Status of India’s Biggest Corporate Heists

If there were no bad people, there would be no good lawyers: Charles Dickens

Slow investigations have allowed the people behind India's biggest corporate heists to enjoy immense impunity. Here’s a snapshot of where things stand as far as India’s biggest corporate heists are concerned.

Satyam Computers: An accounting scandal involving Rs. 72 bn where B Ramalinga Raju confessed to having cooked up the accounts of the Company and inflated its bank balances. He has, along with his family members, also been accused of laundering money through a mesh of hundreds of companies.

Status:  Mr. Raju walked out of jail in late Nov’11 after the CBI failed to charge him on time and the ED delayed launching criminal prosecution because of lack of clarity on which court will hear the matter. Besides Raju, all 10 accused are also out on bail.

Ketan Parekh Securities: Ketan Parekh was involved in circular trading and stock manipulation to the tune of Rs. 12.5 bn through 1999-2001 in a host of companies. Like Harshad Mehta, he too borrowed from banks like Global Trust Bank & Madhavpura Mercantile Co-op Bank, and manipulated a host of stocks popularly known as K-10 stocks.

Status: Parekh – who spent only one year in jail – has been banned from trading till 2017. His name though, continues to haunt the street as he has been accused of pulling the strings from the backstage.

Speak Asia: Speak Asia – an online business survey firm that collected ~Rs. 20 bn from more than 2.4 mn investors, in a ploy to fill surveys and guaranteeing to quadruple their income in one year – was accused of running a Ponzi scheme. A criminal case was registered against the firm in 2011, some accounts frozen and its business shutdown.

Status: The Economic Offences Wing hasn’t yet filed a charge-sheet in the case. As per media reports, Speak Asia has not refunded money to its panelists and its key management personnel are absconding, with no convictions made till date.

Saradha Chit Fund: Saradha Chit Fund is one of the biggest Ponzi schemes in West Bengal – involving Rs. 20.6-24 bn– lured investors to deposit money with the promise of abnormally high returns. Eventually it collapsed resulting in massive defaults.

Status: Various agencies including ED & SFIO are probing the misappropriation of funds. Sudipto Sen, its CMD was arrested earlier this year and the ED has been granted his custody for interrogation. Kunal Ghosh – an MP from TMC who was accused of involvement in scam – has been called for questioning by SFIO, but not arrested yet.

Reebok India: After acquiring acquired Reebok International – the parent of Reebok India – in 2005 Adidas AG claimed that it had uncovered a fraud of the magnitude of Rs. 8.7 bn at Indian operations of Reebok. The SFIO claims to have found evidence related to falsified documents amounting to sundry debtor charges up to Rs. 5 bn.

Status: Since then, 12 people, either former employees of Reebok India, including its former MD Shubhinder Singh Prem and former COO Vishnu Bhagat have been arrested.

Tata Finance: IECL – a subsidiary of Tata Finance (TFL) – entered into a transaction with two broking houses to buy 2.15 lakh shares of TFL at Rs. 91 per share. However, the transaction took place on later dates when the market crashed with TFL’s shares slipping to Rs. 35 per share. The brokers bought 2 lakh shares from five entities controlled by the TFL MD Dilip Pendse and his associates.

Status: TFL filed a criminal complaint with the Mumbai police, and after two years, the probe was handed over to CBI. Mr. Pendse was in Tihar jail for only 11 months.

Public Sector Banks – IOB & SBI: The PSBs have cumulatively lost a massive sum of Rs. 227.43 bn due to cheating and forgery during FY11-FY13 alone, as per media reports on the basis of an RTI reply. While IOB is the worst hit with Rs. 32 bn loss, SBI lost Rs. 27.12 bn.

Status: As per the documents available, over 6,000 employees – lower/mid-level employees including some CMDs & directors of different banks – are under the scanner but no arrest is made.

United Bank of India: With Ms. Archana Bhargava as the CMD, the bad loans of United Bank of India trebled to Rs. 85.46 bn at the end of Dec’13 from Rs. 29.64 bn in Mar’13 amid widespread irregularities in loan disbursement. This RBI appointed Deloitte as the forensic auditor, and initiated a fresh credit audit.

Status: After the RBI sought removal of Ms. Bhargava, the government permitted VRS to her despite serious charges about loans of Rs. 8 bn being disbursed with Rs. 3 bn collateral overruling the board to extend a loan of Rs. 1 bn to a developer.

The Latest & How it is Different from the Above Cases?

National Spot Exchange (NSEL): As a brokers’ broker the money exchanged for trading of contracts on NSEL never belonged to NSEL, which itself acted as a market place against small transaction fee. NSEL neither received money nor paid money on its trading platform on its own account. The payment crisis emanated in the wake of suspension of trading due to government directive, while 24 members defaulted to make pay-in and had a total outstanding of Rs. 5,541.12 crore.

Status: The EOW of Mumbai Police attached 235 assets of the 21 defaulting members and three NSEL accused persons, which is amounting to ~Rs. 3,790.03 crore. Like other scams, the key employees are responsible for the crisis, but unlike most of them promoter of FTIL, FTIL and other directors of FTIL/NSEL. Despite lookout notice some of the defaulters are roaming free even undertaking foreign trip. In other cases when the accused are set free from jail, in this case the promoters are taken to task, which is shocking.