CBI busts corporate loan bribery scandal

Exposing a massive bribery scam in corporate loans given out by prominent public sector banks and financial institutions, the CBI on Wednesday arrested the chief executive officer (CEO) of LIC Housing Finance Ltd in Mumbai, a top officer of LIC and officers of Bank of India (BoI), Central Bank of India and Punjab National Bank (PNB).

CBI conducted raids in six major cities, including Delhi and Mumbai. Eight persons were arrested. Officials said this is a case of big- ticket corporate loans being given out by these institutions on payment of huge bribes to their top officials and by- passing mandatory conditions. Over 30 corporates, including some big real estate firms, are under the scanner for obtaining such loans.

It is alleged that some companies got housing loans by faking themselves as individuals and submitting fake documents, which were duly processed by the accused bankers upon payment of bribes. Corporates are not entitled to housing loans.

These are meant only for individuals and come at a lesser interest rate than commercial loans. CBI has named over a dozen such corporates in its FIR, albeit not as accused.

A Mumbai-based private financial services company, Money Matters Group, was acting as the mediator for such loans.

Those arrested are Ramchandran Nair, CEO, LIC Housing Finance Ltd; Naresh K. Chopta, secretary (investment), LIC; R. N. Tayal, general manager, BoI, Mumbai; Maninder Singh Johar, director (chartered accountant), Central Bank of India, New Delhi and Venkoba Gujjal, deputy general manager, PNB, New Delhi, Rajesh Sharma, CMD, Money Matters and two of his employees, Suresh Gattani and Sanjay Sharma.

CBI has accused Nair of showing undue favour to companies like D B Realty, Pashmina Ltd, Mantri Realty, Sigrun Holdings Ltd, Entertainment World and Indore City Treasures. It has also alleged that Rajesh Sharma of Money Matters delivered Rs  45 lakh to Nair last November besides financing the purchase of a flat, at a discounted price, by Nair in Goregaon.

CBI has alleged that Tayal received Rs  25 lakh from Sharma for assistance in a matter connected with Ashapura Minechem. Tayal is also accused of assuring Sharma to associate him in the power project proposals of BGR Energy worth Rs  200 crore and OPG Group worth Rs  300 crore.

CBI has accused Chopta of receiving Rs  16 lakh as kickback for providing inside information about LIC's dealing with companies like Adani, JP Hydro, JSW Power, Religare and Pantaloon.

Johar of Central Bank is accused of accepting Rs  30 lakh for providing undue favour to Lavasa.

Venkoba Gujjal of PNB is accused of taking Rs  20 lakh as bribe for facilitating a loan of Rs  50 crore to a client of Sharma.

The eight arrested were produced before a court from where CBI got their custody for five days. They are now being interrogated by CBI to identify the quantum of bribes paid to them - which CBI believes is between Rs  25 lakh to several crores in each case.

CBI has been reportedly tracking this matter for over a year and now moved in after getting concrete proof.

CBI sources insist it is not a case of unrecoverable loans given by the banks but a plain case of bribery where the top bankers took hefty bribes to speed up loan applications of corporates.
Courtesy: Mail Today
Aman Sharma     
New Delhi   Last Updated: November 25, 2010  | 10:34 IST
http://businesstoday.intoday.in/story/cbi-busts-corporate-loan-bribery-scandal/1/10543.html

Scam around the corner - The enemy within

The fastest expanding business in the Indian accounting fraternity revolves around fraud. Fraud is ballooning so fast in corporate India that audit firms cannot keep pace. The forensic practice of KPMG has some 500 people, doubling over the last two years. At rival Ernst & Young, revenues from the fraud investigation business are expected to double this year and the next, after growing at 50 per cent last year.

As the number of frauds is growing, so is their complexity. Says Arpinder Singh, E&Y's Partner for the service: "If five years ago a typical case would be that of a simple kickback paid to a particular vendor, today it is much more complex, involving data theft, intellectual property issues or complicated bribery cases where tracing money movement can be a challenge."

The sensitivity of companies to such frauds is also increasing. After the Satyam Computer scandal, where Chairman B. Ramalinga Raju cooked the books to report fictitious revenues in excess of Rs 7,000 crore, "tolerance for frauds is veering towards zero in performance-driven companies," says Deepankar Sanwalka, Head of KPMG India's Risk and Compliance Group.

This is a big change from the last decade when the focus at most corporates was on revenue expansion with little thought for controls over the risks that come with unbridled growth. At a given point, KPMG is investigating one or two cases of financial statement fraud with the average size of the transgression being about Rs 50 crore. In fact, Sanwalka believes that, if the slowdown had continued, more Satyam-like skeletons would have tumbled out of India Inc.'s cupboard.

