The unusual rise in the stock price of Panoramic Universal witnessed some years ago was proof of how Indian stocks can be ramped up brazenly. Now, an investigation has alleged that the company has been involved in money laundering. But the regulators choose to remain silent
In 2007, the sharp rise of Panoramic Universal's stock price automatically short-listed it among Moneylife's list of stocks worth watching.
A look at its website and the assets listed there made us wonder about the very-steep-and-too-fast rise in the price of this tiny Pune-based company. This rang alarm bells about how Indian stocks can be ramped up so brazenly, and over such appreciation within a single year, or even a few months, that can skew the data over a 10-year period.
Moneylife reacted to this by changing our stock picking methodology to exclude tiny companies and those which showed abnormal price rallies. Strangely enough, while we took corrective action, the two national stock exchanges-the first-line regulator-and the Securities and Exchange Board of India (SEBI), which is mandated to protect investors, has remained somnolent.
In fact, Moneylife continues to regularly highlight the many stocks that are ramped up (mainly on the Bombay Stock Exchange, due to legacy issues) in the 'Street Beat' section of the magazine under the headlined 'Unquoted'. But nothing seems to awaken the regulator from its deep slumber or painfully slow investigation.
Panoramic's 'dubious' business claims and involvement in money laundering has been exposed in the latest issue of Tehelka weekly news magazine. The company's chairman, Sudhir Moravekar, is the owner of a Rs1,000 crore empire, spanning hotels, software development, tourism, manufacturing and real estate. The Tehelka special investigation reports that he has hoarded Rs200 crore in US banks between 2005 and 2010.
According to the report, despite being in existence since a long time the company has managed to escape the regulatory scanner. That was till whistleblowers within the company blew the lid off its money-laundering activity, which involved "transferring small amounts of money, almost on a daily basis, against seemingly bogus invoices".
One of the areas that should have raised eyebrows is the company's hotel business which managed to book astonishing profits, when the sector was reeling on account of the global economic recession. The hotel occupancy rates were dismal, but revenues were huge.
Not one, but three employees from the US subsidiary, Panoramic Ace Properties, alleged that the company was involved in massive laundering of money.
The first information about the company's wrongdoings was lodged by Arvind Kumar with the Major Economic Crimes Bureau of Manhattan at New York County District Attorney. After lodging a formal complaint with the US authorities, Mr Kumar resigned from the company. Along with him, two more company employees, Joseph Steele and Carol Brown Surprenant (both US nationals), also put in their papers and set up the Panoramic American Whistle Blowers Protection & Welfare Association.
Suspecting that both Joseph and Carol were conducting enquiries into the company's funds, they were asked to leave, Mr Kumar is quoted as saying by Tehelka.
However, the communication between the whistleblowers and the Manhattan DA suggests that the US authorities weren't keen on detailed investigations, saying that there was no clear US law broken.
In India, Tehelka reports, the company in being investigated by the Central Board of Direct Taxes (CBDT).
A senior income-tax official was quoted in the news report as saying that Rs200 crore might just be a fraction of the total money allegedly laundered by the company over the past 10 years. "It's the whistleblowers from just one subsidiary of the company who have unearthed Rs200 crore laundered against bogus invoices raised in the name of hospitality consultancy. The company runs dozens of such subsidiaries, both in India and abroad. Many subsidiaries had also been shut down and new ones were opened. We are investigating all of them and following the money trail," said the investigator who requested anonymity.
Tehelka also reported that in 1996, Mr Moravekar launched a dubious scheme named the Pancard club, through which he raised a substantial amount of money. This is now also under investigation. The Pancard club scheme promised a stay for seven days in a hotel every year, on the payment of a small subscription fee. But, if a customer chose not to avail of the facility, he would be reimbursed the full annual fee along with some interest.
Surprisingly, the actual source of such huge funds remains to be traced. Whether it is coming from legitimate business or otherwise, has to be ascertained by the investigating authorities.
