Systemic failures Scandals

Scams

Frauds

 2010 plagued by scams 2G, Adarsh, CWG, IPL, LIC Housing Loan Rs 80 lakh crore (80 trillion) => 70k per Indian over 12 years 94 major Indian scams in wiki

2G Scam 1.76 lakh crore

Past history of this Risky Portfolio: BJP Arun Shourie Unified Access License NDA Pramod Mahajan License to Revenue sharing => 64k cr loss Undercharging mobile telephony companies (2001 rates), FCFS How it surfaced? Niira Radia phone tapping by IT Telcom Min Kapil Sibal Paralyzed winter session 9 companies collectively paid 10k+ cr against expected Rs.1.76 lakh cr

Parties
Raja-DMK Arun Shourie BJP Pramod Mahajan BJP 99-03

Media Niira Radia Barkha Dutt Vir Sanghvi

2G
Corporations Unitech Telenor Swan Telecom Tata, Reliance, Vodafone Essar

Bureaucrats Siddhartha Behura Pradip Baijal R K Chandolia

Swan Telecom
Sold 45% of company

Etisalat
4,200 cr

1,537 cr

Unitech
Sold 60% of wireless div

Telenor
6,200 cr

1,661 cr

DMK channel, Swamy wants to implead Karunanidhi in case adopting the first-come-first-served basis in allocating Spectrum to ineligible companies.

Politicians Environment Defence/Naval

Chavan changed bye-laws to include 40% civilians Vilasrao Deshmukh just signed letter of intent not final statement Environment related clearances given by UDD (Urban Dvlpmt Dept) without Envirn. Dept knowledge Envir Min Jairam Ramesh orders demolition of entire 31 storied structure

Sensitive coastal area and houses naval establishments

Social Activists
Bureaucrats

Medha Patkar has been trying to uncover the scam

Pradeep Vyas IAS gave wrong answer in Lower House indicating Army land being transferred to Adarsh

 Adarsh Housing Society Cooperative Society Houses reserved for Kargil war widows Posh Colaba locality Violated environment ministry rules Then CM Ashok Chavan had to resign Jairam Ramesh orders demolition of entire structure on Nov 12, 2010

Serious corruption by OC officials Delays in the construction of main Games' venues Infrastructural compromise Poor ticket sales 400,000 people from three large slums evicted 70 workers died violation of min wage for workers Award of work contracts at higher prices Poor quality assurance and management Work contracts awarded to ineligible agencies Excess cost (85 cr vs. 961 cr for Nehru stadium)

Rs 8,000 crore in the allocation of rights and procurement of materials for the Game Indira Gandhi stadium renovation at `669 crore and for the shooting range at `149 cr Renovation of all stadia 4459. 48 cr 1. Labour law violations (min wage Rs 85, 70 died, child labour) 2. Alleged sex slavery 3. CVC overinvoicing 1. work contracts at higher prices, poor quality assurance and management, and work contracts awarded to ineligible agencies 2. inexplicable payments to bogus companies and inflated bills for every purchase from toilet paper to treadmills 4. Preparation delays (13/19 out of schedule) 5. Mass volunteer walkout (10k/22k quit 1 week before event) 6. Poor ticket sales and attendance (100/19000 seats in MDC stadium) 7. Spectators response at opening ceremony (thanking Diana) 8. Opening ceremony (Australians sportspen) Racial discrimination (African countries) 9. Unlivable Venues (dogs) 10. Events (swimming pool etc)

Lalit Modi may be replaced by BCCI Shashak Manohar Match fixing to IPL betting the source of funding of the billion-dollar premier league Gave $50 mn to give Kochi Franchisee to Ahmedabad Pune Franchise bought by Sahara Adventure Sports Group - US$370 million Kochi Franchise - Rendezvous Sports World Limited - $333.3 million (1530 cr) Total auction US$723.59 million Alleged of costing BCCI US$80 million 70 cr (4.5% of sweat equity) shareholding of the Kochi-IPL by Sunanda Pushkar

Union Agriculture Minister Sharad Pawar questionable money trail has found its way to Pawar, his wife Pratibha and daughter Supriya Sule Aviation Minister Praful Patel

CMD and other associates were allegedly bribing senior officials of public sector banks and financial institutions for facilitating large scale corporate loans

LIC Housing Finance scam CEO- LIC Housing Finance Ramachandran R Nair and seven others, including three top officials of PSU banks, were recently arrested in connection with a multi-crore housing finance racket recently. Naresh K Chopra, secretary (investment), LIC; R N Tayal, general manager of Bank of India (Delhi); Maninder Singh Johar, director (chartered accountant) of Central Bank of India; and Venkoba Gujjal, deputy general manager, Punjab National Bank (Delhi). Rajesh Sharma, chairman and managing director of Mumbai-based firm Money Matters Ltd and two of its employees -- Suresh Gattani and Sanjay Sharma-were also among those arrested, CBI said. Money Matters was allegedly acting as a middleman for loans. The officials allegedly colluded with the firm to sanction large scale corporate loans, overriding mandatory conditions for such approvals along with other irregularities. LIC housing stocks plunging by 20%.

