SC agrees to hear Kanimozhi's bail plea, issues notice to CBI

The apex court has also asked the investigating agency to inform it about the status of trial in the second generation (2G) spectrum allocation case before a CBI special court

New Delhi: The Supreme Court today sought the Central Bureau of Investigation’s (CBI) response on DMK MP Kanimozhi’s bail plea and also wanted to know the status of Rs200 crore allegedly given to Kalaignar TV, reports PTI.

Terming corruption as the worst form of ‘human rights violation’, the apex court asked the CBI to estimate loss accrued to the exchequer on account of licences issued to telecom operators during the tenure of A Raja as telecom minister.

A bench comprising justices BS Chauhan and Swatanter Kumar also asked the investigating agency to inform it about the status of trial in the second generation (2G) spectrum allocation case before a CBI special court.

The court granted a week’s time to the CBI to file its response on the bail plea of Ms Kanimozhi and Sharad Kumar, MD of Kalaignar TV.

Ms Kanimozhi and Mr Kumar, named as accused in the second charge sheet for allegedly taking bribe of Rs200 crore, were arrested on 20th May after the special court dismissed their bail pleas in the case.

Both Ms Kanimozhi and Mr Kumar have 20% stake each in Kalaignar TV Pvt Ltd, which allegedly received Rs200 crore through a “circuitous” route from Shahid Balwa-promoted DB Realty.

Ms Kanimozhi, the 43-year-old daughter of DMK chief M Karunanidhi, and Mr Kumar have approached the Supreme Court against the order of Delhi High Court and the trial court which had refused to grant them bail in 2G case.

The high court had on 8th June dismissed their pleas after observing that they have strong political connections and that there was a possibility of they influencing witnesses.

Mr Karunanidhi’s wife Dayalu Ammal, who has been left out from the list of accused, owns the remaining 60% share in the channel.

Ms Kanimozhi and Mr Kumar had moved the high court on 23rd May challenging the trial court’s order which had rejected their bail pleas.

The special CBI court had on 20th May rejected the bail pleas of Ms Kanimozhi and Mr Kumar and ordered their ‘forthwith’ arrest. They are currently lodged in Tihar Jail.


Strike enters 10th day, no production at Maruti’s Manesar plant

The striking workmen said they are willing to end the stir provided that 11 of their colleagues who were sacked by the company for allegedly inciting others to go on strike, are reinstated

New Delhi: The country's largest car-maker Maruti Suzuki India's (MSI) Manesar facility continues to be completely shut down, with a workers’ strike at the plant entering its 10th day today, reports PTI.

“The talks are going on, but the strike is still continuing. The production at the plant is stopped,” a company spokesperson told PTI.

Around 2,000 workers at the plant have been on strike since 4th June, resulting in a loss of about Rs390 crore for the company on account of a 7,800-unit hit in output till Saturday. The factory had its weekly-off on Sunday.

The striking workers are demanding the recognition of a new union—Maruti Suzuki Employees Union—formed by those working at the Manesar plant, among other things.

Cracking the whip, the company fired 11 workers last week for allegedly inciting others to go on strike.

Yesterday, however, the company said it is willing to recognise the new union—the main demand of the workers.

The workers also said they are willing to end the stir provided all 11 of their sacked colleagues are reinstated.

Meanwhile, unions of various firms in the Gurgaon-Manesar industrial belt, who have been supporting their colleagues at the Maruti facility, will hold public meetings at the gates of 60-65 factories on Monday to raise awareness among workers in the region about the issues at the car-maker’s plant.

The All-India Trade Union Congress, which is leading the agitation along with other unions such as the Centre of Indian Trade Unions, said workers in the region will hold a two-hour tool-down strike on Tuesday in support of the strike.

The Manesar plant rolls out about 1,200 units every day in two shifts. The factory produces hatchbacks Swift and A-Star and sedans DZiRE and SX4.

Shares of the company were trading 0.81% down at Rs1,219.75 apiece on the Bombay Stock Exchange in noon trade today.


Muddy Waters indeed: Sino-Forest stock crash puts focus on scrutiny and quality of information

Sino-Forest Corporation, the Chinese forestry company in which hedge fund Paulson & Co was the largest investor, lost about two-third of its share value in the past few days after a little-known research firm alleged that the sales it reported would have required 50,000 trucks driving on two-lane roads through the mountains from a remote region, which is beyond belief 

Where do you get your information? Do you trust it? Accurate, timely and complete information is essential for investors, yet few investors have the clout to go out and collect their own information. Worse, there are large economic incentives to lie. So, most of us play a game of follow the leader. We like to pick large investment banks, star investors, celebrity analysts, or Nobel laureate economists and trust them, but in certain countries, even this doesn't work.

