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Corporate Scam,Chit fund(Saradha scam) & Corporate Governance

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Corporate Scam,Chit fund(Saradha scam) & Corporate Governance

  1. 1. BY: Zeba Rukhsar MBA(HR & MARKETING) 2013-15 13MBA030 13209V14025 Dept.of Business Administration,Utkal University Bhubaneswar,Odisha,INDIA.
  2. 2. SCAM-  A fraudulent scheme/activity performed by a dishonest individual, group, or company in an attempt obtain money or something else of value. DEFINITION OF 'CORPORATE SCAM'  Activities undertaken by an individual or company that are done in a dishonest or illegal manner, and are designed to give an advantage to the perpetrating individual or company.  By creating effective policies, a system of checks and balances and physical security, a company may limit the extent to which fraud can take place. It is considered a white collar crime.
  3. 3.  A chit fund is a kind of savings scheme practiced in India.  A chit fund company is a company that manages, conducts, or supervises a chit scheme—as defined in Section of the Chit Funds Act, 1982.  According to Section 2(b) of the Chit Fund Act, 1982: "Chit means a transaction whether called chit, chit fund, chitty, kuree or by any other name by or under which a person enters into an agreement with a specified number of persons that every one of them shall subscribe a certain sum of money (or a certain quantity of grain instead) by way of periodical installments over a definite period and that each such subscriber shall, in his turn, as determined by lot or by auction or by tender or in such other manner as may be specified in the chit agreement, be entitled to the prize amount“.
  4. 4. Notable Scandals- INDIA Scandal Year reported Scope INR Crore Location Key players Saradha Group financial scandal 2013 2,500 West Bengal Kunal Ghosh,Sudipto Sen, Madan Mitra and many more[1][2][3] Vyapam Scam 2013 NA Madhya Pradesh Laxmikant Sharma, Dr. Vinod Bhandari, O. P. Shukla, Pankaj Trivedi, Sudhir Sharma, C. K. Mishra, Nitin Mahendra, Dr. Jagdish Sagar Indian coal allocation scam[8] 2012 185,591 National Comptroller andAuditor General of India, the coal ministry, manyelectricity boards and private companies Uttar Pradesh NRHMscam 2012 10,000 Uttar Pradesh Mayawati, Babu Singh Kushwaha 2G scam 2008 176,000 National Nira Radia, A. Raja, M. K. Kanimozhi, many telecommunications companies Uttar Pradesh food grain scam 2003 35,000 Uttar Pradesh Mulayam Singh Yadav, Mayawati
  5. 5. SARADHA CHAIRMAN & M.D- SUDIPTO SEN
  6. 6.  The Saradha Group financial scandal was a major financial scam and alleged political scandal caused by the collapse of a Ponzi scheme run by Saradha Group, a consortium of over 200 private companies that was believed to be running collective investment schemes(CIS) popularly referred to as chit funds in Eastern India.  The group collected around 200 to 300 billion (US $4–6 billion) from over 1.7 million depositors before it collapsed in April 2013.  The State government also set up a fund of 5 billion (US$79 million) to ensure that low-income investors were not bankrupted.
  7. 7.  Sudipto Sen was a Naxalite.In his youth, he was known as Shankaraditya Sen, and was part of the Naxalite movement in West Bengal. He changed his name to Sudipto Sen and may have had plastic surgery sometime in the 1990s,after which he became associated with land development projects in South Kolkata.  Many prominent personalities were arrested for their involvement in the scam including two Members of Parliament(MP) - Kunal Ghosh Srinjoy Bose, former West Bengal Director General of Police Rajat Majumdar, a top football club official Debabrata Sarkar, Sports and Transport minister in the West Bengal Government – Madan Mitra.Odisha MP Ramchandra Hansda (Biju Janata Dal),MLA Pravat Tripathy(Biju Janata Dal) and former Odisha MLAs Subarna Naik(Biju Janata Dal)and Hitesh Kumar Bagarti(Bharatiya Janata Party) have also been arrested for ponzi scam. Madan Mitra Debjani Mukherjee Kunal Ghosh  Sudipto Sen, Debjani Mukherjee and Arvind Singh Chauhan were arrested in Sonmarg, Kashmir, on 23 April 2013.
  8. 8. Fate Allegations that this consortium of companies is a Ponzi scheme Founder Sudipto Sen Defunct April 2013 Headquarters Kolkata, West Bengal, India Key people Sudipto Sen, Chairman and MD Debjani Mukherjee, Director Kunal Ghosh, CEO, Media Div. Number of employees 16,000+ Divisions Saradha Realty Saradha Exports Global automobiles Saradha media group
  9. 9.  Scandals in the corporate world, whether centered around corruption, bribery, fraud, or other greed tend to have a significant impact on the economy as a whole.  The increasing rate of white-collar crimes demands stiff penalties, exemplary punishments, and effective enforcement of law with the right spirit.  Corporate scams show a complete failure of Corporate Governance. To avoid this, a company needs to strictly follow a proper system of corporate governance and rotating the auditors for every couple of years.  The Satyam,2G spectrum and southern mining scandals have left India’s system exposed and naked on corporate governance like never before. From the Ambanis to the Jindals,Adanis,Tatas,K.M.Birla and others have had to face awkward questioning & suspicion in many scams.
