Monday, March 24, 2014

Public Health Fraud of India (PHFI): Here’s why Manmohan Singh deserves the fate of his crony Rajat Gupta

This article - which I wrote in October 2012 and is still incomplete - is a sequel to two articles I'd published in March 2011 and September 2012 whose links are pasted below.

This series of articles explains what I call the 'Public Health Fraud of India' or PHFI whose foremost perpetrator is Prime Minister Manmohan Singh. 

As I noted above, this article was written in October 2012, but could not be completed then or subsequently taken up for completion, for various reasons. It's, however, quite substantial in its current form and is an important part of the painful research I'd done on PHFI, which must be shared with those who need this information now. Several public health-related people have been requesting me to publish this article at the earliest.

So, rather than waiting more for the time when I'd be able to take it to its final form, I am publishing the article in its current incomplete form and hope to publish supplementary material in my succeeding posts.

The article pasted below explains that Public Health Foundation of India (or PHFI whose 'F' should always be read as 'fraud' rather than 'foundation') is neither a 'public-private partnership' (PPP) nor an 'autonomous body', as the Manmohan Singh government claimed repeatedly.

That is, PHFI's formation and existence had nothing, whatsoever, to do with the PPP rules notified by the finance ministry. And PHFI's supposed status as an 'autonomous body' has nothing to do with the General Financial Rules (GFR), 2005, which apply to the formation of 'autonomous bodies'.

Manmohan Singh government falsely claimed alternatively, within and outside Parliament, that PHFI is a "PPP" or "autonomous body" or "autonomous PPP", thus committing a gargantuan fraud on the people as well as the Parliament - the latter being a fraudulent breach of Parliamentary privilege.

Equally massive is the falsehood and fraud that Manmohan Singh and his government used in first posing PHFI as an organization that was to engage only in education, research and career-building and then expanding its remit to include anything and everything that can be pushed under the rubric of "public health", including policy making and legislation drafting. 

PHFI is now 'the government' vastly more powerful than the central ministry of health and family welfare. This private club, which sponges on hundreds of crore of grants and other public support, has come to be an unelected and unlawful 'government', accountable only to a coterie of business owners who control it. 

Manmohan Singh, who's personally responsible for creating and supporting PHFI, is liable for prosecution for fraud and corruption, under various sections of various statutes, and should go to jail.

A full investigation will reveal the full scale of this massive fraud and many subordinate frauds, such as the illegalities in the formation/registration of PHFI society and the large number of lucrative contracts and other benefits that have been granted to this illegal and fraudulent organization without following the rules of public procurement.

Since I published my first article in March 2011, there has been huge pressure from the PMO on the mainstream media to prevent them from investigating further.

I had given some of the contours of the fraud to a senior journalist from DNA, an award-winning scam buster who had contacted me in the middle of 2012, but nothing came out of that.

New Delhi (October 2012): Last June, when a US court held Rajat Gupta, the former head of McKinsey & Co, guilty of securities fraud, the sword of justice also brushed past Prime Minister Manmohan Singh himself.

Being the conviction of a wheeler-dealer who has long had an “open door” to the PMO, the verdict of the 12-member jury represented a much closer encounter that Manmohan Singh or any of his associates has had so far with penal justice; it was closer, in terms of establishment of guilt, than the arrest and indictment of former telecom minister A. Raja − who’s since been freed on bail − in 2G spectrum scam case.

The verdict was also a reminder that if justice had indeed been allowed to run its course in India, many of the high and mighty would find themselves in jail.

An RBI investigation revealed, for instance, that Rajat Gupta, a US citizen since 1984, colluded with other foreign investors in making an illicit purchase of shares in Tamilnad Mercantile Bank and transferred his shares to another foreign investor in violation of the Foreign Exchange Management Act (FEMA).

Manmohan Singh, to take another example, has been abusing the prime ministerial office and public resources to promote and support Public Health Foundation of India (PHFI), a private club put together by Gupta, as a policy making body under the wholly fraudulent cover of a ‘public-private partnership’ (PPP).

