Helios & Matheson: Now Bankers Also Allege Fraud
In an interesting new development; the State Bank of India (SBI) has filed a first information report (FIR) against the controversial Helios & Matheson Information Technology Limited (H&M) with the Central Bureau of Investigation (CBI) in Bengaluru. H&M, which was delisted from India’s two national exchanges at the end of May 2018, has left thousands of depositors in the lurch since 2014. It now turns out that bankers have also been defrauded or have allowed themselves to be conned by not paying attention to H&M’s dubious ways for over a decade. 
 
SBI’s regional manager, who has filed the FIR, alleges a criminal conspiracy, criminal breach of trust by public servants, forgery of valuable security, using as genuine a forged document and criminal misconduct by a public servant. The complaint is against H&M, its managing director, Muralikrishna Gadiyaram, several executive directors (Diwakara Yerra, Sasi K Patil, Chandra Ramesh and SR Sistla) as well as spouses and guarantors—Ramachandran V, Anupama Muralikrishna and Padmaja R. 
 
SBI claims that it has been duped to the tune of Rs31.96 crore plus interest; but the FIR indicates that the total borrowing of around Rs200 crore was sanctioned by Axis Bank, Corporation Bank, Bank of Baroda and Standard Chartered Bank against a pledge of promoters’ shares, personal guarantees and a charge on the assets of the company. The bank claims that it discovered that, contrary to the loan terms which require it to operate only through lender banks, H&M had opened a current account with HDFC Bank and Bank of Maharashtra and transferred funds to these accounts. 
 
The FIR further says that term loans obtained from SBI were diverted to H&M’s US subsidiary, Maruthi Consulting Inc, after providing fake documents to suggest that the money was to go to another subsidiary, Jaya Maruti Software Services Company Pvt Ltd, which was to import software on its behalf. The FIR, whose link I have provided, details how money was brazenly siphoned to the US consulting firm Maruthi Consulting Inc as a loan. This was discovered on checking SWIFT transfers from Bank of India. 
 
According to SBI, it classified the H&M account as a fraud and informed the Reserve Bank of India (RBI) about it in 2016. So why wasn’t the FIR filed then? Wouldn’t timely action have ensured that the promoters were booked when they had adequate resources? Astonishingly, SBI says in the FIR that it was orally informed by Bank of India and Corporation Bank on 30 March 2017 that the account had not been listed as a fraud in their books until then. 
 
This smacks of collusion, scandalous complaisance and worse by bankers. Why did they fail to act in time? Why did they not wake up to the fraud even after the Exim Bank of the US had filed a winding up petition against H&M as far back as April 2015, that too in the Madras High Court? Let’s not forget that the FIR against the former chairman, managing director and their spouses is quite meaningless because, we learn, they have all moved to the US and it will be a long-drawn process to bring them back to India—as we have seen with attempts to bring back large defaulters like Nirav Modi, Vijay Mallya, Jatin Mehta and Mehul Choksi. 
 
SBI’s gullibility in releasing part of a term loan to a subsidiary called Jaya Maruti Software also seems rather suspicious. Did the Bank make any attempt to check group links displayed by H&M’s website? Even today, while H&M’s website carefully blanks out the names of its founders and management, it lists several group entities. Helios & Matheson Analytics Inc figures at the top of its list of group companies although US investors seem clueless about the connection. The Laxmi Group, headquartered in California, is claimed to be a part of H&M group since 2001. There is no Maruthi Consulting Inc listed among the group companies; instead there is Maruthi Infotech which, the website claims, is an IT consulting firm and part of the group since 2004. Another subsidiary, called HMIT (Bangalore) Ltd which is listed on its website, is understood to be doing well and may have also provided guarantees to the parent company, say our sources. SBI’s FIR does not mention this and we could not independently verify it; but CBI could surely ask the bankers some tough questions. 
 
Bankers have remained silent spectators to H&M’s dubious dealings for years, perhaps wilfully, and are now under pressure to act and file complaints only because of the spate of actions by CBI against bankers themselves. There is a lot more investigation in the public domain that has been accessed and dug up by beleaguered depositors of H&M, desperate to get their money back. Bankers, with more access to the group’s business dealings, can surely do a lot more, unless, of course, they don't want to.
 
