Corporate Fraud

What Frank Abagnale Jr.(Remember Catch Me if You Can) achieved in the space of ten years around the world, does indeed look completely out of a Hollywood script, except for the fact that it wasn’t fiction. To some, fraudsters evoke an image of street-smart brilliance unless of course you are one of three lakh investors who woke up one Wednesday morning on 7th January 2009 to find that they have been rewarded for their trust on Satyam Computer Services by stripping them of almost 90% of their investment in the company’s Sensex listing.
Mr. Ramalinga Raju confessed to fudging up Satyam’s balance sheet to the tune of Rs 5040 crores and other excesses which add up the total amount to about Rs.7000 crores.(a fraud larger than all of Indian politicians’ creative advances added up together). Mr Raju of course surrendered to the police and Satyam was stripped off Golden Peacock Global Award for for Corporate Governance under Risk Management and Compliance Issues. To quote Rahul daCunha, the brain behind the creative Amul Girl quotes ,“Satyam Sharam Scandalam” !! Mr. Raju employed a very simple technique to create the balance sheet misbalances. A company balance sheet has two basic divisions : liabilities and assets. He interchanged the liabilities and assets by 600 cr each quarter. It’s like changing the negative and positive signs of an integer. Only this time it involved investor’s hard earned money. On top of one “inflated” bank balance he was forced to add another since otherwise it would expose the previous fraud and make the company suspect as well as open to an acquisition which also would expose the fraud. This continued for some time with shareholders investing on false notions of a profitable balance sheet until recession struck and FIIs withdrew money , share prices dipped and Raju was forced to buy back his own shares and with his assets’(read: real estate) valuation decreasing, he ran out of ideas on how to control the fraud which had already assumed giant proportions. As a last ditch attempt he tried to acquire Maytas Infra(Note the palindrome) his family real estate concern owned by his sons ,which would induct fresh capital into Satyam and help sustain the fraud till the economic crisis ended; but due to large investor and Board of Directors’ dissent, cancelled the deal at the eleventh hour. By then the Satyam stock was already poorer by Rs 3400 crore due to panic selling. During the whole course he was helped by the blind sight of his auditors PriceWaterHouse Cooper (PwC), which is still under investigation not just by ICAI but by the CBI as well.
Corporate fraud is not a new phenomenon . Incidentally the largest ever investor fraud was revealed very recently in December last year when by one Bernie Madoff , an ex chairman of NASDAQ , finally plead guilty to defrauding many thousands of investors. Federal prosecutors estimated client losses which included fabricated gains of almost $65 billion. His asset management firm Bernard L. Madoff Investment Securities LLC was used to attract billions of investor money and he fabricated the returns from his investment in various securities and siphoned out the funds from his firm to his own account through huge salary paychecks. He marketed his investment method as “too complicated for outsiders to understand”, was secretive about the firm’s business, and kept his financial statements closely guarded. It was a neat ploy but faced with severe credit crunch coupled with the market mayhem , when investors demanded their money back he couldn’t pay back and his fraud was officially apprehended.
The Enron scandal was one of the longest running and complicated corporate fraud subject to constant media glare due to its magnitude and elaborate scheme. The mastermind, one Kenneth Lay, has confessed that the scam goes as back as 1985 when Enron was formed as a result of a merger between Omaha based Internorth and a Houston based Houston Natural Gas with Mr. Lay as the new CEO. No sooner was Lay at helm of affairs , than Enron plunged into debts and layoffs and asset sales followed. The following years were tumultuous years for Enron with regulation battles with Peru government and money laundering scandals . Many top brass people like Lou Borget took the hit but Lay survived. In the early 90’s the Congress of the United States of America passed legislation deregulating the sale of electricity. It marked the turnaround of Enron , which further thrived creating offshore entities, units which may be used for planning and avoidance of taxes, raising the profitability of a business. The names of these SPEs, or special purpose entities, were Bob West Treasure, Jedi and Hawaii .This provided ownership and management with full freedom of currency movement, and full anonymity, that would keep, losses the company was taking, off of the balance sheets. These entities made Enron look more profitable than it actually was, and created a dangerous spiral in which each quarter, corporate officers would have to perform more and more contorted financial deception to create the illusion of billions in profits while the company was actually losing money. In simple language in a world where Enron was swimming in debts and huge losses balance sheets were shown in green thanks to unloading these losses on these SPEs which were conveniently