A survey of 200 companies in India by KPMG in August this year indicated that weak support for whistle-blowers, regulations with gaping loopholes, and lax board and senior managements were the main reasons behind a spurt in reported incidents of corporate frauds in recent years. Bribery and corruption were seen as an inevitable aspect of doing business in India. And, while supply chain, bribery and corruption continue to be the most common frauds, intellectual property and electronic crime are emerging concerns, the survey found.

Jamshed J. Irani, Director at Tata Sons, the holding company at the Tata group, believes that the key to foiling corporate fraud is a vigilant board rather than regulations. "We have enough laws in the country to deal with any malpractice," he insists, pointing to a new Companies Act that empowers independent directors.

He says the classic case was that of Tata Finance 10 years ago, where the board got involved and the then chief executive Dilip Pendse, was brought to book and jailed. More recently, last year, a case of accounting misrepresentation was reported at a division of TRF, a company with businesses in automotive undergear and material handling in which the Tata Group holds a 34.30 per cent stake. Irani, who chairs the TRF board, declined to discuss the case because investigation is on. But, those who have tracked the developments say TRF was swift in taking action even though, as a Mumbaibased analyst pointed out, "it was not a case of fraud but of wrong calculation of estimates".

The wrong costs and the consequential revenues recorded in the previous years have been reversed in the current year and the previous year by the company.

The figures were to the tune of about Rs 2.4 crore for the year to March 31, 2010, and Rs 13.32 crore in the previous financial year.

Still, about five senior people of a TRF division have been suspended and asked to go on long leave, pending an inquiry. Perhaps a better choice, some would say, than firing the people and losing control over them. To Irani, the importance of an investigation is its deterrent value and not the actual punishment that can follow. If people know that things will get investigated, that in itself would be a big deterrent.

Deterrence works

Such a deterrent would have worked in an instance that the E&Y team dealt with recently. Some employees of a company had floated their own firms to divert cash from their employer. The losses bloated to Rs 100 crore before they were caught. If TRF is an instance of a proactive board, at HDFC Asset Management Company it was the stock markets regulator that stepped in to seek corrective action. In June, following a case of alleged front running by Nilesh Kapadia, Assistant Vice President for Equities at HDFC AMC, the Securities and Exchange Board of India or SEBI asked the company to overhaul its internal controls and get an inquiry done by the trustees of HDFC Mutual Fund. SEBI also barred Kapadia from trading activities done on behalf of HDFC AMC.

SEBI investigations found that Kapadia had tipped off an associate, Rajiv Ramniklal Sanghvi, before placing the purchase or sell orders for HDFC AMC. Sanghvi, in turn, traded based on such tips, making substantial gains. In his order, K.M. Abraham, a member of SEBI, directed the fund's trustees "to identify whether (Kapadia) had indulged in similar front running activities on other occasions". The trustees had been given six months for the investigation, which means SEBI should be hearing from the company in December.

And it is not just the private sector. Cut to Navi Mumbai. In recent years, a government-owned petroleum products company, Hindustan Petroleum Corp Ltd or HPCL, had to deal with instances of alleged corruption and abuse of official position by some of its employees.

Red flags

Results consistently in line with budget

Unclear costs, often accompanied by failure to perform reconciliations

Profi t and loss items based on judgements rather than hard data

Too many manual journals and accruals without automatic adjustment

Unusual fl uctuations in sales or forward purchase orders, particularly at the year-end

Profits not converted into cash

Undue concern about audit visits

Source: KPMG
Courtesy:
December 26, 2010 /Story

Puja Mehra and E. Kumar Sharma       
Edition: December 26, 2010

http://businesstoday.intoday.in/story/corporate-fraud-in-india/1/11295.html

CBI ‘welcomes’ CVC joining probe of Coal Scam

The Central Bureau of Investigation (CBI) director Ranjit Sinha, who decided against registering FIR in 20 out of the over 250 coal block allocations under scanner, says the agency welcomes the assessment of an external agency — Central Vigilance Commission (CVC) — on its probe’s findings.

Sinha took the decision on grounds that the agency’s probe found no apparent “criminality or criminal intent” (mens rea) in the 20 allocations and gave a “detailed reasoning” on the files, said a senior CBI official. The CBI’s 20 files — one each for the allocations — may be handed to the CVC for scrutiny on Monday as per Supreme Court’s direction on Friday. The court had directed the agency to hand over the files within five days.

On being contacted, Sinha told HT, “The decision to not lodge cases in the 20 coal block allocations was taken as no criminality was found. We respect the court’s order and welcome an external agency’s assessment on our probe that is professional and transparent.”

The SC had on Friday sought the CVC’s assistance to scrutinise the CBI’s decision on the 20 coal block allocations in the wake of divergent views between the agency’s officer supervising the coal scam probe and his senior officials including Sinha on whether cases should be registered. CVC has to file its report to the SC in a sealed cover in four weeks.

