Gen Singh has also been named in an FIR by the Delhi Police for his alleged role in protests against the gang rape of a girl in a moving bus on 16th December
New Delhi: The Union Government has decided to withdraw all security cover provided to former Army Chief Gen VK Singh, who has been taking part in a number of protests over corruption, Delhi gangrape incident and other issues, reports PTI.
The former Army Chief was provided Z 'Plus' security cover till 30th November but in a review meeting, the Ministry of Home Affairs took a decision that he does not require any protection, Army sources said here.
After the decision was conveyed to the Army Headquarters, it is in the process of withdrawing all vehicles including a bullet-proof car and around 30-35 personnel from his security, they said.
Seven vehicles and 30-35 personnel were deployed in his security duties round the clock, they said.
Gen V K Singh, who retired on 31st May, was given a Z Plus security cover till 30th November and he was allowed to stay in Government accommodation in Delhi Cantonment area for one year after he had sought a nine-month extension from Defence Minister AK Antony.
Singh has been named in an FIR by the Delhi Police for his alleged role in protests against the gang rape of a girl in a moving bus on 16th December.
Soon after his retirement, he was critical of the government on various issues and shared the stage with yoga guru Ramdev and Anna Hazare on Lokpal and blackmoney issues.
On the gang rape issue, he had recently said the system stands "completely exposed and defanged" as not just one daughter, but hundreds of others are equally vulnerable to predators in the face of "growing impotency" to take any action.
In late November, he had also called for the dissolution of Parliament and had called for its gherao in support of the demands raised by sugarcane farmers from Uttarakhand and Uttar Pradesh.
In the last few months of his tenure, he became the first Chief of the Army to have approached the Supreme Court against the Government on the personal issue of his date of birth.
In the first part of this series, we reported Bill Ackman’s analysis of Herbalife’s business, which consistently achieves high sales of a commodity product despite extremely low advertising and technological input. So, how has it grown so fast over the past 30 years? This is where Herbalife’s business model, which ensnares many millions, comes in
Bill Ackman, the famous hedge fund investor, has torn apart Herbalife’s products to show that the company is worth nothing. The company is very active in India, too, having made its entry in around 2000. In this short span of time, the company has managed to sell a lot of product, mainly through high-pressure sales tactics and promotion of the glamourous lifestyle of those at the top of the pyramid. In this article, we will elaborate on Ackman’s analysis and discuss why Herbalife’s pyramid fails to provide the rewards it promises.
Click here for the first part of our Herbalife story.
According to Bill Ackman, Herbalife markets itself as a sort of an annuity that will bring the consumer ever-increasing income, even well into retirement. Consumers are shown a chart of this, but despite how unbelievable it is, it is what sucks in those who double up as entrepreneurs.
In order to make money, all the consumer has to do is recruit (or sell), say 155 more people, and will soon be earning as much as $44,150 per month! One of the 155 people could be a family member, too!
Once a product is sold, a distributor/salesperson is deemed to have been ‘recruited’. There are two ways to make money—from selling a Herbalife product (and thereby recruiting another person) and from ‘rewards’.
In order to be eligible for ‘rewards’, one must move up the pyramid. And how does one move up the pyramid? Recruit and sell more to become a ‘sales leader’ and then accumulate volume points to graduate to higher tiers which will entitle you to larger compensation.
However, if you are looking to become rich quickly and yearning for that Ferrari, the distributors who are above recommend recruiting people more vigourously rather than just selling at your own pace.
Herbalife says that one can aspire for a lavish lifestyle in as little as three years. John Tartol, a Herbalife director, said that one can make it to the top, to the “Presidential Team” in less than three years. Claims like these are often touted by distributors at the top of the pyramid in order to lure more consumers.
But what is the reality? As you would expect in a pyramid scheme, the top 1% of the recruiters/distributors earn 88% of all the ‘rewards’. A pyramid scheme, after all, is one in which money made at the top is made from the losses of the people at the bottom of the pyramid. How does one get to the 1% and earn lots of money and rewards? Most of the people at the bottom usually get lured by emotional testimonials and success stories, often from the top 1%—who own expensive cars or large mansions, etc—only to be disappointed when the pyramid fizzles out or becomes saturated.
Getting to the top is much harder than advertised. In Ireland, in 10 years, not a single ‘distributor’ made it to the “Millionaire Team” (one tier below the “Presidential Team”). The failure of the MLM business model becomes so apparent within months that many people have dropped off and lost faith, lost a lot of money and their livelihood. It is pertinent to note that failed distributors have lost as much as $3.8 billion since Herbalife’s inception in 1980, according to Ackman. Yet MLMs flourish, mainly because regulators and investigators, both in the US and India, have taken a soft line.
Recruitment is continuous, but drops drastically when the market saturates (i.e. when there aren’t many suckers to sell to) and there will be a sharp drop in retail sales (i.e. when the pyramid starts to tumble), the so-called ‘pop-and-drop’ phenomenon. In mature markets, such schemes have fizzled out. It’s emerging markets where the playground for MLM schemes is ripe.