offshore. While of course the investors were kept in the dark the top officials rewarded themselves with millions of dollars of revenue. The vicious cycle continued until on August 14, 2001, Jeffrey Skilling, the chief executive of Enron, resigned citing personal reasons,selling minimum 450,000 shares of Enron at a value of around $33 million. It led to widespread speculation on Enron’s accounting but Lay managed to ward off all fears. However it was enough to send Enron’s stock into a dizzying fall and by October it had reached $20 levels from $80 levels in just a space of two months.By this time speculations were strife about the clarity of Enron’s balance sheets ,its many suspicious deals and fudged valuations. Lay did his best to allay investor worries and bought back commercial papers from banks to improve the credit crisis but its credit rating continued to dip and by the end of October it had been downgraded to just above junk bond, meaning it was only marginally profitable to invest. It was at this juncture that Dynegy another Houston based energy firm offered to buy Enron; however with news that Enron’s top officials had continually withdrawn company stocks to the tune of millions and with further downgrading of its credit rating coupled with the stock price falling to as low as $7,Dynegy finally called of the deal on November 28,2001.Its debts were vastly in excess of of its available cash and and the stock price fell to $0.61 by the end of the day. Enron filed for bankruptcy two days later, the biggest in US history at that time. Kenneth Lay was convicted with 11 counts of corporate fraud and falsifying accounts and securities
There are remarkable similarities between the Satyam and the Enron scandals. Both were extremely elaborate schemes with long timelines of account falsifying. They were both characterized by rapid falls in stages, of their share prices and while the Satyam fiasco comes as a blow to the Indian IT industry already reeling under the effects of recession, the Enron scandal was large enough to send the state of California into a full-fledged energy crisis. However there were notable differences ; while Lay managed to drive Enron to bankruptcy, Raju was conscious enough to come out with a disclosure before it was all over. Enron’s modus operandi was to siphon out all debts and losses to its off-shore entities which Raju could not manage after a failed attempt to acquire Maytas Infrastructure. One can only think what would have surfaced had the deal gone through.
As you can see, corporate fraud can have a devastating effect on the lives of people. A dangerous aspect is that often there are thousands of people affected , their life savings vanishing overnight .There was a lot of praise on the Indian Government when the Indian banks managed to stay shielded from the effects of the sub-prime crisis thanks to good regulation but the Satyam scam shows that India never learnt from the Enron scam. A big reason was maybe because it thought corporate fraud was unthinkable of in a third-world country such as ours. But we have to realize that India Inc. has come of age. We have giant MNCs and millions of dollars in FII and FDI investment each year and investors have millions at stake. That itself asks for a lot of regulations. Scams of such a magnitude can seriously dent FII and FDI confidence in our nation and they may abstain from investing in India . It hurts investor sentiments badly to say the least. Our government can no longer run away from it. “Keep IT Simple” should be the watch word.
In India, we have a system of Public Issue of shares with ‘Red Herrings Prospectus’. If you are a commoner like me you probably may not be aware of the meaning of ‘red herring’.Even a decade back ,by looking into the offer document of a public issue, an investor could get an idea of how much amount has been invested by the promotor of the company in the business and how many shares he had acquired with that amount. In the present system the ‘red herring prospectus’ is a very bulky document which does not reveal these basic data to the investor. This opens up a very easy way of laundering money by fooling investors through mere speculation. What is required is to restore INTEGRITY in our economy . The Govt can start with the following steps.
1. Congress needs to draft and implement basic reasonable and prudent regulations to establish corporate adherence to sound business principles as a legal requirement.
2. The financial auditing firms should be required to report infractions against the regulation standards to the oversight authorities.
3. Any CEO, CFO or corporate upper management or individuals in financial auditing firms who violate the regulations and standards should be prosecuted to the FULLEST extent of the law to provide deterrents for corruption.
4. The penalties and punishments for “white collar crimes” needs to be commensurate with the crimes; not just a token slap on the wrist or short sentences in “country club” detention centers or “white collar prisons”.
5.The CEOs and other corporate management are quite adept at setting up “fall guys” to take the rap for such illegal and fraudulent actions. The guilty parties should be prosecuted to the fullest possible extent; prosecutors should certainly look beyond “token fall guys” as a screen for upper management.

