Hindenburg vs Buch: How the 1998 General Pinochet case serves as a lesson for SEBI

Amid the ongoing controversy between the chairperson of the Securities and Exchange Board of India (SEBI), Madhabi Puri Buch, and Hindenburg Research over the probe into Adani Group; parallels are being drawn with a 1998 UK case involving Chilean dictator General Pinochet.

The Chilean dictator was visiting the UK in 1998 when he was arrested there for human rights violations. A court ruling found General Pinochet guilty, but later it was overturned when it emerged that one of the judges on the panel had a conflict of interest.

Lord Hoffmann, one of the judges, had close ties with Amnesty International (AI), which was representing the Chilean victims. Also, Hoffmann’s wife was linked to AI. Hoffmann himself was the director of Amnesty International Charity Limited, a sister entity which had reported on Chile’s human rights violations.

When the revelations came, Pinochet’s legal team appealed the decision with the House of Lords, urging the ruling to be set aside. As a result, Lord Hoffmann was disqualified from the case and a rehearing was ordered.

One judge on the four-member panel said, “His (Hoffmann’s) relationship with Amnesty International was such that he was, in effect, acting as a judge in his own cause.”

Allegations against SEBI chief Buch, levelled by Hindenburg Research, also indicate that ‘she acted as a judge in her own cause’.

1. Investments in an offshore entity under SEBI investigation connected to Vinod Adani, the elder brother of Gautam Adani.

2. A 99 per cent ownership in an advisory firm, called Agora Advisory, used by her husband for business consulting. Reuters reported that she even earned revenue from the firm during her seven-year tenure, potentially violating SEBI norms.

3. Promoting an asset class in which her husband had a perceived interest.

Buch in a statement on Aug 11 just denied the allegations, without providing any details.

Despite the allegations by Hindenburg, Buch didn’t recuse herself from the investigation against the Adani group. Pinochet case reveals how a conflict of interest can be taken as a ground to dismiss the investigation as well as the ruling. This also indicates that the integrity of the investigation may have been severely compromised.

Experts also believe that the SEBI chairperson should have revealed the conflict of interest.

Former SEBI chairman CB Bhave was quoted as saying in media reports that Buch should have demanded a recusal from the finance ministry.