The I-T department has sought permission to quiz Mr Raja, Swan Telecom promoters Shahid Usman Balwa and Vinod Goenka and three Reliance ADAG top officials-Gautam Doshi, Hari Nair and Surendra Pipara
New Delhi: A Delhi court on Thursday allowed the Income Tax (I-T) department to interrogate six accused, including former telecom minister A Raja, arrested for their alleged involvement in the second generation (2G) spectrum scam, in judicial custody itself, reports PTI.
Special CBI judge OP Saini allowed the application moved by the I-T department seeking permission to quiz Mr Raja, Swan Telecom promoters Shahid Usman Balwa and Vinod Goenka and three Reliance ADAG top officials-Gautam Doshi, Hari Nair and Surendra Pipara.
The I-T department moved three separate applications seeking interrogation of Mr Raja in connection with his family income, senior standing counsel for the I-T department Sanjeev Rajpal said.
Mr Balwa will be quizzed by the I-T team from Mumbai regarding his connection with Etisalat DB.
Meanwhile, the third application was moved on behalf of the additional commissioner of income tax, Mumbai to quiz Mr Balwa, Mr Goenka and three ADAG officials.
"Our applications have been allowed by the court and these six persons will be interrogated from 27th July to 29th July," Mr Rajpal said.
The CBI, meanwhile, started the arguments on framing of charges against various accused in the 2G scam.
The court had on 18th July also allowed the CBI to interrogate afresh Mr Raja, former telecom secretary Siddhartha Behura and Gautam Doshi in the lock up of Patiala House court complex for one hour each.
The court had allowed the agency's application that in the interest of the case, it required to interrogate key accused afresh for the ongoing probe.
The CBI, in its first charge-sheet on 2nd April, had accused Mr Raja, and eight other persons including Mr Balwa, Mr Goenka, Mr Doshi, Mr Nair and Mr Pipara as well as three companies of causing a loss of Rs30,984 crore to the exchequer.
Charges of cheating, forgery, criminal conspiracy and corruption have been levelled against the six, who are currently lodged in Tihar Jail along with other eight accused in the case including DMK MP Mr Kanimozhi.
We have missed out on the correct valuation of cooperation over competition, quality over quantity, standard of ‘life’ over standard of ‘living’ and the innate urge to give rather than to grab
The advent of high-tech, high-speed life has impacted societies all over the globe in a big way. The societal impact has been diverse and enormous. On the positive side, Indian techies are emerging more competitive and grabbing higher salary jobs than any other in the world market. Yes, Indians have created a niche of honour for themselves in diverse fields like IT, medicine, environment, astrophysics, et al.
On the domestic side, our economy has managed to remain on a steady growth path despite a roller-coaster journey through scams, red-tape and corruption. We are now a society that is fast adapting international norms of social, professional and commercial behaviour. With mobile-wielding rickshaw-pullers, roadside hawkers and their non-haggling, cash-ready customers milling around, chain-snatching bikers too have melded as a category in the milieu.
Notwithstanding the minor hiccups, there is plenty for everyone to enjoy life-air-conditioned homes, workplaces, malls, cars, bars, clubs… 'What's not there, man?'
On the negative side, in our exuberance to compete and hurry to win, we seem to have forgotten to carry with us some valuable paraphernalia that we will require to sustain our achievements on reaching the destination-our value system based on ethics and morals. We have missed out on the correct valuation of cooperation over competition, quality over quantity, standard of 'life' over standard of 'living' and the innate urge to give rather than to grab.
The national scene today is a veritable mix of oddities and contradictions. In affluence, we have our cities that will challenge the world's best. In poverty, too, we have regions in the hinterland that could make Somalia, Burundi and Zimbabwe appear affluent in comparison. We have business empires and tycoons whose wealth and lifestyle will disconcert the best-known kings and emperors. Yet our ordnance factories are so primitive and dysfunctional that we depend on others to arm and equip our military, which is the world's second largest military might. Israel, which came into existence in the most desolate part of our world and after India gained her independence, also manufactures and supplies sophisticated military equipment to us!
