. The key adjustment is the replacement of constant volatility with stochastic, or random, volatility. After ARCH came an explosion of different models; GARCH, E-GARCH, N-GARCH, H-GARCH, etc, all incorporating ever more complex models of volatility. In everyday practice, however, the classic Black-Scholes model remains dominant with options traders. [unquote]

For nerds and quarks, the link is

[quote] The world financial system had faced a systemic crisis threat as recently as the September 1998 collapse of the Long-Term Capital Management (LTCM) hedge fund in Greenwich, Connecticut. Only extraordinary coordinated central bank intervention then, led by Greenspan’s US Federal Reserve, prevented a global meltdown.

That LTCM crisis contained the seed crystal of all that is going wrong with the multi-trillion dollar asset securitization markets today. Curiously, Greenspan and others in positions of responsibility systematically refused to take those lessons to heart.
The nominal trigger of the LTCM crisis was an event not foreseen in the hedge fund’s risk model. Its investment strategies were based on what they felt was a predictable mild range of volatility in foreign currencies and bonds based on data from historical trading experience. When Russia declared it was devaluing its rouble currency and defaulting on its Russian state bonds, the risk parameters of LTCM’s risk models were literally blown out of the water, and LTCM with it. Sovereign debt default was an event that was not “normal.”

Unlike the risk assumptions of every risk model used by Wall Street, the real world was also not normal, but rather highly unpredictable.

To cover their losses LTCM and its banks began a panic sell-off of anything it could liquidate, triggering panic selling by other hedge funds and banks to cover exposed positions. In response, the US stock market dropped 20%, while European markets fell 35%. Investors sought safety in US Treasury bonds, causing interest rates to drop by over a full point. As a result, LTCM’s highly leveraged investments started to crumble. By the end of August 1998, it lost 50% of the value of its capital investments.

…At the beginning of 1998, LTCM had capital of $4.8 billion, a portfolio of $200 billion, built from its borrowing capacity or credit lines loaned from all the major US and European banks hungry for untold gains from the successful fund. LTCM held derivatives with a notional value of $1,250 billion. That is one unregulated, offshore hedge fund held a portfolio of options and other financial derivatives nominally worth one and a quarter trillion dollars. Nothing of that scale had ever before been dreamed of. The dream rapidly turned into a nightmare.

In the argot of Wall Street, LTCM was a highly geared fund, unbelievably high. One of its investors was the Italian central bank, so awesome was the fund’s reputation. The major global banks who had poured their money into LTCM hoping to coattail the success and staggering profits included Bankers Trust, Barclays, Chase, Deutsche Bank, Union Bank of Switzerland, Salomon Smith Barney, J.P.Morgan, Goldman Sachs, Merrill Lynch, Crédit Suisse, First Boston, Morgan Stanley Dean Witter; Société Générale; Crédit Agricole; Paribas, Lehman Brothers. Those were the very banks that were to emerge less than a decade later at the heart of the securitization crisis in 2007…

The source of the awe over LTCM was the “dream team” who ran it. The fund’s CEO and founder was John Meriwether, a legendary trader who had left Salomon Brothers following a scandal over purchase of US Treasury bonds. That hadn’t dented his confidence. Asked whether he believed in efficient markets, he once modestly replied, “I MAKE them efficient.” The fund’s principal shareholders included the two eminent experts in the “science” of risk, Myron Scholes and Robert Merton. Scholes and Merton had been awarded the Nobel Prize for economics in 1997 for their work on derivatives by the Swedish Academy of Sciences. LTCM also had a dazzling array of professors of finance, doctors of mathematics and physics and other “rocket scientists” capable of inventing extremely complex, daring and profitable financial schemes. …

There was only one flaw. Scholes’ and Mertons’ fundamental axioms of risk, the assumptions on which all their models were built, were wrong. They had been built on sand, fundamentally and catastrophically wrong. Their mathematical options pricing model assumed that there were Perfect Markets, markets so extremely deep that traders’ actions could not affect prices. They assumed that markets and players were rational. Reality suggested the opposite—markets were fundamentally irrational in the long-term. But the risk pricing models of Black, Scholes and others over the past two or more decades had allowed banks and financial institutions to argue that traditional lending prudence was old fashioned. With suitable options insurance, risk was no longer a worry. Eat, drink and be merry…

That, of course, ignored actual market conditions in every major market panic since Black-Scholes model was introduced on the Chicago Board Options Exchange. It ignored the fundamental role of options and ‘portfolio insurance’ in the Crash of 1987; it ignored the causes of the panic that in 1998 brought down Long Term Capital Management – of which Scholes and Merton were both partners. Wall Street blissfully ignored the obvious along with the economists and governors in the Greenspan Fed.

