Getting bigger and bolder, CFO News, ETCFO

Greed is the big problem. The love of money is the root of many evils. And it seems that insatiability is growing rapidly. But let me fall back on an age-old hypothesis of the famous triangle of fraud. These are pressure, opportunity and rationalization.

When my last book titled: “Corporate Frauds: Bigger, Broader, Bolder”, was published in December 2021, I had not expected that within two months I would have to write an article announcing that commercial crimes are becoming more important , deeper and bolder. My initial thought was that over time corporate fraud is likely to spread its tentacles. But unfortunately, things are already spiraling out of control!

Let me cite a few examples of how corporate fraud is taking on new dimensions.

  • The biggest scam game in the management of a stock exchange

I have never encountered a case where a professional executive would lead an organization based on the advice of a “yogi”! Many Indian entrepreneurs and managers follow the advice of certain seers or gurujis, regarding auspicious dates, times, etc. an anonymous yogi for 20 years by e-mail? More importantly, the CEO apparently shared most confidential matters, including NSE numbers and targets, with the mystic. Whether the fakir was an insider or a foreigner is still a mystery.

The transgression of corporate governance is unprecedented and the behavior of the CEO absurd!~

Bank loans of Rs 23,000 crore from 28 banks, for more than 5 years, were embezzled by one of the largest private shipbuilding companies, ABG Shipyard Ltd. ex-CMD, a few board members and others, apparently colluding to embezzle and embezzle funds.

Essentially, the bank loans were used for purposes other than those for which they were released. The loans were apparently diverted through 98 sister companies and mostly used to build personal assets. Why has the fraud gone undetected for so long?

Worst of all is that in 2010 and 2013 the company’s profit (PBT) figures were around Rs 300 crore (negative results started trickling in from 2014). And its fixed assets were rather lacking at around Rs 2,500 crore. How come the company managed to collect and defraud Rs 23,000 Cr of money from the bank? The math just doesn’t match.

Let me give you another set of numbers. Between 2013 and 2017 (when the company was in financial restructuring), sales fell from Rs 2,000 Cr to almost zero, while financing costs fell from Rs 400 Cr to Rs 1,500 Cr. What were the banks doing at that time? Didn’t they receive the quarterly financial figures?

Bank fraud may not get any worse!

  • Resignation of all independent directors

It is very rare for “all” independent directors (IDs) to resign in anger. The recent episode of ID quitting while sending a raunchy letter to regulators, citing corporate governance issues, has rocked the halls of business. This incident occurred at the subsidiary of power solution provider PTC India – PTC India Financial Services (PFS), an NBFC for infrastructure financing.

It’s not clear yet why all PFS IDs have resigned en masse, but things are surely getting murkier in some boardrooms!

What’s wrong ?

The above three recent episodes have given new colors to the history of good governance in India. Let me try to hazard a few guesses as to what’s wrong.

  • Greed is the big problem. The love of money is the root of many evils. And it seems that insatiability is growing rapidly.

Beyond the main cause, let’s return to an age-old hypothesis of the famous “triangle of fraud”. They are:

  • Pressure – motivation to commit fraud. It is possible that there was pressure to do something from the IDs of PTC India Financial Services which forced them to resign en masse. The pressure to outperform leads to many infractions, and PFS may have been guilty of this.
  • Opportunity – given a chance, many disappointments could occur. ABG Shipyard’s massive fraud could be the result of laxity on the part of bankers to monitor the company’s performance and what it was doing with the huge sums of money lent.
  • Rationalization – it is the state of mind to justify that it is correct to commit a hoax. The creation of the mystical yogi by the CEO of NSE could be the result of his mental justification by creating emails justifying his probable bad moves.

A global phenomenon

Increased commercial crimes and concomitant mainstream interest is not just an Indian phenomenon. Corporate fraud is becoming the talking point of many people around the world.

Recently, Switzerland’s biggest financial fraud trial in years against an ex-Swiss banker has sparked so much public interest that the hearings are taking place in a theater hall, a popular concert hall in Zurich. Former Raiffeisen Bank CEO Pierin Vincenz not only fraudulently invested millions of bank money in businesses he owned but also spent over $210,000 (Rs 1.6 Cr) in strip clubs -tease, charging it to the company’s account as a business expense.

Another example of outrageous CEO conduct!

A few last words

Just because several high thieves are imprisoned, it’s not enough to stop the greedy from cheating you and me.

Even now, the individuals behind the white collar crimes get away with it, most of the time the punishments are meted out to artificial legal entities – business organizations.

Unless the holdouts are named and humiliated, and law enforcement becomes more honest and nimble, the world is unlikely to be free from the growing disease of the banking system swindle and corruption. ordinary man, by a few selfish souls.

Corporate Frauds: Increasingly Big and BoldAbout the Author: Robin Banerjee is Managing Director of polyvinyl chloride film manufacturer Caprihans India. Prior to this, he was Managing Director of Arcelor Mittal Germany, Managing Director of Essar Steel and Thomas Cook, and Chief Financial Officer of Suzlon Group. He is the author of three non-fiction books “Who Cheats and How”, “Who Cheats and How” and “Corporate Frauds: Business Crimes Are Now Bigger, Wider and Bolder”.

Disclaimer: The opinions expressed are those of the authors alone and does not necessarily endorse them. will not be responsible for any damage caused to any person / organization directly or indirectly.

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