Arrests Ramachandran Nair, CEO of LIC Housing Finance Naresh K Chopra, Secretary (Investment) of LIC (Mumbai) R N Tayal, General Manager of Bank of India (Mumbai) Maninder Singh Johar, Director (Chartered Accountant) of Central Bank of India (Delhi) Venkoba Gujjal, Deputy General Manager of Punjab National Bank (Delhi) Rajesh Sharma, CMD of Money Matters; his staff members Suresh Gattani and Sanjay Sharma

Companies to which loans were given

Lavasa Corp., a unit of Hindustan Construction Co. Oberoi Realty Ltd. Ashapura Minechem Ltd. Suzlon Energy Ltd. DB Realty Ltd., a part of the Dynamix Balwas Group Emaar MGF Land Ltd. Mantri Realty Kumar Developers Ltd

Moving from UPA to BJP

Oct 1 | RTI Revelation: CM flouts rules in denotifying land Oct 4 | RTI Revelation: CM defies HC, SC fiat, de-notifies BDA land Oct 4 | CM de-notifies 'special case' in Nagarbhavi, contradicts officials' report Nov 11 | Ashoka walks away with Rs 15 crore land in CM's sweet deal - paid merely Rs 44 lakh for 2 plots Nov 13| Yeddyurappa's sons floated firm, got land in a fortnight; CM got an additional site for his son in violation of rules Issue 1 acre and 12 guntas in Arkavathy layout in Blore bought by sons for 8 lakhs in 2006 Land cost is now 60-70 crores Violates Local rules: f special site cannot be allotted to anyone who already owns land in Bangalore

Lokpall Bill
Initiatives/ role of lokpal bill 42 years from emergency period The draft Lokpal Bill 2010 is meant to create the institution of an ombdusman that will tackle political corruption, but civil society groups say it will be a toothless body with only recommendatory powers and will also not cover guilty bureaucrats.

CVC
The Central Vigilance Commission was set up by the Government in February,1964 on the recommendations of the Committee on Prevention of Corruption, headed by Shri K. Santhanam, to advise and guide Central Government agencies in the field of vigilance

Lokayukta
Anti-corruption ombudsman organization in the Indian states Conducts raids. But surprisingly, it does not have binding powers to punish anyone

RTI (set in 2005)

Require government officials to furnish information requested by citizens or face punitive action, computerisation of services and various central and state government acts that established vigilance commissions have considerably reduced corruption or at least have opened up avenues to redress grievances 'The present anti-corruption system in the country consists of the Central Bureau of Investigation (CBI) and the Central Vigilance Commission (CVC). While the CBI is directly under the government, the CVC is a recommendatory body

For 2010, India was ranked 87th of 178 countries in Transparency International's Corruption Perceptions Index

1 lakh billionaires and 40 crore BPL

Responsibilities as future managers and decision makers

Money stashed away in Swiss banks: Rs 21 lakh crore India lost $462 billion, or about Rs 21 lakh crore, in illicit financial flows due to tax evasion, crime and corruption. Faster rates of economic growth - deterioration of income distribution Illicit financial flows (tax evasion, corruption, bribery and kickbacks, and criminal activities) Total illicit financial flows (IFFs) is at least $462 billion Vs. External debt of $230 billion

TOP FIVE INDIA $1,456 BILLION RUSSIA $470 BILLION U.K. $390 BILLION UKRAINE $100 BILLION CHINA $96 BILLION

India lost assets at a rate of US $19 billion per year

Ramalinga Raju: Rs 8,000 crore The biggest corporate scam in India came from one of the best known businessmen. Satyam founder Byrraju Ramalinga Raju resigned as its chairman after admitting to cooking up the account books. His efforts to fill the "fictitious assets with real ones" through Maytas acquisition failed, after which he decided to confess the crime. With a fraud involving about Rs 8,000 crore (Rs 80 billion), Satyam remains one of India's biggest ever corporate scams.

