The Seven Biggest Financial Scams in India

By SiliconIndia   |   Saturday, 09 June 2018, 10:08 Hrs
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The Seven Biggest Financial Scams in India

The seven biggest financial scams in India cost the country millions of dollars in lost revenue. These scams weakened investor confidence, and they led to the loss of livelihoods for many people across the nation. Analyzing them is the first step to understanding their impact on India and its people.

1. The 2010 Commonwealth Games Controversy

The total expense incurred by the Indian taxpayers because of these games was $4.1 billion.This eventual cost was 114 times more than the initial estimate.In contrast, Australia shot past its budgeted estimate for the 2006 commonwealth games by 0.6%.Corruption and incompetence were to blame for such exorbitant expenses in the 2010 commonwealth games.For example, officials within the Organizing Committee for the 2010 games had conspired with private companies for special favors.They had awarded a Swiss firm a contract for a TSR system for $23 million when a Spanish firm had placed a bid for it at $9.2 million.This transaction alone cost the Indian taxpayer 13.8 million.

2. The Coalgate Scandal

Unfortunately, the Indian people do not benefit from coal production as much as they should because of corruption. In March 2014, the Indian Comptroller & Auditor General revealed that Indian taxpayers had lost $28 billion. This loss resulted from the uncompetitive allocation of coal blocks. This amount could pay for two commonwealth games even if the price for each one were $13.8 billion. This matter went to several courts. Eventually, it ended up in the Indian Supreme Court. This legal body canceled 214 out of 218 coal blocks that the Indian government had allocated from 1993 to 2014. It imposed a fine as well for every ton of coal that the private entities had extracted during that time.

3. The Fodder Scam

This one took place throughout the late 80s and early 90s. It involved powerful government officials in the State of Bihar in addition to elected politicians and prominent businesspeople. These individuals conspired to create fictitious documents alleging the existence of vast herds of livestock. Then they would allocate money for the procurement of fodder, equipment, and medicine for these herds. These funds would end up in their pockets. In total, the fraudsters in this scandal stole more than $510 million from the people of Bihar. More than 53 trials related to this case have taken place thus far leading to the conviction of over 500 people who participated in this scam.

4. The Satyam Scandal

Founded in 1987 by Ramalinga Raju, Satyam was an IT service based in India. It was a large and prosperous firm. In fact, FIFA announced in 2007 that Satyam had become the official IT providers for its World Cup in both 2010 and 2014. Then in 2009, Raju resigned as chairperson of Satyam’s board. He confessed that he had manipulated Satyam’s earnings to reflect a favorable position for the company. More specifically, 94% of the cash indicated in Satyam’s accounting books was fictitious. The reaction to this revelation was immediate. Satyam shares fell by $2.2 billion. Investigations commenced, and in April 2015, a special court found that Raju and nine other officials including PWC employees had committed fraud.

5. The Hawala Scandal

Hawala refers to an informal money transfer system. In this case, hawala brokers used this system as a means of sending illegal payments to politicians. Estimates indicate that these politicians received bribes that totaled to $18 million. Interestingly, four brokers existed, and they were all brothers. However, the mastermind was Surinder Kumar Jain. The court cases that focused on this scandal collapsed. More specifically, the judges in these cases felt that hawala records were an unworthy source of evidence for the alleged crimes.

The Seven Biggest Financial Scams in India

6. The Bofors Controversy

This one was a scandal between two countries, i.e., India and Sweden. India received 410 field howitzer guns for $1.4 billion. In return, Sweden benefited from its most massive arms deal in history. In this case, the specific Swedish company that sold these arms to India was Bofors AB. To facilitate this trade, Bofors offered kickbacks to government officials in Sweden and India. These transactions took part in the 1980s and the 1990s, and they implicated highly prominent politicians in India.

7. The Harshad Mehta Scandal

Harshad Mehta, a well-known stockbroker in the late 80s and early 90s, found ways manipulating the stock market in India. More specifically, he focused on the Bombay Stock Exchange. Mehta distorted the value of stocks in this exchange by forging bank receipts. He also took advantage of loopholes in the banking sector siphoning millions from interbank transactions. His unscrupulous practices led to the most significant stock market scandal in the Indian history. Mehta died in 2001 after nine years of continuous trials.

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