Did SAT Bail Out Price Waterhouse?
The Supreme Court has pulled up the Indian government for the delay in appointment of judges to the Securities Appellate Tribunal (SAT). Almost 500 cases are pending in the Tribunal for want of a judicial member. The posts of presiding officer and judicial member have been lying vacant since then and CKG Nair, the (lone) technical member of SAT has been passing orders on a daily basis. (Read: SC To Decide if Single Technical Member of SAT Can Stay SEBI Order)
 
The presence of a judicial member is mandatory on every bench. As on date, there is only one member (Tech), Dr CKG Nair.  This raises serious apprehensions if the delay is being caused by design to perhaps bail out Price Waterhouse (PW) and some other lucky ones. The facts seem to suggest this. 
 
Securities and Exchange Board of India (SEBI) vide its order on 10 January 2018 had restrained, for two years, all the 10 audit firms referred to as ‘PW entities’ from doing any audit related work of listed entities and intermediaries registered with the market regulator. 
 
The restraining order was passed over the alleged collusion of PW network with directors and employees of the erstwhile Satyam Computer Services Ltd (Satyam), in the country’s biggest corporate accounting scandal. 
 
SEBI’s order was effective immediately but was not to affect audit assignments relating to financial year 2017-18. PW network filed an appeal with SAT, which, vide its order on 15 February 2018, allowed the firm to audit existing clients till 31 March 2019 or until a new bench was formed, whichever was earlier. 
 
Verdict of the new bench could have gone against PW network. This eventuality may have been taken care of by ensuring that new members were not appointed.   
 
Interestingly, Jog Singh retired on 19 February 2018, just four days after SAT’s order.  The presiding officer, JP Devdhar, who recused himself from the PW network case, retired on 11 July 2018. Had he not recused, the PW network case could have been heard as late as July 2018. But perhaps that was never intended. PW network was given extended time, prima-facie, surreptitiously.
 
Non-filling of the vacancies in SAT is baffling given that the retirement dates of the members were well known in advance. Two members of SAT retired after completing a five-year term and the vacancies were not caused by any abrupt exit. 
 
Mr Singh had been a member since 20 February 2013. Mr Devdhar had been a member since 12 July 2013. Interestingly, the SAT order has not been uploaded on its website till the time of writing this article even though the author had brought this to the notice of SAT vide his letter dated 12 March 2018.
 
Of course, contrary to public perception, the wheels of justice can move very fast provided you are rich and powerful.  Hearings can be delayed endlessly; appeals can be heard at midnight.
 
SEBI’s order of 10 January 2018 against Price Waterhouse had prima-facie overlooked a major criminal conspiracy despite taking nine long years. Twice it even missed the deadlines set by the Supreme Court which had castigated it for unnecessary delays. SAT’s benevolent order took just one month! When the new bench will be formed is anybody’s guess.
 
The intention seems to be clear. Delay as much as possible, public memory is short, something bigger will come. This prayer has also been answered. We now have the IL&FS fiasco which dwarfs Satyam.
 
 
(Sarvesh Mathur is a senior financial professional, who has earlier worked as CFO of Tata Telecom Ltd and PricewaterhouseCoopers.)
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COMMENTS

Shankar g

1 month ago


Sorry state of affairs.......and disheartening to note that the basic morality and work ethics is being forgotten majorly in every institution whether private or public, despite growing number of Professionals .

Governance Lessons for India from US SEC in Elon Musk & Tesla Case
Elon Musk, credited with building Tesla into one of America’s most valuable car companies, has been fined $20 million by the Securities and Exchange Commission (SEC) of the US.  Additionally, he has to step aside as chairman for three years. Not only Musk, but the company has also been fined $20 million. The crime: an irresponsible tweet from Musk, just last month.
 
Musk had boasted on 7 August 2018 on Twitter that he had secured funding for a buyout of his electric car company. 
 
