Could Arrest of Indian Diplomat Sink Preet Bharara?

Won't prosecute "untouchables," but fierce against errant diplomats

For years, complaints have swirled around the most visible--and inexplicable--outcome of the 2008 financial crisis: Not a single financial executive has been prosecuted for doing engaging in any criminal activity. And no, I don't mean insider trading, a favorite of Manhattan U.S. Attorney Preet Bharara. I mean the kind of stuff that almost sank the banking system.

PBS's Frontline, in a memorable special report, called them "The Untouchables."

Five years after the crisis, prosecutors here are supposedly "exploring new strategies for criminally charging Wall Street bankers who packaged and sold the bad mortgage loans behind the financial crisis," according to Reuters, but time is not on their side. The trail is going cold, and statute of limitation issues are going to start kicking in.

Bharara has famously focused on other kinds of wrongdoing--drug gangs in the Bronx, insider trading rings, and other wrongdoing not involving large, politically connected Wall Street banks. Most recently, his office arrested Devyani Khobragade, deputy consul general for India based in New York, for allegedly submitting false documents to obtain a work visa for her housekeeper and paying the woman less than the minimum legal wage. She faces ten years in prison on one charge and five on another.

It seemed at first as yet another day at the office for Bharara, who I profiled for the Daily Beast in 2011. Another heavy-handed prosecution of a fairly routine immigration-law violation, aimed at deterring other transgressors, and also showing the public that the man is not entirely an empty suit. I mean, he is actually doing something. He may not be prosecuting people involved in the financial crisis, but at least he can nab people for visa transgressions.

I wonder if Bharara knew that he'd be touching off the worst diplomatic crisis between the U.S. and India--a crucial U.S. ally, for heaven's sake--in recent memory.

The Indians have gone ballistic. There was outrage that not only was Khobragade arrested, but strip-searched and tossed in the clink with dope addicts before forking over a steep $250,000 bail. The New York Times reported today that the U.S. ambassador was summoned for a strongly worded protest, and people in Delhi were furious. Indian authorities even removed the vehicle barriers that prevent car-bombers from driving into the U.S. Embassy grounds.

The Indian national security adviser, Shivshankar Menon, used words like “despicable” and “barbaric,” and the Indian government retaliated in a way that harkened back to the Cold War, when India and the U.S. were barely on speaking terms:

In addition to removing the maze of concrete security barriers surrounding the American Embassy compound, Indian news reports said, officials demanded that the embassy provide details about all the Indians it employs, as well as the names and salaries of teachers at the American Embassy School; that the embassy commissary stop importing liquor; and that diplomatic identification cards for consular staff members and their families be returned.

Here's a video from NDTV of the barriers being removed outside the U.S. Embassy:

What's striking about this diplomatic crisis is that it was totally unnecessary. Expelling the diplomat, or arresting her while showing more sensitivity to Indian sensibilities (you'd think the Indian-born Bharara would be acquainted with them) would have had the same deterrent effect, without causing a rupture in U.S.-India relations.

And yes, it is a rupture.  Politicians from leading parties refused to meet a visiting U.S. congressional delegation, The Guardian reported. The leader of the opposition Bharatiya Janata Party suggested arresting gay U.S. diplomats because homosexuality is illegal in India, the Times reported.

This is not to say that there isn't an element of hypocrisy in the Indian protest. As the Times points out, "It is not unusual in India for domestic staff to be paid poorly and required to work more than 60 hours a week; they are sometimes treated abominably. Reports of maids being imprisoned or abused by their employers are frequent."

But that's beside the point. The handling of Khobragade's case was inept, and  as ham-handed as his approach to Wall Street has been hesitant. Make no mistake: all this happened because of one man, the prosecutor who can't find a single major banker to prosecute, but seems to think that a deputy counsel general of a major U.S. ally should get ten years in prison for visa violations. Right now it is Devyani Khobragade who is in jeopardy, but I have to wonder if Bharara has sealed his own downfall with this prosecutorial overreaching.

© 2013 Gary Weiss. All rights reserved.
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My latest book is AYN RAND NATION: The Hidden Struggle for America's Soul, published by St. Martin's Press. Click here to order the book from Amazon.com, and here to order it from Barnes & Noble. Follow me on Twitter: @gary_weiss

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