While the Enforcement Directorate continues to “look into” Gupta’s alleged wrongdoing more than two years after it was reported by the RBI, Manmohan Singh being an Indian Prime Minister is virtually protected from any suggestion of an independent inquiry of his misconduct, let alone an inquiry itself.

Gupta has a record of more dubious dealings in India. And even without an inquiry a lot more is plainly evident in Prime Minister’s dubious dealings with the businessman, who is set to be sentenced on October 17, and his commercial network.

PHFI: an elaborate fraud
The most interesting manifestation of Manmohan Singh’s association with Rajat Gupta is Public Health Foundation of India (PHFI), an organization wholly fraudulent in its conception, formation, objectives and operation. It is dominated by Big Business, but has been allowed to thrive on hundreds of crores of public money.

PHFI has also been advertised, fraudulently, as a “public-private partnership” in order to be given the privileges of a governmental authority with no public accountability. In over six years of its existence, PHFI has gone far in building its illegal empire and exercising its baleful influence on public health policy and administration with enormous costs to the citizens.

Based on information available in the public domain and obtained through RTI, this article explains why PHFI is an outright fraud on the citizens of India and a new low in the degradation of the concept of democratic accountability that has taken place under Manmohan Singh government. It shows how the government has been using terms like ‘PPP’ and ‘autonomous PPP’ to hoodwink the public and the Parliament about PHFI’s formation, identity, privileges, area of work and influence.

The intent behind this fraud has been to give powerful business interests a back-door entry into government, so that they are able to shape public health policy to serve their narrow private interests and gain control over public resources.

The establishment of PHFI also betrays the contempt with which the current regime has treated public health of over a billion people.

The illegal beginnings
The role of the government in conceiving and planning PHFI remains a mystery with no attempt by the official channels to explain how this organization was conjured up in early 2006.

(The morning after the “launch” of PHFI by Prime Minister Manmohan Singh, Indian Express reported: “The PHFI initiative has been collaboratively developed over the last two years under the leadership of Rajat Gupta of McKinsey, the Ministry of Health and Family Welfare and Srinath Reddy, head of the Department of Cardiology at AIIMS.”)

According to the information – which is not free from dubiousness – released by PHFI under RTI Act, it was registered as a society (under the Societies Registration Act of 1860) on 08 February 2006 in Delhi by the following eight men who also formed its first governing body.

(a)    Rajat Gupta, then a senior partner in McKinsey. He was the prime mover in the creation of PHFI and became the chairman of the governing board within weeks of the registration of the organization. Gupta was compelled to relinquish the post in March 2011 after being charged in the US with involvement in Galleon insider trading ring.
(b)   Gautam Kumra of McKinsey. He has been a member of PHFI’s governing body from the very beginning.
(c)    Prashanth Vasu of McKinsey.
(d)   Ashok Alexander, country director of Bill and Melinda Gates Foundation which he joined in 2003 after 16 years at McKinsey. Alexander has also been a member of PHFI’s governing body from the very beginning. He described Rajat Gupta as a “friend, mentor and occasional coach” at the trial of the latter in Galleon insider trading case.
(e)    K Srinath Reddy, then a cardiologist at AIIMS. He has been heading Manmohan’s official medical panel and been Gupta’s right hand man in all matters PHFI. He used his access to the Prime Minister to wangle an unlawful five-year “deputation” to be made the president of PHFI. Having taken voluntary retirement from AIIMS after the five-year term, he continues full time as PHFI president at a salary of Rs 60 lakh per annum plus perks.
(f)    RA Mashelkar, then Director-General of Council of Scientific and Industrial Research (CSIR). He has been associated with American India Foundation and Indian School of Business, both of which organizations list Gupta as one of their founders. He has also been a member of the board of PHFI since its inception.
(g)   Ajay Bahl of law firm AZB & Partners.
(h)   Raman Sharma of law firm AZB & Partners.