In its most simple and basic form, none of this is difficult. It is the “politics” and “creative accounting practices” that pervert the INTEGRITY of our economic systems, corporations and stock markets.But at the same time, there is only so much the regulators can do. Our corporates need to be more responsible and transparent with its record books to its investors. We are a growing economy and are going through a very rough patch what with recession and the Chinese intrusion into our markets. We can ill-afford these body blows if we are to grow unhindered.

Hillsborough – Personal Ramifications

On April 15th 1989, over 25,000 Liverpool supporters travelled down to Hillsborough to watch the FA Cup semi-final match with Nottingham Forest. 96 of them never returned. The sun had been shining and what should have been a fantastic day for both the club and the fans turned into the scene of the most horrific football disaster the English game has ever seen.

96 Liverpool supporters were crushed to death in the Leppings Lane end just after kick-off. Football in England and Liverpool Football Club, in particular, would never be the same again. But – amidst the tears, the scarves, the flowers and the funerals, an unbelievable bond between the club and the supporters emerged. Players, staff and fans from all over the world supported each other through the most difficult time in the club’s history.

The events at Hillsborough on April 15th Shook The Kop more than any other day but the aftermath – with supporters, players and LFC comforting one another – highlighted why we all support Liverpool Football Club.

96 Reds live on in our memories.

John Aldridge (LFC player 1987-89): If I hadn’t become a footballer it is almost certain I would have been in the middle of the Leppings Lane terrace at Hillsborough on Saturday, 15 April 1989. In the days when I was a fan I would never have considered missing an FA Cup semi-final involving Liverpool so I have to assume I would have travelled with everyone else to Sheffield for the game against Nottingham Forest. But fate decreed that John Aldridge be elsewhere that day. I was not on the Leppings Lane terrace, I was on the Hillsborough playing field, oblivious to what was going on among the Liverpool contingent.
John Barnes (LFC player 1987-97): Saturday 15 April 1989 should have been a day of excitement when a compelling FA Cup semi-final between Liverpool and Nottingham Forest was played at the home of Sheffield Wednesday. I try not to think about the day itself, but I will never forget it. The events were like a nightmare unfolding.

Kenny Dalglish (LFC manager 1985-91): I will never, never forget 15 April, 1989. I cannot even think of the name Hillsborough, cannot even say the word, without so many distressing memories flooding back. I find it very difficult to write about Hillsborough, where terrible mistakes by the authorities, both police and football, ended with 96 of our supporters dead. The memory will remain with me for the rest of my life.

Alan Hansen: In the opening few minutes of Liverpool’s FA Cup semi-final against Nottingham Forest at Hillsborough on Saturday 15 April 1989, I felt happier than I could have anticipated. Two months short of my thirty-fourth birthday, I had been out of Liverpool’s first team for nine months – the result of a dislocated left knee sustained in a pre-season friendly against Atletico Madrid in Spain – and had only started playing again, for the reserves, four days before the semi-final. The Liverpool fans gave me a tremendous reception as I came on to the pitch, and I made a great start to the game. In those opening minutes, I hit three good passes – two long balls over the top of the Forest defence to Steve McMahon and the other to Peter Beardsely, who hit a shot against the Forest bar. All my fears about my fitness evaporated. I felt as if I had never been away. Then, suddenly, I started to fall into the blackest period of my life.