A stealth deal And now for the scams that drew headlines in the UPA's first stint in power. In October 2005, India and France signed a Rs 16,000-crore Scorpene submarines deal. It was alleged that one of the accused in the Navy War Room leak case, Abhishek Verma, sent an e-mail to the French manufacturer of the submarine demanding, on behalf of the Congress, four percent commission to broker the deal. Various government agencies, including the IB, were involved in investigating the Navy War Room leak. In February 2006, the authorities decided to hand over the case to the CBI for initiating criminal proceedings against the naval officers and civilians allegedly involved. The CBI told the Delhi High Court that after preliminary investigations it had found no evidence of payment of kickbacks in the submarine deal. Image: A Scorpene submarine

Scorpene submarine scam Rs 18,978 crore In what is billed as one of the biggest defence scandals in India, huge kickbacks were alleged in the planned purchase of 6 French Scorpene submarines. Other scam that hit the national exchequer include: Army ration pilferage scam of 2008 Rs 5,000 crore Bihar land scandal in 1997: Rs 400 crore Bihar flood relief scam of 2005: Rs 17 crore Sukh Ram telecom scam in 1997: Rs 1,500 crore SNC Lavalin power project scam in 1997: Rs 374

Images: BJP MPs Ashok Argal (R), Faggan Singh Kulaste (C) and Mahavir Bhagora (L), along with others, show the packets of money they have been allegedly bribed to switch sides, during the special session of the Lok Sabha in New Delhi on July 22, 2008.

Cash-for-votes scandal The UPA was alleged to have openly bribed MPs to the tune of lakhs of rupees to survive its very first confidence vote on July 22, 2008 in the Lok Sabha after the Left parties withdrew support from the government over the country approaching the IAEA for Indo-US nuclear deal. The alliance's win was marred when three BJP lawmakers waved bundles of cash, amid accusations of vote-buying. The BJP demanded the resignation of Prime Minister Manmohan Singh over the allegations that the government bribed the MPs. A probe by a Lok Sabha committee was ordered into the scandal. The committee submitted its report to the Lok Sabha on December 15, 2008, after finding no evidence of bribery.

Oil-for-Food scam Perhaps, the first major issue to rock the UPA was the Iraqi Oil-for Food scam. An independent inquiry committee headed by Paul Volcker reported on October 27, 2005 that former external affairs minister Natwar Singh and his son Jagat Singh were noncontractual beneficiaries of the United Nations Oil-for-Food programme. They, along with Jagat Singh's childhood friend Andaleeb Sehgal, were allegedly associated with a company called Hamdan Exports, which acted as an intermediary for illegal sales of oil to a Swiss firm named Masefield AG. In return, Masefield had to pay kickbacks, (termed 'surcharges') partly to Saddam Hussein's regime and partly to Natwar Singh and others. It was alleged that such surcharges were Hussein's way of securing support from politicians around the world and that this influenced Natwar Singh to lobby against US policies in Iraq (in particular, US sanctions on Saddam Hussein). This controversy heated up when Anil Mathrani, then Indian envoy to Croatia, and a close aide to Natwar Singh alleged that the minister had used an official visit to Iraq to procure oil coupons for Jagat Singh from Saddam's regime. The Opposition stalled the proceedings of Parliament demanding his resignation. The Congress distanced itself from him and he resigned from the cabinet. While resigning, Natwar maintained that he was 'completely innocent' in the Volcker issue and no charges had been framed against him.

Harshad Mehta: Rs 5,000 crore He was known as the 'Big Bull'. However, his bull run did not last too long. He triggered a rise in the Bombay Stock Exchange in the year 1992 by trading in shares at a premium across many segments. Taking advantages of the loopholes in the banking system, Harshad and his associates triggered a securities scam diverting funds to the tune of about Rs 5,000 crore (Rs 50 billion) from the banks to stockbrokers between April 1991 to May 1992. Harshad Mehta worked with the New India Assurance Company before he moved ahead to try his luck in the stock markets. Mehta soon mastered the tricks of the trade and set out on dangerous game plan. Mehta has siphoned off huge sums of money from several banks and millions of investors were conned in the process. His scam was exposed, the markets crashed and he was arrested and banned for life from trading in the stock markets. He was later charged with 72 criminal offences. A Special Court also sentenced Sudhir Mehta, Harshad Mehta's brother, and six others, including four bank officials, to rigorous imprisonment (RI) ranging from 1 year to 10 years on the charge of duping State Bank of India to

Hassan Ali Khan: Rs 39,120 crore Pune-based real estate consultant Hassan Ali Khan was the main accused in a case involving alleged money laundering to the tune of $8 billion (Rs 39,120 crore), and suspected tax evasion. The Mumbai Income-Tax department had sent him a notice demanding Rs 40,000 crore for not disclosing funds in several foreign bank accounts, including $8 billion in an account in UBS AG, Zurich

Teak plantation swindle Rs 8,000 crore The plantation scam took thousands of investors for a ride and is said to be of the order of Rs 8,000 crore. Dinesh Singhania: Rs 120 crore Another major scam involved Dinesh Kumar Singhania, the former president of Calcutta Stock Exchange. Singhania was accused in the Rs 120 crore (Rs 1.2 billion) CSE scam. Singhania was president of the exchange for two terms and also a director when the scam was unearthed in March, 2001, Mitra said.