Referring to the divergence in views, the official said, “Divergence of views is not unusual for an agency like CBI, which conducts its probes in a professional and scientific manner relying on robust, admissible evidence.” The official said, “Even in cases where a mistake may have occurred, but without any criminal intent, we have to make a distinction.”

“In order to term the CBI decision on the 20 allocations as incorrect, the agency that scrutinises them would have to come up with concrete grounds as well,” he said.

The agency has so far filed 18 FIRs, two of which were recently closed, as part of its coal scam investigation. It has so far filed two charge sheets against two firms that allegedly misrepresented to bag coal block allocations.

BOX
WELCOMING THE MOVE
who decided against registering FIR in 20 out of the over 250 coal block allocations under scanner, says the agency welcomes the assessment of an external agency -- Central Vigilance Commission (CVC) -- on its probe’s findings.

the decision on grounds that the agency’s probe found no apparent “criminality or criminal intent” (mens rea) in the 20 allocations and gave a “detailed reasoning” on the files, said a senior CBI official. The CBI’s 20 files -one each for the allocations -- may be handed to the CVC for scrutiny on Monday as per Supreme Court’s direction on Friday. The court had directed the agency to hand over the files within five days.
Courtesy:
Abhishek Sharan, Hindustan Times  New Delhi, March 30, 2014
First Published: 00:07 IST(30/3/2014) | Last Updated: 00:09 IST(30/3/2014)
http://www.hindustantimes.com/india-news/cbi-welcomes-cvc-joining-probe/article1-1201982.aspx

M-Sat finds Satyam fraud began in 2002

The multi-thousand-crore-rupees accounting fraud at the erstwhile Satyam Computer Services Ltd by its ex- chairman B. Ramalinga Raju dated back to 2002, much further back than earlier thought.

Investigations carried out by Mahindra Satyam (M-Sat), which took over Satyam Computer Services Ltd in April, 2009, revealed this fact.

The investigating team noted that there were certain transactions which were either improperly recorded or remain unrecorded. There was no proper information about fictitious transactions to the tune of Rs 1,122 crore prior to 2002, as a result of which it was shown as net opening balance as on April 1, 2002. It was classified as " unexplained differences suspense account," in the assets and liabilities statement.

The fraud committed by Satyam's founder and ex- chairman B. Ramalinga Raju and his team was exposed in the restated audit report of M- Sat for the years 2008- 09 and 2009- 10, which was approved by the board of directors of the company on Wednesday.

An independent forensic team appointed by the new management had to struggle a lot to unearth the fraud. " It was the most challenging task. The forensic team had to do 100 types of investigations, go through 2,70,000 files running into 30 terabytes, decode the secret data gathered from 300 hard disks seized from the erstwhile promoters, study one billion lines of secret transactions and examine 200 bank accounts to dig out the scam," M- Sat chairman Vineet Nayyar said.

These include fictitious accounts in revenue receipts, interest income, exchange fluctuations, salary, other expenses, bank borrowings and interest, and tax payments. The total extent of fraudulent entries had an impact of Rs 6,800 crore on the profit and loss account of M- Sat.

For instance, the fictitious revenue from April, 2002, to September, 2008, was Rs 5,353 crore, generated by creating 7,500 inflated invoices and circumventing the normal revenue recognition cycle. This was followed by showing fictitious cash collections as collections from customers. In order to substantiate these fictitious collections, forged bank statements and fixed deposit ( FD) receipts were also prepared.

Of the total fictitious revenue shown, about Rs 4,870 crore was translated into fictitious cash and bank balances. Similarly, fictitious interest income recorded from 2002 to 2008 was Rs 899 crore, of which Rs 327 crore was translated into fictitious cash and another Rs 197 crore was recorded as withholding tax on such interest income.

The remaining Rs 375 crore was reflected as accrued interest as on September 30, 2008.

The forensic investigation also exposed the record of Rs 206 crore towards fictitious exchange gains, which resulted in fictitious debtors of Rs 18 crore and balances of Rs 188 crore. It revealed that Raju had knocked away Rs 293 crore as net salary costs, which were not recorded in the books of accounts, resulting in fictitious cash and bank balances of Rs 299 crore.

What is more, during the scam period, Raju and his team had borrowed Rs 720 crore from banks, but there are no loan records. The company had effected unrecorded repayments to the extent of Rs 581 crore. The unrecorded interest expenses in respect of such accounts amounting to Rs 17.5 crore also resulted in fictitious cash and bank balances.

"The promoters showed fictitious tax payments ( advance tax and US federal tax) to the tune of Rs 306 crore. We have also noticed some entries and debits which we are unable to explain as they remain unidentified," Nayyar said.