Herbalife has targeted India, too, where regulation is spotty. In 2010, Herbalife’s CFO called India one of the “top 10 markets”. When they entered India, few knew what a global pyramid scheme looked like.
Herbalife is reportedly involved in window-dressing of their financial accounts to paint a rosy picture. According to Bill Ackman, the company has, among other things, misstated gross earnings and failed to disclose several expenses.
In fact, the number of “sales leaders” (i.e. people who have qualified for ‘rewards’) have declined and the company had stopped disclosing this figure. This shows that the market may be near its saturation point. When this happens, Herbalife will target another market, another country.
Mr Fitzpatrick, author of False Profits, who has written about the dangers of such MLMs, says, “Verified data show that 'success' in MLM schemes is less than 1% per year for consumer investors. Profit comes only from investments from other poor investors, nearly all of whom are destined to lose. If this is the case, and it is occurring on a significant scale, it means that MLM may be corrupting the micro-credit lending field, which is operating in many of the world's poorest countries.” The fact that India was one of the biggest markets for Herbalife makes it more obvious that a regulatory overhaul is a must. But who cares?
Vepa Kamesam, former deputy director of the RBI, has resigned from the High Mark Board as independent director. The troubled credit bureau, which urgently needs an injection of money to remain viable, allotted 70% of its ESOPs to four independent directors, including Mr Kamesam and its chairman Prof Pandya
Moneylife’s reports on the affairs at the troubled and cash strapped High Mark Credit Information Services Pvt Ltd (High Mark Credit Bureau) seems to have claimed its first victim. Vepa Kamesam, one of the most high profile directors has resigned from the High Mark Board. However, it is not clear as to what would happen to the 1.63 lakh shares that Mr Kamesam was allotted.
Mr Kamesam, a former deputy governor of the Reserve Bank of India (RBI) was one of the four directors who, along with Prof Anil Pandya, chairman and founder-director of High Mark, bagged 70% of the employee stock ownership plan (ESOP). Mr Kamesam was allotted 1.63 lakh shares in the credit bureau as ESOPs.
According to sources, High Mark violated Credit Information Companies Regulations (CICR) Act, 2005 (CICRA) as well as Companies Act, while appointing Prof Dr Anil Pandya as its executive chairman. The issue was first raised by Siddharth Das, former Chief Operating Officer (COO) of High Mark, before the company board. But the board, including Mr Kamesam, apparently ignored it.
High Mark never appointed Prof Pandya on a full-time basis. The prefix ‘Executive’ before chairman was supposed to give the impression that he is a full-time employee in the nature of a CEO. Even as Prof Pandya continues to work on a part-time basis, the credit bureau also did not appoint any whole-time director or managing director. This clearly violates Regulation 9 (2) of the CICRA for which the board should be made responsible.
Subsequently, Das sent a legal notice raising this issue. Ajay Kohli, former chief executive of High Mark, tried to bring this to the attention of the board. This too has been ignored so far by the company Board.
As Moneylife reported earlier, High Mark's four independent directors, Dipankar Basu (1.63 lakh), Vepa Kamesam (1.63 lakh), Rajiv Johri (6.53 lakh) and Shyam Sunder Suri (6.53 lakh) and its chairman Prof Anil Pandya (3.27 lakh), together hold 70% of ESOPs. Of these, while Prof Pandya was designated executive chairman in position, if not in responsibilities, the other four directors have had little operating roles.
The board also allotted 1.9 lakh ESOPs to Kiran Moras, its senior vice-president and 2.7 lakh to Siddharth Das, its executive vice-president and chief operating officer. These options lapsed due to the resignation of both these officials. While Moras resigned on 21 March 2012, Das left High Mark on 20 March 2012. We learn from reliable sources that Prof Pandya has been indiscriminately sacking senior officials who are in the process of filing litigation.
Meanwhile, High Mark seems to be operating on the understanding that the Italy-based CRIF credit bureau will be allowed to bailout the Credit Bureau quite easily. We learn that CRIF executives have already been meeting senior executives to assure them of support and continuity after takeover. This development suggests that CRIF is completely confident of a green signal to acquire High Mark although the business is ostensibly strictly regulated by the RBI.
There is no evidence that Mr Kamesam has been perturbed by this alleged violation of the CICR Act and the possible action by the RBI. Of course, it remains to be seen whether the RBI will act atleast now, following resignation of Mr Kamesam, a former deputy governor of the central bank.
Mr Kamesam was appointed as deputy governor of RBI on 1 July 2001 and his tenure ended in 2003 after getting extensions twice. He was the first deputy governor of the RBI to hold the position even after crossing the age of 62 years.
Prof Pandya and Dipankar Basu (a former IAS officer of the Gujarat cadre and also an independent director of High Mark) did not respond to repeated text messages. Our email query addressed to Mr Basu and to Prof Anil Pandya was also not answered at the time of publication. Their response, if any, will be incorporated when it is made available.
High Mark is a start-up promoted by Prof Pandya and Anuj Desai. In 2005, Professor Pandya founded High Mark and in 2007 the company applied to the RBI for a license to operate as a credit bureau.