Forensics and the art of triangulation


(Sarvesh Gupta) #143

Thanks for sharing. I have also seen multiple watsapp messages floating around the same - Its just ridiculous for any one setting up a business to take money from the dubious group of Videocon as loan or equity. I don’t understand that if I am the husband of country’s leading bank’s CEO why would a) I do business in such a convulated manner - read the entire article - so many transactions - selling and buying - I think initially the entity which gave loan became a subsidiary of the entity which it gave loans to etc. - this itself smells of fraud and b) even if the loans were given on merit - given that the quantum of loan is very high, notwithstanding the fact that loan was given as a part of consortium, ICICI bank should have recused itself from the consortium on grounds of conflict of interest.

If I were RBI, I would tell the bank to conduct a board meeting and tell the CEO to step down immediately and appoint someone from HDFC Bank as the head. Since banking is a public service, I would appoint someone from the right culture (Kotak or HDFC) to lead all prominent banks with immediate effect given the amount of rot that is coming to the fore. Akin to military police and court marshals, we need to set up a separate banking police and courts to catch all these theives in banking system who have made a mockery of the system and more importantly public money. Videocon’s track record for wealth creation has been so bad that any banker worth its salt would have even in 2012 would have not given loan to it without taking kickbacks. I was just checking its market cap in 2012 was just 6000 cr (400 cr now) and it is ridiculous that it was able to get 40,000 cr loan on a market cap of just 6000 cr and that ICICI Bank finds 3250 cr as a small amount for this organization.

PS - in case nobody noticed 64 cr on 3250 cr comes to a nice round figure of 2% commission :slight_smile:


(shreys) #144

It’s just baffling how morally depleted we have become as a society. A society where doing the wrong thing, committing the immoral act is the easy thing to do. Probably because it’s not at dissonance with our moral compass. But, there’s a good chance that had we been in the position of top bankers we’d have committed similar actions. As some behavioralists say, it’s the case of the barrel being bad instead of the apple. Bad circumstances can transform virtuous into evil. But, there are some of us who can resist all temptation and do the right thing out of no self interest. They are the true followers of the virtue theory- where doing the right thing requires no consideration. There’s automaticity. It’s ingrained in the being. As long as society associates a happy life as one that’s endowed with wealth- ill gotten or otherwise it’s unlikely we’ll see the end of corruption.


(Krishnaraj) #145

The whistle blower who had initially brought this to the attention of all authorities speaks here.

Great job by Bloomberg to reach out to the gentleman who blew the lid. Worse he says, no investigating authority, even now, has reached out to him. The conflict was clear (and Ms Kochchar was part of the credit committee what gave the loan to Videocon, and saw no need to recuse herself) and it is certainly dirty banking.

If you look at the Chairman’s defence carefully, he says we were not the only bank lending to Videocon, others did as well. We were only 10%. What does he mean when he says that? He seems to be following the age old PR strategy. When you don’t have an answer to the question asked, answer the question you wanted to be asked


(Bhaskar Jain) #146

Markets seem to be “aware” of all this shady deals and more that is why ICICI always quotes at a discount wrt HDFC ??

I remember in the past there was a bank run on ICICI bank also and they had to bring in Shahrukh Khan to do damage control. In my area all the ATMs were running dry. I maintain a big list of negative/chor companies which surprisingly already had Gitanjali jewels, Videocon in it. Added ICICI also to it.


(shreys) #147

Isn’t it likely that most companies indulge in unscrupulous activities? It’s only when information is made available to the public that we become aware of their wrongdoings. And, those companies that have sterling reputations I truly wonder how these companies are able to recruit talent that’s virtuous. It’s difficult to resist activities that are morally wrong but remunerative because self interest is always accorded supreme importance. That’s how we’ve evolved.In my humble opinion, we, as retail investors will never know if the company we’ve invested in is moral or immoral, honest or dishonest. There’s a small part of the whole information available in public domain.
We never really know if a person is nice or bad just by their actions in the public domain. Their characteristics may be representative of fine human beings. But, will we every know that truth? In my opinion- No.


(Krishnaraj) #148

Good question. But we cannot apply the reverse of this i.e., if a company quotes at a discount wrt to its competitors, then can it be shady. For eg WIPRO is generally at a discount to TCS, but from all accounts, it is very clean.

@shreys my observation is that some people are compulsively dishonest, some are compulsively honest and a large majority falls in between depending on various factors, including risk of being caught. But the good news is that some people are honest no matter what. For example Mr Vasudeva of Hawkins is known to have put his business growth in jeapordy to avoit paying a bribe. I have found the promoter of a 150 cr mcap to be absolutely honest from various accounts and interactions with him and people around him, even when he could have afforded to be dishonest and make more money. And his firm is by far the market leader.


(shreys) #149

@diffsoft
Absolutely. I totally agree. For some people doing the right thing is easy. There’s spontaneity, automaticity.


