What a world will it be wherein the lawmakers turn into lawbreakers? Who should an ordinary person turn to?
SEBI, the security exchange board of India, a supposed watchdog of financial operations in the world’s second most populated country has been accused of many conspiracies and overlooking several frauds.
The question is, does turning a blind eye toward these cases facilitate the directors in some way? Well, before you guess…it’s a big yes! Helping these fraudsters set them with a big chunk of money and what’s an evil world without greed in it?
The article incorporates within itself the instances wherein SEBI has failed to carry out its basic function: to regulate and keep an eye on fraudulent activities.
The famous Satyam Scam of 2008 bring about some revelations in recent times. A close study of the account has resulted in truths that are not just horrifying to the investors but also betray the confidence laid by them in the financial system of the government. Before delving into the conspiracy let’s have a brief recap of what the Satyam scam was.
Satyam Computer Services Ltd, situated in Hyderabad, was the largest IT and BPO service provider when it was founded in 1987 by three brothers. It was the crowning achievement of India’s economic development, but it was soon ensnared by falsification, betrayal, and criminal conduct. When the global recession hit in 2008, Satyam was one of the worst-affected companies, exposing its dark secrets.
We’ve got you covered if you want to grasp the fraud in a clear and simple manner. The story begins in 1999, when the corporation exaggerated its quarterly profits to meet analyst expectations. This was not the case.
The firm was also accused of creating 13000 fictitious workers and countless fictitious client invoices. The total value of the employees’ salary was roughly $3 million, which founder Mr. Raju withdrew.
They were successful in concealing the fact that they were backed by Pwc’s external auditors from investors and the board of directors. You might wonder why. Your solution is money. It is, after all, the answer to everything.
Satyam was paying PwC’s auditors twice as much money. Any company of this nature was doomed to fail. The total amount of money manipulated was Rs 7000 crores, which was later raised to Rs 12000 crores.
The unexpected change of events occurred when the 108-page SEBI order relating to Satyam was made public. Companies are built on the foundation of auditing. The watchdogs are in charge of conducting a thorough audit.
When it fails, though, stock markets are sure to tremble. The Companies Act of 1957 specifies which companies are eligible to be audited.
The most significant, and the one on which this swindle was founded, was that the right to transfer auditing privileges rested with shareholders and not with any other entity, whether it the board of directors or the designated auditor.
It is crucial to note that PWC or the Price Waterhouse network was divided into various segments mainly, “Price Waterhouse”, “Price Waterhouse & Co LLP” and “Price Waterhouse & Co Bangalore LLP” with not just the difference in the city as it operated in several cities.
What is absurd is to note that Price WaterhouseCoopers was specified on the documents to SEBI for conducting the audit, however, what came to light was that Price Waterhouse & Co Bangalore LLP was doing that on their behalf, and the audit reports signed by the partner, S. Gopalakrishnan and Srinivas Talluri, of same.
Another dark revelation was that the partners were not part of Price Waterhouse. What seems to be fascinating in the whole scenario was Price Waterhouse & Co Bangalore LLP which was found responsible for the auditing of Satyam company for good 8 years was involved in no other operation besides this. And the question dawns is do the shareholders of the company had that information?
The eye of suspicion on SEBI along with ICAI fell because it is baffling to understand how could the pillars of auditing of India failed to see what was right in front of them: forgery of signatures! And the question which arises is, whether this is merely an act of ignorance or a deliberate attempt at large-scale corruption? And if it is, why aren’t we talking about it?
The consequences of this act of SEBI behold within themselves extraordinary power in sense of loss of investor’s confidence, impacting investments in the economy and therefore the overall economic growth. For those who cannot judge the harsh ramifications let me ease it up for you.
What happens is when auditing agencies, whether public or private fails to cover a sincere audit, it results in frauds conduction by various firms and as is said by Martin Luther King, “ It may well be that we will have to repent in this generation”, the frauds will expose themselves and this will result in loss of trust among investors for these financial watchdogs.
Eventually, they will cease investing or pull their funds back. No investment in the economy will slow the production which in turn will result in greater unemployment and ultimately lead to poor economic growth.
This was just an instance of SEBI’s alleged involvement or failure. Another famous event in the course of SEBI’s fate was its former chairperson Chitra Ramkrishna sharing all the vital and confidential information with a Yogi, which remains unidentified to date.
Many intriguing facts came to light. The one that caught my eyes was, that a mid-level employee of Balma Lawrie’s subsidiary became a prime devotee of the same Yogi. The whole analysis and investigation also exposed that facts shared by Chitra included NSE five-year projections, employee appraisal discussion, board meeting agenda, and other similar realms. This was famously called an NSE scam.
Many wide-angles including tax evasion by none other than the chairperson! streamlined. Such a blister on the fiduciary relationship will be known forever resulting in limited confidence and trust of investors.
The above-listed scenarios question the government why aren’t a case of criminal conspiracy, fraud, and cheating slapped on Sebi and its directors?
edited and proofread by nikita sharma