Paulson & Co, the hedge fund run by the legendary investor and billionaire John Paulson. Paulson is one of savviest and best informed investors on Wall Street. The hedge fund has $37 billion under management. His fund made $4 billion betting against subprime mortgages. The result, some of his bets helped the demise of Lehman Brothers.

But for all of Paulson's expertise, he is helpless in China. His hedge fund made an investment in a Chinese forestry company called Sino-Forest Corporation. In fact, the fund owns 14.13% of Sino-Forest's outstanding shares and is the largest holder.  But it is not just Paulson. According to the Financial Times, Sino-Forest's shares are also owned by other large fund managers including Hartford Investment Management (3.2%), BlackRock, Vanguard and Henderson Global.
Paulson & Co's investment was worth $646 million. Not anymore. This month, the Sino-Forest stock which is listed on the Toronto Stock exchange, dropped over 71%. The share price crash was the result of a report by a Canadian research firm called Muddy Waters.

Muddy Waters alleged, among other issues, that the sale of $231.1 million in timber in Yunnan by Sino-Forest was largely fabricated, because "transporting the harvested logs would have required over 50,000 trucks driving on two-lane roads winding through the mountains from this remote region, which is far beyond belief [and likely road capacity]." It also pointed out that Sino-Forest overstated its purchases by over $800 million and its corporate structure utilised over 20 British Virgin Island entities.
But Paulson & Co are not the only ones. The Carlyle Group is one of the largest and most famous of the private equity firms with $106 billion of capital under management. It is known for its ability to attract the best connected people in the world, including former US president George HW Bush and James Baker III, the former US secretary of state.

Carlyle is one of the most successful private equity groups in China. Some of its investments have, at least on paper, generated some excellent returns for its grateful investors. But even Carlyle has problems. China Forestry, a Chinese lumber products firm like Sino-Forest, received an investment of about $55 million from Carlyle before it went through its Hong Kong IPO in December 2009. By May 2011 it posted a $417 million annual loss, and its auditor, KPMG, stated that it could not vouch for the accuracy of the group's financial results, because of incomplete books and records.

But China Forestry was not the only dud investment by Carlyle in China. China Agritech is a Nasdaq-listed fertiliser maker in which Carlyle has a 22% stake. Its shares reached an all-time high on 1 February 2010 at $31.21 a share. It is now trading at $2.81 a share, a fall of 91%, after a failure to file its accounts.

David Rubenstein, the co-founder of Carlyle, defended its investments in China and claimed that most of the 50 deals it had done in China were apparently profitable. Others weren't so sure. According to an executive at another big international private equity group, "To have two go wrong in such quick succession is somewhere between careless and unlucky."

It wasn't just the investments of Paulson and Carlyle that went bad. In the first six months of 2011, over 25 New York-listed Chinese companies have disclosed accounting discrepancies or seen their auditors resign. In May of 2011 Nasdaq had suspended 19 stocks from trading, 15 were Chinese.

Many of these stocks were once Wall Street darlings. China Agritech jumped over 1000% from 2007 to its height in 2010. The China 'story', the unending growth of China, and all things relating to China seemed like a sure bet.

Yet, the foolishness continues. A Chinese stock named Yongye, an agricultural nutrient company, fell 60% along with Sino-Forest, but rebounded 64% as soon as it received the OK from Morgan Stanley Private Equity Asia.

The reason why these highly experienced, connected, and professional firms are making mistakes is because the bright young things who do the analysis are assuming that the same rules apply for Chinese firms as for firms in more developed markets. They have not taken into account the lack of any meaningful legal disincentives and the active suppression of information. Until they figure this out, investors would be wise to take their advice with a large grain of salt.

(The writer is president of Emerging Market Strategies and can be contacted at [email protected]  or [email protected].)



R Balakrishnan

5 years ago

Would be interesting to add up the business of truck financing companies in India ....

Mark T

5 years ago

@William - Shouldn't the first 'quality information' we scrutinize be Muddy Waters'? After all, here we have a one man research house, with a short position and a vested interest in seeing SF fail, up against information provided by numerous analysts, and in which the likes of Paulson and Co are invested. The key evidence that they tout - and which you reprint in your first paragraph - about their sale of timber holdings in Yunnan province was rebutted days ago, and is already old news for anyone following the story. (it was a sale of standing timber, so no trucks needed, and a critical mistake in the MW research)

Certainly there should be balanced coverage on this, and its possible that there are some problems with SF that will emerge, but won't you feel at least a little bit foolish yourself if it turns out that the fraud is on the part of Muddy Waters, not SF, and the mistake is media (and investors) like you trusting the first research house/short seller to publish something that runs contrary to conventional wisdom?

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