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Counted as it is among the world’s fastest growing economies, an unfathomable amount of money flows in and out of the Indian economic system. But there are cracks in said system, and ever so often, a fraudulent mastermind uses them to slip some cash out for their advantage. From <keyword id="19964851" type="General" weightage="20" keywordseo="ponzi" source="keywords">Ponzi</keyword> schemes to bank frauds, the Indian government and investors have fallen victim to many financial scandals — some of which were so sordid that they can be recounted like they happened yesterday. Here’s a rundown of the most infamous scams in Indian financial history: <h2><keyword id="20713434" type="General" weightage="20" keywordseo="harshad-mehta" source="keywords">Harshad Mehta</keyword> Scam (1992) – ₹4,000 Crore </h2>Perhaps the most iconic of all Indian financial scams, Harshad Mehta was known as the "Big Bull" of the stock market. He manipulated stock prices using illegal loopholes in the banking system. By obtaining unsecured loans from banks and investing them in the stock market, Mehta artificially inflated stock prices. His bubble burst when banks demanded their money back, revealing the massive fraud. This scandal led to a major reform in India's financial markets. Mehta died in jail before full legal accountability was reached, but the scam caused a significant loss to investors and led to tighter regulation in the Indian stock market. <h2><keyword id="23122396" type="General" weightage="20" keywordseo="satyam-scam" source="keywords">Satyam Scam</keyword> (2009) – ₹14,000 Crore </h2>Dubbed as India’s Enron, the Satyam scandal involved its founder, <keyword id="23122397" type="General" weightage="20" keywordseo="ramalinga-raju" source="keywords">Ramalinga Raju</keyword>, admitting to falsifying the company's accounts to the tune of ₹14,000 crore. Satyam Computer Services, once considered a blue-chip company, was found guilty of inflating profits and revenues. Raju admitted to the scam after a failed attempt to buy two Maytas firms owned by his family. This case brought corporate governance issues in India to the forefront. Raju was convicted, but the legal processes have allowed him temporary freedom through bail. But this incident called for improved transparency and stricter corporate governance norms. <h2>Punjab National Bank Scam (2018) – ₹13,700 Crore </h2>Diamond merchant Nirav Modi and his uncle Mehul Choksi orchestrated one of the largest frauds in Indian banking history by obtaining fraudulent Letters of Undertaking (LoUs) from Punjab National Bank (PNB). These LoUs allowed them to obtain loans from foreign branches of Indian banks without providing any collateral. The scam involved over ₹13,700 crore, and Modi fled the country, causing significant reputational damage to India’s banking sector. Nirav Modi’s extradition is still pending, and Mehul Choksi remains out of India’s legal jurisdiction. The scam, however, resulted in strengthened banking regulations regarding LoUs and SWIFT transactions. <h2><keyword id="23122399" type="General" weightage="20" keywordseo="vijay-mallya-scam" source="keywords">Vijay Mallya Scam</keyword> (2016) – ₹9,000 Crore</h2>The "King of Good Times" was living large while his airline, Kingfisher, was drowning in debt. Vijay Mallya allegedly defaulted on loans amounting to ₹9,000 crore from various banks. He fled to the UK in 2016, leaving creditors, employees, and stakeholders in financial distress. His lavish lifestyle amidst the collapse of his airline made this scandal a high-profile case. Mallya’s extradition process is ongoing, but he remains out of reach of Indian authorities. The main impact was enhanced scrutiny of loan defaults and triggered legal reforms on extradition. <h2>Saradha Chit Fund Scam (2013) – ₹2,500 Crore </h2>The Saradha Group, operating a ponzi scheme disguised as a chit fund, promised unrealistically high returns to its investors, mostly in West Bengal and Odisha. The scam collapsed, leaving over 1.7 million people, many of whom were low-income investors, without their life savings. Politicians and celebrities were also implicated in the case. While Sudipta Sen is behind bars, not all the accomplices have been held accountable. But this Ponzi scheme resulted in reform of chit funds and greater regulatory oversight on such investment schemes. <div type="Article" hostid="261" msid="112337071" title="Noida woman invests in stock market via an app, loses over Rs 69 lakh as it turns out to be a scam" mstype="2" mssubtype="0"></div> <h2><keyword id="6560832" type="General" weightage="20" keywordseo="2g-spectrum-scam" source="Orion">2G Spectrum Scam</keyword> (2008) – ₹1,76,000 Crore </h2>The 2G spectrum allocation scandal involved the underpricing of telecom licences to select companies in exchange for bribes. Telecom minister A. Raja was at the centre of this controversy, which allegedly caused a loss of ₹1.76 lakh crore to the exchequer. The case was seen as a massive blow to public trust in India’s telecom sector and led to significant political fallout. Sadly, all key figures involved were acquitted despite the Supreme Court’s intervention and cancellation of 122 telecom licences. <h2><keyword id="455134" type="General" weightage="20" keywordseo="coal-allocation-scam" source="Orion">Coal Allocation Scam</keyword> (Coalgate) (2012) – ₹1,86,000 Crore </h2>The coal allocation scam, or "Coalgate," involved the illegal allocation of coal blocks to private companies between 2004 and 2009. The CAG of India estimated a loss of ₹1.86 lakh crore to the exchequer due to non-competitive bidding. Many high-profile politicians and industrialists were implicated, making this one of the largest political scandals in India. While some officials faced legal consequences, many key players were not prosecuted. But it did trigger policy reforms in the allocation of natural resources. <h2>DHFL Scam (2019) – ₹34,615 Crore </h2>Dewan Housing Finance Corporation Limited (DHFL) was accused of syphoning off over ₹34,000 crore through a series of shell companies and fraudulent loans. Investigations revealed that the promoters used these funds for personal enrichment and illegal political donations. The case came to light after an investigation by investigative journalists and was later confirmed by a report from KPMG. The case is ongoing, and the main accused are in custody. For now, regulations governing non-banking financial companies (NBFCs) have been strengthened. <h2>Yes Bank Crisis (2020) – ₹3,788 Crore </h2>Yes Bank, under its founder <keyword id="19899935" type="General" weightage="20" keywordseo="rana-kapoor" source="keywords">Rana Kapoor</keyword>, was involved in questionable lending practices. The bank made high-risk loans to companies already in financial trouble, which eventually turned into non-performing assets (NPAs). Kapoor was arrested, and the Reserve Bank of India had to step in to stabilise the bank. The case highlighted serious lapses in corporate governance and risk management. As of now, Rana Kapoor is facing trial, and legal proceedings are active. The RBI has also introduced new measures to monitor the health of banks more rigorously. <h2>Commonwealth Games Scam (2010) – ₹70,000 Crore </h2>The 2010 Commonwealth Games held in New Delhi were overshadowed by corruption allegations involving inflated contracts and kickbacks. <keyword id="23122398" type="General" weightage="20" keywordseo="suresh-kalmadi" source="keywords">Suresh Kalmadi</keyword>, the head of the organising committee, was arrested for awarding contracts at exorbitant rates. The estimated loss to the exchequer was around ₹70,000 crore. This scam tarnished India’s image on the global stage. Kalmadi was arrested but the case has not resulted in major convictions or recoveries, except for stricter oversight on large public projects and international event planning. These scams not only caused financial damage but also eroded public trust in India’s institutions. In response, India has tightened regulatory frameworks, improved corporate governance, and adopted stricter banking standards, although challenges persist in tackling large-scale fraud. <div type="Article" hostid="261" msid="112896255" title="I was scammed out of $300K in a 3-month-long government impersonation scam" mstype="2" mssubtype="0"></div>