Financial markets, contrary to the religious dogma taught at every business school since decades, were not smooth, well-behaved models following the Gaussian Bell-shaped Curve as if it were a law of the universe. The fact that the main architects of modern theories of financial engineering—now given the serious-sounding name ‘financial economics’—all got Nobel prizes, gave the flawed models the aura of Papal infallibility. Only three years after the 1987 crash the Nobel Committee in Sweden gave Harry Markowitz and Merton Miller the prize. In 1997 amid the Asia crisis, it gave the award to Robert Merton and Myron Scholes.

The most remarkable aspect of the incompetent risk models in use since the origins of financial derivatives in the 1980’s, through to the explosive growth of asset securitization in the last decade, was how little they were questioned.

LTCM had ace Wall Street investment bankers, two Nobel Prize economists who literally invented the theory of pricing derivatives on everything from stocks to currencies. To top its all-star LTCM lineup, David Mullins, the former vice-chairman of the Federal Reserve Board under Alan Greenspan quit his job with the Maestro to become a partner at LTCM. Despite all this, the traders at LTCM and those who followed them to the edge of the financial abyss in August 1998 did not have a hedge against the one thing they now confronted—systemic risk. Systemic risk was precisely what they confronted once an “impossible event,” the Russian state default, had occurred.

Despite the clear lessons from the harrowing LTCM debacle—there is no derivative that insures against systemic risk—Greenspan, Rubin and the New York banks continued to build their risk models as if nothing had taken place. The Russian sovereign default was dismissed as a “once in a Century event.” They were moving on to build the bubble and, in the aftermath, the greatest financial bubble in human history—the asset securitization bubble of 2002-2007.

Life is no Bell Curve

Risk and its pricing did not behave like a bell-shaped curve, not in financial markets any more than in oilfield exploitation. In 1900 an obscure French mathematician and financial speculator, Louis Bachelier, argued that price changes in bonds or stocks followed the bell-shaped curve that the German mathematician, Carl Friedrich Gauss, devised as a model to map statistical probabilities for various events. Bell curves assumed a mild form of randomness in price fluctuations, just as the standard I.Q. test by design defines 100 as “average,” the center of the bell. It was a kind of useful alchemy, but still alchemy.

That assumption that financial price variations behaved fundamentally like the bell curve allowed Wall Street Rocket Scientists to roll out an unending stream of new financial products each more arcane and complex than the previous. The theories were modified. The “Law of Large Numbers” was added to say that when the number of events becomes sufficiently large, like flips of a coin or rolls of die, the value converges on a stable value over the long term. The Law of Large Numbers, which in reality was no scientific law at all, allowed banks like Citigroup or Chase to issue hundreds of millions of Visa cards without so much as a credit check, based on data showing that in “normal” times defaults on credit cards were so rare as not to be worth considering.

The problems with models based on bell curve distributions or laws of large numbers arose when times were not normal, such as a steep economic recession of the sort the United States economy today is beginning to experience, a recession comparable perhaps only to that of 1931-1939.

The remarkable thing was that America’s academic economists and Wall Street investment bankers, Federal Reserve governors, Treasury secretaries, Sweden’s Nobel Economics Prize judges, England’s Chancellors of the Exchequer, her High Street bankers, her Court of the Bank of England, to name just the leading names, all were willing to turn a blind eye to the fact that economic theory, theories of market behavior, theories of derivative risk pricing, were incapable of predicting, let alone preventing, non-linear surprises. It was incapable of predicting bursting of speculative bubbles, not in October 1987, not in February 1994, in March 2002, and most emphatically not since June 2007. It couldn’t because the very model created the conditions that led to the ever larger and more destructive bubbles in the first place. Financial Economics was but another word for unbridled speculative excess.

A theory incapable of explaining such major, defining surprise events, despite Nobel prizes, was not worth the paper it was written on. Yet the US Federal Reserve Governors—above all Alan Greenspan, US Treasury secretaries, above all Robert Rubin and Lawrence Summers and Henry Paulsen—prevailed to make sure that Congress never lay a legislative or regulatory hand on the exotic financial instruments that were being created, created based on a theory that was utterly irrelevant to reality.
On September 29, 1998, Reuters reported, “any attempt to regulate derivatives, even after the collapse—and rescue—of LTCM have not met with success. The CFTC (the government agency with nominal oversight over derivatives trading-w.e.) was barred from expanding its regulation of derivatives under language approved late on Monday by the US House and Senate negotiators. Earlier this month the Republican chairmen of the House and Senate Agriculture Committees asked for the language to limit the CFTC’s regulatory authority over over-the-counter derivatives echoing industry concerns.” Industry of course meant the big banks.

