A case of individual misconduct, no system failure: LIC

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A case of individual misconduct, no system failure: LIC

LIC Housing Finance has been in focus since the news of a large scale multi-crore scam broke out. In a bid to clear Life Insurance Corporation's name from the murky dealings, the company's Chairman TS Vijayan relegated the matter to individual misconduct and denied having any kind system failure.

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Excerpts from Your Stocks on CNBC-TV18 Watch the full show » ALSO READ See latest News about LIC Housing Fin See previous management interviews See what other Experts & Brokerages are saying about LIC Housing Fin LIC Housing Fin BSE | NSE 31/05/12 Are Mutual Funds betting on LIC Housing Fin?

Life Insurance Corporation and LIC Housing Finance have been in focus since the news of a large scale multi-crore scam broke out. In a bid to clear Life Insurance Corporation's name from the murky dealings, the company's Chairman TS Vijayan relegated the matter to individual misconduct and denied having any kind of system failure.

Speaking exclusively to CNBC-TV18, Vijayan said the allegation against the concerned individual - an investment secretary - was that of seeking illegal gratifications and LIC will conduct an internal inquiry into the whole affair. He said the concerned employee was not "big enough" to influence investment decision. Asked if the employee was bribed to pass on sensitive informations, Vijayan said "We do not have sensitive information about any company." However, arrest of the LIC Housing CEO is a concern for the company, Vijayan admitted and said the assets of that company will be investigated.

Below is a verbatim transcript of his exclusive interview with CNBC-TV18's managing editor Udayan Mukherjee. Also watch the accompanying videos.

Q: Can you take us through what information you have got from the CBI on the Secretary (Investments) of LIC and what wrong he has been accused of?

A: We have seen the preliminary report that the CBI has procured regarding LIC Housing Finance Ltd's CEO. The allegations are about misconduct of an individual. It is obvious that there is no systemic failure, the asset quality has not been impacted and all the procedures are followed scrupulously. This is what I felt after seeing it all.

Q: What is the specific nature of the misconduct that you allude to, as you understand?

A: They are saying that some illegal gratification has been taken by him. That is the misconduct that has been seen.

Q: For what end, why has he taken those bribes?

A: It seems somebody has given it to him. "Why" has not been mentioned there. He has taken, is only mentioned. We are trying to have an internal enquiry also into this matter.

Q: There has been some suggestion by the CBI since yesterday that maybe the bribes were taken to leak out some sensitive business information on corporate houses?

A: We do not have any sensitive information about corporate houses. As far as our main LIC Investment Department is concerned, if anyone comes for a loan or equity investment, it's based on published information. There cannot be anything like confidential information that any company shares with us that is to be shared with other outside people. I don't think so.

Q: But since the LIC sits on the board of many companies would the Secretary of Investments have recourse to that kind of information?

A: No, absolutely not. LIC has representatives in some of the companies of course but those things are taken in at a different level if at all report come. If any exceptional things come in the board, they do report but it is in a different level, it's not at secretary level.

Q: And there are Chinese wall between the two departments?

A: Of course we have three departments here: operations, front office, back office-they're all segregated. These board actions are monitored in the monitoring section at the dxecutive director level.

Q: The other allegation of which there is a rumour, against that specific person, that maybe LIC funds were used from the investment department to either subscribe to IPOs or FPOs of real estate companies or to support their stock prices in a certain way. Have you come across any such reference from the CBI since yesterday?

A: No, no such thing has come up and investments what we are making in area of the companies, whether real estate or any other companies, are governed by a particular regulation and decisions are taken at a different level.

Q: But would the Secretary Investment now be in a position to make an investment in a real estate company which would seem legitimate?

A: Not possible at all.

Q: Why do you say it's not possible?

A: Because investment decisions to equities are taken on the basis of both the research report and operations at very extremely senior level and the information, once the decision is taken for implementation, it might go down but decisions are not influenced by any of these things.

Q: Are you saying that this gentleman was not suitably senior enough to take a decision like that?

A: The decision is taken at a Managing Director and Chairman's level only.

Q: Every individual investment?

A: Yes. In fact in the life funds this is taken up by this level. Our ULIP investments as per the procedure, there is a committee of Chiefs or Executive Directors who take a call and the timing is decided by them when to make it. On what level it has to be purchased or sold, it is decided at a very high level and the timing is decided at a separate level.

Q: If this Secretary (Investment) was so powerless why would he be bribed?

A: That is exactly what we also want to find out why he was bribed if such a thing happened. What are all the allegations is what we are trying to find out.

Q: Surely he must have been in a position to influence some investment decision if he was a recipient of bribes?

A: No. At that level he is not in a position to influence any of the investment decisions.

Q: Are you saying that the CBI was wrong in arresting him?

A: I don't know, the allegations I have not seen. The details will come to court and somebody will prove whether he has taken them etc.

Q: If you say he was incapable of any wrongdoing, if it was beyond his ambit of influence then surely the CBI is wrong in arresting such an individual from LIC?

A: I don't know what the allegations are. I wouldn't be able to make a comment at this stage. Let me see the details properly. When the charge sheet comes the details might come.

Q: How long has this gentleman been with LIC?

A: He is a very senior officer, in the sense in seniority. He has been with the Investment Department for the last two years.

Q: Before that?

A: Before that, he was somewhere in the North, Ludhiana. On promotion he was brought here.