10 financial scams that shook India: A dive into deception

A special court will deliver its verdict in <keyword id="74971" type="UNKNOWN" weightage="20" keywordseo="Satyam-fraud-case">Satyam fraud case</keyword> on March 9, 2015. Special <keyword id="2655311" type="UNKNOWN" weightage="20" keywordseo="Judge-BVLN-Chakravarthi">Judge BVLN Chakravarthi</keyword> deferred the judgment, owing “voluminous documents.” 
 
“You know the volume of the case…it requires some more time (to study). You may be satisfied or not (with the outcome), but I must satisfy myself (before coming to a conclusion). Typing of the judgement itself needs 2-3 weeks,” the judge said. 
 
Satyam Computers founder and erstwhile chairman B Ramalinga Raju, his brother and the company’s former managing director B Rama Raju and former chief financial officer Vadlamani Srinivas were present in the court during the hearing. 
 
The others accused in the case are: former PwC auditors Subramani Gopalakrishnan and T Srinivas, Raju’s another brother B Suryanarayana Raju, former employees G Ramakrishna, D Venkatpathi Raju and CH Srisailam, and Satyam’s former internal chief auditor VS Prabhakar Gupta. 
 Raju was arrested by the <keyword id="6451278" type="ORGANIZATION" weightage="20" keywordseo="Crime-Investigation-Department">Crime Investigation Department</keyword>, Andhra Pradesh police, after he confessed to the fraud.

Verdict In Satyam Case To Be Delivered On March 9

<keyword id="10958" type="CITY" weightage="80" keywordseo="Satyam">Satyam</keyword> Computers founder <keyword id="41263" type="PERSON" weightage="80" keywordseo="Ramalinga-Raju">Ramalinga Raju</keyword>, his brother <keyword id="8810" type="PERSON" weightage="80" keywordseo="Rama-Raju">Rama Raju</keyword> and eight others were granted bail on Monday by a metropolitan sessions court. The court also suspended their seven-year rigorous imprisonment sentence in the multi-crore rupee accounting fraud in the erstwhile IT firm. 
 
They had been taken into custody barely a month ago after the conviction in the trial court. 
While Ramalinga Raju and Rama Raju will have to give a surety of Rs 1 lakh, the eight others will have to cough up Rs 50,000 each. 
 
