Matiz maker's mega rip-off

By siliconindia staff writer   |   Thursday, 04 March 2004, 20:30 IST
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NEW DELHI: They stopped producing cars in India almost two years ago, but it has now come to light that Daewoo Motors India Limited (DMIL) and its parent company in Korea may have committed one of the biggest frauds in Indian corporate history. Led by IDBI and ICICI, 18 Indian banks who sunk about Rs 1,500 crore in Daewoo, stand to lose all or most of it, reports Hindustan Times. The government's Serious Fraud Investigation Office (SFIO) has been investigating Daewoo's affairs for about six months now. Its findings tell the story of how Daewoo guzzled its creditors' money and siphoned it by fabricating accounts. Daewoo raised money from Indian and Korean banks and financial institutions to set up its manufacturing unit in Surajpur. DMIL imported plant and machinery from its parent company Daewoo Corporation (DwC), but none of DMIL's books give specifics of what prices were paid for individual imports. But after comparing the two companies' books for 1997 and 1998, SFIO has come to the conclusion that while the Indian subsidiary bought plant and machinery worth just $135 million from DwC, it paid its parent $380 million. This is a classic case of over-invoicing. The Korean company practically trebled the bill to its Indian arm. The difference made DwC's books look good and enabled it to raise even more money from lenders. Meanwhile, DMIL was burdened with loans. The process was repeated over several years. It's no surprise then that DMIL hasn't paid back a rupee of the principal it borrowed from its Indian creditors. In fact, it stopped servicing interest on various term loans in 2000. Daewoo also raised a dollar loan of $150 million in India which it parked in a US bank. The money was controlled directly by DwC which deliberately chose a US bank, says the SFIO. It was a way of avoiding the heat that the Korean government had turned on the company. Daewoo's assembly line is now being sold to General Motors. The money from the sale could partly cover DMIL's Indian creditors' losses. As for the rest of their money, it looks like it's gone.