Corporate Scams in India

SCAMS IN INDIA read the emailed case study in detail

What Happened

• Founder Chairman admitted to the fraud in a letter dated Jan 7, 2009 to the board of directors, in which he falsified revenue, margins and cash balances to the tune of ₹7,855 crore.

Perpetrator

• Founder-Chairman, B. Ramalinga Raju

• Managing Director, B. Rama Raju

Fall Out

• Raju brothers charged with breach of trust, conspiracy, cheating and falsification of records.

Corporate Governance Issues

• Unethical Conduct by the Founder-Chairman and his accomplices

• Complaisant Board of Directors

• Insider Trading

• Questionable Role of Auditors

Satyam Computers

How They Did It

• They had been falsifying records since 2002 and started with small figures which slowly snowballed into bigger ones.

SCAMS IN INDIA

What Happened

• Saradha Group ran a ponzi scheme in the guise of its various businesses.

• Investors duped of ₹2,500 crore, according to WB SIT.

Perpetrator

• Sudipta Sen, Chairman and MD

Fall Out

• More than a million depositors/agents affected. More than 60 commit suicide.

• Sudipta Sen arrested in Apr. 23, 2013.

Corporate Governance Issues

• Violation of Corporate Ethics

• Non-compliance with the Companies Act

• Lack of Transparency

Saradha Group

How He Did It

• Depositors were lured with very high returns. Money taken from new depositors were used to pay off old depositors.

SCAMS IN INDIA

What Happened

• Rose Valley group ran a ponzi scheme through its group companies where investors were allegedly duped around ₹15,484 crore.

Perpetrator

• Chairman, Gautam Kundu

Fall Out

• ED freezes the bank accounts and attaches assets of the Rose Valley Group.

• Gautam Kundu arrested by ED in March 2015.

Corporate Governance Issues

• Violation of Corporate Ethics

• Non-adherence to the Companies Act

• Lack of Transparency

Rose Valley Group

How He Did It

• Mobilised funds from the public under its illegal collective investment schemes (CIS)

SCAMS IN INDIA

What Happened

• Kingfisher Airlines collapsed in Nov. 2015, with its parent UB Group’s chairman Vijay Mallya being accused of being a “wilful defaulter,” besides other allegations.

• Consortium of 16 banks led by SBI approach SC in Mar. 2016 to prevent Mallya from leaving the country as he owed them over ₹9000 crore.

Perpetrator

• UB Group Chairman Vijay Mallya

Fall Out

• ₹9661 crore worth of assets of Vijay Mallya and Kingfisher in India attached by ED by Dec 2016.

• Efforts of the Govt. of India for extradition of Mallya from the UK still underway.

Corporate Governance Issues

• Accounting not as per acceptable standards.

• Questionable role of the Audit Committee.

• Ineffective Board of Directors

• Independent Directors’ conflict of interest

• Unconvincing role of banks

Kingfisher Airlines

How He Did It

• Many companies of UB Group had allegedly borrowed money from United Spirits, the cash cow of the group, which was used to fund defunct Kingfisher Airlines.

• Ill-advised decision of acquiring Deccan Airlines.

SCAMS IN INDIA

What Happened

• Unable to complete 15 housing projects and was on the verge of bankruptcy.

Perpetrator

• Anil Sharma, CMD of Amrapali Group

Fall Out

• Government-owned National Buildings Construction Corporation (NBCC) has taken the charge of completing stalled projects

Corporate Governance Issues

• Questionable role of the Board of Directors

• Improper Statutory Audits

• Lack of Transparency

• Lack of Adequate Regulations

• All-Powerful Chairman-and-Managing Director

Amrapali Group

How He Did It

• Diversion of homebuyers fund to other projects (Silicon, zodiac,princely) and not completing home construction in time.

SCAMS IN INDIA

What Happened

• NCLT accepted insolvency case of Jaypee Infratech filed by IDBI Bank in August,2017

Perpetrator

• Manoj Gaur, Chairman of the Jaypee Infratech Limited.

Fallout

• Jaypee Infratech has failed to return homebuyers money and has not delivered homes in more than 90% project.

• The home buyers and banks who for the committee of creditor didn’t take any decision and is waiting for NCLT hearing on 2nd July,2019

Corporate Governance Issues

• Questionable role of the Board of Directors

• Lack of Adequate Regulations

Jaypee Infratech Limited

How He Did It

• Diverted money from its parent company to subsidiary company and showed it as loan which gave a escalated picture of its financial earning.

SCAMS IN INDIA

What Happened

• Complaints by whistle-blowers with allegations of insider trading and other financial irregularities.

Perpetrator

• Founder & MD, Dilip Sanghvi

• His brother-in-law, Sudhir Valia of the Sudhir Valia group

Fall Out

• SEBI announced in Dec. 2018 that they were examining the whistle-blower complaints, and there were reports that SEBI could re-open the Ranbaxy insider trading case, the probe into which was settled by making a payment of ₹18 Lakh in Aug. 2017

Corporate Governance Issues

• Lack of Ethical Conduct

• Potential conflict of interest

Sun Pharmaceutical Industries Limited

How They Did It

• Violated the internal code of conduct for prevention of insider trading which the company had framed under SEBI’s PIT (Prohibition of Insider Trading) norms, apparently in relation to the acquisition of Ranbaxy Laboratories Ltd. in 2014 by Sun Pharma from Japanese drugmaker Daiichi, who were the then majority stakeholders of Ranbaxy.