Two of the eight ‘main objects’ that PHFI’s memorandum of association lists are setting up public health institutes and “driving” research and consultancy for “shaping public health policies” through the help of central and state governments, corporate houses and other agencies.

PHFI claims its governing body enlarged itself to 24 members − who were drawn primarily from Big Business, corporate-funded international foundations (like Gates Foundation) and the central government − on 27 March 2006, i.e. a day before the organization was “launched”. 

The enlarged board, shows the information released by PHFI, had four officials of the ministry of health and family welfare: Prasanna Hota, Secretary, Nirmal Ganguly, Director General, Indian Council of Medical Research, RK Srivastava, Director General, Health Services, and K Sujatha Rao, DG, National AIDS Control Organization.

That takes, together with Reddy and Mashelkar, government officials on PHFI board to six.

In comes the Prime Minister
Manmohan “launched” PHFI on 28 March 2006 in a function attended by his ministerial colleagues (Anbumani Ramadoss, Panabaka Lakshmi, Kapil Sibal), top bureaucrats, K. Srinath Reddy (then senior cardiologist at AIIMS), Rajat Gupta (head of McKinsey & Co.), Barry R. Bloom (Dean of Harvard School of Public Health), Amartya Sen (the Nobel laureate whose presence on the PHFI board has played its part in camouflaging the real identity of the organization) and other worthies.

In his 1732-words speech, the Prime Minister referred twice to PHFI as a “public-private partnership” without ever naming any of the public partner(s) or the private partner(s). He made no reference to any contractual arrangement between the two sides nor outlined the contribution of any party to the purported PPP. He, however, did thank “all donors” including “the corporates who have contributed to this laudable effort” and “several international academic institutions of high repute”.

(No one is better placed than Manmohan Singh to know the specific meaning that the Government of India attaches to “public-private partnerships”, including the ones in the ‘social sector’. At the time of his speech, he was the chairman of the Committee on Infrastructure, the highest decision-making body on PPP policy matters then.)

He also said, “The setting up of the PHFI presents a unique opportunity to develop innovative models of public-private partnership in major social sector programmes.”

Speaking of the need for “managers of health and not just of diseases”, Manmohan commended the 7-weeks-old organization (whose fuller governing body came into existence the previous day) “in taking this initiative to bridge a critical gap in health education and in blazing a trail by setting up a series of public health schools”. He congratulated Rajat Gupta “for the efforts that he has made to give concrete shape to this idea”.

The Prime Minister also set PHFI sweeping objectives, calling on it “to develop an Indian agenda both in academics and research,” and hoping that it “will invest in capacity-building in existing public health institutions across the country” and “our state governments will find it beneficial to partner your initiative”.

Unexplained largesse
On 6 July 2006, i.e. 14 weeks after Manmohan conjured up PHFI out of thin air, the government announced that the Cabinet Committee on Economic Affairs (chaired by the PM) had approved a “one time contribution of Rs 65 crore to the initial Rs 200 crore corpus of PHFI”.

A notification issued by the CCEA said: “The PHFI basically aims to improve the public health human resource capacity and advocacy in India” by doing the following (seven items under three headings).

(i) Strengthening Education in Public Health: (a) Building new world class institutions of public health in India, (b) Strengthening existing such institutions, both within the government and outside, (c) Creating a critical mass of high quality faculty in the field of public health.

(ii) Setting Standards in Public Health Education: Improving quality of public health education, by clearly defining academic standards in public health education.

(iii) Strengthening Research and Policy in Public Health: (a) Conducting high impact, India relevant research in public health, (b) Using the research to empower national programme and enable appropriate policy formulation, (c) Working with the governments (central and state), as also the private sector, to create meaningful career tracks for public health professionals.

