Ramesh Bawa of IL&FS Financial Services Arrested in Delhi by SFIO  
The Serious Frauds Investigation Office (SFIO) is understood to have arrested Ramesh C Bawa, former chief executive (CEO) of IL&FS Financial Services (IFIN), who had switched off his phone and vanished after the Supreme Court of India dismissed his petition challenging the SFIO’s powers to arrest him.  
 
Sources in the know told us that Mr Bawa was holed up with a friend and tracked down towards midnight by questioning his family members.  
 
Moneylife was the only publication to report that Mr Bawa had gone missing and had switched off his phone. As we reported on 11th April, Mr Bawa lives at Greater Kailash Part 1 in New Delhi. On enquiring at his home landline number, we were told that he was not at home. The person who answered the call, passed the phone to ‘madam’ , who we assume was his wife. She informed us that she was unaware of Mr Bawa’s whereabouts and that she had no idea if he had plans for any other legal action. When Moneylife  tried calling Mr Bawa on his mobile number, it was indeed  switched off. 
 
Sources say the agency will now follow the laid down procedure and he may be brought to Mumbai for further questioning.  
 
The SFIO, which is probing the Infrastructure Leasing and Financial Services Ltd (IL&FS) fraud, had issued summons to several former senior executives of IL&FS, including Mr Bawa. As much as 90% of the loans advanced by IFIN, the lending arm of the infrastructure conglomerate IL&FS have turned bad. Interpol notices have been issued against all the key members of the management cabal that worked closely with Mr Ravi Parthasarathy, founder of IL&FS, who ruled the 346 company conglomerate with unfettered powers and pliant boards for over 25 years. 
 
 IL&FS vice chairman, Mr Hari Sankaran, is already in SFIO custody. However, the founder and past chairman Ravi Parthasarathy  has not been touched on humanitarian grounds since he is undergoing treatment. However red cornor notices have been issued against him too and he is no longer allowed to go to London for treatment. 
 
 As reported by Moneylife, almost 90% of the loans advanced by IFIN have turned bad underlining the deep corruption and culpability of the previous management. Of its loan book of Rs18,805 crore, Rs10,656 crore was lent to third-party borrowers and nearly Rs7,000 crore to group companies, N Sivaraman, chief operating officer at IL&FS group, has revealed.  
 
According to Kaushik Modak, who now heads IFIN, the company has recovered Rs931 crore since the new board led by banker Uday Kotak took over the IL&FS Group.
 
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COMMENTS

Asheem Srivastav

3 weeks ago

Kindly let people know the impact of IL&FS scam on share market, if any

Rajiv Gupta

1 month ago

IL&FS is the biggest scam in the recent times & proving to be a black hole. None of the shareholders representative ever bothered about being vigilant & stem the rot. Like Sankaran & Bawa, they were also responsible & therefore held liable & put into jail. You cannot believe that they did not dip their fingers in the pie. Therefore, all criminals should be treated alike. The rating agency should be held liable & once again those responsible should be put into jail. No scam of 1 lakh Crore magnitude can happen without the blessings of the auditors. Therefore those responsible in Deloitte should be put behind the bars. Remember the case of Rajat Gupta of Mckinsky in US, all those responsible should be behind the bars. We are not talking about layman or uneducated fools but highly qualified & well regarded officials. If they were chosen to be in that position, they are responsible for the consequences. The cheats pay for the crimes.
Even in 2014, the GoI allowed them to issue RCPs, which is actually a hybrid & generating tax free incomes. It appears that several MNCs invested in that the pension & PF funds of the employees. The GoI is directly responsible for stopping cheating in this case because institutions like SBI & LIC of India & HDFC (one of the best) are involved. If they failed to see & assess the truth then you cannot have confidence in these institutions also! Is it really acceptable to the GoI. Therefore, the GoI needs to take the responsibility.
What about the mother company i.e. IL&FS Ltd. What is the status of this company? Is it down the drain then why we should have a new Board. Is it to ensure that people are given false assurance of something being done but actually nothing will happen. Is this not cheating once again?
Lastly, reportedly, the GoI is settling the liability of the International institutions because of the fear of losing faith in making investments being safe in India. Is this really, the correct thing to do? No, once again this is cheating? Why no priorities are being set to take care of the individual investors who have put in their lifetime savings into the company? Is suicide the only solution for these people? Why & how the government is least bothered?

