Tuesday, March 8, 2016

Aircel - Maxis scam : ED - IT raids dig up empire of PC's son in 14 countries

J Gopikrishnan / New Delhi / Feb 29, 2016

Former Finance Minister P Chidambaram’s son Karti has built a huge empire for himself in different parts of the world by making investment in real estates and engaging in other business activities in London, Dubai, South Africa, Philippines, Thailand, Singapore, Malaysia, Sri Lanka, British Virgin Island, France, USA, Switzerland, Greece and Spain. This came to light from the documents recovered during the recent joint raids of the Enforcement Directorate and Investigation Wing of Income Tax in the Aircel-Maxis scam.
The investigation team got the details of Karti’s wealth following raids on his company, Advantage Strategic Consulting, which is involved in the Aircel-Maxis deal for financial transactions with telecom beneficiaries. 
Most of the transaction and purchases of properties and acquisition by Karti was executed through Advantage’s Singapore-based subsidiary Advantage Strategic Consulting Singapore Pte Ltd. According to the investigators, the ED and I-T (Investigation Wing) are expected to contact their international counterparts to get more details from the 14 countries as per the United Nation’s Convention on prevention of money laundering.
The 2G Court had already issued Letter Rogatory to Singapore for getting transaction details of the Karti-controlled company in Singapore.
The probe details coming out of the recent raids expose massive wealth acquired by Karti during 2006 to 2014 when his father was Finance Minister and Home Minister at the Centre. Karti’s Singapore firm acquired 88 acres in September 2011 at Surridge Farm in Somerset in the UK for one million Pounds. The deal comprises four land titles, which were seized by joint probe team of ED and I-T. Karti’s company in Singapore also has investments in Artevea Digital Limited in Cambridge and has transactions with another London-based company Oppenheimer Investments (UK) Limited.
According to the details unearthed by investigators, Karti’s Singapore-based firm had acquired majority shares of a big resort in Sri Lanka, known as Lanka Fortune Residencies. This company owns the prestigious resorts ‘The Waterfront’, ‘Weligama Bay Resort’ and Emerald Bay Hotel. During the raid, the tax sleuths unearthed the acquisition agreement papers between Karti’s Singapore company and share holders of the Sri Lankan firm. Document of money trail of investments made in a Sri Lanka with a Lanka-based financial firm, Union Development & Investment Company Private Limited, were also seized in the December raids.
The probe details how Karti’s Singapore firm routed money via Dubai to acquire three farms and vineyards in South Africa, identified as Rowey Farm in Grabouw, Cape Orchards and Vineyards Private Limited, and Zandvliet Enterprises, a wine and stud farm in Ashton. The Karti-controlled Singapore firm also had money transactions with Nicholls Steyn and Associates in South Africa.
The Dubai-based Desert Dunes Properties Ltd has also investment in Karti’s Singapore-based company Advantage. The sleuths have unearthed a money trail of 1.7 million Singapore Dollars between these firms. Another Dubai-based company, Pearl Dubai FX LLC, also had financial transaction with the Advantage.
The Advantage’s Singapore subsidiary had entered into joint ventures with the Philippines-based companies to obtain a franchise team of International Premier Tennis League (Asia). The Philippine firms, which were engaged in joint ventures with the Karti-controlled company, are SM Arena Complex Corporation, Sports Entertainment Events Management Inc and two persons from Philippines - Juna Kevin and Haresh C Hiranand.  
The Advantage had also had financial transactions with another real estate company in Singapore known as Real Beyond Pte Ltd having three subsidiaries in Malaysia. The investigation has unearthed that these transactions led to 16 land purchases in Thailand.
The Advantage’s Singapore unit has set up a firm in British Virgin Island (BVI), namely Somerset Surridge Ltd. The Advantage also invested 400,000 Singapore dollars in another BVI firm known as Full Innovations Ltd. It also has financial dealing with Geben Trading Limited in BVI and offices in Switzerland. This firm’s major transactions were through the famous Swiss Bank, namely UBS. The investigators got proofs of transactions in Dollars and Euro. The Advantage also has transaction of five million Singapore dollars with another firm in Singapore, namely Unison Global Investment Ltd.
The Karti-controlled company in Singapore has also entered into joint ventures with Gravitas Investments, Match Point International Tennis Events to buy a franchise Tennis team called ‘Manila Mavericks’.
The investigators unearthed that this deal was worth of 12 million US dollars and the money was paid in 10 installments. 
The Advantage had also acquired a residential flat in Malaysia worth 1.9 million Malaysian Ringgits from a firm called Peninsular Smart. The probe team also found that the Advantage holds franchisees of CafĂ©’ Coffee Day in some areas of Malaysia. The investigators have found several transactions to Karti’s Singapore firm with Malaysian companies. Malaysia is the head quarters of telecom giant Maxis which acquired Aircel in 2006. The raids have seized some payment details amounting to more than Rs.30 crore in foreign currencies.   
The Advantage in Singapore also opened a subsidiary firm in Barcelona in Spain known as Advantage Estrategia Esportiva SLU in August 2012. This is a sports academy having four acres with seven tennis courts. Karti-linked Singapore firm has also one million US dollar investments in a company in France known as Pampelonn Organisation. The Advantage also has transactions with a Greek firm known as Pisani John Sakellarios in Athens. 
Karti’s Singapore company has also transferred 50,000 dollars to a Bank of America account in the name of “Chennai Reserve - Business Advantage Checking” and the beneficiary of this transaction was one company called Kitchen Inc, a Delaware Corporation company in New York engaged in issuance of Convertible Promissory Notes.
The Chennai-based Advantage also has transactions with Aircel Televenutres, DCB Client, Diageo Scotland Limited, Katra Group, Sri Lanka Export Development Board, Unifi Wealth Management Ltd, VST Tillers Tractors, Carlton Trading Company, Claris Life Sciences’, ITC Centre, Best Land Realty Limited, Essar Steel Limited, Gokul Builders and Estates, S Kumar, INX Media, Reflections, Thiagarajar Mills Private Limited, Sak Soft, EL Forge Limited.  