John Barnes: I didn’t realise anything was amiss on the Leppings Lane terrace until a couple of fans ran on to the pitch shouting, ‘There are people being killed in there.’ I thought they were exaggerating, like when players say ‘that tackle nearly killed me.’ I just thought the fans were getting a bit squashed. But Bruce Grobbelaar, who was closest to the Leppings Lane terrace, quickly realised there was something terribly wrong when he went to retrieve a ball and heard fans screaming – ‘They’re killing us, Bruce, they’re killing us.’ Bruce shouted at the stewards to do something.

John Aldridge: I was the Liverpool player furthest away from the Leppings Lane terrace when a fan decked out in Liverpool red approached Ray Houghton and shouted something at him. I assumed it was some kind of pitch invasion. The last action I could remember was Peter Beardsley hitting the crossbar with a fierce shot. But soon a policeman with a look of concern approached referee Ray Lewis and began talking to him. The game was brought to a halt. I remember Steve Nicol saying something to the referee, though I was too far away to hear anything. I didn’t have a clue what was going on.

John Barnes: Six minutes into the match, a policeman ran on to tell Ray Lewis, the referee, to halt the game. Lewis immediately led the players back to the dressing-rooms. The scale of the tragedy was still unimaginable. We thought a few fans had been squashed but that we would be playing again soon, once the stewards had sorted out the problem. Lewis kept coming in and saying, ‘Another five minutes.’ Each time, we all got up and started jogging again until he finally came in and said, ‘That’s it, lads, match off.’
Kenny Dalglish: Nobody knew the scale of the disaster. I ordered the players to stay inside and went out into the corridor. A few fans had gathered there. They called out to me: ‘Kenny, Kenny, there are people dying out there.’ News of the horror filtered through. People who had been outside began to give a hint of the unfolding disaster. Like any man, my first reaction was to check my family was all right.

John Aldridge: The confirmation that Liverpool fans had died reached us while we were getting changed. Some of us were showering, though some had already put their clothes back on. Again, I don’t remember exactly what I did. I cast my eyes over to John Barnes and could see tears in his eyes. He was sitting there quietly, not wanting to be disturbed. A few of the other players looked stunned. I couldn’t talk. Nobody could. There was a strange sort of silence. Usually there is much conversation and banter when the lads are all together in the dressing-room. Not now. Too many thoughts were flashing through our minds. The sense of logic was disappearing.

John Barnes: All the rumours of crushing and deaths became desperate reality when I heard Des Lynam say, ‘There’s been a tragedy at Hillsborough. There are many dead.’ I went numb. I couldn’t believe it. Complete silence seized the room. Every face turned towards the television screen. No one sat down. No one spoke. Forest’s players were also in the lounge. What could they say? ‘We’re sorry your fans have been killed?’ The fact that they played for Forest and we played for Liverpool was irrelevant. These were human beings who died. We watched the television for an hour in silence. Many in the lounge were crying. Each of the players wondered whether he knew anyone who could have been in that terrible cage. I had only been at Liverpool for two years and knew hardly any of the fans. It was far worse for the local players like John Aldridge and Steve McMahon. Aldo was very agitated. He was desperately trying to make phone-calls. Eventually, we got on the coach, each player sitting next to his wife, holding hands, still numb and speechless. Everyone drank heavily all the way back to Liverpool. I got completely smashed on brandy. People wept all the way home. All the wives were crying. I was crying. Kenny was crying. Bruce said he was considering quitting.