MIHIR AVINASH KULKARNI

1 month ago

There's Moneylife on one side and then there's the rest. Kudos! God bless; more power to you and Team.

Hudaf Shaikh

1 month ago

Welcome step - the British Courts have not just denied bail to Nirav Modi but also thrown him in a third class jail with druggies and murderers for scamming PNB of $ 1 billion.

Our courts should not just throw Bawa and Sankaran but entire team of directors of IL&FS for the $15 billion scam which has impacted retirement savings of millions of people.

B. Yerram Raju

1 month ago

Congratulations for making bandicoots come out of the hole to go to the cell.

IL&FS Mess: Where Is IFIN’s Ex-CEO Ramesh C Bawa?  
Even as the Supreme Court has dismissed a petition filed by Ramesh C Bawa, former chief executive officer (CEO) of IL&FS Financial Services (IFIN), the man himself appears to have given investigation agencies like the Serious Fraud Investigation Office (SFIO) and the Enforcement Directorate (ED) the slip.
 
According to sources, Mr Bawa has stopped using his old mobile number and is not traceable. Sources close to Infrastructure Leasing & Financial Services (IL&FS) told us that he had changed his SIM card. 
 
 When Moneylife tried calling Mr Bawa on his mobile number, it was, indeed, switched off. Mr Bawa lives at Greater Kailash Part 1 in New Delhi. On enquiring at his home landline number, we were told that he was not at home. The person who answered the call, passed the phone to ‘madam’, who we assume was his wife. She informed us that she was unaware of Mr Bawa’s whereabouts and that she had no idea if he had plans for any other legal action. 
 
However, it is surprising that the SFIO and other government agencies, that are investigating the fraud, have lost track of him. Highly placed sources tell us that there are frantic attempts to track him down at various places where he is known to have assets, including Chandigarh and Pithampur. 
 
The SFIO, which is probing the IL&FS fraud, had issued summons to several former senior executives of IL&FS, including Mr Bawa. As much as 90% of the loans advanced by IFIN, the lending arm of the infrastructure conglomerate IL&FS, have turned bad. Interpol notices have been issued against all the key members of the management cabal that worked closely with Ravi Parthasarathy, founder of IL&FS, who ruled the 346 company conglomerate with unfettered powers and pliant boards for over 25 years. 
 
Corporate observers are also stunned that the government seems to be treating those associated with IL&FS with kid gloves, especially when ordinary investors in mutual funds have begun to bear the brunt of investments made in IL&FS companies. 
 
So far, only the former vice-chairman Hari Sankaran, has been arrested, that too only last month. His arrest saw Mr Bawa hiring some of the most expensive lawyers in the country to challenge the SFIO’s powers to arrest and to get protection for himself from the courts. However, his plea was not entertained either by the Bombay High Court or the Supreme Court. 
 
On Wednesday, a bench headed by Chief Justice Ranjan Gogoi told senior counsel Mukul Rohatgi, "We are sorry to deny you any relief in the matter. Petition to be dismissed." Mr Rohatgi, the counsel for Mr Bawa told the Court that his client fears arrest in the case, as "SFIO proceedings under Companies Act was completely illegal".
 
As reported by Moneylife , almost 90% of the loans advanced by IFIN have turned bad underlining the deep corruption and culpability of the previous management. Of its loan book of Rs18,805 crore, Rs10,656 crore was lent to third-party borrowers and nearly Rs7,000 crore to group companies, N Sivaraman, chief operating officer at IL&FS group, has revealed. 
 
According to Kaushik Modak, who now heads IFIN, the company has recovered Rs931 crore since the new board led by banker Uday Kotak took over the IL&FS group.
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COMMENTS

Godavari Joshi

1 month ago

The ex senior management of the ILFS is indeed being treated with kidgloves by the Govt and regulatory authorities. The situation at ILFS ( and every other major such cases coming to light ) are not overnight developments. These have been the outcome of the crises building up over the years and decades, sadly due to the attitude of greed, apathy , ticking all the checkboxes approach followed by the statutory & regulatory authorities following the law in letter and not in spirit by the people who were to act in Fiduciary capacity. The impact of the ILFS, may still be unravelling, and probably the worst is yet to be seen ! Its going to be the gullible small investors who end up bearing the brunt- as we do not know when and if at all the crooks will be brought to book and how will the investors be compensated.