Reuters added that “when the initial subject of regulation was broached by the CFTC both Fed chairman, Alan Greenspan, and Treasury Secretary Rubin leapt to the defense of the industry claiming that the industry did not need regulation and that to do so would drive business overseas.”

The combination of relentless refusal to allow regulatory oversight of the explosive new financial instruments from Credit Default Swaps to Mortgage Backed Securities and the myriad of similar exotic “risk-diffusing” financial innovations and the 1999 final repeal of the Glass-Steagall Act strictly separating securities dealing banks from commercial lending banks opened the way for what in June 2007 began as the second Great Depression in less than a century. It began what future historians will describe as the final demise of the United States as the dominant global financial power.

Liars’ Loans and NINA: Banks in an orgy of fraud

The lessons of the 1998 Russia default and the LTCM systemic crisis were forgotten within weeks by the major players of the New York financial establishment. Flanked by MBA whiz kid ‘rocket scientist’ analysts, bell curve models and fatally flawed risk models, the financial giants of the US banking world launched a wave of mega-mergers and began to create ingenious ways of getting lending risk off their books. That opened the doors to the greatest era of corporate and financial fraud in world history, the asset securitization bonanza.

With Glass-Steagall finally repealed in late 1999, at the urgings of Greenspan and Rubin, banks were now free to snatch up rivals across the spectrum from insurance companies to consumer credit or finance houses. The landscape of American banking underwent a drastic change. The asset securitization revolution was ready to be launched.

With Glass-Steagall gone, now only bank holding companies and subsidiary pure lending banks were directly monitored by the Federal Reserve. If Citigroup opted to close its Citibank branch in a sub-prime neighborhood and instead have a new wholly-owned subsidiary, CitiFinancial, which specialized in sub-prime lending, work the area, CitiFinancial could operate under entirely different and lax regulation.

CitiFinancial issued mortgages separately from Citibank. Consumer groups accused CitiFinancial of specializing in “predator loans” in which unscrupulous mortgage brokers or salesmen would push a loan on a family or person far beyond his comprehension or capacity to handle the risks. And Citigroup was only typical of most big banks.

On January 8, 2008 Citigroup announced with great fanfare publication of its consolidated “US residential mortgage business,” including mortgage origination, servicing and securitization. Curiously, the statement omitted CitiFinancial, the subsidiary with the most risk.

Basle I loopholes

The driver pushing the banks towards securitization and the proliferation of off-balance-sheet risks including highly leveraged derivatives positions was the 1987 Basle Bank for International Settlements Capital Adequacy Accord, known today as Basle I. That agreement among the central banks of the world’s largest economies required banks to set aside 8% of a normal commercial loan as reserve against possible future default. The then-new innovation of financial derivatives were not mentioned in Basle I on US insistence.

The Accord originally had been intended by Germany’s ultra-conservative Bundesbank and other European central banks to rein in the more speculative Japanese and US bank lending which had led to the worst banking crisis since the 1930’s. The original intent of the Basle Accord was to force banks to reduce lending risk. The actual effect for US banks was just the opposite. They soon discovered a gaping loophole—off-balance-sheet transactions, notably derivatives positions and securitization. Because they were left out of Basle I banks need not set aside any capital to cover potential losses.

The elegance of securitization of loans such as home mortgages for the issuing bank was that they could take the loan or mortgage and immediately sell it on to a securitizer or underwriter who bundled hundreds of such loans into a new Asset Backed Security. This seemingly genial innovation was far more dangerous than it sounded. Lending banks no longer needed to carry a mortgage loan on its books for 20-30 years as was traditional. They sold it on at a discount and used the cash to turn the next round of credit issuing.

That meant as well that the lending bank now no longer had to worry if the loan would ever be repaid.

Fraud a la mode

It didn’t take long before lending banks across the United States realized they were sitting on a bonanza bigger than the California gold rush. With no worry about whether a borrower of a home mortgage, say, would be able to service the debt for the next decades, banks realized they made money on pure loan volume and resell to securitizers.