The court on Friday had deferred its order to Monday, on an application filed by Mr Raju and nine others, seeking suspension of their sentence and fines imposed on them in the multi-crore rupee accounting fraud. 
 Mr Raju, the kingpin of the scam that ran into crores, and nine other convicts, currently lodged in Cherlapally Central Prison had challenged their conviction, besides sentences and fines imposed by the <keyword id="2847183" type="ORGANIZATION" weightage="80" keywordseo="Additional-Chief-Metropolitan-Magistrate-Court">Additional Chief Metropolitan Magistrate Court</keyword> (ACMM) in the over Rs 7,000-crore fraud that came to light in 2009. 
 On April 9, the ACMM court, which tried the Satyam corporate fraud case probed by the <keyword id="6354889" type="ORGANIZATION" weightage="80" keywordseo="Central-Bureau-of-Investigation">Central Bureau of Investigation</keyword> (CBI), sentenced Mr Raju and others to seven years' rigorous imprisonment for criminal conspiracy and cheating, among other offences. 
 
It had also imposed Rs 5.35 crore fine on Mr Raju and his brother Rama Raju while others were fined Rs 25 lakh each.

Hail the Bail! Now Former Satyam Founder Ramalinga Raju, 9 others granted bail after suspension of court sentence

If you are eyeing the bull in 2017 and have a fully funded emergency account, you are all set to invest in the stock market. You might be fully charged up. Having read online guides to become a millionaire, you might have learnt that investing in stocks is the quickest way to be rich. 
However you aren’t that confident unless you know about the nitty gritty of investments. 
 Fret not, for <keyword id="330196" type="PERSON" weightage="20" keywordseo="Santosh-Nair">Santosh Nair</keyword> has debunked your fear about stock markets in his new book ‘Bulls, Bears and Other Beasts: A Story of the Indian Stock Market’. Published by <keyword id="664635" type="UNKNOWN" weightage="20" keywordseo="Pan-Macmillan-India">Pan Macmillan India</keyword>, this is a comprehensive account of the stock market over the last 25 years. It tells you what to watch out for while investing. It also looks at policies that the government needs to revise if the country is to harness domestic capital more effectively. 
 <keyword id="824043" type="COMPANY" weightage="20" keywordseo="Business-Insider">Business Insider</keyword> in an exclusive interview with <keyword id="6357049" type="PERSON" weightage="20" keywordseo="Nair">Nair</keyword> finds out what to watch out for when investing in the Indian stock market. 
 
What is Indian stock market all about? 
It’s definitely one of the best places to grow your wealth. Only thing is that you need to be a little patient. The basic misconception about stock market is that you can make money very quickly. However they don’t do their homework well and later on start thinking that system has cheated on them. The system does have its shortcomings. But if you are patient enough and willing to work hard, the stock market is a very good place to grow your wealth. 
 
How to start investing? 
If you don’t want to take much risk, then equity is a very good way. However, if you plan to invest in stocks directly, you need to do a lot of homework. But, you should also be prepared to accept losses. It’s not always that you win. Big industrialists buy stocks in large amounts from different sectors. So even if one flunks, there is the profit of others to back you up. It’s better to invest in a company or industry where in you have a decent understanding about how it works as opposed to companies and industries, you absolutely know nothing about. 
 
<keyword id="6484188" type="CITY" weightage="20" keywordseo="Sensex">Sensex</keyword> and <keyword id="6354646" type="CITY" weightage="20" keywordseo="NSE">NSE</keyword> are different. For an ordinary person how do you define it? Also how do you position Indian market with developed markets? 
 Indian stock market has done well because the country is the fastest growing economy in the world. Sensex and <keyword id="6354813" type="COMPANY" weightage="20" keywordseo="nifty">NIFTY</keyword> are indices comprising of a number of companies. <keyword id="3983529" type="UNKNOWN" weightage="20" keywordseo="so-sensex">So Sensex</keyword> comprises of 30 companies and NIFTY is 50. It may happen that the index, either NIFTY or Sensex is up, but the stocks you have invested in aren’t. Conversely, the index may be down but the stocks you have invested in are getting you fair returns. A lot of things boil down to the stocks in your portfolio. If there is a report about an index going up by 30%, it’s not necessary that all stocks in that index would go up. If you are investing directly in the market, you should be a little more careful about the companies in the market. It might be that the market has come crashing down, but that doesn’t mean that stocks are cheap. There will always be companies, which have fallen 30-40%, but after the fall they would still be expensive. 
 
Most regular people who invest in retail, get confused between price and value of stocks. Big investors don’t commit these mistakes. It’s like you buy land and you pay a price on the basis of its value. Some years later, this plot gets connected to the main road or metro and the value goes up, so does the price. 
 
Talking about retail stock investors, they would buy stocks that are cheap. For say a stock costs Rs 5, they would go for it and not the one that is expensive, because the chance of Rs 5 stock to become Rs 10 is much probable than the expensive ones. 
 