We have the world's most educated and 'honest' man heading the government, yet, no previous government has been more maligned than the government of Dr Manmohan Singh and there is no sign yet of the flood of scams abating. We have set up lavish civic infrastructure like primary health care centres, dispensaries, roads, electricity, television and telecommunications networks (even water supply networks in some remote areas), but these amenities lie in utter neglect due to neglect by a callous government, despite a glut of government grants, and have failed to deliver.
Despite easier access to modern amenities, rural India has been left far behind the high-speed urban advancement. The rural-urban divide has widened. Even poverty has its own status and class, clearly setting the urban poor apart from the rural rustics. Whereas the exploited destitute of our city slums assume an urbane swagger at the sight of a displaced tribal from Orissa, Madhya Pradesh or Chhattisgarh, or a debt-burdened farmer from the barren lands of Vidarbha, the farmer presents a pathetic picture, like that of a humbled warrior in dire need of justice and fair play, rather than a share of the loot.
It is these contradictions that are threatening to slow down India's march to a glorious future in the new world that's emerging from the recession in the West and the movement against autocracy in North Africa and West Asia. The younger generation is already providing high-tech solutions to complex problems of organisations and governments all over the world. Our reservoir of skilled and semi-skilled workforce too is larger than China's. A new class of entrepreneurs is also well poised to venture out, to take the global lead. But what is holding them up? It's the environment creators at home! And who are the environment creators? They are a vicious circle of people whose insider-trading techniques keeps them camouflaged, away from public view.
Recently, a former minister simultaneously agreed and disagreed with my argument, and sought to explain away this vicious environment of corruption and callous governance. "Forget about the theories you read in political science books about democracy and governance. Agreed, it is the people who matter in democracy, but which people?"
"The people, citizens of the country, of course! Who else?" I stressed hard.
"No, it is not that simple. The people who count here come in four categories.
I - The top academic brains who compete and win the most coveted careers through IITs, IIMs and other top grade institutions. It is the guys in this category who get the fattest salary packages.
II - The next best join the civil services at the centre and in the states. They control everything, including the first category, through a maze of regulatory mechanisms.
III - Those who fail to qualify for the above two categories, take to politics and constitute the third category, the Third Reich of Indian politicians! In the name of democracy, they control both the top categories.
IV - School dropouts and those who fare poorly academically join the underworld of crime, handle black money and control the other three categories!"
Little wonder then, that the last category is now joining active politics and assuming direct control as 'elected representatives' in Parliament and state legislatures.
The emerging amalgam of crime, corruption and politics is a more potent threat to India's security than any external threat-even the nuclear danger. As the crime graph continues to rise steeply, rape, murder, highway robbery are becoming more daring in metros and towns. The audacity of the criminals and the failure of the police to act effectively only indicate the patronage and impunity that they enjoy. The politico-bureaucratic combine is now busy drafting innovative bills that could silence the public outcry against raging corruption in higher government echelons and to protect the high and mighty engaged in corruption.
Hopefully, India will be inducted as a permanent member of the UN Security Council in the near future. A plethora of opportunities lie ahead for India to assume a bigger role at the regional and world levels. There is enough talent too. But the government machinery has gone rusty and needs urgent overhauling and oiling. It is not that those in authority are unaware of what is required to be done. They have become accustomed to move only when pushed by public pressure. Corruption is the breeding ground for all crime and terrorism since such pursuits need black money. However, corruption has seeped so deep into our political system that no political party today is keen to institutionalise any effective mechanism to curb and punish corruption at the political and bureaucratic levels.
People power alone can coerce them into positive action. The public anguish over rampant corruption and government apathy is fully justified. This simmering energy needs to be carefully harnessed and channelled to bring in accountability and good governance. Anna Hazare's movement against corruption has been so far fair, straight and transparent. More organisations need to lend a helping hand and all people must rise for a peaceful but sustained campaign. No doubt there are a number of reforms pending, but let corruption be the first enemy to be vanquished.
(The writer is a military veteran who commanded an Infantry battalion with many successes in counter-terrorist operations. He was also actively involved in numerous high-risk operations as second-in-command of the elite 51 Special Action Group of the National Security Guard (NSG). He conducts leadership training and is the author of two bestsellers on leadership development that have also been translated into foreign languages).