Whistleblower Alleges Deloitte Has Helped IL&FS Fudge Its Accounts Year after Year
An anonymous whistleblower, who claims to be part of the “senior management team at Deloitte, Haskins and Sells LLP (Deloitte)” and has been “privy to several internal irregularities in providing professional services to the IL&FS (Infrastructure Leasing & Financial Services) group” has written to us outlining how the audit firm benefited by helping the failed group fudge its accounts year after year. 
 
In fact, Deloitte ensured a clean chit to IL&FS even when the Reserve Bank of India (RBI) claims to have red flagged a few issues and asked it to reduce its outstanding debt. It is another matter that IL&FS did nothing. The whistleblower says, “The extent of the scam is mind boggling” and hopes that investigation agencies would question members of the audit team, thereby giving him a chance to disclose how the “the senior management at Deloitte is aware of the financial mismanagement and impropriety by the IL&FS group” and actively helped fudge facts. 
 
Deloitte has an internal reporting system; but the whistleblower says, “I have no faith in the current leadership and, hence, am consciously not resorting to our internal whistle-blowing mechanism.” He goes on to provide a few details which need to be understood in the context of what we already know about its relationship with IL&FS. 
 
Deloitte has audited IL&FS Financial Services Ltd (IFIN) for 10 years and remained the auditor until it completed 10 years in 2018. The audit report had absolutely no adverse findings even in 2017-18. On 3rd April, the new IL&FS management headed by banker Uday Kotak said that 90% of the loans advanced by IFIN, the lending arm of IL&FS, had turned bad. 
 
Key Allegations
1. Deloitte was a beneficiary of IL&FS’s ‘unmitigated growth’ over the decade in multiple ways. It enjoyed a ‘preferred advisor role’ and was awarded several advisory contracts on a ‘single sourced basis’ at ‘substantially high fees’ as compensation.
 
2. When audit findings would not show IL&FS in a ‘favourable light’ and Deloitte had to take a position, the auditor conveniently relied on “management explanations and comfort letters by compromising on its independent opinion.” At times, IL&FS’s top management would meet and “coerce Deloitte partners for a more favourable position or watered down position.” This was in addition to the ‘watering down of views’ that already happened internally at Deloitte, in the first instance. 
 
3. Over the years, says the whistleblower, this led the entire audit becoming “susceptible to legacy positions and compounded the financial misreporting.” In many cases “the language of the management response was agreed before hand by Deloitte to close its internal reviews.”
 
4. The whistleblower claims that, in the past three years, Deloitte discovered enough facts that would have qualified the report. However, a specific audit partner (name withheld by Moneylife) would hold close-door meetings with IL&FS’s senior management and find ways to ‘manage’ these by relying on management explanations and opinions. 
 
The whistleblower goes on to outline how Deloitte benefited from these compromises. 
 
Financial Benefits 
“As a compensation,” for accommodating IL&FS in audit “it was agreed that the group will remunerate Deloitte by way of consulting and advisory fees.” Deloitte Consulting, a separate legal entity was paid crores of rupees under the guise of a ‘strategy study for diversification’. He also says, “Deloitte charged a very large sum of fees to recommend creating a more complex financial services business and grow its already stressed books.”
 
The audit partner allegedly worked with the consulting entity partner to ensure that Deloitte earned a whopping Rs20 crore annually from the IL&FS group as a reward for ‘managing’ its audit. The ‘round-tripping’ of loans, which was disclosed in detail by a forensic audit ordered by the new management at IL&FS, was not only well known to Deloitte’s senior partners, but they also “helped to identify new businesses to cover round-tripping.”
 
According to the whistleblower, Deloitte employed a senior tax adviser (name withheld by Moneylife) at a very high salary “to ensure that he would continue to earn high revenues for Deloitte.” He helped design complex tax structures that would meet the ‘eye of the law’ while Deloitte would be protect itself through management explanations. 
 
How To Unearth 
Worryingly, the whistleblower says that since the collapse of IL&FS, the team at Deloitte has been “involved in a massive cover up and creating paper trail.” He goes on to suggest how investigators can unearth the involvement of Deloitte’s top brass. 
  • Accessing internal mails of select persons and checking their e-calendars for meetings that were not officially minuted.
  • Confirming internal revenue targets for fees earned from IL&FS group. Checking non-audit and consulting fees billed by Deloitte from IL&FS group, its associates and especially its joint venture partners.
  • Questioning audit team members dealing with IL&FS. 
 