All these massive investments, transactions, acquisition of companies and properties abroad were executed by the Advantage after the Aircel-Maxis deal in 2006. It is learned that ED and IT has dispatched all these information to Supreme Court, which is monitoring the probe on Aircel-Maxis scam in a sealed cover and also shared with their counterparts in CBI. Both CBI and the ED had said in their chargesheets that FIPB clearance given by then Finance Minister Chidambaram to Maxis to acquire Aircel was totally illegal.

Six telecom companies hushed up over Rs. 45000 cr : CAG

J Gopikrishnan / New Delhi / March 8, 2016

In what could be a mega scandal, the Comptroller and Auditor-General (CAG) has unearthed under-invoicing of revenue to the tune of over Rs45,000 crore by six telecom companies from 2006 to 2010. The CAG submitted a related report to the President’s Office and the Ministry of Finance in mid-February. The report, which is expected to be tabled in Parliament during the Budget Session, says that due to this massive under-invoicing, the exchequer lost more than Rs12,000 crore in taxes, that does not include penalty for tax evasion.
Given the go-ahead by the Supreme Court and the Delhi High Court, the CAG audited the revenue and expenditure receipts of Airtel, Vodafone, Reliance Communications, Idea, Tata and Aircel.
The auditors decided to undertake this exercise after they came across several cases of discrepancies in revenue calculations of the telecom companies in 2010 when the CAG was preparing the 2G scam report.  Alerted by the auditors, then CAG Vinod Rai ordered auditing of the revenue and expenditure of the six telecom companies.
After they challenged the decision in court, in 2011 Delhi HC asked the six telecom companies to share their accounts with the CAG and passed an order ratifying the CAG’s decision in January 2014. The SC in April 17, 2014, upheld the Delhi HC’s judgment on CAG’s power to audit any entity related to the revenue and expenditure of the Government.
During the audit, which officially started during August 2014, the CAG had called for the records and inspected the offices of all telecom companies.
“We were happy to note that there were several whistleblowers forthcoming to reveal the methods of under-invoicing by the telecom companies. Some companies were maintaining actual and manipulated accounting books and these whistleblowers helped us track down the original revenue earned,” said a senior auditor of the team engaged in the audit of the telecom companies.   
According to the auditors, each of the six firms under-invoiced the revenue between Rs6,000 crore and Rs18,000 crore.  
“What we noted is the difference in auditing in Government and private sectors. In the Government sector, not many people will come forward to help us, whereas in the private sector several people are forthcoming to expose the frauds to CAG,” he added. 
During the 2G scam audit, the CAG found discrepancies in the customer base of the telecom companies and revenue and tax figures. The telecom companies fielded a battery of top lawyers to oppose the CAG in the High Court and the Supreme Court.
The estimated tax evasion figure of over Rs12,000 crore is based on the tax structure and telecom levy norms between 2006 and 2010. The loss figure does not include the penalty for under-invoicing of revenue.

It is expected that if the Government start acting on the CAG report, the telecom companies might have to pay up to  Rs30,000 crore to the exchequer by way of tax and penalty. 
PS : CAG report was tabled in Parliament on March 11, 2016. Recommending the Government to check the revenues of telecom companies from 1999, the CAG in its report exposed that from 2006 to 2010, six major operators had under- invoiced Rs. 46045.75 crore resulting a tax loss of Rs.12488.93 crore to the exchequer. The apex auditor caught Airtel, Tata, Reliance Communications, Idea, Vodafone and Aircel for hushing up their revenues to evade mandatory remitting of portion of the revenue to the Government, which was collected from people.

The detailed audit report has devoted one chapter for each telecom company’s revenue during the four years and tax evasion. Among the total tax evasion of more than Rs.12488 crore, Reliance Communications evaded Rs.3728.54 crore and Tata evaded Rs.3215.39 crore. CAG found Airtel evaded Rs. 2651.89 crore, followed by Vodafone (Rs1665.39crore), Idea (Rs.964.89 crore) and Aircel (Rs.262.83crore).