The investigation has been unable to identity the nature of certain alleged transactions amounting to Rs 1,203 crore against which the firm had received notices from 37 firms.
Courtesy:
Srinivasa Rao 
Hyderabad   
Last Updated: October 4, 2010  | 17:47 IST

http://businesstoday.intoday.in/story/m-sat-finds-satyam-fraud-began-in-2002/1/9290.html

SC: Where has depositors’ money gone?

Saradha report ‘sketchy’

New Delhi, March 4: The Supreme Court today expressed displeasure with the Saradha default probe details submitted by the Bengal government, saying it was “sketchy” and wondering where the money collected from depositors had gone.

The apex court granted 10 days’ time to the state government to file an additional affidavit on the investigation to examine whether it ought to order a CBI probe.

“What you have given is sketchy. Where has the money gone? Because as per the details given by the ED (Enforcement Directorate), they have attached 131 properties worth Rs 35 crore. As per your (state government’s) statement, you have attached some properties. Let us take it is worth another Rs 65 crore,” the bench of Justices T.S. Thakur and C. Nagappan told senior counsel C.S. Vaidyanathan, who is appearing for the government.

“So far, you have been able to account for only Rs 100 crore. But where has the rest of the money gone? We need to know where is the balance amount,” the court added.

“Most of the money, it seems, is collected in cash. (Saradha’s) bank accounts have very little money,” the bench said.

The extent of the deposit default scandal has not been conclusively established yet. During the hearing on February 25, the Supreme Court had said 18 lakh investors had been affected, a figure that appeared to have been based on the number of people who have registered themselves with the state government-appointed Shyamal Sen Commission. All the names are still to be vetted.

There is no consensus on the exact amount defaulted. While a petition has put the figure at Rs 30,000 crore, Vaidyanathan had estimated the amount to be Rs 1,700 crore.

Today, Vaidyanathan told the court that the Saradha Group had spent around Rs 820 crore to pay its agents. According to the senior counsel, 30 per cent of the total amount collected from investors had been spent on paying the agents.

Going through the 417-page report submitted by the government today, the court pointed out that according to it, Rs 50 crore had been spent to promote Saradha’s media business, particularly a TV channel.

“So, even for promoting a channel, you need Rs 50 crore?” the court asked. Senior counsel Harish Salve, who is also appearing for the Bengal government, said channels paid money for “dressing up” their shows and for “consultation fees”.

However, the court was not convinced with the state’s submission and directed it to file a detailed report on the probe. It posted the matter for further hearing on March 26.

Earlier, additional solicitor-general Sidharth Luthra told the bench that in July last year, the CBI had informed the Supreme Court that it was willing to investigate the case if the court so desired.

“If we are to investigate, we will now have to take a re-look at the various cases registered by the state government and plan our strategy. We do not have the manpower, but if the court wants, we are willing to carry out the task because we need to examine various angles and the inter-state ramifications, if any,” Luthra told the bench.

Luthra submitted to the court in sealed covers additional probe reports on behalf of the Serious Fraud Investigation Organisation (SFIO).

The apex court is hearing two PILs — one filed by advocates Pratim Kumar Singha Ray and Abu Abbasuddin, and the other by advocate Subrata Chattoraj — seeking a CBI probe into the Saradha default. The PILs allege that several Trinamul leaders are involved in the default. The Opposition in Bengal has also levelled a similar allegation.

On February 25, the Supreme Court had asked some tough questions to the Bengal government on why it was fighting shy of a CBI probe into the Saradha default scandal.
Courtesy:
OUR LEGAL CORRESPONDENT
http://www.telegraphindia.com/1140305/jsp/bengal/story_18046308.jsp

Online racket busted: 4,500 duped of Rs. 11 cr

The police here on Saturday nabbed a fraudster who had alle gedly duped 4,500 people across the country to the tune of Rs. 11 crore. The accused was active in Chandigarh and its adjoining areas and he had set up his offices also.

The police claimed that he was involved in an online fraud and made Rs. 11 crore within six months by cheating people.

The accused has been identified as Shyam Prasad, a resident of Andhra Pradesh. The police have arrested his three other partners but have not disclosed the names of other gang members.

He had registered a website “Helping us.me”. He had advertised through inter net and allured the people by giving assurances that the money would be doubled within 40 days.

He used to show the doubled amount in some of the accounts. The gang members were trying to misguide the people by claiming that they were able to double the money within 40 days.

By this method, they were able to make 4500 members within India who were deceived. Police officials are taking the assistance of bank officials for tracing the account numbers.

They are also getting assistance from the cyber cell to trace other gang members. The police arrested him on the charges of cheating and various sections of the IT Act.

Courtesy:
Gurpreet Singh Chhina, Hindustan Times  Fategarh Sahib, May 25, 2014
First Published: 10:12 IST(25/5/2014) | Last Updated: 10:14 IST(25/5/2014)
http://www.hindustantimes.com/punjab/patiala/online-racket-busted-4-500-duped-of-rs-11-cr/article1-1222606.aspx