Harsh Truth behind Billionaire Scams | Dhruv Rathee - YouTube

Greetings, Friends!

Who doesn't want to have a grand mansion near the beaches of Goa?

where one is enjoying beer or cocktails in their swimming pool

where one can throw lavish parties for their friends which can go on till 6-7 AM.

There used to be one such villa in Candolim beach of North Goa, belonging to Vijay Mallya- Kingfisher villa.

It still is there. Now, it’s not known as Kingfisher Villa,

as it was sold to actor and businessman Sachin Joshi for 73 crore rupees in April, 2017

From whom? Not Vijay Mallya but from SBI, and 14 other banks.

Yes, you've heard me correctly, as 14 banks have organized the auction of the property as Mallya owes them more than 9,000 crore.

ED had registered a money laundering case against Mallaya, but he was in London.

The type of crime which Mallaya is accused is known as white-collar crime

which is usually committed by rich and educated people because of their greed for money.

Usually, when we talk about crimes and criminals, we understand bribery or pick-pocketing.

But these types of crimes are done by the rich on the ordinary citizens.

You must be worried that how come so many business scams are possible in India?

They're such reputed companies, as their financial information is available in the public domain, they're also listed in the stock market exchange

whether it's Kingfisher Airlines, Satyam Computers, or Sterling Biotech.

How are they able to pull this off? And why is it impossible to catch them?

Today, we'll get to know everything in our video.

All these big industrial groups, or businessmen have not only one, but multiple companies.

One of the companies is the main company, which is known as the Parent Company,

where the real owner is the shareholder of the Parent Company, and below it are subsidiary companies.

Every company has a Board of Directors, whether it's subsidiary company, or the parent Company.

Now, you can imagine, one industrial group, such as Nirav Modi's Firestar Diamond, or Wadhawan's HDIL

(which is connected with 6,500 crore PMC bank's scam)

How many companies under them must be connected, in forms of parent or subsidiaries!

The funds are distributed among the companies in a manner so that it becomes extremely difficult to track them.

It's very easy to get confused in understanding which one is a parent or subsidiary.

This Is the reason corporate lawyers and financial consultants earn so much, their only job is to understand the layer of the companies, and restructure them.

Then there comes shell companies whose name you must have heard a lot, especially in the case of fraud.

So, what are these shell companies?

From outside, they look beautiful, but inside they're hollow exactly like a shell.

They're also known as dummy companies.

They're created mostly for financial fraud, they don't have employees, office space, or no business transactions take place from them.

Their names are entirely different from the owners, or their main companies, so that the authorities are unable to connect them.

You must have heard about Benami Transactions, where all the transactions are done on someone else's name, but the profit goes to the third party

According to law, it's known as Beneficial owner, or the ultimate beneficiary.

You must have heard about Nirav Modi, about whom I've also made a detailed video in February, 2018.

He is accused of committing around 2 billion dollar bank fraud under his diamond business company in Punjab National Bank.

According to the ED investigation, Nirav Modi had created more than 15 shell companies outside India.

And in Hong Kong, his five shell companies had received funds of 8,270 crores under the pretext of export-import business.

According to ED, the owners and directors of this company are the junior employees of Modi’s Firestar Diamond,

whose salary is only between 8,000 and 30,000 rupees.

The directors were staying in India, and there's a very high possibility that these junior employees didn’t have any idea.

They were just dummy directors of a dummy firm.

There’re many places in the world where it’s very easy to open a shell company

because in these territories or companies, according to law, there’s no need to write the name of the beneficial owner in any of the documents.

There’s no requirement to reveal the real beneficial owner of this private firm.

Most of the companies and billionaires use these companies to avoid paying their taxes.

You must have heard about countries like Switzerland, and Hong Kong, but there are small islands as well where companies don’t have to pay corporate taxes

Ex- British Virgin Islands, Cayman Islands and Bermuda.

Here, a company doesn’t need to pay the taxes, and here it’s comparatively very easy to create shell companies

and there is no need to reveal the name of the beneficiary owner

Hence, they become the perfect place to set up shell companies.