Only CBI or the SFIO (Serious Fraud Investigation Office) can follow the obvious trail and bring dubious promoters to book. There is plenty of information in the public domain to create a powerful trail. Will they follow it? A reader has sent me links that expose how H&M’s managing director, Muralikrishna Gadiyaram, has been earning fat consulting fees and also been buying and disposing a huge chunk of shares of Helios and Matheson Analytics Inc (HMNY). This reader alleges that some of the shares were owned by H&M India whose depositors and bankers have been cheated. Interestingly, all the top executives of HMNY seemed to have been trading in a big way in their shares in October and November 2017 and in January 2018 when the shares were spurting on its acquisition of MoviePass and in anticipation of a successful IPO. It is another matter that HMNY’s shares have now crashed by almost 97% after the MoviePass subscription debacle.
 
According to this reader, Mr Muralikrishan made a neat profit on his trades but did not deposit the proceeds of this sale in court. It is up to the investigation agencies to find out what happened to the funds and bring the money back to India. And what about the money earned by Mr Muralikrishan from his consulting contract with HMNY of the US? Why are bankers, SFIO and CBI not tracking those funds?  
 
The consulting agreement was signed on 5 October 2017. The SEC (Securities Exchange Commission, US) shows a two-year contract with a very wide and easy mandate to provide guidance to the US company, virtually on his own terms. He would receive a monthly compensation of $18,750 from 31 January 2017 with scope for further payments for ‘additional services’. The agreement was to terminate automatically “on the occurrence of the bankruptcy or insolvency of either party,” but this personal deal naturally does not cover the Indian listed entity. The agreement was signed by Theodore Farnsworth, CEO of HMNY on behalf of the US entity.
 
HMNY’s stock has now crashed and its plans to raise funds have dimmed after its disastrous handling of MoviePass subscriptions. It added three million subscribers by slashing subscription rates from $50/month to $9.95/month but ended up with such huge losses that its viability as a going concern is now in question. This, probably, means that Indian investigators have a small window of opportunity to recover anything for bankers and depositors, mainly senior citizens, who were conned into losing large sums of money invested its fixed deposits.
 
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tapan sur

11 months ago

This has been happening for the last 30 years and looks like nobody may be able to prevent these financial frauds. We are like this only.

No bidders for Sahara's Aamby Valley, auction has failed, SC told
The Supreme Court on Thursday was told that the auction of Sahara group's flagship project Aamby Valley in Maharashtra has failed as there were no bidders in response to the notice inviting tenders.
 
The Bombay High Court's official liquidator in his report told the bench comprising Chief Justice Dipak Misra, Justice Ranjan Gogoi and Justice A.K.Sikri that there were no bidders in pursuance to its notice inviting bids.
 
With the auction of Sahara's Aambay valley off the table, the court on Thursday discharged Bombay High Court's official liquidator who was asked to sell the Aamby valley.
 
The top court had on April 16, 2017, asked the official liquidator to evaluate and auction the Aamby Valley property of the Sahara group to recover the money it has to pay to market regulator Sebi for returning to the investors from whom two group companies had raised it in 2007 and 2008.
 
Meanwhile, the court on Thursday permitted Sahara to sell its Vasai property to Sai Rydam and Prime Downtown Real Estate Developers for Rs 982.80 crore.
 
As the counsel appearing for Sai Rydam and Prime Downtown Real Estate Developers handed over a cheque of Rs 100 crore to the counsel for Sebi, the court directed the firm to deposit Rs 200 crore by July 24, another Rs 200 crore by August 15 and the balance amount by September 12 as it fixed next date of hearing on September 13.
 
Senior counsel Vikas Singh who appeared for Sahara informed the court that one of the two hotels in New York has been sold and the proceeds from its sale have gone to Bank of China towards the payment of loan taken from it for purchasing the two hotels.
 
The court then directed that all the details of the sale of the hotel including payments made to Bank of China would be filed before the court in an affidavit. It also asked Sahara to tell on what basis the hotel was sold.
 
As Sahara chief Subrata Roy urged the court that he may be allowed to do the business, the court said: "Let this money come, then we will have sympathy for you."
 
Sahara companies' Sahara India Real Estate Corporation Ltd (SIRECL) and Sahara Housing Investment Corporation Ltd (SHICL) had raised Rs 24,000 crore through optionally fully convertible debentures.
 
The top court, by its August 31, 2012, order directed Sahara to refund this amount along with 15 per cent interest.
 
The group has already given a part of the money to SEBI, that is parked in the SEBI-Sahara Refund Account.
 
On August 10, 2017, the apex court had declined the plea of Roy to put on hold the auction of Aamby Valley and allowed the liquidator to go ahead with the auction.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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tapan sur

11 months ago

Can we ever have a clean life in this country? We do elect governments through popular choice. Are advancing towards banana republic?