SCAMS IN INDIA

What Happened

•Former senior executives of IL&FS were involved in financial and accounting irregularities that eventually led the company to its ruins.

Perpetrator

• Former IL&FS chairman Ravi Parthasarathy

Fall Out

• IL&FS moved to National Company Law Tribunal (NCLT) in Mumbai in September 2018 to seek relief and protect itself from potential bankruptcy proceedings.

• On 1st October 2018, the entire board of IL&FS were replaced by the government with a new one consisting of 6 members, led by Uday Kotak.

Corporate Governance Issues

• Poor risk management

• Unethical conduct

IL&FS

How He Did It

• showing picture of high profits to attract creditors

• Giving loan to its own subsidiary companies which inflated assests wrongly.

SCAMS IN INDIA

What Happened

• Allegations of conflict of interest on MD of ICICI bank for providing loan of Rs. 3,250

crore to Videocon in 2018.

Perpetrator

• MD & CEO Chanda Kochhar

Fall Out

• CBI has filed FIR against Mrs & Mr.Kochhar and Mr. Venugopal.

• ED has also filed a criminal case for money laundering against these three

Corporate Governance Issues

• Potential conflict of interest

• Questionable role of the Board of Directors

• Ineffectiveness of the Whistleblower Policy

ICICI Bank

How she Did It

• She was in loan sanctioning committee for videocon

• She never disclosed that videocon has business relationship with her husband Deepak Kochhar

On August 26, 2009, a rupee term loan of Rs 300 crore was sanctioned to Videocon International Electronics Ltd (VIEL) in contravention of rules and policy by the sanctioning committee… Kochhar was one of the members of the sanctioning committee, who in criminal conspiracy… dishonestly by abusing her official position sanctioned this loan in favour of VIEL,” the FIR said.

Read more at: https://economictimes.indiatimes.com/industry/banking/finance/banking/cbi-files-case-against-former-icici-bank-chief-chanda-kochhar/articleshow/67671367.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

• The FIR says the role of senior bank officials, including former chairman KV Kamath (currently president of New Development Bank, formerly BRICS Bank), current ICICI Bank MD Sandeep Bakhshi, K Ramkumar, Sonjoy Chatterjee (CEO, Goldman Sachs India), NS Kannan, Zarin Daruwala (CEO, Standard Chartered India), Rajiv Sabharwal (CEO, Tata Capital) and Homi Khusrokhan, might also be probed. These individuals were part of the sanctioning committee that cleared loans amounting to Rs 1,575 crore.

• "ICICI has filed a suit seeking recovery of amounts towards the claw back of bonuses given to the petitioner (Kochhar) from April 2006 to March 2018 pursuant to the termination of the petitioner's services," the bank said in its affidavit. Read more at: https://economictimes.indiatimes.com/industry/banking/finance/banking/icici-bank-seeks-recovery-of-amounts-from-chanda-kochhar/articleshow/73231214.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

An interesting point to note is that clawback provisions for Fortune 100 companies were less than 3% before 2005. By 2010, they rose to about 82%.

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Read more at: https://economictimes.indiatimes.com/industry/banking/finance/banking/cbi-files-case-against-former-icici-bank-chief-chanda-kochhar/articleshow/67671367.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

SCAMS IN INDIA

What Happened

• There was decline in demand of steel after 2008 olympics which resulted in around 10,000 crore debt.

• Major investment in Odisha plant to overcome debt also failed in 2013 and investors shed their hands.

Perpetrator

• Neeraj Singal, former promoter and managing director

Fall Out

• Bhushan Steel has since been officially renamed by its new management as Tata Steel BSL Ltd. on 27th November 2018.

• Further investigation in the case is going on by Serious fraud investigation office (SFIO)

Corporate Governance Issues

• Unethical conduct

• Poor Risk Management

• Inefficient Board of Directors

Bhushan Steel

How He Did It

• funds taken from banks as loans were put down as promoter equity for the purpose of taking further loans.

• rotating funds through bogus loans, advances and investment in more than 80 companies.

SCAMS IN INDIA

What Happened

•In 2011, Unitech was hit by its managing director Sanjay Chandra, Ramesh Chandra’s son getting arrested in the 2G spectrum case

•With the market cooling off and the dipping sales figures, Unitech was forced to apply brakes on construction because of the constraints in cash flow

Perpetrator

• Sanjay Chandra, managing Director

• Sanjay’s brother- Ajay Chandra

Fall Out

• Chandras have failed to deposit 750 crores which was homebuyers money and are facing jail term.

Corporate Governance Issues

• Questionable role of the Board of Directors

• Improper Statutory Audits

• Lack of Transparency

• Lack of Adequate Regulations How they Did It

• Invested homebuyers money in multiple projects rather than finishing home

• Investments were made in retails, amusement parks etc.