It’s not so that shell companies are only outside India, they’re found in India, too.

They’re very useful to store and transfer black money.

In 2017, the government had set-up a task force, to identify shell companies.

Since then, according to a PTI report, the Ministry of Corporate Affairs has expunged 4.25 lakh shell companies from its register

So, y'all can see how complicated this is by the time the police, CBI and ED get to know about it,

in many cases, businessmen like Nirav Modi have already left the country

He had already left India by the time the bank fraud news went public

After one year, he’s found in London, as it’s the favourite spot of Indian businessmen.

Why do so many of the economic fugitives prefer the UK?

Why do all of them end up in London? There are many reasons, one of them is that Americans question a lot!

Secondly, if we talk about Europe, countries like France and Germany language are different,

and unless and until they learn the language, they won’t be able to survive.

The main reason is that, according to the law, it’s not at all easy to bring back anyone to India from the UK, and make them answerable to the judiciary.

There’s an extradition treaty between India and the UK since1992

According to it, both the countries can request each other to return the accused or convicted criminal to the home country

It could be considered a type of International co operation

Between 1992 and 2006, India has requested at least 23 times for the extraditions, but it has been accepted only once.

The thing is that, before extraditing, the UK law lists multiple conditions, and one of them is Human Rights.

It means that Indian authorities have to convince the UK judiciary that in India the accused will get a fair trial, and will not be tortured in jail

Much is talked about this condition

because this was precisely argued by Vijay Mallaya before a London court

where he had stated that Mumbai’s Arthur Road jail has insufficient natural light, and fresh air.

Delhi’s businessman, Sanjeev Chawla, the one wanted in the 1999 cricket scandal, had used the same argument, that the Tihar Jail’s conditions are horrible.

This year, in February, finally Sanjeev Chawla had been extradited from London to Delhi.

This is the only second successful extradition from the UK.

Hence, we can hope to get to see Mallaya, and Modi back.

Even, if we bring them back, then the actual problem is systemic.

In November, 2019, the Finance Minister, had told the Parliament that between April to September, 2019,

within the six months period, state-run banks - public sector banks, had reported fraud worth more than 95,000 crore.

Many small, and big businessmen, have taken undue advantage of inefficiency, corruption and outdatedness of our public sector banks

Our system is designed in such a manner, that before giving out the loan, the bank has to carry out a due diligence on the borrower.

It’s like a background check where they need to calculate the assets of the borrowing company,

observe their group companies, their borrowing and repayment history, and what their collateral assets are.

Basically, before sanctioning the loan, the bank has to analyze whether they’re capable of giving back the loan or not

In many cases, mid-level, and junior level bank officials, who belong to simple middle-class families, get lured or bribed by the companies.

In Nirav Modi’s case, CBI had arrested deputy manager and a bank clerk of foreign exchange of PNB bank.

According to the CBI charge-sheet, the manager had issued Letters of Undertaking (LoU) without any collaterals,

and on this basis, Modi’s company had taken loans in dollars from the branches of Indian banks in America, which they failed to repay.

In March 2018, then Finance Minister of India, Arun Jaitley, had updated the Parliament that 1,213 fraudulent letters

had been issued to Modi’s companies.

It had happened over seven years.

So you can understand that such types of financial frauds are impossible without the collaboration, and cooperation from inside the bank

and in many cases there is political support, even if they are discovered then there can be no investigation on them.

Another loophole was discovered, where PNB’s core banking system (CBS) software was not integrated with the SWIFT system

SWIFT is an international bank to bank messaging system, where bank transfers and payment information are updated,

hence it’s an international system with inbuilt checks and balance.

According to banking experts, if they would have been integrated with SWIFT, then it would have spotted the irregularity

If LOU, or bank loan would have been given without the collateral, then it would have triggered the warning alarm in the SWIFT system

Deputy manager, and clerk - both are stating that they’re innocent.