  10. 10.  CONT…  An attempt is made to examine and analyze in-depth the Satyam Computer’s “creative-accounting” scandal, which brought to limelight the importance of “ethics and corporate governance”.  The Satyam scandal highlights the importance of securities laws and Corporate Governance in ‘emerging’ markets. Indeed, Satyam fraud “spurred the government of India to tighten the CG norms to prevent recurrence of similar frauds in future”.  The focus of virtues in corporate governance is to establish a series of practical application of core values & principles as well as commitment to ethical business practices.
  11. 11. 1) First, the promoters’shareholding is spread across several friends and relatives as well as corporate entities. It is sometimes difficult to establish the total effective holding of this group. 2) Second,the promoters are the dominant shareholders & that a large chunk of the shares is held by state owned financial institutions. As the financial institutions play a passive role, the promoters are effectively dominant shareholders and are able to get general body approval for all their actions. 3) The system's inability to separate promoter interests from corporate interests, leading to the shortchanging of minority shareholders.
  12. 12. 4) Over several decades of the command economy, a large parallel black economy has developed in India where transactions are carried out in cash and are not recorded in the books of accounts. Many Indian business groups have succumbed to the lure of black money.  5) Another important corporate governance issue is that of mergers and restructuring of companies in the same group.The promoters had secretly built up large positions in this company as a cheap means of acquiring shares of the merged company.  6) The continuing decline in interest rates, rapid financialisation of household savings, lack of financial literacy and investor awareness, political patronage, absence of adequate legal deterrence, and regulatory arbitrage encouraged the growth of similar companies.
  13. 13.  1. Businesses should conduct & govern themselves with ethics,transparency & accountability.  2. Businesses should provide goods & services that are safe and contribute to sustainability throughout their lifecycle.  3. Businesses should promote the wellbeing of all the employees.  4. Businesses should protect the interest of and be responsive towards all stakeholders,especially those who are disadvantaged,vulnerable & marginalized.
  14. 14.  5. Businesses should protect and promote human rights.  6. Businesses should respect,protect and make efforts to restore environment.  7. Businesses when engaged in influencing public and regulatory policy shoul do so in a responsible manner.  8. Businesses should support inclusive growth and equitable development.  9. Businesses should engage with & provide value to their customers and consumers in responsible manner.
  15. 15.  The problem in the Indian corporate sector (be it the public sector, the multinationals or the Indian private sector) is that of disciplining the dominant shareholder and protecting the minority.  The problem of corporate governance can be solved only by forces outside the company itself- the regulator and the capital market. Regulators can facilitate the process by measures such as: enhancing the scope, frequency, quality and reliability of information disclosures; promoting an efficient market for corporate control; restructuring or privatizing the large public sector institutional investors; and reforming bankruptcy and related laws.  The newly unleashed forces of deregulation, disintermediation, institutionalization, globalization and tax reforms are making the minority shareholder more powerful and are forcing the companies to adopt healthier governance practices.
  16. 16.  Corporate Accounting Fraud: A Case Study of Satyam Computers Limited by Madan Lal Bhasin  www.businesstandards.com  www.firstpost.com  www.dailymail.co.uk  www.wikipedia.org  www.history.com  www.slideshare.net  www.iimahd.ernet.in

Hinweis der Redaktion

  • A scam is an illegal trick usually with the purpose of getting money from people & avoiding paying tax.
  • Debjani Mukherjee was one of the executive directors of Saradha Group who could sign cheques on behalf of the group.Mukherjee originally joined Saradha Group in 2010 as a receptionist, and rose rapidly to be the group's executive director.
  • White-collar crimes –Financial crimes of Non violent nature. Crimes commited by top officials,directors,managers,etc are termed “White-collar crimes”.

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