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Report on Research Project of Financial Scams in India

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Report on Research Project of Financial Scams in India REPORT ON RESEARCH PROJECT OF FINANCIAL SCAMS IN INDIA Submitted in partial fulfilment of the requirement of the Masters in Business Administration Programme Offered by Jain University during the year 2013-14 BY MOHAMMED MAAZ 3rd Semester MBA UNDER THE GUIDANCE OF PROF.SHRUTI AGARWAL # 319, 17th Cross, 25th Main, JP Nagar 6th Phase Bangalore – 560 078 Phone : 080-43430400, Fax : 080-26532730 E-mail : [email protected], Website : www.bschool.cms.ac.in Declaration I, hereby declare that this Lab Hours / Project (Research Project) on FINANCIAL SCAMS IN INDIA is prepared by me during the academic year 2014-15 under the guidance of prof. Shruti Agarwal. I also declare that this project which is the partial fulfillment of the requirement for MBA programme Offered by Jain University, it is the result of my own efforts with the help of experts. Name : MOHAMMED MAAZ Sem : 3rd Sec : “C” Reg.No : 13MBA63049 Date : Place : Signature ACKNOWLEDGEMENT It gives me immense pleasure in presenting the project report on Financial Scams in India Firstly, I take the opportunity in thanking almightily and my parents without whose continuous blessings, I would not have been able to complete this project. I would like to thank my project guide Prof. Shruti Agarwal for her great help, valuable opinions, advice and suggestions in fulfillment of this project. I am also grateful to Prof. Durga Praveena for encouraging me to select the project topic. I am thankful to our college for all the possible assistance and support, by making available the required books and the internet room which have proved useful to me in successfully completing my project. I hope that I have succeeded in presenting this project to the best of my abilities. CONTENTS: SR.NO PARTICULARS PG.NO 1. Abstract 2. Introduction on financial scams 3. Scam 1 – 2g spectrum 4. Scam 2- CWG Scam 5. Scam 3- SATYAM Scam 6. Scam 4- Part 1: HARSHAD MEHTA Scam Part 2: KETAN PAREKH Scam 7. Scam 5- CRB Scam 8. Conclusion Refrences 9. ABSTRACT EXECUTIVE SUMMARY: The findings are based on a comprehensive survey, cutting across several industrial sectors, both public and private. 'Strikes, Closures and Unrest' emerged as the number one risk in the survey report. In the year 2012, it did not surface among the top five risks in the 'Overall Risk Rating'. The risk of 'Political and Governance Instability' has significantly changed position from number eight last year to number two this year. 'Information and Cyber Insecurity', 'Fire' and 'Crime' have been rated at number three, five and six respectively. They have maintained their position among the top six risks from the India Risk Survey 2012 onwards. The risk of 'Corruption, Bribery and Corporate Frauds' has been acknowledged as risk number four. In 2012, India was ranked 94 among 176 countries on the Corruption Perception Index and the Financial Stability Report of the Reserve Bank of India revealed that losses of INR 4,448 crores (approx. USD 8.2 billion) to Indian banks from financial frauds in 2012 were the highest ever. RESEARCH OBJECTIVE: An attempt is made to examine and analyze in-depth about various ―Financial‖ scandals, which brings the limelight to the importance of ‗ethics‘ and corporate ‗governance‘. The fraud committed is a testament to the fact that ―the science of conduct is swayed in large by human greed, ambition, and hunger for power, money, fame and glory.‖ Scandals from India have, time and again proved, that ―there is an urgent need for good conduct based on strong corporate governance, ethics and accounting & auditing standards.‖ Unlike Enron, which sank due to ‗agency‘ problem, Satyam was brought to its knee due to ‗tunneling‘ effect. The Satyam scandal highlights the importance of securities laws and CG in emerging markets. Indeed, Satyam fraud ―spurred the government of India to tighten the CG norms to prevent recurrence of similar frauds in future.‖ Thus, major financial reporting frauds need to be studied for ‗lessons-learned‘ and ‗strategies-to-follow‘ to reduce the incidents of such frauds in the future. INTRODUCTION ON FINANCIAL SCAMS: What are scams? A fraudulent scheme performed by a dishonest individual, group, or company in an attempt obtain money or something else of value. Scams traditionally resided in confidence tricks, where an individual would misrepresent themselves as someone with skill or authority, i.e. a doctor, lawyer, investor. After the internet became widely used, new forms of scams emerged such as lottery scams; scam baiting, email spoofing, phishing, or request for helps. These are considered to be email fraud. Also see phishing, scheme. A scam is a dishonest attempt to trap you into parting with your money. A 'scammer' may make a personal approach, with an