Ketan Parekh: Rs 1,000 crore Ketan Parekh followed Harshad Mehta's footsteps to swindle crores of rupees from banks. A chartered accountant he used to run a family business, NH Securities. Ketan however had bigger plans in mind. He targetted smaller exchanges like the Allahabad Stock Exchange and the Calcutta Stock Exchange, and bought shares in fictitious names. His dealings revolved around shares of ten companies like Himachal Futuristic, Global Tele-Systems, SSI Ltd, DSQ Software, Zee Telefilms, Silverline, Pentamedia Graphics and Satyam Computer (K-10 scrips). Ketan borrowed Rs 250 crore from Global Trust Bank to fuel his ambitions. Ketan alongwith his associates also managed to get Rs 1,000 crore from the Madhavpura Mercantile Co-operative Bank. According to RBI regulations, a broker is allowed a loan of only Rs 15 crore (Rs 150 million). There was evidence of price rigging in the scrips of Global Trust Bank, Zee Telefilms, HFCL, Lupin Laboratories, Aftek Infosys and Padmini Polymer.

Fertiliser import scam Rs 1,300 crore The fertiliser import scam cost the national exchequer over Rs 1,300 crore. Similar scams which cost the nation hugely include: Sugar import scam of 1994: Rs 650 crore Meghalaya Forest scam of 1995: Rs 300 crore Urea scam of 1996: Rs 133 crore Bihar fodder scam of 1996: Rs 950 crore

C R Bhansali: Rs 1,200 crore The Bhansali scam resulted in a loss of over Rs 1,200 crore (Rs 12 billion). He first launched the finance company CRB Capital Markets, followed by CRB Mutual Fund and CRB Share Custodial Services. He ruled like a financial wizard 1992 to 1996 collecting money from the public through fixed deposits, bonds and debentures. The money was transferred to companies that never existed. CRB Capital Markets raised a whopping Rs 176 crore in three years. In 1994 CRB Mutual Funds raised Rs 230 crore and Rs 180 crore came via fixed deposits. Bhansali also succeeded to to raise about Rs 900 crore from the markets. However, his good days did not last long, after 1995 he received several jolts. Bhansali tried borrowing more money from the market. This led to a financial crisis. It became difficult for Bhansali to sustain himself. The Reserve Bank of India (RBI) refused banking status to CRB and he was in the dock. SBI was one of the banks to be hit by his huge defaults.

2006 IPO scam: Rs 1,000 crore estimated The Securities and Exchange Board of India barred 24 key operators, including Indiabulls and Karvy Stock Broking, from operating in the stock market and banned 12 depository participants from opening fresh accounts for their involvement in the Initial Public Offer scam. It also banned 85 financiers from capital market activities.

Abdul Karim Telgi: Rs 500 crore He paid for his own education at Sarvodaya Vidyalaya by selling fruits and vegetables on trains. He is today famous (or infamous) for being he man behind one of India's biggest scams. The Telgi case is another big scam that rocked India. The fake stamp racket involving Abdul Karim Telgi was exposed in 2000. The loss is estimated to be Rs 500 crore (Rs 5 billion), it was initially pegged to be Rs 30,000 crore (Rs 300 billion), which was later clarified by the CBI as an exaggerated figure. In 1994, Abdul Karim Telgi acquired a stamp paper license from the Indian government and began printing fake stamp papers. Telgi bribed to get into the government security press in Nashik and bought special machines to print fake stamp papers. Telgi's networked spread across 13 states involving 176 offices, 1,000 employees and 123 bank accounts in 18 cities.

