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Last Updated : Aug 02, 2019 03:32 PM IST | Source:

Digging Deeper podcast | The Scams we forgot about

On this edition of Digging Deeper – a weekend retrospective on the scams that rocked the nation.

Moneycontrol Contributor @moneycontrolcom

Harish Puppala | Rakesh Sharma

Scams. That word is familiar to us Indians. When was the last time we went, say, 12 months without hearing of a scam seeing the light of day? Given the slackness in law enforcement in India, and a host of other factors, we all live with some amount of surety that there are more scams out there. Those guys just haven’t gotten caught yet. And the RBI confirmed our collective pessimism. Over 50,000 cases of fraud had hit banks in India between FY09 and FY19, the Reserve Bank said in a response to an RTI query. So, over a period of approx. 4000 days, India witnessed 50,000 frauds. The total amount of money involved? 2.05 lakh crores. A grim reminder that India has a long way to go before it can confidently shrug off the moniker  ‘developing country.’


On this edition of Digging Deeper – a weekend retrospective on the scams that rocked the nation.

An update on the IL&FS scam: because bad decisions occur in groups

Take, for instance, the IL&FS scam. It emerged in July that there were numerous cases of favours and gifts extended by the erstwhile top management to senior officials of rating agencies and their family members - from tickets for a Real Madrid football match and hefty discounts on a luxurious villa to a Fitbit watch and shirts. Yes, Fitbit. You’d think they’d just wait for the Amazon or Flipkart sale like the rest of us materialists. But no, they had to go and make it look like a modern day dowry case. The continuing probe has already led to the CEOs of two rating agencies being sent on leave by their respective boards. I suppose they will now have enough time to do their 10,000 daily steps.

Meanwhile, more details were revealed about suspected attempts by the former top management personnel of IL&FS Group to influence the rating agencies and their top officers for high credit ratings.

According to Business Today, the new board of IL&FS, which was appointed by the government, had mandated Grant Thornton to carry out a forensic audit. The new board was put in place after massive defaults by the IL&FS group to the tune of over Rs 90,000 crore as well as other less than honest dealings by the former top management were revealed. In an interim forensic audit report on the role of credit rating agencies engaged by the erstwhile management, Grant Thornton has flagged a number of cases amounting to potential favours and gifts given to senior officials of the agencies and their family members. Several emails between the previous management and the representatives of those credit rating agencies were analysed in the audit.

The Business Today reports claims CARE, ICRA, India Ratings and Brickwork were the main rating agencies for group companies IL&FS Transportation Networks (ITNL), IL&FS Financial Services IFIN and IL&FS during the period. From 2016, Brickwork was also introduced for IFIN and ITNL.

Alright, brace yourself. According to BT, Grant Thornton found multiple emails in the period between September 2012 and August 2016, where it appeared that Ramesh Bawa, former CEO of IFIN, facilitated the purchase of a villa for the wife of Ambreesh Srivastava (Head of Financial Institutions South and Southeast Asia, Fitch Ratings) and also helped them obtain a discount. Bawa requested Ajay Chandra, the MD of Unitech Limited, to personally get involved and resolve the issue that Srivastava's wife was facing with regards to interest charged on delayed payments for the villa. Then there’s mention of an email trail from April 2015 which showed D Ravishankar, the founder and director of Brickwork Ratings, thanking Arun Saha, the Joint Director of IFIN at that time, for arranging tickets for a football match of Real Madrid in Madrid, Spain, in the IL&FS corporate box along with his son. As for ICRA, the audit found an email from February 2008, sent by Meenakshi Kanagat, a Manager in IL&FS, to Ravi Parthasarthy, the  former chairman of IL&FS, indicating a donation of Rs 25 lakh be made to Sameeksha Trust. Grant Thornton found that DN Ghosh was a Managing Trustee of Sameeksha Trust and also a former chairman of ICRA Limited. Emails were also traced where Saha asked Sujoy Das, the Chief Risk Officer of IL&FS group, to arrange a favourite Fitbit watch for Rajesh Mokashi, the  Managing Director of CARE.

