Zee and Subhash Chandra have always managed to escape from punishments in the past even when irregularities have been proven. However, this time they are facing a Congress MP and a powerful corporate who has right connections in place. Can Zee and Subhash Chandra escape this time?
Subhash Chandra and his Zee group have always got away lightly from all kind of troubles so far possibly due to the “right connections” in the government. In fact, it is easy to forget that the Zee group was one of the three or four that were closest to scamster Ketan Parekh of the stock market scam of 2000. The Zee stock was among the K-10. The ten scrips—Zee Telefilms, Himachal Futuristic, Satyam Computers, Global Telesystems, DSQ Software, Ranbaxy, Silverline, SSI, Aftek Infosys, and Pentamedia—were openly ramped up by Ketan Parekh, while the regulator, and the finance minister (Yashwant Sinha) watched indulgently.
When the investigation into the scam started, it was found that Global Trust Bank (GTB) had rapidly routed money through a couple of Zee accounts in a single day in an unsuccessful bid to bail out Ketan Parekh. All this was documented by the Securities & Exchange Board of India (SEBI) and was on record with the Joint Parliamentary Committee (JPC). Even those days, the group and its media empire hit back at anyone who dared to write about the issue. A lackadaisical investigation was conducted by SEBI, which dragged for years and was to have been settled through a consent order. But suddenly, in the first week after CB Bhave was appointed chairman, in 2008, a whole-time member of SEBI passed a strange order allowing the group to get away with a mere warning. Not a single rupee was paid was as a fine.
This time around, things are different. The Congress itself is under pressure over innumerable corruption scandals and the victim of alleged extortion by the Zee group is a powerful industrialist and Congress Member of Parliament (MP) Naveen Jindal. The chairman of Jindal Steel & Power is one of the most aggressive players in the steel sector and has hit back with a sting operation that has led to a couple of investigations. Jindal has alleged that Zee News and its senior journalists (who also double up as business heads) demanded Rs100 crore in advertising to suppress negative reports about his involvement in the coal mining scam. Although the charges made by Naveen Jindal are of a serious nature, it is not clear if he would take his legal action to its logical conclusion—after all he is a businessman and needs the media. However, a suo moto investigation has been ordered by justice JR Verma, chairman of the News Broadcasting Standards Authority (NBSA) and this will not be as easy to manage as a pliant and easy to pressure SEBI.
It is worth going back in time to Zee’s involvement with Ketan Parekh. The share price of Zee Telefilms’ was ramped up almost 25 times from just Rs21 in March 1999 to around Rs490 in February 2000. The Essel group (promoters of Zee) even gave an advance of Rs706.4 crore to Parekh, a part of which was later returned. Doesn’t this unexplained advance sound familiar to what several politician-‘entrepreneurs’ and famous sons-in-law have received in recent times?
SEBI dragged on the investigation ordered by the JPC for eight long years after the scam. Then, to the shock of market observers, SEBI, under CB Bhave, allowed the company to walk away with a mere warning, after concluding that if found no nexus between the company and Ketan Parekh!
The whole-time member, TC Nair, who passed on the order, concluded that “the promoters of Zee Telefilms had by their conduct and actions given an impression that they aided and abetted Ketan Parekh (KP) entities in large-scale market manipulation of various scrips, including Zee, during 1999-2001 period.” There was copious evidence of Zee Telefilms’ extraordinary fund transfers through accounts in GTB.
This same member, was also guilty of earning a rent for hiring his flat to the Stock Holding Corporation of India (SHCIL)—a regulated entity—at Coimbatore where SHCIL had absolutely no business or operations. There was no action against Mr Nair, who in fact was expecting an extension when he passed the Zee Telefilms order. What was more shocking was that Zee Telefilms had been negotiating a consent penalty
of Rs5 crore when Mr Nair let it get away with a warning.
Coming back to Jindal-Zee episode, earlier the Congress MP filed a first information report (FIR) against Subhash Chandra, chairman of Zee group, Punit Goenka, managing director of Zee, Sameer Ahluwalia and Sudhir Chaudhary, both editors and business heads of Zee Business channel.
The complaint also blames Zee group’s head Subhash Chandra. It says, “Aforesaid Sameer and Sudhir further informed us that a vilification campaign against our company is under instruction, consent and full knowledge of aforesaid Subhash Chandra and other officials of their top management. They further informed that Subhash Chandra Goyal was fully aware of this. In fact this whole thing was his plan and each step had his concurrence”.
The Zee group, however, denied the allegations made by Jindal. According to a PTI report, Punit Goenka, managing director and chief executive, Zee Entertainment Enterprises has said, “This kind of allegation has happened in the past and may happen in the future. It doesn’t make any difference to us and we will stick to the truth. These are all pressure tactics.”
Coming back to Global Trust Bank, it played the role of a ‘buddy’ lender to Ketan Parekh. However, after the exposure of its role in the Ketan Parekh scam, GTB was about to collapse before the Reserve Bank of India (RBI) arranged its shotgun marriage with Oriental Bank of Commerce (OBC). At that time OBC was among the best banks in India with the lowest percentage of bad loans or non-performing assets (NPAs). After GTB’s merger, OBC declared a loss during the fourth quarter ending March 2008 and 39% fall in net profit because of crippling Rs242 crore write-offs for amortisation of losses due to the merger. OBC’s total loss due to GTB was estimated to be around Rs1,220 crore.
OBC reported a net profit of Rs302 crore during the second quarter ended September 2012 mainly due to strong recovery of assets that had gone bad in the past. During the second quarter, OBC’s total recovery was Rs449 crore compared with Rs303 crore in the year-ago period.
So far, Subhash Chandra and Zee have escaped from any punishment. This underlines one simple fact—no matter what regulations the government puts in place, powerful corporates with excellent media and political connections are never punished. Instead, their mess is distributed across a few million small and tiny shareholders or depositors.
It would be interesting to see if Jindal, the powerful corporate and Congress MP would take this case to its right conclusion or Subhash Chandra and Zee again manage to get away.