offer too good to be true. Someone may email you, phone, text-message or post an offer that they press you to take up. Scams can reach their target audience in many ways, ranging from a one-person door-stepping operation, through to multinational highly sophisticated telemarketing scams. Advertisements, direct mail, text messaging, phone calls and e-mail are all widely used. However SCAM means when a person tries to deceptively cheat you by first giving you a very good offer about something but later on you would be shocked to know that the person was simply bluffing and you have lost your money. An example of this can be the lottery scam. For example a person calls or emails you and tells you that you have won a lottery prize but to get the money there is a small processing fee, you have to pay that fee and then the money would be sent to you. The top ten financial scams in India: 1) 2G Spectrum Scam 2) Commonwealth Games Scam 3) Satyam Scam 4) Telgi Scam 5) Bofors Scam 6) The Fodder Scam 7) The Hawala Scandal l8) IPL Scam 9 )Harshad Mehta Stock Market Scam 10 )Ketan Parekh Stock Market Scam. SCAM 1 2G Spectrum scam Introduction to 2G 2G is short term for second-generation wireless telephone technology. Second generation 2G cellular telecom networks were commercially launched on the GSM standard in Finland by Radiolinjain 1991. Three primary benefits of 2G networks over their predecessors were that phone conversations were digitally encrypted; 2G systems were significantly more efficient on the spectrum allowing for far greater mobile phone penetration levels; and 2G introduced data services for mobile, starting with SMS text messages. After 2G was launched, the previous mobile telephone systems were retrospectively dubbed 1G. While radio signals on 1G networks are analog, radio signals on 2G networks are digital. 2G has been superseded by newer technologies such as 2.5G, 2.75G, 3G, and 4G. 2G SPECTRUM SCAM The 2G spectrum scam involved officials from the government of India illegally undercharging mobile telephony companies for frequency allocation licenses, which they would use to create 2G subscriptions for cell phones. The shortfall between the money collected and the money which the law mandated to be collected is estimated to be 1, 76,379 crore (1.763 trillion) rupees (roughly equivalent to 39 billion US dollars) based on 3G auction prices. The issuing of licenses occurred in 2008, but the scam came to public notice when the Indian Income Tax Department was investigating about the political lobbyist Nira Radia. The government's investigation and the government's reactions to the findings in the investigation was the subject of debate, as were the nature of the Indian media's reactions. Much of the credit of bringing this whole scam into public light and pursuing it in the court of law goes to Subramanian Swamy who is the chief petitioner for this case in the court of law. 2G licenses issued to private telecom players at throwaway prices in 2008. This scam has cost the government total loss of Rs. 1.76 lakh crores. Rules and procedures floated while issuing licenses. Main accused behind the scam: He is A. RAJA one of the main person behind India’s largest corporate fraud. Andimuthu Raja born on May 10, 1963, Tamil Nadu, India, is an Indian politician from theDMK political party. He was a member of the 15th Lok Sabha representing the Nilgiris constituency of Tamil Nadu.In 2007, he became cabinet minister for communication and information technology. On being re-elected in 2009 he was again appointed cabinet minister for communication and information technology until being tainted in the 2G spectrum scam and resigning in 2010. HIS INVOLVEMENT IN 2G SCAM The 2G spectrum financial scandal in the Telecommunications and IT Ministry under A. Raja is noteworthy as the largest political corruption case in modern Indian history, amounting to a record $40 billion loss from under pricing to the Government of India. The alleged modus operandi was telecom bandwidth being grossly undervalued and offered to a chosen few with vested interests, on a dubious 'First-Come-First- Served' basis. It is alleged that it should have been put under a transparent auction system, purportedly advised by higher office. An FIR filed by the CBI claims that the allocation was not done as per market prices, resulting in a scam worth 200 crore (US$40.56 million).However it had been alleged by Arun Jaitley of Bhartiya Janata Party (BJP) that the scam is worth around 176,000 crore (US$35.69 billion). The Comptroller and Auditor General holds Raja personally responsible for the sale of 2G spectrum at 2001 rates in 2008, resulting the previously mentioned loss of up to Rs. 1.76 lakh crores (US$40 billion) to the national exchequer. In August, 2010, evidence was submitted by the CAG showing that Raja had personally signed and approved the majority of the questionable allocations.
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