Interestingly, the notification of 06 July 2006 contains no descriptor for PHFI. The organization is neither described as a “public-private partnership” nor is there a mention of any agreement between the public and private partners that a PPP would require.

There is also no explanation as to the nature of the “one time contribution” of Rs 65 crore. What justified this expenditure of public money? Why was this “one time contribution” needed to be made? What made PHFI deserving of this governmental support? Who asked for it, on what grounds, in what form of proposal? What did that proposal, if any, contain? What were the terms and conditions governing this “one time contribution”?

None of these questions is addressed in the notification, which adds that the rest of the corpus “is being generated” from Gates Foundation (Rs 65 crore) and “approximately Rs 80-90 crore is being generated from an assortment of high net worth of Indians from all over the world”.

The to-do list is also very interesting, containing as it does only those items that are related to education, research and careers in public health, and nothing else.

It would indeed be a stretch to interpret any of the seven listed items to mean that PHFI was to directly participate in policy formulation or enjoy the privilege of being awarded government projects without competition or receive foreign aid as part of the agreements that the Government of India has signed with the foreign governments – though that is what has actually transpired.

Money first, plan later
On 28 July 2006, the ministry of health and family welfare issued a letter to K Srinath Reddy, President of PHFI, informing him that the “competent authority has approved the proposal for one time grant of Rs 65 crore to the PHFI corpus”.

The letter asked for the following seven items of information to be furnished “in order to facilitate the release of funds”: (a) Roadmap for the activities, (b) Progress achieved in receipt of fund from abroad and within India as indicated during the launch on 28 March 2006 for the corpus, (c) Status of getting possession of land and plan to start the first school, (d) The decision on the number of schools to be built, (e) Action plan for curriculum design and development, (f) Action plan for strengthening the collaborative arrangements with the existing Indian institutions engaged in public health education, (g) Action plan for demand survey in states for public health professionals passing out of PHFI schools.

What is immediately noticeable in this letter is the introduction of the word “proposal” for the planned financial support for PHFI, without an explanation as to when and where it originated and what it contained. And “one time grant” has replaced the earlier usage, “one time contribution.”

Obviously, the government was determined to pour public funds into PHFI anyhow and decided in just 22 days since the 06 July notification that the “one time contribution” would have to be clothed as a grant-in-aid.

Positioning the largesse as grant-in-aid would mean that PHFI would now have to be described as an “autonomous body” in order for the government support to pass muster.

The descriptor “public-private partnership” would be toned down for a while after which it would be used together with “autonomous body” – as a new term invented especially for PHFI – or interchangeably.

The 28 July letter also reveals the absurdity of the situation − in PM-headed CCEA and then the “competent authority” approving a large public investment in a non-entity even before ascertaining basic facts such as its “roadmap of activities” and “action plans”. This charade only serves to betray the larger game of the creation of PHFI as a front for a network of corporate interests, which then waits to be legitimized and propped up by the government with public money and other kinds of support.

Also revealing is PHFI being asked to furnish information on “progress achieved in receipt of fund from abroad and within India as indicated during the launch on 28 March 2006 for the corpus” − four months after the Prime Minister “launched” the organization and thanked “all donors who have graciously contributed to this noble effort”. 

It is noteworthy that the seven items of information contained in the 28 July letter also deal with only education, research and careers in public health, and nothing else. 

Misleading the Parliament
On 24 November 2006, in reply to a query, Panabaka Lakshmi, the then minister of state for health, informed the Rajya Sabha of the decision of the government to support PHFI.

“The Government has decided to support the PHFI in setting up of world class Institutes of Public Health in India. PHFI is an autonomous body. The Government of India proposes to contribute as one-time grant up to Rs 65 crore only to the initial Rs 200 crore PHFI corpus. PHFI initially proposes to set up two schools. The locations have yet to be decided by PHFI,” an official press release quoted Lakshmi as informing the Rajya Sabha.