How should one invest in crisis laden companies, something like <keyword id="6360721" type="COMPANY" weightage="20" keywordseo="Tatas">Tatas</keyword> is going through at present? 
 Most of the times, these kind of incidents are triggered by sentiments. There will be some kind of development and the market would react to that. It’s neither a knee jerk reaction nor a well thought one. In case of <keyword id="10958" type="CITY" weightage="20" keywordseo="Satyam">Satyam</keyword>, there was a fraud. The company never made as much money as it claimed to be. Now for this company to regain the faith of investors was impossible. For companies, where there is a labour unrest or failure of a product, initially the stocks fall and sentiments turn negative but over longer period, it regains. There is a brisk market reaction. By and large, investments shouldn’t be a result of panic. 
 
The amount of profit you make at the stock market is directly proportional to the amount of risk you are willing to take. 
 
Why did you write the book? 
 
I have been tracking the market for two decades. When you meet people outside the stock market, most people don’t have any idea about how the system of stock market works. It’s very interesting. They have their own notion, which isn’t always right. There is also a good history of the market, which hasn’t been recorded anywhere – like how the evolution happened and how the changes took place over the last few years. So, I thought this could be a good book that explains, educates and entertains. 
 
I have pitched it as a kind of history book. Then when I was writing the book, I thought it would be better if it is narrated by somebody. So, I included my personal experiences of brokers and investors to make it a fun read. 
 
There are various stories, which you have spoken from a close perspective. Which story do you think aptly describes the stock market? 
Compared to the 80s and 90s, Indian stock market has grown to be a far safer place now. It’s far more transparent as far as the ordinary investor is concerned. You have access to information better than before. But having said that it’s far more difficult to make play for an outside game. 
 
Is there anything you thought you should have mentioned but skipped out? 
There are quite a few anecdotes. It’s generally felt that some of the individual investors or market operators as we call them are the sharpest. But even they have been taken for a ride by the promoters. It’s not that all big investors know everything. There are many stocks where they lose. It’s not because of their error or judgement, rather they were provoked by these promoters.

Beginners’s guide to becoming the Wolf of the Indian ‘Wall Street’

<ul><li>A number of auditors are ending their relationship with clients amid high scrutiny from SEBI. </li><li>According to the Ministry of Corporate Affairs, the auditors of as many as 204 companies have submitted their resignations in the year so far. </li><li>In January 2018, SEBI slapped a two-year ban and fine on PwC for failing to report the corporate malfeasance at Satyam Computer Services.</li></ul>When it comes to <keyword id="6373268" type="TOPIC" weightage="20" keywordseo="Corporate-Governance">corporate governance</keyword>, India has seen its fair share of scams related to questionable business dealings, balance sheet discrepancies and embezzlement. The most recent debacle that comes to mind is that of ICICI Bank, the country’s largest private sector lender. The bank’s CEO, Chanda Kochhar, is currently being investigated over allegations of conflict of interest and misconduct. She reportedly allowed the extension of loans to Videocon Group, the former chairman of which had a business relationship with Kochhar’s husband. While India Inc has had a tenuous grasp of corporate governance standards, it has never seemed to be a problem for auditors who weren’t subject to very heavy regulatory scrutiny. Until now, that is. At the beginning of the year, the Securities and Exchange Board of India (SEBI) slapped <a href="https://www.livemint.com/Companies/KlbBm6VhxhQQswdgT9bycK/Satyam-case-Sebi-bans-PwC-entities-from-auditing-listed-fir.html">a two-year ban and a fine </a>against the Indian unit of PricewaterhouseCoopers (PwC) for failing to report and facilitating the corporate <keyword id="38935" type="PERSON" weightage="20" keywordseo="Fraud">fraud</keyword> at Satyam Computer Services, founded by the now-imprisoned Ramalinga Raju, which was revealed in 2009. While PwC is challenging the ban, the damage has been done. Auditors now have no choice but to recuse themselves in situations of corporate malfeasance for fear of reputational damage and punitive action. A mass exodus According to the data from the Ministry of Corporate Affairs, <keyword id="6359983" type="UNKNOWN" weightage="20" keywordseo="Accounting">accounting</keyword> firms of as many as 204 companies have submitted their resignations from the beginning of the year to 17 July. Around 75% of these resignations came in the corporate strongholds of Mumbai, Delhi, Kolkata and Ahmedabad. In comparison, only 16 auditors submitted resignations in 2017. In a number of cases this year - such as the resignation of Deloitte as the accountant for Manpasand Beverages Ltd - the resignation came days before the annual accounts were scheduled to be released owing to inadequate information. The resignations have not gone unnoticed by shareholders, based on the declining share prices of companies like <a href="https://www.google.co.in/search?ei=qdRWW5_PDIbavATQxbCQAg&amp;q=Vakrangee+Limited+share+price&amp;oq=Vakrangee+Limited+share+price&amp;gs_l=psy-ab.3..0l5.1607.3010.0.3104.13.9.0.1.1.0.337.1365.0j1j2j2.5.0....0...1c.1.64.psy-ab..8.5.1145...0i22i30k1j0i10k1.0.XUhs6OVQ2Ng">Vakrangee Ltd</a>, an IT services firm whose <keyword id="6437332" type="UNKNOWN" weightage="20" keywordseo="auditor">auditor</keyword> PwC quit at the end of January 2018. The Ministry of Corporate Affairs has initiated a formal investigation into this exodus and is looking to understand the underlying reasons. For its part, SEBI will continue its initiative to improve corporate governance standards across the country. At its <a href="https://www.sebi.gov.in/media/press-releases/mar-2018/sebi-board-meeting_38473.html">board meeting in March</a>, the regulator agreed to a number of reforms including the separation of the posts of CEO and chairman in listed companies and increasing the importance of audit committees. Earlier this month, it also released <a href="https://economictimes.indiatimes.com/markets/stocks/news/sebi-seeks-comments-on-fresh-norms-for-fiduciaries/articleshow/64995732.cms">a set of draft norms</a> giving it clear authority to act against accounting firms in cases of corporate fraud.