The question is: Is the government really serious about a clean-up? So far, everybody connected has been treated with kid gloves. The government-appointed board of IL&FS commissioned Grant Thornton to conduct a forensic audit of IFIN (Project Icarus) which came up with a shocking interim report detailing outright fraud, mismanagement of funds, capricious actions and total disregard for regulators and regulation by the previous management. It also narrowed down the responsibility to the committee of directors (CoD) comprising: founder and former chairman Ravi Parthasarathy, former vice-chairman Hari Shankaran, director Arun Saha and IFIN’s former managing director, Ramesh C Bawa. Even this has not led to any decisive action other than issuing a few show-cause notices. What is worse, some very close friends of this cabal have been appointed by the government to head the new management. 
 
The Institute of Chartered Accountants of India is also investigating the role of all auditors and its interim report has already accused them of acting in a ‘fraudulent and negligent’ manner. The Deloitte whistleblower has only confirmed that this was the result of a deliberate nexus with the auditor and for financial benefit. 
 
Moneylife wrote to Deloitte’s India CEO (chief executive officer) Punit Ranjen for his comments. A PR (public relations) agency for the audit firm sent us this reply on behalf of Deloitte. 
 
“Deloitte strongly disagrees with the issues raised in your mail and these seem to be an attempt to malign the reputation of the firm. The statements made are incorrect and misleading. As you are aware, there are ongoing investigations by regulators and agencies. Further, given our responsibility to maintain client confidentiality, we are regrettably constrained from providing you with the information you have sought. However, we wish to emphasise that our work has been conducted in accordance with prescribed standards and regulations.”
 
We shared the whistleblower’s letter with Claire Hassett, managing director, Deloitte Global Communications who, in turn, appears to have shared it with senior management in India. There has been no further response from Deloitte. 
 
We have also shared the whistleblower’s letter with Uday Kotak, now the chairman of IL&FS, and with an official of the Serious Frauds Investigation Office (SFIO), which is investigating IL&FS, as well as other Central government agencies. 
 
The independence of rating agencies and statutory auditors is critical to keep a check on malpractices of borrowers. If rating agencies and auditors were not derelict in their duty, the shenanigans of IL&FS would have been discovered much earlier. The loss to lenders could be well in excess of Rs30,000 crore. More importantly, if the checks & balances in a system—provided by ratings, audits and inspections (by the RBI in this case) fail—then all investment decisions become like a lottery. If that is the basis on which we are forced to invest, why has the government spent so much money on creating five giant regulatory organisations for the financial sector alone?
 
Unless those responsible for allowing the IL&FS mismanagement to continue for years are booked, what kind of message are we sending to investors and the people?
 
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COMMENTS

Nagaraju Bommanahalli

1 month ago

In few years most of the PSU banks, NBFC , companies become bankruptcy because they gave huge fraud loans to big companies with out proper security.common man will loose their money in few months

Ravindra Shetye

1 month ago

Unless such INDIVIDUALS, whether in individual capacity or in the capacity as PARTNERS of an ENTITY are put behind the bars at least for a few years such White Collar Thugs will not reduce in number.

REPLY

Nagaraju Bommanahalli

In Reply to Ravindra Shetye 1 month ago

In few years most of the companies, Banks NBFC etc become bankruptcy because they gave huge fraud loans to big companies with out proper security.for giving loans BJP, Congress leaders, RBI ,auditors ,central government officials etc involved that is why investigation going slowly.I think [email protected] fraud started from Gujarat itself . common people will loose their hard earned money in few months

K V RAO

In Reply to Nagaraju Bommanahalli 1 month ago

ILFS frauds didn't originate from Gujarat. It started in Mumbai. Gujarat state has an office of ILFS like it's other offices.

B. Yerram Raju

1 month ago

You are doing tremendous service by exposing these branded Auditors. Earlier in Satyam Case PWC has been banned. Unless Deloitte is more powerful and more capable to hide its acts of connivance, it should find the same fate.