Two obvious points to note in this statement are that PHFI has once again been described as an organization that will engage only in education-related work and the descriptor “autonomous body” has been introduced with no mention of “public-private partnership”.

Did the minister mean that PHFI was an “autonomous body” as Indian Council of Medical Research (ICMR) is an autonomous body under the ministry of health?

Neither the ministry, however, has ever listed PHFI as an “autonomous body” on its website nor has PHFI − with top-most health ministry officials on its board − ever described itself as an autonomous body under the ministry.

ICMR, National Institute of Health and Family Welfare (NIHFW) and several other organizations describe themselves as autonomous bodies under the jurisdiction of the ministry and are subject to CAG audit and the RTI Act 2005.

PHFI has neither been asked to submit to regular public audits nor to meet the statutory requirements for transparency, though it was compelled by an order of the Central Information Commission (CIC), passed on 14 February 2012, to start complying with the RTI Act.

Further, in the matter of setting up of autonomous bodies, the very first principle that General Financial Rules 2005 require the central government to adhere to reads: “No new autonomous institutions should be created by ministries or departments without the approval of the Cabinet”.

The GFR 2005 say: “Stringent criteria should be followed for setting up of new autonomous organizations and the type of activities to be undertaken by them. The Ministry or Department should examine in detail; (a) whether the activities proposed to be taken up are necessary at all; (b) whether these activities, if necessary, need to be undertaken by setting up an autonomous organisation only or whether these could be performed by the concerned government agency or any other organisation already existing.”

These rules also say that autonomous bodies with a budgetary support of more than Rs five crores per annum should be required to enter into an MoU with the ministry or department, spelling out the “output targets” and “input requirements”.

No Cabinet approval
There is nothing in the public domain to show that Cabinet approval was taken for setting up PHFI. Indeed, the government would have us believe that it had no role to play in bringing together the eight men who registered PHFI as a society on 8 February 2006.

The CCEA decision to give Rs 65 crore to PHFI came nearly five months after the registration with no mention of any Cabinet approval or use of the descriptor “autonomous body”.

Nor is any “stringent criterion” evident in CCEA deciding to make a contribution of Rs 65 crore to an organization registered few weeks ago by a bunch of manipulators and front men feigning an interest in improving India’s public health without any expertise or experience in this vital area of public policy and administration.

There is no publicly available proof of any ministry having signed an MoU with PHFI to make the latter spell out its “output targets” and “input requirements” in line with GFR 2005.

Lying to the Parliamentary panel
Considering the demand for grants (2006-07), the Parliamentary Standing Committee on Health and Family Welfare “cautioned” the government – in relation to PHFI which the department concerned described as a “Public-Private Partnership” – that “the track record of private sector participation in health sector has not been very helpful so far as public at large is concerned”. A number of corporate hospitals had failed “miserably” to provide free treatment to the poor after having received land from the government at cheap rates, said the panel and pointed out that the “so called public-private sector” had penetrated the state health systems also.

“The committee is not much convinced by the contention of the department that this experiment will be confined to the area of public (medical) education only. The committee would like to be apprised about the full details of this initiative.”           

The government responded by saying that “PHFI is created for capacity building in public health education, training and research”.

Here the government is clearly assuring the parliamentary panel that PHFI would only engage in educational and research work and that’s all there was to the “experiment”.

That was a patently false assurance as PHFI has been engaged directly in formulation of public health policy by being given membership of all important committees of the government.

For example, PHFI acted – at full public cost – as the secretariat for the High Level Expert Group on Universal Health Coverage that was chaired by its president K Srinath Reddy and whose report is currently being considered by the government.
Belying its assurance, the government has also been granting lucrative assignments to PHFI without any competitive bidding.

For instance, PHFI charged the government more than Rs 1.68 crore for developing website which gives vitally useful health tips, such as the benefits of eating home-cooked food, washing hands after using the toilet, and keeping the nails short and clean.

