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The long-standing fraudulent activities at IL & FS, in crisis, could have been revealed much earlier in 2017, but an investigation by the SFIO revealed that the management had been conniving complicity with the independent directors.
The detailed investigation conducted by the Office of Investigation of Serious Fraud (SFIO) in the business of IL & S Financial Services Ltd. (IFIN) has revealed a plethora of disqualifications, violations, loans more and more green, Deliberate delays in recoveries and even a whistleblower complaint dismissed by management in 2017.
While a multi-pronged strategy continues to revive the troubled group and engage the perpetrators of the fraud, the previous IFIN audit committee was found guilty on several occasions.
Analysis of e-mails as well as information gathered from staff and other sources revealed that a whistleblowing complaint had been received in early 2017, according to officials.
However, the audit committee, which must oversee the company's watch mechanism, has not acted properly with respect to the complaint.
Citing the SFIO's investigation report, which is part of a complaint form filed by the white-collar government investigative agency, officials said the management of the IFIN was aware of the whistleblower complaint received in March 2017, but the audit committee had only discussed it in December 2017.
The investigation further revealed that the audit committee was simply based on the management version and had not investigated the allegations made in the whistle-blower complaint.
The fraud at IL & FS was revealed last year after the late repayment of several group entities due to serious liquidity problems. Later, the government replaced the board, which is now looking for ways to revive the troubled group.
IFIN, which has been financing its own revenues for several years, was the main source of funding for the entities of the IL & FS group. The group had accumulated a debt burden of over 90,000,000,000 RRs.
The company converted the banks 'and public funds' funds into profits through fraudulent lending activities, while the profits were also used to pay the management fees and dividends to the holding company.
Officials noted that the audit committee had not raised the red flag, even when there had been cases of "disbursement loan recovery" on the same day or in a few days.
IFIN's loans to the group's companies jumped to about Rs 5,200 crores, or 37% of the total loans and advances of the company for the 2017-2018 fiscal year.
The investigation also revealed that IFIN's audit committee had neglected many indicators of impairment and was actively in contact with management to present potential investors with a good picture of the financial results of the company.
According to the conclusions, the incorrect half-yearly financial statements were of great importance as they were used by the rating agencies for the new ratings as well as for the supervisory ratings. These statements were also used for market borrowings.
The SFIO filed its first indictment after inspecting the accounts of nearly 400 entities, carried out a thorough judicial audit, collected data on desktops and laptops seized from various IL & FS offices, as well as as emails extracted from IL & FS servers, among other sources.
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