Earlier this week, the National Company Law Appellate Tribunal said it would hear the pleas of auditors of IL&FS - Deloitte Haskins & Sells LLP and B S R Associates LLP - against an order passed by NCLT to implead them in the ongoing case of oppression and mismanagement of the scam-hit firm. The case will next be heard on August 19.

The scams time forgot 

We have so much on our plates these days that one could be forgiven for not remembering the heavy hitters in India’s catalogue of scams. While we do recall the Harshad Mehtas, the Vijay Mallyas, and the Nirav Modis, in this podcast, we’re gonna do a quick round up of the great scams that, for some reason, we only seem to have vague memories of.

  1. Telgi Scam

Remember the Telgi scam? It was right out of the movies. In 2002, Abdul Karim Telgi was charged for counterfeiting stamp paper in India.

The son of a railway employee who started off as a vegetable and fruit vendor in trains, Abdul Karim Telgi attained notoriety as the kingpin of a multi-crore counterfeit stamp papers scam.

What did he do? Telgi appointed 350 fake agents to sell stamp papers to banks, insurance companies, and stock brokerage firms. The operation was spread across 12 states and the amount involved was pegged at 20,000 crores.

The investigation revealed that Telgi enjoyed support from various government departments that were involved in the production and sale of high-security stamps. In January 2006, Telgi and several associates were sentenced to 30 years rigorous imprisonment.

My favorite part of the Telgi story is this: He was arrested in 1991 by Mumbai police on charges of cheating, but reportedly used his stay in the prison to learn the tricks of the trade from an expert forger. Talk about unabashed recidivism.

A report submitted in 2017 by DIG (Prisons) D Roopa alleged that Telgi was among several prisoners who received special treatment in the jail. The facilities included special massages given by three or four convicts allotted to him. However, Telgi died soon after due to multiple organ failure.

2. The Jain Diaries/ Hawala scam

The Jain Diaries/ Hawala scam made headlines in the early and mid-90s in a sensational case that ended more than a few careers.

Here’s what happened. In 1991, an arrest linked to militants in Kashmir led to a raid on hawala brokers, revealing evidence of large-scale payments to national politicians. I know, right? Very 1980s bollywood movie script. According to court documents, Ashfak Hussain Lone, who was allegedly part of the terrorist organisation Hizbul Mujahideen, was arrested in Delhi. During his interrogation, the police learnt that his organisation was funded through hawala, using a man named Surendra Kumar Jain and his family as a conduit. Based on this and further information received during Lone's interrogation, the CBI conducted raids on the premises of Jain, his brothers, relations and businesses. During the raids, the CBI seized Indian and foreign currency, two diaries and two notebooks at the premises. These diaries, which the case gets its name from, contained detailed accounts of vast payments made to people identified only by initials. Hmm...very Jason Bourne type espionage, apparently.

According to The Hindu, the gist of the allegations made in the hawala case petition was that financial support was given to terrorists by clandestine means using tainted funds from “hawala” transactions.

Interpol's definition of hawala is "money transfer without money movement." For instance, say person A in Mumbai wants to send Rs 100 to D in SIngapore. A goes to a person B, who is a hawaldar involved in hawala transactions, and hand over the 100 bucks. B then gets in touch with another hawaldar named C in Tokyo, and asks him to hand 100 rupees to D, on the condition that D states the correct password. So, at the end of the transaction, person B owes person C Rs 100 but person D receives the money that A wanted to send him. This hawala system is built on intangibles like trust, honor etc, and transactions can sometimes be noted down. In this case, SK Jain was accused of playing the roles of persons B and C. Further, since these transactions are carried on outside the law, deceptions invariably lead to gang violence.

The report by The Hindu claimed the CBI had failed to investigate this properly and prosecute those involved, and that it was done to protect people who were influential and powerful. The courts claimed there wasn’t enough evidence and the cases eventually petered out.

3. The Coalgate scam

September 2012 saw the unearthing of a scam that involved bureaucrats, political leaders and several ministers from the ruling political party. I know, shocking. The Comptroller and Auditor General, India’s audit watchdog, reported inefficient and possibly illegal allocation of coal blocks between 2004 and 2009. While initially the loss to the exchequer was pegged at Rs 10.7 lakh crore, the final report stated that the scam amounted to Rs 1.86 lakh crore.