The Jharkhand medical equipment scam Rs 130 crore Major irregularities were alleged in the UPA government's free healthcare services programme in Jharkhand. Other notable scams include: Punjab's City Centre project scam in 2006: Rs 1,500 crore Taj Corridor scam of 2006: Rs 175 crore State Bank of Saurashtra scam in 2008: Rs 95 crore Rice export scam of 2009: Rs 2,500 crore Orissa mine scam in 2009: Rs 7,000 crore Madhu Koda mining scam of 2009: Rs 4,000 crore Preferential allotment scam of 1995: Rs 5,000 crore Yugoslav Dinar scam of 1995: Rs 400 crore

Cobbler scam: Rs 1,000 crore Sohin Daya, son of a former Sheriff of Mumbai, was the main accused in the multi-crore shoes scam. Daya of Dawood Shoes, Rafique Tejani of Metro Shoes, and Kishore Signapurkar of Milano Shoes were arrested for creating several leather co-operative societies which did not exist. They availed loans of crores of rupees on behalf of these fictitious societies. The scam was exposed in 1995. The accused created a fictitious cooperative society of cobblers to take advantage of government loans through various schemes. Officials of the Maharashtra State Finance Corporation, Citibank, Bank of Oman, Dena Bank, Development Credit Bank, Saraswat Cooperative Bank, and Bank of Bahrain and Kuwait were also charge sheeted.

Dinesh Dalmia: Rs 595 crore Dinesh Dalmia was the managing director of DSQ Software Limited when the Central Bureau of Investigation arrested him for his involvement in a stocks scam of Rs 595 crore (Rs 5.95 billion). Dalmia's group included DSQ Holdings Ltd, Hulda Properties and Trades Ltd, and Powerflow Holding and Trading Pvt Ltd. Dalmia resorted to illegal ways to make money through the partly paid shares of DSQ Software Ltd, in the name of New Vision Investment Ltd, UK, and unallotted shares in the name of Dinesh Dalmia Technology Trust. Investigation showed that 1.30 crore (13 million) shares of DSQ Software Ltd had not been listed on any stock exchange.

Virendra Rastogi: Rs 43 crore Virendra Rastogi, chief executive of RBG Resources, was charged with for deceiving banks worldwide of an estimated $1 billion. He was also involved in the duty-drawback scam to the tune of Rs 43 crore (Rs 430 million) in India. The CBI said that five companies, whose directors were the four Rastogi brothers -Subhash, Virender, Ravinder and Narinder -exported bicycle parts during 1995-96 to Russia and Hong Kong by heavily over invoicing the value of goods for claiming excess duty draw back from customs.

The UTI scam: Rs 32 crore Former UTI chairman P S Subramanyam and two executive directors -- M M Kapur and S K Basu -- and a stockbroker Rakesh G Mehta, were arrested in connection with the 'UTI scam'. UTI had purchased 40,000 shares of Cyberspace between September 25, 2000, and September 25, 2000 for about Rs 3.33 crore (Rs 33.3 million) from Rakesh Mehta when there were no buyers for the scrip. The market price was around Rs 830. The CBI said it was the conspiracy of these four people which resulted in the loss of Rs 32 crore (Rs 320 million). Subramanyam, Kapur and Basu had changed their stance on an investment advice of the equities research cell of UTI. The promoter of Cyberspace Infosys, Arvind Johari was arrested in connection with the case. The officals were paid Rs 50 lakh (Rs 5 million) by Cyberspace to promote its shares. He also received Rs 1.18 crore (Rs 11.8 million) from the company through a circuitous route for possible rigging the Cyberspace counter.

Uday Goyal: Rs 210 crore Uday Goyal, managing director of Arrow Global Agrotech Ltd, was yet another fraudster who cheated investors promising high returns through plantations. Goyal conned investors to the tune of over Rs 210 crore (Rs 2.10 billion). He was finally arrested. The plantation scam was exposed when two investors filed a complaint when they failed to get the promised returns. Over 43,300 persons had fallen into Goyal's trap. Several criminal complaints were filed with the Economic Offences Wing. The company's directors and their relatives had misused the investors' money to buy properties. The High Court asked the company to sell its properties and repay its investors.

Sanjay Agarwal: Rs 600 crore Home Trade had created waves with celebrity endorsements. But Sanjay Agarwal's finance portal was just a veil to cover up his shady deals. He swindled a whopping Rs 600 crore (Rs 6 billion) from more than 25 cooperative banks. The government securities (gilt) scam of 2001 was exposed when the Reserve Bank of India checked the accounts of some cooperative banks following unusual activities in the gilt market. Co-operative banks and brokers acted in collusion in a bid to make easy money at the cost of the hard earned savings of millions of Indians. In this case, even the Public Provident Fund (PPF) was affected. A sum of about Rs 92 crore (Rs 920 million) was missing from the Seamen's Provident Fund. Sanjay Agarwal, Ketan Sheth (a broker), Nandkishore Trivedi and Baluchan Rai (a Hong Kong-based Non-Resident Indian) were behind the Home Trade scam.