A spate of auditor resignations points to India Inc’s problems with corporate governance

New Delhi, Dec 16 () Regulator Sebi has imposed a one-year ban on K P Joshi &amp; Co from auditing any listed company for preparing fake and inflated financial results of Coral Hub Ltd. 
 Besides, K P Joshi, proprietor of the audit firm, has also been barred for one year.
 The regulator has restrained listed companies and registered intermediaries from engaging audit firm wherein Joshi is associated directly or indirectly for issuing any certificate for one year.
 This is the first order passed by Sebi on an auditor after the Supreme Court in November stayed an order of the Securities Appellate Tribunal (SAT) which had held that markets watchdog does not have the power to bar auditors.
 This comes after Sebi had challenged SAT's decision to quash a two-year ban that was imposed on PwC in connection with the Rs 7,800 crore Satyam fraud.
 In the present case, an investigation was undertaken by Sebi from April, 2008 to June, 2010 into the matter of manipulation of revenues and profits of Coral Hub Ltd (CHL).
 The probe found that the company and its directors had inflated its sales which led to false and misleading reporting of financial results in the annual reports of the company.
 KP Joshi &amp; Co was the statutory auditor of the company during the investigation period.
 The regulator's investigation unearthed that annual sales figures reported in the annual financial statements of the company for 2008-09 and 2009-10, with respect to two of its customers, were inflated by over Rs 70 crore. 
 Joshi did not cross check or verify the sales with purchasing parties and instead chose to accept whatever sales figures were reported to him by the director and CFO of the company.
 Sebi said Joshi, in connivance and in collusion with the management of CHL, concocted false accounts during the period of investigation. 
 Such manipulated and misleading results were reported in the company's annual reports and were also disseminated to the public through the stock exchanges which in turn misled the investors into investing in securities of the firm
 However, Joshi in his submission to the regulator denied all the allegations.
 "I have no hesitation to conclude that the alleged acts of the noticee (Joshi) as an auditor of a listed company are found to be in violation of provisions of...Sebi PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) Regulations," Sebi's Whole Time Director S K Mohanty said in his 19-page order passed on Friday.
 Accordingly, Sebi said, "noticee (Joshi) shall not directly or indirectly issue any certificate of audit and render any other auditing services including issuances of certificates of compliances, whatsoever, to any listed companies and intermediaries registered with Sebi...for a period of 1 year".
 The regulator has clarified that such directions may not impact ongoing audit assignments already undertaken by Joshi and he shall complete such ongoing audit assignments as expeditiously within six months. SP 
RVK