Kenny Dalglish: The next day people began coming up to Anfield. They just wanted to leave tributes and flowers at the Shankly Gates. Peter Robinson got in touch with the groundsman and told him to open the ground. Liverpool Football Club didn’t want supporters standing around on the street. That was a magnificent thing to do. At 6 pm. we all went to St Andrew’s cathedral. Bruce Grobbelaar read from the scriptures. There was an awful sense of loss, confusion, and frustration. So many emotions were felt. The players and their wives were determined to do something. We all went into Anfield the next day. The wives were brilliant. Everything just stopped and rightly so. It comforted people coming into Anfield, talking to the players, the wives, and having a cup of tea. Liverpool Football Club was the focus of so many people’s lives that it was natural they should head for Anfield. It gave them somewhere to go, something to talk about.
John Aldridge: When the full extent of the disaster that eventually claimed the lives of ninety-six people unfolded, my emotions were of great sadness for the victims whose only mistake was choosing the wrong day to watch a football match; a football match in which I was playing.

I remember giving an interview to the Liverpool Echo in which I said I didn’t care if I never played again. I meant every word. For the two weeks following the disaster I was in a state of shock, helpless to do anything. I feel no shame in admitting Hillsborough affected me mentally for a time, a long time. I couldn’t cope, It weakened me physically, emotionally and mentally. The thought of training never entered my head. I remember trying to go jogging but I couldn’t run. There was a time when I wondered if I would ever muster the strength to play. I seriously considered retirement. I was learning about what was relevant in life. I didn’t really see the point in football.

John Barnes: The events of 15 April 1989 at Hillsborough made me realise what is really important in life. Before Hillsborough, I had always tried to keep things in perspective but what happened on the Leppings Lane terraces made me question so much in my life. Football lost its obsessive significance; it was not the be all and end all. How could it be when ninety-six people died, when parents lost children and children lost parents? Bill Shankly’s comment that ‘football is not a matter of life and death, it is far more important that that’ sounded even falser after Hillsborough. Football is a game, a glorious pursuit but how can it be more important than life itself?

John Aldridge: Hillsborough was a real tragedy on a real day involving real people. We often talk of nightmares in our lives, of disaster, of tragedies, but most of us don’t really know what we’re talking about. I was injured playing for Liverpool the season before Hillsborough and I called it a personal disaster. Disaster? When you know people have died in your vicinity you realise missing a football match or two through injury is irrelevant. Most things are irrelevant. The death of the innocent – the suffering, the injustice – is a real disaster. A real tragedy.

Kenny Dalglish: I was offered the manager’s job at Sheffield Wednesday after I left Liverpool but I couldn’t take it because of what had happened at Hillsborough. The person who offered me the job said: ‘I never thought of that.’ But I can never be in the stadium without thinking of all those people who died on the Leppings

The Greatest Football Tragedy Ever

April 15 1989 is a date indelibly etched on the memories of all English football fans. It is the day that 93 Liverpool supporters perished in an horrific crush at Hillsborough stadium, home to Sheffield Wednesday and host of the FA Cup semi-final between Kenny Dalglish’s side and Brian Clough’s Nottingham Forest. Three more died days and years later from their injuries.

The images of people in helpless despair remain clear in the mind. The questions as to how such a tragedy could have occurred stretched far and wide. The repercussions throughout the police force were enormous. The victims’ plight touched the nation and their families’ fight for justice continues in many quarters.

Twenty years on, we remember how the disaster and its aftermath and of course the grave injustice metted out to the dead.We are of course fighting for the dead and the Justice Campaign is on. Read the tragic details below to see how the most horrific and avoidable tragedy in world football unfolded.

Please do go through and support the cause

http://www.contrast.org/hillsborough/history/buildup1.shtm

NIT Trichy : The How/When/Why/Where Guide

Opening quotes :
“Man made booze , God made grass, To enjoy both come to NITDBPPA “ – Unidentified student

“Give me 28 years of Island of Despair, not 4 years of NITDBPPA” – Robinson Crusoe

“Where are the studs of India?” – Oscar Wilde

“Get a Life, Oscar” – a student of NITDBPPA

“Ich hasse Amerika , Ich hasse die Juden, Ich liebe NITDBPPA “- Hitler (use Google Translate )

The National Institute of Technology,Doping,Boozing and Pornographic Art at Tiruchirappalli, NITDBPPA-Trichy, (formerly Regional Entertainment Centre, Trichy, TREC) is an institute specially meant for over-priviledged students selected across the country for “Daring To Dream” about marijuana,porn,movies,Romanov and Counter Strike. It is a co-educational college meant for both boys and girls posing as boys. Of course the regime of no discrimination based on sexual orientation, means gays are also free to pursue their own choices. It may however lead to the following criminal activities.