Indian ship owners, seafarers up in arms against new cabotage rules
Indian ship owners and seafarers working on different ships, are up in arms against Union Shipping Ministry’s new regulation to allow foreign ships to operate in Indian waters without any pre-condition.
 
The National Union of Seafarers of India (NUSI) has already decided to launch an agitation, which would include steps like blockade of foreign ships in Indian waters, if this decision is not withdrawn by the Government.
 
NUSI and Maritime Union of India, in the memorandums, have urged Prime Minister Narendra Modi to save Indian flag ships from being wiped out and have also appealed to all Indian seafarers to send long entreaties to PMO, urging Modi and the Union Shipping Minister Nitin Gadkari to “re-consider” the decision and to desist from scrapping the Right of First Refusal (ROFR) given to Indian ships. Indian National Shipowners’ Association (INSA) has also opposed the move arguing that it would potentially undermine the position of the domestic shipping industry in coastal trading.
 
Shipping goods from one Indian port to another is known as “cabotage.” It is governed by the Merchant Shipping Act 1958 (MSA). As per the earlier Indian Cabotage rules contained in sections 406 and 407 of the MSA, only Indian flagged vessels or vessels chartered by an Indian citizen or company, operating under a licence granted by the Director General of Shipping (DG, shipping), were allowed to carry cargo from one Indian port to another.
 
Earlier the foreign flagged vessels were permitted to carry cargo only if Indian flagged vessels were not available. That too if DG, shipping, received a no-objection certificate (NoC) from the Indian National Ship owners’ Association (INSA), a Mumbai-based trade association. However now this restriction has been relaxed and ships with foreign flags are  required to only obtain a licence under Section 407 of the MSA to operate in Indian waters.
 
“This decision is likely to result in major gains for companies which own and operate private ports in India, which import coal and agricultural products. This is the latest move in a policy tussle going for many years and appears to tilt the balance in the shipping industry and the ports sector, hugely in favour of major multinational shipping lines and private port operators to the detriment of Indian shipping companies and government-run ports,” a spokesman for NUSI said and added that due to this move, Indian ships will lose business and eventually “thousands of seafarers, who include officers, petty officers and ratings, will be rendered jobless”.
 
“Indian companies borrow at 12-14% and the debt has a tenure of about seven years while foreign companies borrow from 0 to 2% for a period of 10-12 years. As such the per day repayment cost for Indian companies is much higher. Such a skewed borrowing cost makes services of foreign ships in coastal waters much more competitive than Indian-registered ships”, sources said and added that in terms of fuel too, there is a cost advantage for the foreign ships. Foreign ships get fuel at cheaper prices in overseas ports while Indian ships pay 17-20% higher cost for fuel in Indian waters”.
 
Most of the ports are also opposed to the change and JNPT has also expressed apprehension about the change. The main point of contention in the new rules relates to a stipulation that once cabotage relaxation is granted to an existing container handling port, it should be able to tranship at least 50% or more of the total containers handled during the first year. The new port would have to achieve this level in the second year after a gestation period of one year. Otherwise, the relaxation granted would be revoked and the port/s will not be considered again for such relaxation for the next three years.
 
But according to official sources in Union Shipping Ministry, the decision is part of India’s plan to promote coastal shipping on major scale. At present only 100 million MT of cargo is moved along the Indian coast in India and 80% of it comprises petroleum products, coal and iron ore. A study by the Shipping Ministry has shown that coastal shipping could carry about 230-280 million tonnes per annum (MTPA) of coal, cement, iron and steel, food grains, fertilisers, petroleum, oil and lubricants, which could save Rs21,000-27,000 crore by 2025. Besides, by easing cabotage regulations, India could attract more containerised cargo by reducing time and cost for mainline vessels that now trans-ship containers at neighbouring hub ports. It would eventually help India in building a successful trans-shipment hub.
 
There are over 1200 Indian merchant ships with about 10300 million MT total gross registered tonnage (GRT) and 14.500 million MT dead weight tonnage (DWT). India ranks 15th in the world in terms of total DWT. At present India supplies around 12.8% of officers and around 14.5% of ratings to the world seafaring community. 
 
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Akshay Kini

11 months ago

The government should reduce taxes on fuel used by shipping and airlines to allow them to be globally competitive.
Once that is done, it will be unfair on railways, so they should also be given a discount on fuel.

It is then unfair on truckers, so reduce taxes for them as well.

There is no way to tax fuel for truckers separately, so reduce fuel taxes altogether...

This is a no win scenario.

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