More falsification
The government told the Parliamentary standing committee that PHFI was managed by an “independent governing board” that had three representatives of the health ministry. It added: “TKA Nair, Principal Secretary to Prime Minister; MS Ahluwalia, Vice Chairman, Planning Commission; Sujata Rao, AS&PD, NACO (National AIDS Control Organization); Dr. Mashelkar, DG of CSIR, are also members of the governing board. The presence of the officials from government would ensure that the decisions taken in PHFI are in consonance with the objectives for which PHFI has been supported by Government of India”.

That assurance is also based on falsehood. The rules and regulations of PHFI have ensured that the government has never had anything more than a cosmetic role to play in decisions made by the organization.

The rules not only limit the number of government representatives on PHFI board to a meagre proportion of the total membership, but also give non-government members (read Big Business) the super-majority to decide who would be considered a “government representative” and, generally, who should simply be thrown out of the governing body.

Until 28 October 2011, when rules were tweaked, persons affiliated with the government (centre and states) could form no more than one third of the members of the governing body “either in an individual or ex officio capacity as determined by the governing body”. The actual government representation has always been too paltry to be anywhere near one third.

“MS Ahluwalia is a member of the PHFI board as MS Ahluwalia, not as deputy chair of the Planning Commission,” a counsel for PHFI explained “individual capacity” to the CIC on 24 January 2012 at a hearing that this writer attended. That makes “ex officio capacity” the only government representation on PHFI board.

Since the rules require a majority vote of 51 per cent of the membership of the governing body for decisions not amenable to consensus, the government representatives stand no chance of ever influencing any decision if enough non-government representatives don’t cooperate. A government representative (or any other member) in the governing body can just be stripped of their membership anytime by a simple majority of the members present and voting.

Further eroding the ability of the government representatives to play any meaningful role in PHFI’s decision making, the changes effected in the rules on 28 October 2011 turned the executive committee – its current strength being 15 – into the most powerful body within the organization, with just one ex officio position for the government.

Again, as a foolproof safeguard against government influence, the members of the executive committee who are affiliated with central or state governments cannot be more than one third of the total membership. As for the governing body whose current strength is 30, the changes of 28 October gave just four ex officio positions to the government officials (i.e. less than one seventh of the total membership).

While making the dubious claim that seven of its officials were on the PHFI board, the government omitted, cleverly, to apprise the Parliamentary panel of the important distinction between “ex officio” members (which it had no more than three) and “individual capacity” members who by very definition are not government representatives.

The Parliamentary panel was also assured, “It is expected that all members of the governing board would ensure the functioning of the Foundation as a professional organization and with complete transparency” − more humbug.

Ahluwalia, TKA Nair (both of Minister of State rank and nominated directly by Manmohan) and other government officials on PHFI board have instead allowed PHFI to cock a snook at even basic canons of transparency while continuing to scrounge off public resources and exert its sinister influence on public health policy.

PHFI remained non-compliant with the RTI Act 2005 for over six years of its existence until a CIC order insisted on compliance from 15 March 2012. In its order, information commissioner Shailesh Gandhi noted “with dismay that the highest levels of public servants in India did not accept the citizen’s enforceable right to information in PHFI, despite the government substantially funding it and exercising some control”.

PHFI was broached again in Rajya Sabha on 31 August 2007. This time Panabaka Lakshmi, the minister of state for health, described it as an “autonomous public-private partnership.”

The Minister said: “It (PHFI) will not only train health professionals, but will also assist in strengthening the existing institutions in the public health sector, create a pool of excellent faculty, act as a think tank for the Government providing inputs for policy initiatives and set standards for public health education. The research programmes of PHFI would be geared to facilitate policy and programme development in public health through inter-disciplinary studies.”

While the Minister described PHFI as a “Public-Private Partnership”, neither the PPP agreement, if any, has ever been made public nor has there been a mention of how the private partner of this PPP was selected in conformity with the elaborate rules and regulations governing PPPs.

(To be completed through succeeding posts.)

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