There is a particular genius to corruption that wears the mask of virtue. The Enforcement Directorate's recent exposure of a bribery racket touching at least 40 public sector undertakings, banks, and companies is, on its face, a story about fraud. A man impersonating a doctor ran a network of trusts for nearly three decades, taking in corporate social responsibility (CSR) money and quietly returning it to the donor companies, minus a commission, like a dry cleaner pressing crumpled bribes into clean shirts. But look closer and this is not merely a story about one con artist. It is a story about what happens when a society tries to legislate conscience, and conscience, being unenforceable by statute, simply goes into hiding.

India's CSR mandate, introduced under Section 135 of the Companies Act in 2013, was supposed to be a world first: a legal requirement that profitable companies spend 2% of net profit on social good. The intention was admirable. The execution, as this scandal shows, has in places curdled into something closer to money laundering with a philanthropic alibi. Companies did not necessarily want to give money away. The law said they must appear to. And wherever law demands appearance rather than substance, someone will eventually sell the appearance at a discount.

The Nabob Problem, Recurring

India has seen this movie before, under different management. In the eighteenth century, East India Company officials returning from Bengal with obscene fortunes were derisively nicknamed "nabobs." Robert Clive came home at 34 with an income of £40,000 a year, an astonishing sum, while the Company itself raised shareholder dividends to 10% in 1767 and proposed 12.5% by 1771. Parliament, alarmed less by moral outrage than by the political threat these new fortunes posed to the old aristocracy, forced the Company to pay £400,000 annually to the British treasury starting in 1767. The nabobs were publicly shamed in the press and shunned by polite society, but the extraction continued underneath the condemnation, because the structure that rewarded extraction was never actually dismantled.

The parallel is not exact, but it rhymes uncomfortably. Then as now, a formal mechanism existed to redirect private gain toward public benefit (tribute to the treasury, CSR spending to society), and then as now, the people closest to the money found ways to let the mechanism run on paper while the substance flowed quietly back to them. The Company's defenders argued it was simply following the normative goals of a legitimate enterprise; critics called it theft dressed in bookkeeping. The same argument is being relitigated today in ED case files instead of in Parliament.

When Institutions Decay From Inside Their Own Virtue

Corporate social responsibility is, at its best, meant to be exactly what its academic definition suggests: a form of self-regulation in which companies conduct core operations responsibly, reducing harm and contributing to societal goals. But self-regulation has a long and mixed history, and institutions that begin as instruments of virtue have a documented tendency to decay from the inside, precisely because their moral prestige makes them resistant to scrutiny.

Consider Buddhism's decline in India, a case that seems distant from corporate law but is instructive about institutional entropy. Buddhist monasteries, founded on austerity and renunciation, eventually became what historians describe as "virtual landed magnates." Nalanda alone collected revenue from 200 villages. Monks who had once rejected material attachment began practicing idol worship and accepting lavish royal grants that made monastic life comfortable rather than ascetic. By the seventh century, monasteries had become centers of what historians now describe as corrupt practice, and by the twelfth century Buddhism was virtually extinct in the land of its birth. The institution did not fail because its founding ideals were wrong. It failed because the structures meant to embody those ideals were captured by people more interested in the revenue than the renunciation.

CSR trusts are, in miniature, monasteries of modern capitalism: vehicles built to channel surplus toward the public good, now vulnerable to capture by operators who understand that the appearance of virtue is itself a monetizable asset. The accused in this case did not invent a new crime. He simply found the newest wineskin for the oldest wine: diverting funds meant for the collective good into private pockets, with enough paperwork to survive a casual audit.

The Mughal Lesson About Selfishness, Not Just Corruption

It is tempting to call this simple greed and leave it there, but the more precise diagnosis, historically, is institutional misalignment. Historians of the Mughal Empire's decline, notably those examining its nobility, have argued that the empire's unraveling was not primarily a story of moral collapse but of structural incentive: a growing number of nobles competing for a shrinking pool of jagirs (land assignments), which bred factionalism and pushed nobles to extract maximum revenue from peasants simply to maintain their position. The nobility's weakness, as historical accounts suggest, was not moral decay but selfishness and lack of devotion to the state.

Substitute PSU executives for Mughal nobles and CSR trusts for jagirs, and the structure of the problem looks eerily familiar. When compliance becomes a scarce resource that must be publicly demonstrated (a certain percentage of profit, properly documented, routed through an approved trust), and when career advancement or regulatory peace depends on hitting that number cleanly, the incentive to find a trust that will simply hand the money back, for a fee, becomes almost rational. This is not a defense of the executives implicated. It is an argument that 40 institutions do not independently discover the same scheme by accident. They discover it because the system makes the scheme attractive.

Greenwashing's Cousin

There is a term for companies that advertise environmental virtue they do not practice: greenwashing, a form of advertising or marketing spin that deceptively uses green PR to persuade the public that an organization's products, goals, or policies are environmentally friendly. What the ED has uncovered might fairly be called CSR-washing: the use of a legally mandated charitable structure not to distance a company from harm, but to actively launder money while collecting the reputational credit of generosity. It is greenwashing's more cynical cousin, because it does not merely exaggerate good behavior; it manufactures fraudulent good behavior as a cover for bad behavior.

Criminologists have defined corporate crime as illegal acts that are the result of deliberate decision making or culpable negligence within a legitimate formal organization, carried out in accordance with the normative goals, standard operating procedures, and cultural norms of the organization, and intended to benefit the corporation itself. That definition fits this scandal almost too neatly. The trusts were legitimate on paper. The kickback scheme, per the ED's findings, was systematic enough to run for nearly three decades and touch dozens of institutions, which suggests it was not an aberration from standard operating procedure but had, in practice, become one.

What History Suggests, and What It Does Not

None of these precedents offer a tidy solution, and I am wary of claiming they do. The British Parliament's response to the nabobs, taxing the Company's profits, did not end the extraction of India's wealth; it merely redirected a cut of it toward the London treasury while the underlying economic drain of resources from India to Britain continued for another 180 years. Reforming CSR enforcement by adding more paperwork risks the same fate: a treasury-style cut imposed on top of a broken structure, rather than a fix to the structure itself.

What the historical record does suggest, consistently, is that institutions built on voluntary virtue dressed as mandate (Buddhist monasteries living off royal grants, Mughal nobles chasing scarce jagirs, Company officials laundering nabob fortunes through respectable London society) eventually require external, adversarial scrutiny to survive, not internal good faith. Brahmanical reform in the first millennium succeeded partly because it adapted to compete for popular loyalty rather than relying on royal patronage alone. The Company's abuses were checked not by its own conscience but by parliamentary acts, public ridicule in the press, and eventually by the Regulating Act and Pitt's India Act, which imposed real oversight rather than symbolic tribute.

The CSR mandate does not need to be abandoned. But if this scandal teaches anything, it is that a law requiring companies to perform goodness, without a serious apparatus to verify that the goodness is real, simply creates a new market: the market for appearing to comply. The ED's investigation is a start. But 40 institutions and three decades suggest this was never a rogue actor exploiting a loophole. It was a loophole wide enough to drive an entire shadow industry through, and until India treats CSR compliance with the same adversarial seriousness it treats tax evasion, the trusts will keep multiplying, each one promising virtue and quietly delivering a commission instead.