Sebi bans auditor for one year in Coral Hub case

<div class="KonaFilter image-container float_right"><div class="image">Win McNamee/Getty Images</div></div>Business has always been plagued by fraud: witness the South Sea Company in the 1710s (which enveloped the British economy in a giant bubble) or Charles Ponzi's Securities Exchange Company in 1920 (which gave the world the Ponzi scheme) or the Enron and WorldCom scandals in the early 2000s. 
Ambitious fraudsters are attracted to businesses for the same reason that Willie Sutton, a contemporary of Ponzi, reportedly said he robbed banks: "Because that's where the money is."
Some frauds are committed by people at the top such as Bernard Madoff or Allen Stanford. Others are committed by hired-hands lower down the organisation. But all frauds involve abusing people's trust and diverting corporate resources for personal ends. Fraud by wayward employees, be they high or low, can never be eliminated. Directors and executives can, however, treat it like any other unavoidable risk, and manage it professionally.
The risk is particularly acute at the moment. Companies are straining the bonds of loyalty. They are making ever more use of contractors and temporary workers. They are putting more pressure on employees to hit targets; they are also holding down the wages of the majority of workers while increasing the boss's pay. This is all happening at a time when economic activity is shifting to the emerging world (where corporate fraud is rife) and to the internet (where fraudsters are having a field day). Kroll, a security consultant, found that 70% of the companies that it studied were affected by fraud in 2013, up from 61% in the previous year.
At the same time the punishment is harsher than ever. Companies nowadays run the risk of being held liable for their employees' misbehaviour unless they can show they had done their best to prevent it. Directors who play even the smallest role in frauds can now go to prison. America's Foreign Corrupt Practices Act and its European imitators have made a serious crime of something once seen as normal business practice: bribing foreigners. Companies infected by fraud can incur all sorts of other costs. Their licences to trade may be withdrawn, they may be barred from bidding for government work and they may be subjected to online campaigns urging customers to boycott them.
What can companies do to uncover internal scams? A new book, "Corporate Fraud: the Human Factor", by Maryam Hussain, an investigator atEY, an accounting firm, provides a timely guide. One answer is to look for the telltale signs. Some of the biggest corporate tricksters were people whose flamboyant personalities often raised suspicions: think of Robert Maxwell, or Augustus Melmotte in Anthony Trollope's "The Way We Live Now", perhaps the best novel about corporate fraud. Boards have a duty to pluck up the courage to challenge such larger-than-life bosses.
However, most corporate fraudsters do not have swishing reptilian tails as a giveaway sign. In many instances they are not borderline psychopaths, just ordinary people gone wrong. Frequently, they start with small crimes and then engage in ever bigger misdemeanours to conceal their wrongdoing. Nick Leeson, who destroyed Barings Bank by losing £862m in bad bets on derivatives, said, "It all started when I tried to cover for a junior colleague who had lost £20,000." Ramalinga Raju, the chairman of Satyam, who admitted to inflating the computer-services company's revenues by $1 billion, said, "It was like riding a tiger, not knowing how to get off without being eaten."
A second answer is to put procedures in place to detect frauds. The Sarbanes-Oxley law passed in America after the Enron and WorldCom frauds requires the boards of public companies to commission independent audits of their internal financial controls. But rigorous procedures can easily lure companies into a false sense of security. The employees most affected by those rules may be precisely the ones most capable of finding ways around them, as was the case with Mr Leeson and Jérôme Kerviel, a renegade trader at Société Générale.
Many companies seek reassurance that all is well by installing cyber-security tools to monitor employees' e-mails and internal accounting systems for suspicious activity. But fraudsters are often quicker at harnessing technology to disguise what they are up to (for instance, using instant messaging on their smartphones as a back-channel to communicate with accomplices) than companies are at using it to spot them. Those running scams may also be skilled at tricking colleagues into giving them passwords--a technique Edward Snowden may have exploited to devastating effect.
<h3>Praising the bearers of bad news</h3>
The most powerful weapon against fraud is not an algorithm or a checklist but a whistleblower. The Association of Certified Fraud Examiners calculates that three times as many frauds are discovered by tip-offs than by any other method. It also notes that firms with fraud hotlines, which staff can call anonymously, suffer smaller losses from fraud, and cut by seven months the "exposure gap" between the start of an illicit scheme and its discovery. Governments are increasingly providing whistleblowers with legal protection and financial incentives: America's Securities and Exchange Commission has created a $450m fund to reward them.
Companies that dither, blather or launch half-hearted inquiries when presented with evidence of employee misconduct often end up regretting it. JPMorgan Chase lost billions in its "London Whale" rogue-trader scandal, initially dismissed by the bank's boss, Jamie Dimon, as a "tempest in a teapot". Besides doing more to encourage whistleblowers, businesses must take decisive action to close the exposure gap. A botched investigation can tip off a fraudster and make it easy for him to cover his tracks. A suspicion of deliberate foot-dragging can render an entire company vulnerable. The damage done by corporate fraud can last long after the culprits have been identified.

Fraud Within Companies Is A Risk That Can Never Be Eliminated, Just Managed

<ul><li>A Hyderabad civil court passed the stay order on a petition filed by Raju, who was released on bail in 2018. He sought orders to restrain <keyword id="128682" type="COMPANY" weightage="20" keywordseo="Netflix">Netflix</keyword> from releasing the web series on the ground that it would invade his privacy in an unlawful manner.</li><li>Raju also claimed that the narrative contained half-truths and palpably designed to bring down his reputation.</li><li>Netflix released the trailer of the web series which is about Vijay Mallya, Nirav Modi, Subrata Roy and <keyword id="41263" type="PERSON" weightage="20" keywordseo="Ramalinga-Raju">Ramalinga Raju</keyword>.</li></ul> A court in Hyderabad on Tuesday restrained Netflix from releasing web series "<keyword id="9827211" type="UNKNOWN" weightage="20" keywordseo="bad-boy-billionaires">Bad Boy Billionaires</keyword>: India" on the life story of Satyam Computer Services founder B. Ramalinga Raju who was convicted in Satyam scam and three others. A Hyderabad civil court passed the stay order on a petition filed by Raju, who was released on bail in 2018. He sought orders to restrain Netflix from releasing the web series on the ground that it would invade his privacy in an unlawful manner. Raju also claimed that the narrative contained half-truths and palpably designed to bring down his reputation. Netflix has already released the trailer of the web series which is about Vijay Mallya, Nirav Modi, Subrata Roy and Ramalinga Raju. "What would you do to make it to the top? To build an empire? To maintain an image? Bad Boy Billionaires answers just that. Dive into the stories of India's most infamous billionaires - Vijay Mallya, Nirav Modi, Subrata Roy, and Byrraju Ramalinga Raju as they plan, plot and maneuver through their rises and falls. Watch as insiders and experts discuss what made these men genius and, in some cases, the greatest conmen," reads the description by Netflix. A court in Bihar had last week restrained Netflix from using Subrata Roy's name in the web series. The over Rs 7,000 crore Satyam scam came to light on January 7, 2009 when Ramalinga Raju confessed that the company's account books and profits were inflated over many years to the tune of several crores of rupees. Police arrested him two days later on a complaint by some shareholders. The CBI filed three charge sheets against Raju and the other accused, charging them with cheating, criminal conspiracy, forgery, falsification of accounts and breach of trust. A special CBI court in April 2015 had sentenced him, his two brothers and seven others to seven years in prison in the case, said to be India's biggest corporate fraud. However, a month later, the metropolitan sessions court suspended their sentence and granted them bail. SEE ALSO: <a href="https://www.businessinsider.in/india/news/icj-raises-concern-on-sc-decision-in-bhushan-case-says-its-inconsistent-with-international-standards/articleshow/77885669.cms">ICJ raises concern on SC decision in Bhushan case — says it’s inconsistent with international standards</a>