1.Since all the girls look like boys,they may end up with red roses for them , come Rose Day, which may force a girl to reveal her actual identity and face fraudulent charges under IPC/420/TTS/5355, since you know girls are not allowed in our college.

2.Male Rape cases have been on the rise with over 40 such cases in the new hospital registered this year where the rapist demanded to know why the rapee never got pregnant.(Engineers and Biology never mix)

NITT is built on a land the Indian government bought for INR 36 million from the American Government , where the latter used to test radioactive and nuclear bombs as a result of which you will find a totally barren desert which some genetically mutated cows which have however made our college famous as the technical institute with the biggest traffic problem a.k.a cattle who occupy the roads waiting for the non-existent traffic signals to turn green.
My inside sources however claim this land was particularly chosen due to its vicinity to the special place called Thuvakudi, a mystery though I haven’t managed to solve due to time constraints.

Admission is through a very tough exam called AIETSDFSRRGDSF, actually the full form is the largest of its kind in Milky Way hence people have stopped deciphering it. Anyways it’s a very very selective exam with over 7 lakh hopeless youth fighting it out for some 800 seats, and what with Arjun Singhs policy of reservations for the mentally retarded and the Congress voters in UP(where incidentally they lose election after election), it becomes even more tough. It is actually a very pointless exam where you are tested on Physics,Chemistry and Maths rather than Porn, Alcohol and Drug Abuse.This creates a peculiar condition where the X gets screened out but Y gets in and turns into X thereby increasing the population of X in general, where
X = drug addicts, drug dealers, porn kings, vandals and miscreants
Y= nerds, geeks and underage genius who study Laplace transforms as an additional for kindergarten.
This indigenious policy drafted by the HRD ministry ensures that India follows the American Society and Economic model and turn into a third-world country like them, from being a 27th world country.

Student Activities are mainly through various clubs and associations.

Rotaract Club – They conduct mock AIETSDFSRRGDSF exams to ensure the continuity of the above mentioned process and do stuff in the “Barn” which may range from feeding cattle, or eating the haystacks themselves.

Leo Club – It’s a club whose primary event is inducting mental retards into the club, who themselves got into the college under the NRI (Non-Reservation Idiots) quota.

Aayam Club – They intend to establish a mini state of Bihar in TN right in NITDBPPA, but last heard Laloo had refused to conduct a guest lecture because apparently he was asked to speak in Hindi whereas after his IIM-Ahd visit he only speaks English.

E-Cell – Its an very hardworking club whose sole objective is to blow Govt of India money by inviting people from Tunisia, El Salvadore and Burkina Faso to present their ideas on how to waste more money. Their magazine, Paisa Inc, is hugely popular owing to the fact that the NRIs take time adjusting to the “no-tissue paper” system in toilets.

UNESCO Club – It’s a spoof of the real UNESCO organization.

CRY Club – Initially intended as another spoof, but now nobody is quite sure of its existence anymore. Legend has it, it used to sell drafters to freshers.

The hostels of NITDBPPA are an architectural wonder. They offer each student more leg-room than Deccan Airways gives to its Cattle Class seats and are the most eco-friendly in the world with rats, mosquitoes, cockroaches, lizards all coexisting in the same habitat.

The festivals hosted by NITDBPPA include Festember, the annual gay-parade , full of colours, dancing around non-existent trees and gay T-shirts and Pragyan where hundreds of nerds collaborate together to make this world an even more complicated place. Of course the latter is an international event since we have participants from Sri Lanka (what with the LTTE problems across the channel they find NITDBPPA safer)