REPLY

K V RAO

In Reply to B. Yerram Raju 1 month ago

PWC was not banned but it's two partners ( most of the auditors who join become partners as per US parlance)were banned. PWC used it's clout (it may mean anything from money to influence)and got itself exonerated. ICAI , auditors regulator, just remained a mute spectator. Deloitte is quite aware of Indian regulators' strengths and weaknesses. So it doesn't bother about its misadventures. At the most one or two guys may become the sacrificial goat (s).

parinita seth

1 month ago

In my opinion I think all the Audits done by the BIG 4 firms are fudged , Audits certificate today benefit the management , help the promoter's and cheat the shareholders or public at large , not only that but these firms are a gang also for insider trading information based on which positions are taken on the stocks in cash and F&O markets .
There should be revamp of the whole structure of the compliance and audit of the books of accounts with full fraud detection alarm and rewarding those who blow the whistle.
Also all the Audit firm should be banned immediately and wound up for negligence in their working and professional misconduct including PWC , EY , KPMG.
Meanwhile for ICAI should be done away with new mechanism for Auditor just like MCI was wounded up due to corruption.
For few year's Indian institution for Auditor should be given to CPA (US) or ICEW or CIMA till new mechanism is in place.

Mahesh S Bhatt

1 month ago

Audit sells by Delloite Haskin Sells so where is the problem Take it Easy Policy Mahesh Bhatt

Vaibhav Dhoka

1 month ago

Going by Indian track record of action on whistle blowers red flag and investigation and action there on is never taken to logical end. No one has ever been punished and not a pai has been recovered. On the contrary heavy sum is spent on investigation and court room procedures.

Suketu Shah

1 month ago

Yet another reason to have bank transaction tax on non corporates as suggested by Dr Swamy again and again.

REPLY

Amit Chowdhury

In Reply to Suketu Shah 1 month ago

I fail to see the link. Do you do this often? Use random pieces of news to push your own economically illiterate agenda?
BTT is the worst idea anyone has had in a long time. It is inherently regressive (because smaller transactions will face a higher proportionate burden) and will discourage people from using banking channels. What better way of encouraging banking than providing a financial incentive to resort to non-banking channels?

Rajan Nair

1 month ago

What’s new... all the audit firms do it and at times the regulators bend backwards to encourage such fraudsters. The Cadbury tax evasion is a classic case.. they created a phantom factory to claim tax exemptions.. fake audit reports and what not; Matter to heard in CESTAT.

CHATHANTARA GOPALAN PRADEEP KUMAR

1 month ago

The time is probably overdue for issuance of directions by Govt of India prohibiting companies retaining Deloitte for audit of their accounts. The Institute of Chartered Accountants of India and Shareholder Associations ought to make an immediate representation to the Govt of India in this regard.

AAR

1 month ago

Company pays Auditors to audit it books. If Auditors do their job and bring out irregularities they may lose the business. Whats their incentive to do true auditing?

REPLY

Akshay Kashyap

In Reply to AAR 1 month ago

Shareholders of the company pay the fees to the auditor for getting the books audited, duty of the auditor is to audit the books of accounts prepared by management. So shareholders, auditor and management are three different persons. Auditor doesn't need any incentive he is only answerable to shareholders

AAR

In Reply to Akshay Kashyap 1 month ago

No shareholders directly pays auditors. It is the management who pays auditors.

K V RAO

In Reply to AAR 1 month ago

Well said

K V RAO

1 month ago

Deolliot is one of the big five auditors. Massive frauds in financial sector are due to "no fear" environment in India. Further the judiciary and committees take their own sweet time to get into action. None knows who is shielding whom. ILFS is a case of financial misdoings during the last 20 years. It is difficult to trace the fraud trails and certain king pins would have died, resigned, or retired. Top guys who are in the control regime during the last 10 years would have ring fenced themselves. ML is doing it's fine job of investigations. Keep it up. What else we poor readers can say?

REPLY

K V RAO

In Reply to K V RAO 1 month ago

Please read Deloitte.

Meenal Mamdani

1 month ago

Unfortunately auditors have always got away with little or no punishment when the company is found to have committed fraud. The exception was Arthur Andersen in the Enron scandal when the firm went into bankruptcy and ceased to exist. It seems the US govt was so shocked by this outcome that ever since then it has tried to shield auditing companies from such a fate.
The same can be said of the credit rating agencies like S & P who rated the subprime mortgages as triple A leading up to the financial crisis of 2008. All these rating agencies should have been fined heavily but that did not happen.

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