Clerk is on bail, and he’s stating that his only job is to enter the data, and he was just following the orders of his boss that is, the deputy manager

A few days ago, it was reported that CBI has filed a fresh charge sheet against the deputy manager and his wife

According to the chargesheet, they had accumulated disproportionate assets worth 2.63 crores

Here is another example- Sterling Biotech Case, which is a Baroda based pharma company

As per the CBI and ED investigations, the promoters of this company have done a money laundering worth more than 8,000 crores

The promoters have been accused of taking funds from Indian public sector banks and diverting them to their foreign businesses

For example, they have a large oil business in Nigeria

and just like Mallaya and Modi, they too left India and went abroad

In January 2018, ED arrested a former director of the Andhra Bank in connection with this case

According to March 2018 ED chargesheet, the promoters of Sterling, Sandesara brothers,

had made cash payments to this director. The CBI has also alleged

that this cash was laundered by the director through a Kolkata based shell company

just like I'd earlier said about shell companies

This might make you wonder whether it is so easy to take loans from public sector banks and then engage in money laundering?

The bitter truth is that the checks and balances system of the state run banks is not strong

If even one or two people of the bank are in collusion with the promoters, owners or the shareholders of a company,

then the security of the system should be such that the problem is identified as soon as possible

Reserve Bank of India had served repeated reminders to PNB to integrate their banking system software with the SWIFT system

Even then, the systems were not integrated

You must be aware that there is a certain resistance against technology in government organizations

Their thinking is to maintain the status quo

There is a resistance to modernization and up-gradation in public sector banks

Linked with this problem is the lack of motivation of employees

The middle and senior level employees of state run banks do not make as much money

in comparison with the private bank employees

This is why it becomes difficult for these banks to attract dynamic and motivated talent

There is also an attitude problem- the "how does it affect me?" attitude is clearly visible in several public institutions

So, what should the government do?

There are a lot of laws to deal with financial frauds and many of these laws were made in response to financial frauds

For example, the corporate governance norms of India were tightened after the Satyam scam

After the flight of Nirav Modi, the Fugitive Economic Offenders bill was passed by the Parliament

In 2017, the Ministry of Corporate affairs made a law about the layers of the companies

and limited the number of subsidiaries

The agencies have also proliferated- You must already know CBI and Ed, then there is Serious Fraud Investigation Office (SFIO)

Directorate of Revenue intelligence, Directorate of Income Tax Investigations

all these agencies exist today

The matter is about implementation- if the government wants to keep an Indian within India, it can very easily do so

It does so, actually. Take the example of Naresh Goyal of Jet Airways

His Mumbai to Dubai Emirates flight was just about to take off, when in a very Bollywood style dramatic fashion,

Goyal and his wife Anita were off loaded from the flight

Because the government had to start investigation against Goyal in the matter of the bankruptcy of Jet Airways

He had to be questioned. So, the flight was barred from taking off at such an early stage

But it was not possible in the case of Vijay Mallaya, Nirav Modi and Lalit Modi. How were they able to escape?

Even the media houses are to be blamed

There are a lot of rumors in the market- some true, some untrue. Sometimes, financial journalists get confidential information/ tips

to investigate certain cases and unearth fraud

But the editors and owners of these media houses are bound in a manner, you could say

because these business groups give their ads to these TV channels and print newspapers and fund them

To write against them becomes very risky for the media houses

If you want to know more about these financial frauds, there are a lot of books and video content available on it

Pawan Lal, who is an associate editor in the Business Standard,

wrote a book on the rise and fall of Nirav Modi, that was released last year

Talking about visual content, there is a show called "Bad Boy Billionaires" that just got released on Netflix

and there is a web series based on the life of Harshad Mehta, who was behind India's biggest stock market scam

by the name "Scam 1992" which is on Sony Liv

Financial scams are a multi dimensional problem, a type of inter connected web

In a way, it shows a mirror to society- to what extent can a man go for the greed for money and the desire to amplify status and wealth

and what kind of games can he play

It is quite clear

I hope you would have liked this video. If you did, then share it

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We will meet again in the next video

Thank you