Soon it became commonplace for banks to outsource their mortgage lending to free-lance brokers. Instead of doing their own credit checks they relied, often exclusively, on various online credit questionnaires, similar to the Visa card application where no follow-up was done. It became common practice for mortgage lenders to offer brokers bonus incentives to bring in more signed mortgage loan volume, another opportunity for massive fraud. The banks got more gain from making high volumes of loans then selling for securitization. The world of traditional banking was being turned on its head.
As the bank no longer had an incentive to assure the solidity of a borrower through minimum cash down payments and exhaustive background credit checks, many US banks, simply to churn loan volume and returns, gave what they cynically called “Liars’ Loans.” They knew the person was lying about his credit and income to get that dream home. They simply didn’t care. They sold the risk once the ink was dry on the mortgage.

A new terminology arose after 2002 for such loans, such as “NINA” mortgages—No Income, No Assets. “No problem, Mister Jones. Here’s $400,000 for your new home, enjoy.”
With Glass-Steagall no longer an obstacle, banks could set up myriad wholly-owned separate entities to process the booming home mortgage business. The giant of the process was Citigroup, the largest US bank group with over $2.4 trillion of group assets.

Citigroup included Travelers Insurance, a state-regulated insurer. It included the old Citibank, a huge retail lending bank. It included the investment bank, Smith Barney. And it included the aggressive sub-prime lender, CitiFinancial, according to numerous consumer reports, one of the most aggressive predatory lenders pushing sub-prime mortgages on often ignorant or insolvent borrowers, often in poor black or Hispanic neighborhoods. It included the Universal Financial Corp. one of the nation’s largest credit card issuers, who used the so-called Law of Large Numbers to grow its customer base among more and more dodgy credit risks.

Citigroup also included Banamex, Mexico’s second largest bank and Banco Cuscatlan, El Salvador’s largest bank. Banamex was one of the major indicted money laundering banks in Mexico. That was nothing foreign to Citigroup. In 1999 the US Congress and GAO investigated Citigroup for illicitly laundering $100 million in drug money for Raul Salinas, brother of the then-Mexican President. The investigations also found the bank had laundered money for corrupt officials from Pakistan to Gabon to Nigeria.
Citigroup, the financial behemoth was merely typical of what happened to American banking after 1999. It was a different world entirely from anything before with the possible exception of the excesses of the Roaring ‘20’s. The degree of lending fraud and abuse that ensued in the new era of asset securitization was staggering to the imagination.

The Predators had a ball

One US consumer organization documented some of the most common predatory lending practices during the real estate boom:

“In the United States in the first decade of the 21st century there are many storefronts offering such loans. Some are old — Household Finance and its sister Beneficial, for example — and some are newer-fangled, like CitiFinancial. Both offer credit at rates over thirty percent. The business is booming: the spreads, Wall Street says, are too good to pass up. Citibank pays under five percent interest on the deposits it collects. Its affiliated loan sharks charge four times that rate, even for loans secured by the borrower’s home. It’s a can’t-miss proposition. Even if the economy goes South they can take and resell the collateral. The business is global: the Hong Kong & Shanghai Banking Corporation, now HSBC, wants to export it to the eighty-plus countries in which it has a retail presence. Institutional investors love the business model and investment banks securitize the loans. These fancy terms will be defined as we proceed. The root, however, the fodder on which the whole pyramid rests, is the solitary customer at what’s called the point of sale… points and fees can be added to the money that’s lent. CitiFinancial and Household Finance both suggest that insurance is needed. This they serve in a number of flavors — credit life and credit disability, credit unemployment and property insurance — but in almost all cases, it is included in the loans and interest is charged on it. It’s called “single premium” — instead of paying each month for coverage, you pay in advance with money on which you pay interest. If you choose to refinance, you will not get a refund. It is money down the drain, but at the point-of-sale it often goes unnoticed.

Take, for example, the purchase of furniture. A bedroom set might cost two thousand dollars. The sign says Easy Credit, sometimes spelled E-Z. The furniture man does not manage these accounts. For this he turns to CitiFinancial, to HFC or perhaps to Wells Fargo. While the Federal Reserve lends money to banks at below five percent, these bank-affiliates charge twenty or thirty or forty percent. You will have insurance on your furniture: to protect you, they say, from having it repossessed if you die or become unemployed. Before the debt is discharged, dead or alive, you will have paid more than the list-price of a luxury car or a crypt with a doorman.

