Exposed: the Underbelly of the corporate Beast

The money trap

When similar information about anything is provided to our brain for a long time repeatedly, the brain stops processing that word and rejects it. One such word for the Indians is “SCAM”. The research conducted over a period of six months in the Neurosciences centre at AIIMS revealed that the word scam had been repeated about 155,495,785 times in media during the period of the research. This research was conducted in 2012. I’m sure you must have recognized which all scandals stormed the media then. Let’s dig a little deeper and find out what actually happened that paved the way for these swindles to come across the entire nation.

A Raja

Starting with one of the biggest scams in India, the “2G SPECTRUM SCANDAL”, it involved irregularities on the part of telecom ministry during the distribution of 2G licenses to private telecom players. Many came under probe for the corrupt scam. But it was Andimuthu Raja, the then telecom minister who came out to be the main culprit.

Brass tacks - The scam goes back to 2008, when the 2G licenses were distributed to the private telecom companies. 122 licenses were issued in total on first come first serve basis on 2001 prices but not on the market prices. The cut-off date was brought forward from the initially decided date of 1^st October 2007 to 25^th September 2007. This switch eliminated a lot of applications enabling the favoritism policy. It is required as per law that companies meeting the eligibility criteria and having some prior experience in the field can be issued the licenses but in this case, Unitech and Swan Telecom got licenses without any prior experience. All this resulted in a loss of about 1.76 lakh crore rupees.

Scam exposed - After the sale of 3G spectrum the exchequer earned a huge profit, since then the 2G spectrum was viewed from questionable eyes. Although, officially it was the Centre for Public Litigation that filed the first petition for the irregularities and then other petitions followed to the Central Vigilance Commission(CVC). Other star whistleblower was Aseervartham Achary who was A. Raja’s personal assistant for some time when the fraud was happening in real.

Raju caught in his own web

Another big corporate scandal was the “SATYAM SCANDAL”. It was a scam that involved fake accounting aspects developed by the management of the Satyam computers.

The nitty-gritty - The mastermind of the scandal, Ramalinga Raju developed a way by which he could create fake accounts involving fake cash balances, fake salary accounts of fake employees, fake liabilities etc. This led to a strong balance sheet presentation. Satyam raised to such a level that in no time it was one of the fastest growing IT companies.

Catch-22 Situation - All was going very well for Raju, but suddenly on 7^th January 2009 all of it ended with a confession letter. The reason was simple, the fake accounts created a gap in the balance sheet. For every asset there is a liability and vice versa but because in this case there were no real accounts, that led to an imbalance. The gap could not be filled at all. “It was like riding a tiger, not knowing how to get off without being eaten”. The forlorn hope to fill the gap was to acquire Maytas Infrastructure ( company owned by Raju’s sons). But many shareholders backed out from this proposal, this made him confess the shrewd swindle himself.

 The last one that is worth mentioning is the well known stock scandal by"HASHAD MEHTA". It dates back to 1992, when this genius realized the loopholes in the Indian banking system and exploited them for his own benefit.

The straight dope - Earlier the banks used to maintain some government securities in proportion of their total holdings this was the Statutory Liquidity Ratio. The banks entered into the practice of trading these securities by the Ready Forward(RF) deal. This was carried out with the help of a broker, Harshad Mehta was one such trusted broker. The banks gave the securities to broker to sell them to any other bank, it was a kind of loan for the banks. The acknowledgement were the bank receipts(BR) issued by the seller of the securities. Mehta found two banks which could produce fake BRs, so he showed banks fake BRs and in lieu got some money. He was such an expert at this that he managed to make a lot of money through it.

What blew off the lid? - It was Sucheta Dalal, a journalist who first detected this hoax. On April 23, 1992 in her article she disclosed the illegal trading performed by Harshad Mehta.

The golden bird, India is golden no more but it has lost its golden feathered wings in the black smoke of scams.

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