The giant and shocking ILFS scam of over Rs.1 lakh crores, which rattled India’s NBFC sector, as also the banking and capital markets in September 2018, continues to be investigated by various agencies and authorities, including the ED, SFIO, MCA, RBI etc. While on one hand the scammy loans to ILFS are being investigated and so is the collusion and misconduct of the eminent independent directors, auditors and rating agencies that facilitated them, on the other hand, being investigated are charges of blatant corporate violation, corruption and fraudulent enrichment of the key managerial personnel and employees of ILFS, led by its founders Ravi Parthasarthy and Hari Sankaran. What is clearly emerging out of these investigations is that ILFS was a giant fraudulent facade of many sorts, which was deliberately created to violate the law.
It was given a carefully cultivated facade of being a government entity, which it was not, it was given a facade of a AAA credit rating, though it was of junk grade, it was given a facade on an entity that complies with the law, thanks to the clean audit reports given by collusive auditors, which it was not and it was given a facade of being a professionally managed entity, where the professional managers had no or little shareholding in the company, which too was false. And behind this dubious facade created by Ravi Parathasarthy and gang, was an entity ridden with massive frauds, rampant money laundering, corruption, criminal misuse of funds and a complete non disclosure of the facts. Its functioning was opaque and non transparent, though it claimed to be otherwise. These senior directors, which were led by Ravi Parathasarthy and Hari Sankaran, appeared to be clean men of integrity, which they were not. They were the actual crooks who masterminded the scam, for personal greed, ambition and enrichment.
The investigations of SFIO/ED reveal that this bunch of top managers, led by Ravi Parthasarthy, enriched themselves, by various means, one of which was through the ILFS EWT (Employees Welfare Trust). This trust was set up in 1990, as an unregistered entity, with the purpose of providing subsidised loans, housing facilities, medical health and education relief to needy employees of ILFS. But that too was a mere facade. The ILFS EWT was used by the top directors of ILFS to enrich themselves. The modus operandi to do so was simple and utterly scammy. Shares were allotted by ILFS to the EWT, ostensibly for the benefit/welfare of its employees. The Trust was given huge loans by various ILFS group entities to subscribe to these shares. Such allotments were made on several occasions, such that the EWT held 13.64% of the equity capital of ILFS, which is a huge number. Incidentally this shady Trust owes Rs.500 crores, to various lenders, with no assets there against. While on paper these shares were allotted for the benefit of ILFS employees, in reality they were meant to benefit the dubious team of managerial personnel, led by Ravi Parthasarthy and Hari Sankaran.
After these shares were allotted to the EWT, they were transferred at a nominal throw away price to Ravi Parthasarthy and his gang of thieves, who in turn sold them in the market and are said to have earned almost Rs. 300 crores in this manner. The facade of the Trust was created only for the benefit of these privileged looters and not the actual needy ILFS employees, for whom a mere Rs.2.91 crores was spent. This fraudulent scheme of allotting shares to the chosen few, was not informed to the company when they were allotted. Not only were the corporate laws violated by way of non disclosure of interest, conflict of interest, and illegal form of remuneration to the directors, but in this manner the capital of ILFS was increased to show a rosy picture and most importantly, the top directors enriched themselves in a criminal manner. The EWT was a mere facade to hide the reality and to perpetrate an illegal act of duping ILFS and its shareholders.
The fact is that Ravi Parthasarthy, Hari Sankaran and their top team of looters, have illegally remunerated themselves, without disclosing the truth to ILFS, and various regulators. A similar crime of unreported illegal remuneration, was committed by Carlos Ghosn the celebrated chief of Nissan/Renault, who is now in jail in Tokyo, since a few months and the last that we saw him in a Tokyo court, tied in chains and ropes. The ILFS gang of looters deserve a similar treatment, along with all those who abetted the crime, including the independent directors and auditors.