Midway you’ll be approached with a sweet-sounding offer: if you’ll put up your home as collateral, your rate can be lowered and the term be extended. A twenty-year mortgage, fixed or adjustable. The rate will be high and the rules not disclosed. For example: if you satisfy the loan too quickly, you’ll be charged a pre-payment penalty. Or, you’ll pay slowly and then be asked to pay more, in what’s called a balloon. If you can’t, that’s okay: they knew you couldn’t. The goal is to refinance your loan and charge you yet more points and fees.

In prior centuries, this was called debt peonage. Today it is the fate of the so-called sub-prime serf. Fully twenty percent of American households are described as sub-prime. But half of the people who get sub-prime loans could have paid normal rates, according to Fannie Mae and Beltway authorities. Outside it’s the law of the jungle; the only rule is Buyer Beware. But this is easier for some people than others.
Why would a person overpay by so much? In the nation’s low-income neighborhoods, sometimes called ghettos or, in a more poetic euphemism, the inner city, there’s a lack of bank branches. In the late 20th century, many financial institutions left the ‘hood in the lurch. They refused to lend money; they refused to write insurance policies.

In the 1980’s this author interviewed a senior Wall Street banker, at the time recovering from some kind of burnout. I asked about his bank’s business in Cali, Colombia during the heyday of the Cali cocaine cartel. Speaking not for attribution, he related, “Banks would literally kill to get a slice of this business, it’s so lucrative.” Clearly they moved on to sub-prime lending with similar goals in mind, and profits as huge as in money laundering drug gains.

Alan Greenspan openly backed the extension of bank lending to the poorest ghetto residents. Edward M. Gramlich, a Federal Reserve governor who died in September 2007, warned nearly seven years ago that a fast-growing new breed of lenders was luring many people into risky mortgages they could not afford. When Gramlich privately urged Fed examiners to investigate mortgage lenders affiliated with national banks, he was rebuffed by Alan Greenspan. Greenspan ruled the Fed with nearly the power of an absolute monarch.

Revealing what was most certainly the tip of a very extensive iceberg of fraud, the FBI recently announced it was investigating 14 companies for possible accounting fraud, insider trading or other violations in connection with home loans made to risky borrowers. The FBI announced that the probe involved companies across the financial services industry, from mortgage lenders to investment banks that bundle home loans into securities sold to investors.

At the same time, authorities in New York and Connecticut were investigating whether Wall Street banks hid crucial information about high-risk loans bundled into securities sold to investors. Connecticut Attorney General Richard Blumenthal said he and New York Attorney General Andrew Cuomo were looking whether banks properly disclosed the high risk of default on so-called “exception” loans — considered even riskier than sub-prime loans — when selling those securities to investors. Last November, Cuomo issued subpoenas to government-sponsored mortgage companies, Fannie Mae and Freddie Mac, in his investigation into what he claimed were conflicts of interest in the mortgage industry. He said he wanted to know about billions of dollars of home loans they bought from banks, including the largest US savings and loan, Washington Mutual Inc., and how appraisals were handled.

The FBI said it was looking into the practices of sub-prime lenders, as well as potential accounting fraud committed by financial firms that hold these loans on their books or securitize them and sell them to other investors. Morgan Stanley, Goldman Sachs Group Inc. and Bear Stearns Cos. all disclosed in regulatory filings that they were cooperating with requests for information from various unspecified, regulatory and government agencies.

One former real estate broker from the Pacific Northwest, who quit the business in disgust at the pressures to push mortgages on unqualified borrowers, described some of the more typical practices of predatory brokers in a memo to this author:

The sub-prime fiasco is a nightmare alright, but the prime ARMs hold potential for overwhelming disaster. The first “hiccup” occurred in July/August 2007 - this was the “Sub-prime Fiasco,” but in November 2007 the hiccup was more than that. It was in November 2007, that the prime ARMs adjusted upwards.

What this means is that upon the “anniversary date of the loan” the Adjustable Rate Mortgage adjusts up into a higher payment. This happens because the ARM was “purchased” at a teaser rate, usually one or one and one half percent. Payments made at that rate, while very attractive, do nothing to reduce principal and even generate some unpaid interest which is tacked onto the loan. Borrowers are permitted to make the teaser rate payments for the entire first year, even though the rate is good only for the first month.

Concerns about “negative amortization,” whereby the indebtedness on the loan becomes more than the market value of the property, were allayed by reference to the growth in property values due to the bank-created bubble, which it was said was normal and could be relied upon to continue. All that was promoted by the lenders who sent armies of account executives, i.e., salesmen, around to the mortgage brokers to explain how it would work.