 
The immediate effect was a surge in Tesla shares.  The tweet promised to turn the public company into a private one. Musk entered into the settlement with SEC involving such a hefty fine just two days after being sued by it for misleading investors. 
 
The message from SEC is clear. When companies and corporate insiders make statements, they must act responsibly including endeavouring to ensure the statements are not false or misleading.
 
In mera mahaan Bharat,, such a tweet would not have even raised an eyebrow. Here fraudsters enjoy a life time duping investors and banks of billions of rupees and when the going gets tough, simply walk away. Some do not feel the need to do even this. Yet, life goes on as usual for them.
 
Remember Satyam, the largest accounting fraud till date in the history of corporate India. Two US regulators, including the SEC, the Serious frauds Investigation office (SFIO), Central Bureau of Investigation (CBI) and the special CBI court, found the Satyam management and two auditors of PricewaterhouseCoopers (PwC) guilty of falsification of accounts in 2009. Even nine years later, the Satyam management and PwC auditors are out on bail. No one feels the need to challenge it.  
 
Auditors are now getting smarter. They just dump the audit when the going gets tough.  To hell with their fiduciary duties. In the past three months since my earlier article highlighting how it could be fatal for public interest, the number of auditors resignations has climbed from 37 to close to 200. 
 
The resigning auditors include the big boys: Deloitte in case of Nirav Modi’s outfits to  PwC in the case of Vakrangee where the ministry of corporate affairs (MCA) has ordered a probe.
 
Taking a cue from the auditors, some directors are also adopting the same modus operandi. And what has MCA done so far? Precious little. Reportedly, it is now in the process of initiating review of audit standards, making  the auditors more accountable and is planning  a new form for more disclosures from the resigning directors. 
 
It is high time the Indian government takes lessons from the Musk episode. Cosmetic changes, scores of committees, endless paperwork but devoid of willingness to act against the rich and powerful are all meaningless. Only deterrent financial action makes sense, that too if taken swiftly.  
 
If the US can do this in such a high-profile case and for something as trivial as a tweet, why can’t India do the same in scams running into thousands of crores of rupees and where a mountain of evidence exists?  
 
How about Satyam, Vijay Mallya, Nirav Modi, Mehul Choksi, Religare for starters.
 
You may also want to read…
 
 
 
 
 
 
 
(Sarvesh Mathur is a senior financial professional, who has earlier worked as CFO of Tata Telecom Ltd and PricewaterhouseCoopers.)
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Nagarajan Ramachandran

1 month ago

Well, it is all relative. The fine is a not even a gentle slap on the wrist for both the company and Musk given their net worth(s). Also, he is agreeing to step down from the wrong job; Tesla needs a new CEO not a chairman. With Musk's visionary abilities, he would make a better chairman than CEO. The larger point about India of course is bang on. It is not just SEBI; show me one regulator that has the guts to deliver pain to the high and mighty that act with impunity. TRAI and IRDA are worse than SEBI.

Gopalakrishnan T V

1 month ago

In India anybody can get away with any Damn thing with right contacts and money. This is demonstrated by never ending bank frauds, regular and perennial loot of banks and corporates. Governance Standards prescribed are only in paper and not to be practised even by mistakes is what is demonstrated with all sorts of wrong doings and liberal loots seen every where. Laws of the land are meant for common people to scare him and even not to dare to question the power that govern us.

Nachiket Mor’s Second Term on RBI Central Board Cut Short: Report
The government has reportedly cut short the second term of Nachiket Mor as member of the central board at Reserve Bank of India (RBI). He was re-nominated on RBI board in August last year.
 
According to a report in Economic Times, Mr Mor, who was informed about the decision on 20 September 2018, would, however, remain on the eastern area local board of RBI. 
 
Quoting a source, the report says, "He had completed just a year of his four year term. He was brought for a second stint within four months of his stint because of his expertise in banking areas. But he used to speak in a manner that may not have be appreciated by the bureaucrats which could be a reason why his term was cut short."
 
Mr Mor is also director of Bill and Melinda Gates Foundation in India.
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