Sports: Match-Fixing, Great Red Mark


	May 22, 2000

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MATCH-FIXING
Great Red Mark
See Interview with Mark Mascarenhas

Was the DD-WorldTel MoU for the Independence Cup in 1997 a sweetheart deal? The inside story.

By Ashok Malik

India Today issue dated May 22, 2000 While the world's attention -- and the ICC's internal politics -- centres on the television scandal that was the 1998 Mini-World Cup in Dhaka and while Jagmohan Dalmiya attempts to weave away from the bouncers, another swindle stands silently at second slip. It has all the ingredients of its more (in)famous peer -- a sweetheart deal, a defrauded Doordarshan (DD), an enriched WorldTel, Mark Mascarenhas' sports promotion company. For cricket's emperor buccaneer the waters are getting more choppy by the day.

The report submitted by Arun Agrawal, former financial adviser to Prasar Bharati, on DD's strange if highly unprofitable sports telecast rights agreements has an extensive chapter on the Independence Cup held in India in 1997. Touted as the Board of Control for Cricket in India's (BCCI's) tribute to the nation on the 50th anniversary of freedom, the four-team tournament was played at the height of summer -- between May 9 and 28. Cricket purists were aghast; Dalmiya's dream of making cricket a year-round money earning industry had been fulfilled.

In response to the BCCI's call for bids, DD offered Rs 5 crore for the telecast rights. World Tel went one better and offered Rs 6 crore. Then World Tel gave up the rights to DD under conditions spelt out -- and subsequently cut to pieces -- by Agrawal.

For a start, DD agreed to pay the BCCI Rs 6 crore and co-produce the matches' telecast with WorldTel. DD was to provide equipment and appropriate staff as well as pay -- 567,860 (Rs 3.40 crore) to WorldTel as production costs.

Further, the Indian arm of Mascarenhas' company, WorldTel Sports India (wtsi), was given the marketing rights of dd's telecast on the national network. DD was guaranteed a return of Rs 14.4 crore. Revenue in excess of this figure was to be shared between DD and WTSI in a 70:30 ratio.

The figure of Rs 14.4 crore was arrived at fairly neatly. It was meant to cover all DD's costs and, therefore, ensure the national television company did not incur a loss from the telecast of the Independence Cup. So first the Rs 6 crore to be paid to the BCCI was taken care of, then the Rs 3.4 crore to be paid to WorldTel as production charges. Finally Rs 5 crore was presumed to be the "opportunity cost", the quantum of revenue DD would have earned if it had decided not to telecast the matches and continue with its usual mix of programmes.

Agrawal argues this opportunity cost was grossly undervalued: "Analysis by audit of revenue lost due to telecast of this programme aggregated to Rs 8.91 crore. Thus, DD had omitted to reckon revenue of about Rs 3.91 crore while calculating the revenues that could have been earned."

The "Opportunity Cost Scam" apart, Agrawal accuses DD of "acceptance of cost of production without examination". Apparently DD's initial internal estimates of the production costs were "around Rs 2.5-3 crore". Yet "Doordarshan accepted whatever was demanded by WorldTel" and paid Rs 3.4 crore without demur. What's more, it itself spent an additional Rs 28.6 lakh on production.

The coup de grace came when DD paid Mascarenhas' income tax for him. On March 14, 1997, the director-general (DG) of DD officially noted that the highest bidder for the Independence Cup's TV rights was an "Indian company" called WorldTel. He was probably referring to WTSI. However, when the dg entered into an agreement with Mascarenhas' firm on March 19, the co-signatory was "WorldTel Inc, USA".

This had a double impact. First, there was obviously outflow of foreign exchange. An Indian company could be paid in rupees but a foreign one would accept only dollars. Second, "under Section 195 (1) of the Income Tax Act, 1961", a foreign company earning in India is liable to pay income tax. Incredibly, nowhere in DD's MoU with WorldTel was Mascarenhas' company asked to pay the tax. The income-tax liability, by implication, devolved on dd.

The story doesn't end here. DD paid just under Rs 1 crore as income tax for WorldTel, working on the assumption that the entire Rs 3.4 crore WorldTel received as production cost was its income.

The Income Tax Act provides for a taxpayer to indicate what proportion of its revenue constitutes profit -- or income -- and what takes care of expenses. Incredibly, DD decided the entire sum was WorldTel's profit and didn't bother saving money even at this stage.

Meanwhile Mascarenhas, Dalmiya's best buddy on cricket's cocktail circuit, chortled his way to the bank.

THE DD-WORLDTEL GIVEAWAY

DD agrees to pay WorldTel Rs 3.40 crore as production costs for the telecast of the 1997 Independence Cup. This despite the fact that internal estimates suggest a figure of Rs 2.5-3 crore. Later costs rise to Rs 4.69 crore.
DD sells marketing rights for the live telecast on its national network to WorldTel. It calculates the loss of revenue ("opportunity cost") from not relaying normal programmes as Rs 5 crore. Auditors say this was undervalued by nearly Rs 4 crore.
On March 14, 1997, DD papers talk of WorldTel being an Indian company. But the MOU on March 19 is signed with US-based World Tel Inc. Consequently, hard currency payments become a must and tax complications result.
There is no mention in the agreement of US-based WorldTel's income-tax obligations in India. With Mascarenhas' firm let off the hook, DD has to pay nearly Rs 1 crore to the income tax office. It never asks WorldTel for a refund.

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