Investigating agencies probing the scam at Satyam Computer Services are examining whether the software firm’s founder B Ramalinga Raju brought back laundered money into the country through Mauritius to buy shares or property here.
The practice, popularly known as round-tripping of investments, was rampant in the early 1990s, where many domestic firms used the Mauritius route to open shell companies and bring back money to evade taxes. These investors could escape tax, since Mauritius does not tax capital gains on profits from sale of shares.
Investigating agencies now suspect that Raju may have siphoned off thousands of crores overseas through irregular or fictitious foreign exchange transactions to launder money. “The (laundered) money could have found its way into India from Mauritius through sub-accounts of FIIs and then invested in assets here.
We are sounding out the foreign tax division, as round-tripping of investments through Mauritius is illegal if the source of funds are questionable,” said an official with an investigating agency who did not wish to be named.
After Dubai began attracting investments, some Indians have also opened shell companies in Dubai’s free-trade zone.
Money is remitted from India to these entities and brought back as investments in shares and properties after a year or two.
While these transactions look like disconnected genuine inbound investments, they are a camouflage for laundering money.
The Enforcement Directorate is understood to have been roped in to look at possible violation of the Foreign Exchange Management Act. “Investigating agencies may also ask details from banks which were collecting export receivables from Satyam,” the official said. Any evidence of money laundering by Raju will come under the purview of the anti-money laundering legislation as well.
Raju had confessed on January 7 that the firm’s books were fudged to inflate sales, profits and cash balances in a scam estimated at Rs 7,000 crore. Later, the firm’s former chief financial officer Vadlamani Srinivas claimed that there were only 40,000 employees (as against the claimed 53,000) and that Rs 20 crore had been siphoned off into several fictitious salary accounts for over four years.
The shocking revelations have created a huge uproar and raised questions about corporate governance at some of India’s top-performing companies. It comes at a time when the Indian IT sector - the poster boy of the country’s stunning economic success in the past few years - is struggling to cope with slowing demand in some of its biggest markets.
Agencies are looking at whether the money was remitted overseas under the garb of onsite salary payments. The new six-member board of Satyam, however, said last week that there was no prima facie evidence to doubt the employee count.
EAS Sarma, former secretary of the department of economic affairs (DAE), had earlier asked the central board of direct taxes (CBDT) if it had investigated specific cases of major ventures such as SEZs, IT projects and the Gangavaram Port near Visakhapatnam, where investments were made through Mauritius-based agencies.
“I have asked both RBI and Sebi under the Right To Information Act about Mauritius-based companies that are reported to have links with Satyam and other companies operating from Andhra Pradesh,” he said.
In a letter to the prime minister earlier this month, he said: “Satyam and Maytas represent only the tip of the iceberg. There is perhaps large-scale cross-border money laundering that needs to be traced and the culprits be brought to book.”
However, some tax experts said it may be difficult to pin down the round-tripping. “Under the Mauritius law, there are strict know your customer norms. They generally do not allow Indian residents to set up companies there,” said a tax consultant.
Parliamentary panel to take stock of Satyam fiasco
A Parliamentary panel will take stock of the leads that investigating agencies have got so far the case involving fudging of the financial books of Satyam Computer Services.
Top finance ministry officials are set to apprise the parliamentary panel on the nature of the scam and the progress made so far on the investigation based on inputs from key agencies, said a government official who did not wish to be named.
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