Essentially, the Government of India followed a system of competitive bidding to allocate coal blocks. However, the CAG investigation revealed that the government followed another route that was “opaque and subjective”. As a result, the CAG noted that both the private and public sector enterprises paid less, resulting in loss of revenue for the government. After the coal scam was reported, Manmohan Singh offered to resign from Prime Minister's post if found guilty. As more information came to light, the tag of corruption got attached to the Congress government. In April 2015, CBI filed a chargesheet against former Jharkhand chief minister Madhu Koda, former MoS for Coal Dasari Narayan Rao and 13 others in a coal block allocation case.

4. VYAPAM scam

This scam involved irregularities and corruption in the Madhya Pradesh Professional Examination Board or MP Vyavsayik Pareeksha Mandal, abbreviated in Hindi as Vyapam. Some time in 2015, the Congress party and several social activists alleged that the corrupt officials at the board took money to compromise the examination and recruitment for several professional courses including Pre-Engineering, Pre-Medical, MCA, Teaching etc. The accusations mostly involved teaching recruitments.

Not surprisingly,  the opposition accused persons at the highest levels of government of being involved in the scam, including then chief minister Shivraj Singh Chouhan, his wife Sadhna Singh and governor Ram Naresh Yadav. The Congress claimed that these influential persons used their power to push for candidates, via several middlemen including mining baron and prime accused Sudhir Sharma, of their choice to be admitted to certain courses or recruited to certain posts.

The whistleblower in the Vyapam case - an ‘IT expert’ from Indore - claimed to have accessed sensitive information from the computers of the main accused, while assisting the Special Task Force probe the scam. Among other things, he claimed to have gotten his hands on an excel-sheet that contained the names of several candidates and the people who recommended them, and SMS exchanges between the middlemen and government functionaries. The Congress claims that the STF, in an attempt to shield CM Chouhan, had fudged the original excel-sheet and replaced it with another one in which Chouhan's name had been purportedly replaced with entries “CM” and “Uma Bhartiji”.

Most shockingly, as many as 40 people reportedly connected to the scam and its investigation, died during the course of investigation. In 2015, the Special Task Force submitted a list to High Court, naming 23 people who purportedly died "unnatural deaths". According to the STF, most of these deaths took place before it took over the investigation in July 2013.

On February 13, 2017, the Supreme Court of India delivered an 83-page judgement and cancelled the degrees of 634 doctors.

5. The Commonwealth Games scam

The final one in this list is the most embarrassing one, because it genuinely led to a loss of face for India on the international stage.

The Commonwealth Games scam, which took India by storm in 2010, involved pilferage of around Rs 70,000 crore. The organization of the games was such a massive failure that it will likely take many years for India to shake off the negative stereotypes that emanated from that inglorious mess.

The games were, from the start, tangled in a maze of corrupt deals. The charges included inflated contracts, criminal conspiracy, cheating, and forgery. And at the centre of the corruption was Suresh Kalmadi, the then Pune Lok Sabha MP. Investigations suggested that the organising committee ran as cabal of sorts, and Kalmadi was charged under the Prevention of Corruption Act. He allegedly awarded a Rs 141-crore contract to Swiss Timing for its timing equipment, a deal inflated by Rs 95 crore.

New Zealand, Canada, Scotland and Northern Ireland expressed concern about ‘unliveable’ conditions. The Scottish delegation apparently submitted a photograph of a dog defecating on a bed in the games village. The BBC released images of bathrooms with brown-coloured paan stains on the walls and floor, liquids on the floor, and brown paw prints on athletes' beds. Lalit Bhanot, the secretary general of the Organising Committee, made matters worse by saying “due to cultural differences, there are different standards about cleanliness in India and the western world.” He then backed that up by claiming, "This is a world-class village, probably one of the best ever."

Like I said, embarrassing, and even humiliating.

Those are the five scams that, despite being considerably important in their time, have become hazy events in our memories. Well, not anymore I suppose. You’re welcome.

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First Published on Aug 2, 2019 03:32 pm
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