Why has Bharat Shah's arrest sent Bollywood into such a tizzy? The simple answer is that Shah's arrest proves that the biggest names in the high-profile business are now open to police scrutiny.
Those in the film business know exactly how long the Mafia's tentacles are -- but it was a combination of fear, funding needs and their own involvement that has created a conspiracy of silence. The fear is that if Shah breaks down, as producer Nadeem Rizvi did, it would bring several big names under the police spotlight.
The glamour of the film business is itself a powerful magnet for the Mafia, but details rarely make it to the mainstream press. Notice how little was written about starlet Mandakini's disappearance from the film scene or her alleged liaison with Dawood Ibrahim? Or the suicide by actress Divya Bharti? Producers and directors routinely demand and obtain police protection. Not only does Amitabh Bachchan get police protection, but his son, with just a couple of movies released, also demands it.
Extortion is often not reported to the police because those threatened have a record of previous dealings with the underworld. Sometimes, this has fatal consequences. The problem is not restricted to the producers. Top film stars have always found it very lucrative to participate in highly paid live shows in the Gulf or to lend glamour to cricket tournaments.
Instead of co-operating with the police, Shah's arrest has put the industry on the defensive. Having clamoured for protection it is now at pains to prove that the role of Mafia-funding has been 'blown out of proportion.' The industry even contemplated imitating the diamond industry and displaying solidarity with Shah by stopping work. However, saner counsel obviously prevailed.
Film-makers have argued that at any given time the Mafia finances just six or seven out of 250-odd movies on the sets. But details about Shah's operations seem to contradict this claim -- they may not include the Mafia's involvement in music and distribution rights. Shah apparently has Rs 100 crores (Rs 1 billion) invested in film financing, and nearly 30 films have been affected in some form or the other by his arrest.
Clearly, Bollywood finds it difficult to believe that real life can imitate the celluloid fantasies it churns out. Hundreds of movie themes have had good-cop heroes ripping the mask off powerful gangsters who masquerade as socially respected businessmen/political leaders. When it happens in real life, the industry yelps about a witch-hunt.
Such double standards were evident in the past too. Though Gulshan Kumar was gunned down in broad daylight, the industry closed ranks and remained silent, although composer Nadeem and Tips Music magnate Ramesh Taurani were charge-sheeted in connection with the crime. The hypocrisy continued when Taurani went on to tap public funds through an equity issue.
When I wrote about the Tips issue, allowing a murder accused to raise public funds (in The Indian Express), some of the biggest names in the film industry called the CEO to try and stop more articles on the subject. They wanted nothing to dampen public enthusiasm and kill their brand new avenue for raising funds.
Instead of whining about the absence of legitimate funding and persecution by the police and the press, the industry needs to put in place some ethical ground rules which will make the business safer and legitimate financing easier. The growing international market for Indian films and film music has provided a never-before opportunity for the industry to raise bank funds. Unfortunately, the Mafia wants a share of these rights too. This makes it even more imperative for the industry to co-operate in a clean-up.
There are other issues too. While the organised segment of the music industry has launched a drive against piracy with the help of supercop Julio Ribeiro, it has met with limited success because of lack of support from within the business. Piracy in India is lucrative enough for erstwhile pirates to turn legitimate and launch music labels. Organised sector sources also complain that producers still demand a substantial chunk of their money in cash, forcing them out of the bidding process. They also confirm that recently turned legitimate music brands rarely give up non-legitimate activities because they are highly profitable.
It is the same with film piracy. Though big banner directors are anxious about piracy and at pains to prevent their films from being copied, the Mafia connection of the pirates keeps them silent. Then there are the stars who demand a significant portion of their fees in cash. Part of the clean-up would be to force them to get paid in taxable money and stop currying favours with the income tax authorities.
Cash payments, music and distribution rights and funding -- they are all part of a package deal. Bharat Shah's rise to being the most influential film financier has a lot to do with his control over all these segments. His financing package invariably included music and satellite rights; he also gained from exclusive arrangement with some music companies and topped this off with deals with overseas distributors.
Add to that his assiduously cultivated political and social connections and he seemed almost untouchable. The next stage was the nexus he was apparently building with a leading stockmarket operator. Bharat Shah's alleged connections with the Mafia and his alleged role as a conduit for extortion money have yet to be proved. If it is true, it shows how close the Mafia was to infiltrating legitimate funding avenues. It would have been just a matter of time before threats were used to channel bank funds into specific films.
Now that the business has industry status, it is important to ensure that the clean-up extends beyond the dubious links of film producers. Only six movie companies have tapped the capital market -- Tips Music, Mukta Arts, Sri Adhikari Brothers, Cinevista, Padmalaya and Balaji Telefilms. Shah's arrest has sent their stock to their 52 week lows. That in itself could be a blessing in disguise.
Investors are bound to be more careful in future and not get swayed by fancy profit projections by film companies or by the ramping of such stock by market operators. The arrest ought to shake the Securities and Exchange Board of India out of its complacency.
Soon after the debate surrounding the Tips issue, SEBI Chairman D R Mehta went on record with the assertion that the regulator could do nothing more than demand adequate disclosures. Shah's arrest will hopefully force the Malegam Committee to mesh international practices with Indian realities and mandate some scrutiny into the background and track record of corporate managements.
SEBI is equally guilty of ignoring the open ramping of media and entertainment stocks by one market operator. Bharat Shah's arrest is a wake up call. It is up to the industry and the regulators to make the best use of it by ensuring a thorough clean-up.