Hyderabad Court stays release of Netflix's Bad Boy Billionaires: India following Ramalinga Raju's objections

New Delhi, Dec 8 () With an aim to upgrade skills and build their bandwidth, an increasing number of domestic audit firms are looking for global tie-ups to take on multinational giants in the sector.
The aim is to become globally more competitive by deploying stronger processes already being followed by the global audit firms in delivering audit mandates.
"There has been a significant jump in the number of mid-sized Indian audit firms looking for global tie-ups in the recent past. More than a dozen such firms have approached various global players in past few weeks," said a consultant who is helping local firm scout for a foreign partner.
The primary reason being cited is the growing complexity in businesses, which auditors must understand to deliver a high-quality audit, compounded by the fear of stringent action by regulatory and investigating agencies for negligence or collusion by them in cases of corporate frauds and business failures.
In recent times, there has been a spate of actions against auditors, including against PwC in the Satyam case and against Deloitte and BSR in the IL&amp;FS matter.
The Supreme Court recently stayed an order by the Securities Appellate Tribunal, which held that Sebi lacked powers to bar auditors, after the capital markets regulator contested a SAT ruling that had quashed a two-year ban on PwC in connection with the Rs 7,800-crore Satyam scam.
In the IL&amp;FS case, the NCLT had launched proceedings against the company's erstwhile auditors but the Bombay High Court later granted a stay. Besides, some auditors were recently arrested by the Economic Offences Wing of the Mumbai Police in the NSEL matter, though they were released subsequently on bail.
Some auditors, including in the case of IL&amp;FS matter, have also come under the scanner of the Serious Fraud Investigation Office (SFIO), while National Financial Reporting Authority (NFRA) is looking into alleged accounting lapses at Infosys.
The regulatory and government officials have often pointed out that auditors are supposed to be the conscience-keepers of a company and it is their duty to ring the alarm bells even at the slightest hint of a financial wrongdoing.
Within the auditor community, there is a growing feeling that the globalised businesses of the clients they serve call for the latest audit techniques and processes and their absence can be seen as a major obstacle in delivering on the audit mandate.
A robust IT infrastructure is the another biggest gap area that the domestic audit firms are looking to address through global tie-ups.
"Lack of a strong technology infrastructure has been an area of concern for Indian audit firms in carrying out audit for their clients. An effective IT infrastructure at the auditor's end calls for a substantial investment and a global tie-up or getting associated with a multinational network can help significantly on that front," said an audit committee head at a Nifty-50 company.
At the same time, the prevailing macro-economic environment is creating multiple challenges for the industry, while a negative narrative that has got built around the audit profession is making the things worse, experts said.
Vijay Gupta, ex-central council member of the ICAI, said, "Global tie-ups provide local audit firms access to better processes and practices already undertaken by the global partner, thereby building a much-needed bandwidth to serve the clients".
He cited the resource constraints faced by local firms as crucial for pushing them towards global tie-ups, and said the aim is to have a better IT infrastructure to create a more robust audit framework.
"The liability mechanism for auditors is an area that needs to be duly addressed. Drastic actions are being taken against auditors even in the absence of being proven guilty," said an auditor working with a leading firm.
He said a complete ban on any audit firm has a much larger impact on the industry and on people working in it.
On the other hand, officials at regulatory and enforcement agencies have been saying that audit firms tend to put the blame on individuals after finding themselves in the dock for their alleged role in frauds.
Experts opine that availability of trustworthy financial information on performance of companies is important for proper functioning of a market economy, but the entire auditing system has got into a precarious situation as questions are being raised around integrity of auditors.
Serious concerns arise if auditors' independence is compromised or when trust reposed in them gets betrayed as independent audits are fundamental to taking informed and correct investment decisions.
Experts feel that it is important to facilitate a business-friendly environment for corporates as well as for professionals in India and therefore it is vital that Indian laws and regulations on professional services keep pace with the changing market dynamics. BJ
BAL

