Thursday, January 29, 2009

Local Banks role in Satyam fraud- commit faux pas

The local banks in Andhra Pradesh have a key role in Satyam fraud. This was discovered by the Satyam fraud investigation team. The local banks have committed faux pas. This was revealed in the 2002 report of the Hyderabad office of the income-tax (I-T) department details how banks in Andhra Pradesh allowed B Ramalinga Raju and his family members to open multiple accounts with complete disregard to documentation and basic formalities. Complex transactions were done through these accounts to move money around.

Generally for opening a new account bank ask to submit a photograph, complete address proof and permanent account number (PAN). Banks also ask to bring along an “introducer” — an existing account holder. In 2002 these norms were there present. Ever since then, the norms have become stricter.

But in Raju family’s case, on the savings bank and term deposit account- opening forms of Raju’s relatives contained only the names of A Bhaskar Raju, AVL Kumari, I Mallapa Raju, Janaki Ram Raju and D Rajeshwari Devi and an address: Shyamala building, Begumpet, Hyderabad. According to report, “No photographs have been obtained. No nominees have been named. No PAN has been mentioned. There was no introduction by a person holding an account in the bank.”

Raju’s friends and relatives opened accounts in Vyasa Bank (Banjara Hills, Hyderabad), State Bank of Hyderabad (Begumpet), UTI Bank (Kakinada), HDFC Bank (Vishakhapatnam) and Karur Vyasa Bank (Vijayawada).

All these account holders had filled the customary Form 15H with the I-T department to save TDS, or tax deducted at source, on interest income. These “numerous” forms raised suspicion in the minds of the I-T investigation. These members also opened fixed deposits accounts and proprietary concerns they owned. But in the report records do not give details about the individuals and the money they held in the respective bank branches.

When the I-T department took in custody the FDs in Vyasa Bank on February 28, 2002, for instance, it discovered deposits worth more than Rs 1 crore in the name of A Bhaskara Raju and Rs 1.4 crore in the name of AVL Kumari.

Likewise, when the HDFC Vishakhapatnam branch manager was cross-examined on March 3, 2002, obtained the information about the deposits worth more than Rs 40 lakh in the name of AB Enterprises, which belonged to A Bhaskara Raju.

I-T department also recorded bank managers’ statements. The manager of Vyasa Bank, Banjara Hills, said that at the time of opening of these accounts, he was not the branch manager. He also informed the column for the name of the introducer was not filled. According to reports, “An attempt at locating the addresses indicated on the Form 15 H was made. However, none of them could be located.” During the investigations, one of the bank accounts guided to an intermediary, N Rama Raju, and this in turn led to a string of related transactions.

The reports also state that the list of mediators is not exhaustive, suggesting that if the investigation had continued; more names could have come out. I-T report which contains explosive details about money transfers and stock deals, raise questions about the purpose behind the complex layering and routing of transactions. ET had reported about the findings of the I-T report in its edition dated January 28.

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