(Krishnaraj) #150

There is a wonderful book called Spy the Lie written by an ex CIA guy, who writes how to find out if someone is lying (btw, fact is we all lie 8-10 times a day, men mainly to maintain their status and women mainly to avoid hurting someone’s feelings).

He mentions pretty much what you say. If the response to a question is spontaneous and direct then chances are he is honest. If he does not answer the question directly, then that’s a grey area. For eg, if the question is, ‘do you think there was a quid pro quo arrangement between you and Videocon?’ and if the answer is, ‘no, there was no quid pro quo arrangement between me and Videocon’, then it is more likely to be true. But if the answer is, ‘no, the credit committee took cognisance of all facts while approving the loan proposal’, you can see that the question is not directly answered. So chances are > 50% that the response is dishonest.

Real pros can wing even that in my opinion.


(Bhaskar Jain) #151

In this respect, I would encourage watching the ICICI chairman’s so called press conference.

His body language and deliberate use of words. He multiple times re-iterates that they were part of a consortium ( meaning don’t single us out alone), lent just 10% ( against 90% of the other banks, 10% being nothing as per them), followed common rules… no “investor” in nu power was lent money ( not coming clear directly on whether a company backed/invested by Dhoot was involved in nu power), lending decision was by credit committee ( so clearly no individual is responsible even if the rest of the members in the committee are “yes” men/women ) and the board clearing the CEO on the grounds that no special treatment was shown to Videocon ( apparently they did not even go into the nupower, supreme energy transactions )

Finally asking everyone to stop rumour spreading. At least he did not go so far to threaten legal action :slight_smile: Finally hurriedly moved away from the stage when media was about to ask questions. What’s the point of a press meet when you just read the prepared statement which added no new information, they had already submitted this to the exchanges…


(shreys) #152

@diffsoft
Agreed. There will always be people who excel at deceiving. In my opinion most people would readily cheat if there was no fear of retribution. It’s the fear of consequences that makes us do right. It’s self interest. There are truly few like Mr. Vasudeva where there’s no consideration required between right and wrong. They are wired to perform virtuous actions. But even if fear of retribution prevents us from indulging in immoral activities it’s good.


(Krishnaraj) #153

@bhaskarjain very keen observations. An ex CEO of an erstwhile bank was chatting with me and the topic of banking came up. He said, can you name the Chairman of one bank whose CEO you know? I thought…Axis, Kotak, HDFC Bank, ICICI, IndusInd, Yes…not one could I recall.

I shrugged and he said to the effect that, ‘there, you have answered the question of importance of the Chairman of a bank’. That stuck :slight_smile:


(shreys) #154

In my opinion, another factor in selecting companies could be the nature of the top leadership. If there’s concentration of power it’s possible that viewpoints, idea contrary to that of the chief won’t be tolerated. Power corrupts, absolute power corrupts absolutely. And, there’ll always be sycophants. Sometimes even if we differ it’s hard to defy the top leader because of how persuasive they are. They won’t take no for an answer. It’s hard to defy the diktat and do what’s right. And, in the board of directors, there’ll be diffusion of guilt. You hope that someone else will oppose the proposal that’s wrong. No one does. And then they derive solace from the fact that they aren’t totally responsible for the wrongdoing. There were several other directors as well. This is precisely the reason why there are multiple shooters in a firing squad- to diffuse guilt.
So, avoiding companies with leaders who are too powerful could also be an approach to consider.


(VALUE2017) #155

The sanction of Bank loans by ICICI Bank to Videocon is all in Black and white and are as per the internal credit norms of ICICI Bank. It will be almost impossible to establish quid pro quo between the loans sanctioned by ICICI and dealings of Videocon and Mr. Kochar.

But the crux of the issue here is the suspicious dealing between Videocon and Mr Kochar and we have not seen any clarification on this issue by either MR/MRS Kochar or ICICI Bank.
Mrs Kochar would have been aware of the suspicious dealings and should have morally nipped it at the bud. Why is she not coming out with any statement admitting that she is aware of all the dealings between Videocon and his husband and assure to all stakeholders that there is nothing fishy.

The public clarification given by ICICI Bank was mainly on a pre-set of question asked by CNBC TV 18 (obviously comfortable and answerable set of question). I think it would had been better if they would have addresses to the querries raised by the Whistleblower.

I strongly feel that ICICI bank management is beating around the bush rather then addressing the core issue.