Audit firms eye global tie-ups to upgrade skills, build bandwidth

New Delhi, Mar 15 () Auditors need to be equipped with the latest available technological tools to execute high quality audits, right-leaning think-tank Centre for Economic Policy Research (CEPR) has said in a new report. "The business in present times is becoming larger and more complex. It is becoming difficult for the auditor to really access the complete data and study the systems to achieve the in-depth examination and subsequent analysis," CEPR said. "The limited tools to access and analyse the data and study the systems to bring out effective reports is becoming a big challenge and these limitations are across both the large and small enterprise," it added. According to the report, a rapid increase in the volume of data requires auditors to be equipped with the latest available technological tools to analyse a much higher volume of data in their audits than previously required. Vijay Gupta, a former central council member of the ICAI, said, "The globalised businesses of the clients that the audit firms serve, calls for the latest audit techniques and processes that needs to get deployed by such audit firms, the absence of which becomes a handicap in apt deliverance of their duties." He said there is a need for better IT infrastructure to create more robust audit framework. The audit industry has been facing multiple challenges in the current macro-economic environment and these are further getting aggravated by a prevailing negative narrative around the audit profession in the country. There has been a spate of actions taken against auditors in the recent times, including against PwC in the Satyam scam case, and against Deloitte and BSR with regard to the IL&amp;FS fraud. Also, in the 2013 case of NSEL, auditors were arrested by the Economic Offences Wing (EOW) Mumbai, but were realised on bail later. According to CEPR, latest advances in technology promise significant benefits for the audit profession, with a number of key drivers signalling the need for technological change in audit. Such drivers include the rapid increase in volume of data, changes in business models, shift towards automation and the demand for a proactive and forward-looking approach to audit. These developments require auditors to be technologically sound to enable them to execute high quality audits, the CEPR report said. "An effective IT infrastructure at the auditor's end has become a must now to carry out error free audits and build confidence from overall governance perspective," said Pavan Kumar Vijay, founder of Corporate Professional, a corporate and legal advisory firm. He said the volume of transactions and data in businesses has increased dramatically since 2016 and is expected to keep increasing in the future, which underlines that the use of advanced technologies and data analytics promises a transformation in the audit and build confidence. BJ ABM

Auditors must use latest tech tools for quality audits: CEPR

<keyword id="6653" type="CITY" weightage="100" keywordseo="ICICI-bank">ICICI Bank</keyword>’s newly appointed chairman <keyword id="2891027" type="UNKNOWN" weightage="100" keywordseo="MK-Sharma">MK Sharma</keyword> criticised the “poorly-drafted” Companies Act and said that tightening of norms has made it a "curse" to be a promoter and everyone is being made to pay because of a few cases like Satyam and Sahara. 

	Sharma said there is an urgent need to completely re-write the Act as it lays stress on regulations rather than playing a developmental role and it appears to have been written for lawyers and chartered accountants, rather than for companies. 
 

	Talking about the enhanced compliance procedures, Sharma said it is a "curse" to be a promoter in the current times, while cap imposed on directorships has also increased the compliance requirements for individual board members. 
 

	Sharma, who himself has been on various boards, said every document has to be read from cover to cover and called the scope for action against directors as a "frightening feature" given the fact that an audit committee on which the director may sit meets only five times a year. 
 

	"A law should not seek to regulate the black-sheep. You must deal with them through penal action. Just because one Satyam happened and one Sahara happened, everyone else has to play penalty for that," he said. 
 Sharma, who was appointed non-executive chairman in June after his predecessor K V Kamath became first President of the recently launched <keyword id="989539" type="COMPANY" weightage="100" keywordseo="BRICS-Bank">BRICS Bank</keyword>, said that various stakeholders including the industry, ICAI and ICSI should be consulted again for rewriting the legislation. 

	"The law seems to have been drafted for lawyers and some chartered accountants and less for corporates. It is a very poorly-drafted piece of legislation...it is very unfortunate," Sharma said. 
 

	The Companies Act, 2013 came into force from April 1, 2014 after intensive consultations over several years to replace a nearly six-decade-old Companies Act, 1956. The new law has introduced a number of provisions to tighten corporate governance norms, check frauds and safeguard the investors. 
 

	However, the government has made various changes in this law in recent months to make compliance easier for companies. 
 Sharma, who has been a veteran in the financial services and <keyword id="34523" type="CITY" weightage="100" keywordseo="fmcg">FMCG</keyword> industries, further said that rather than taking corrective actions on a few points, which discomfort the industry, there is a need to completely re-write the law. 

	"A law must equally play a developmental role as it plays a regulatory role," he said. 
 

	Citing the example of Titan Industries, Sharma said the company was forced to suffer reverses due to a provision under which it could not keep deposits for over a year. 
 This forced the <keyword id="6355725" type="CITY" weightage="100" keywordseo="Tata-Group">Tata group</keyword> company to liquidate all of their deposits resulting in heavy losses, he said, expressing a fear that travel companies who give over 20-year packages can suffer the same as the money taken for the future can be treated as a deposit. 

	On RBI, Sharma said he is all for the autonomy of the central bank but refused to elaborate further on the controversy triggered by the recent draft IFC.

	 
	 
	(Image credits: Indiatimes)

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