Adjustable interest rates on home loans were the sum of the bank’s profit - the margin - and some objective predictor of the cost of the borrowed funds to the bank, known as the index. Indexes generated by various economic activities - what the banks around the country were paying for 90 day CD’s or what the banks in the London Interbank Exchange (LIBOR) were paying for dollars - were used. Adding the margin to the index produces the true interest rate on the loan - the rate at which, after 30 years of payments, the loan will be completely paid off (”amortized”). It is called the “fully indexed rate.”

I am going to pick an arbitrary 6% as the “real” interest rate (3% margin + 3% index). With a loan amount of $250,000.00 the monthly payment at 1% would be $804.10; that is the “teaser rate” payment, exclusive of taxes and insurance. This would adjust with changes in the index, but the margin remains static for the life of the loan.
This loan is structured so that payment adjustments only occur once per year and are capped at 7.5 % of the previous year’s payment. That can go on, stair stepping, for a period of 5 years (or 10 years in the case of one lender) without regard to what is happening in the real world. Then, at the end of the 5 years, the caps come off and everything adjusts to payments under the “fully indexed rate.”

If the borrower has been making only the minimum required payments the whole time, this can result in a payment shock in the thousands. If the value of the home has decreased twenty-five percent, the borrower, this time someone with stellar credit, is encouraged to give it back to the bank, which devalues it at least another twenty-five percent and that spreads to the surrounding properties.

According to a Chicago banking insider, during the first week of February 2008, bankers in the U.S. were made aware of the following:

Chase Manhattan Bank (”CMB”) has sent out an unlimited number of statements to its customers about Lines of Credit (”LOC’s”. The terms of its LOC’s, which, have been popular in the past, are now being manipulated and the values of the properties securing them are being unilaterally adjusted down, sometimes as much as 50 percent. This means homeowners are faced with making payments on a loan to buy an asset that is apparently worth half of the principal amount of the loan and paying interest on top of that. The only sensible thing to do in many cases is walk away, which results in a major loss in equity, reducing the value of all surrounding properties and adding to the avalanche of foreclosures.

This is especially aggravated in cases of “Creative Financing” LOCs - those that were drawn on equal to between ninety and one hundred percent of the value of the property before the bubble burst…

CMB has automatically closed credit lines that have “open” credit on them - meaning that the borrower left some money in the LOC for the future - over an 80% ratio of the amount of the loan to the value (”LTV”) of the property. This has been done on a mass basis without any reference to the “property owners.”

Loan to Value limits mean that the amount of money which the lender is willing to loan cannot exceed the stated percentage of the property value. In common practice, an appraiser would be hired to assess the value of the property. The appraisal is informed by comparable sales of other properties which have sold in an area that, with a few exceptions, must be no more than one mile away from the subject property. That was merely the tip of the mortgage fraud bonanza that preceded the present unfolding Tsunami.

The Tsumani is only beginning

The nature of the fatally flawed risk models used by Wall Street, by Moody’s, by the securities Monoline insurers and by the economists of the US Government and Federal Reserve was such that they all assumed recessions were no longer possible, as risk could be indefinitely diffused and spread across the globe.

All the securitized assets, the trillions of dollars worth, were priced on such flawed assumption. All the trillions of dollars of Credit Default Swaps—the illusion that loan default could be cheaply insured against with derivatives—all these were set to explode in a cascading series of domino-like crises as the crisis in the US housing market unraveled. The more home prices fell, the more mortgages facing sharply higher interest rate resets, the more unemployment spread across America from Ohio to Michigan to California to Pennsylvania to Colorado and Arizona. That process set off a vicious self-feeding spiral of asset price deflation.

The sub-prime sector was merely the first manifestation of what was to unravel. The process will take years to wind down. The damaged products of Asset Backed Securities were used in turn as collateral for yet further bank loans, for leveraged buyouts by private equity firms, by corporations, even by municipalities. The pyramid of debt built on assets securitized began to go into reverse leverage as reality dawned in global markets that no one knew the worth of the securitized paper they held.
In what would be a laughable admission were the consequences of their criminal negligence not so tragic for millions of Americans, Standard & Poors, the second largest rating agency in the world stated in October 2007 that they “underestimated the extent of fraud in the US mortgage industry.” Alan Greenspan feebly tried to exonerate himself by claiming that lending to sub-prime borrowers was not wrong, only the later securitization of the loans. The very system they worked over decades to create was premised on fraud and non-transparency. [unquote]