Just see the press conference of Chairman and his body language . How can the top management of the largest Private Sector Bank act in such a way…he did not answered a SINGLE question…It is very very serious and I am almost certain that in few days you will hear the news that Mrs Kochar has been expelled from ICICI…

You do not need a forensic triangulation in this case, just watch the press conference of Chairman. Poor fellow exposed every thing without saying anything…


(shreys) #156

In my opinion a clarification from Mrs. Kocchar won’t serve any purpose. The masses and media trials believe she’s guilty.
People have resorted to besmirching her reputation.
Before we jump to conclusions I feel that she does deserve benefit of the doubt.
Yes, the transaction that transpired was definitely alarming. But, was there a malicious intent? We don’t know.
It’s entirely possible that it’s a case of negligence and not malafide intent. I find it hard to believe that a person with a sterling reputation, an illustrious career and tremendous scope for ascension would risk everything for money.
That said, it definitely warrants institution of a committee that’s unbiased and at liberty to suggest necessary action.
If indeed this was a quid pro quo transaction it’ll be the defeat of every common person who works hard his/her entire life to survive. It’ll be our defeat. I don’t mean to sound melodramatic but I truly feel it’ll be devastating.


(VALUE2017) #157

I am sorry but I strongly feel that you will be disappointed this time…( I also wish you should not)

You cannot be negligent while doing fishy transaction for Rs 64 Cr and especially when you are a husband of a CEO of the largest private sector Bank…

I do not believe in mass and media trial but in this age of social networking Mrs Kochar or his husband should come out with some statement or at least a tweet assuring that nothing there is nothing wrong in the dealings between Mr Kochar and Videocon.

I would just request you to go through the press conference of Chairman where his conduct raises more question then answering them…

The persons sitting at this level(CEO) should be of highest moral and ethical values…


(shreys) #158

Sure, I’ll see the video of Chaiman’s interaction with media.


(shreys) #159

I did watch Mr. Sharma’s interaction with media persons. The explanation provided by the bank makes sense to me. The decision regarding loan approval was to be taken by the credit committee which Mrs. Kochhar wasn’t heading. The committee comprised of independent directors as well. I’m certain they do have guidelines for assessing the credit worthiness of the borrower. If Videocon was unworthy of lending to, which it probably was and they were lent 3250 crores the decision must have been unanimous. So, either the independent directors failed to perform their duty or Mrs. Kochhar swayed their decision in her favour. Or were the independent directors also involved in this scheme?
If indeed there was a mutually beneficial arrangement, it’s also the failure of independent directors. Even their role needs to be investigated. If they can’t object to what’s wrong they’ve no business being there. It could be the failure of the entire system. When directors, shareholders’ representatives don’t perform their duty they have to be responsible for their inaction.
And, if there is merit in the allegations and no action is taken, it’ll be a blot in the history of banking.
In Mr. Sharma’s press conference what I found bizarre was his frequent mention of ICICI’s exposure being less than 10%.
Frankly, his body language didn’t tell me much. He possibly doesn’t have much experience dealing with media and therefore he’s nervous.
Then the question arises- How should one find people who are moral, ethical to lead the company?
There’s no way we can tell if the person is honest or not.
Until a few years ago, Mrs Kochhar was the pearl of India’s banking sector, an inspiration for millions. And, today there are allegations of impropriety.
In my humble opinion, we should eliminate the criterion of promoters who are ethical, moral. Because we will never know what kind of a person he/she is.
Brain scanning can help to a certain extent in assessing a person’s moral compass. But, we obviously can’t brain scan people.
So, maybe their past actions could help us to a certain extent.


#160

I think that you are oversold on her illustrious reputation and inspiration to millions stuff. She was awarded one of the highest civilian awards just after becoming the CEO. What had she done till then to receive that award? Gave ~500 crs in loan to Kingfisher (Vijay Mallya) even though Kingfisher was a gone case by then. She heads a private bank and did not have ot take orders from the then finance minister. Later, ICICI booked losses on the loan. Bank’s loss, her profit. Infact, people in the know of things at ICICI may say that she would not be the first ICICI CEO to indulge in this kind of stuff.


(VALUE2017) #161

It is presumed that the chairman had held the press conference to address the questions of media and not to read already published statement.

And my point is that I am not questioning the loan sanctioned by ICICI Bank to Videocon but the dubious transaction between Mr Kochar and Mr Dhoot and there has been no clarification/denial in this regard by neither Mr/Mrs Kochar nor management of ICICI Bank.


(shreys) #162

Dear @VALUE2017,
I’m in agreement with you. The transaction between Mr. Kochhar and Mr. Dhoot should be investigated. It is without a doubt a bewildering transaction. Is it possible that the transfer of ownership to Mr. Kochhar and approval of loan are totally unrelated. Maybe we’re trying to establish a cause and effect pattern. It’s pertinent to note that ICICI was a lender with relatively low exposure to Videocon in the consortium.
Why was the company lent 40000 crores when it was struggling to eke out even a rupee of profit. In December 2011 ending Videocon had registered sales of 13000 crores and losses of 1300 crores. It’s baffling why the consortium led by SBI would do so. If we believe there was an arrangement between ICICI and Mr. Dhoot there also should be a reason why other lenders deemed it appropriate to lend to Videocon. Was there a quid pro quo with other lenders as well? These are some questions we don’t have answers to.