Everything about Deepak Kochhar & Money Laundering case

10 Sep 2020  Read 1441 Views

The dispute between India and China has come out openly in front of the entire world, and it wants the two Asian giants to make peace with each other. Still, despite several diplomatic talks and statements, the issue is far from over. In the current times, a traditional war cannot be an option unless either side triggers something big. Hence, both the nations resort to indirect attacks (proxy-wars) at each other.

One move at this series of ‘proxy-war’ was the recent mobile app ban of Chinese applications by the Indian government, which resulted in a direct financial loss to China. The proxy war is a technique through which you can attack your enemy through indirect techniques. Keeping a note of the pattern of each proxy measure, both the nations can plan ahead and try to minimize the damage caused by the other nation’s move, if not completely avoid it.

In a recent case of fraud, one such proxy measure was used by the top management of a leading bank to cater to their personal advantages. On September 7, 2020, the Enforcement Directorate (ED) arrested Deepak Kochhar, the husband of former ICICI Bank MD and CEO Chanda Kochhar, in a money laundering case registered nearly a year and a half ago. According to reports, Deepak’s arrest was related to the ICICI Bank-Videocon loan case, which had been in the news a few years ago. Reports suggested that he was arrested after ED found fresh evidence related to his alleged direct involvement in the case. Currently, the ED is investigating a money laundering case against the Kochhar couple, based on an FIR filed by the Central Bureau of Investigation.

In this case, the Kochhar family used the Videocon group as a proxy measure to their personal advantage. Now, this may not obviously be similar to the Indo-China situation. Still, it is similar in a way that the Kochhars didn’t resort to a direct way of lending; rather, they chose to take up money from the bank, hiding behind the Videocon group. This was a proxy war measure.

The Kochhar Videocon case and the Money Laundering

What does this have to do with you, an investor? Well, just like nations can plan ahead based on the pattern of proxy measures of their enemy nations, investors, in order to safeguard their money, can be more alert and aware about the companies they invest in, in order to avoid such frauds. If they identify or foresee any suspicious activity, it becomes their responsibility to ask questions and become a whistle-blower, if needed, to avoid a major fraud. If not, at least they can make a better investment decision and save themselves from a major financial hit.

Well, the main reason behind this major fraud expose were two investors of ICICI bank and Videocon group, both of whom, in a span of two years, realized irregularities in the system and set out to uncover them.

How did the whistle-blowers blow out the Deepak Kochhar's fraud?

In October 2016, Arvind Gupta, who had stocks in both ICICI and Videocon, noticed some loan irregularities in the bank and later went public about these concerns. Later in the case, he alleged that the then ICICI Bank MD and CEO, Chanda Kochhar had approved a Rs 3,250 crore loan for Videocon Group in 2012 in exchange for a deal with NuPower Renewables, a company which is owned by her husband, Deepak Kochhar. He tried raising this concern to many higher authorities of the country, which included RBI and even the prime minister, demanding an investigation. Still, his complaints were given any heed to.

However, the came to light again in 2018, when another investor complaint about the top management of the bank and alleged that there was a deliberate delay in recognising the impairment of several loan accounts between 2008 and 2016 with the intention to save on provisioning costs.

The complaint by this whistle-blower forced authorities to look into 2016’s matter as well, and thus a probe was launched by multiple agencies and also led to the questioning of Chanda Kochhar’s family. Chanda was also accused of quid pro quo for approving a loan of 3,250 crores to the Videocon Group.

When the probe was launched, many agencies, including the Securities and Exchange Board of India (SEBI), Serious Fraud Investigation Office (SFIO), and later ICICI bank itself got actively involved in the case to probe the matter. Later, the CBI registered an FIR against Chanda Kochhar, her husband Deepak Kochhar, and Videocon Group MD Venugopal Dhoot over the irregularities in sanctioned loans.

Cut to 2020, a thorough investigation into the matter revealed that loans were refinanced, and new loans aggregating to Rs 1,730 crore were sanctioned to Videocon Industries Ltd, which became non-performing assets (NPA) for ICICI Bank in 2017.

The investigation further revealed that an amount of Rs 64 crore, out of the Rs 300 crore loan sanctioned by a committee headed by Chanda Kochhar to Videocon International Electronics Ltd, was transferred to NuPower Renewables Pvt Ltd (Deepak Kochhar’s company) by VIL in 2009, just one day after disbursement of loan by the ICICI Bank.

Apart from this, the investigation also revealed some more laundering of money and acquiring of assets by Chanda Kochhar and her family. As a result of which, the Kochhar family is now being probed in a money laundering case, and multiple agencies, including the income tax department, CBI, ED, and SFIO, are conducting parallel investigations into the matter.

Investors against the top management

The Kochhar family is still under investigation, and who knows what more will be revealed. Till date, the probe revealed the laundering of big-money by the top management of ICICI and Videocon group. This ‘big-money’ was the money these big industry giants raised from their investors, which were just like us.

 It’s only fair when everyone who understands the ABCs of investing and the stock market asks you to “Choose carefully,” “Invest carefully,” “Be aware of the frauds, “Ask questions,” “stay updated.” You invest because you want to make more money for yourself, not with the purpose of making the company’s promoters richer. And if you are putting in your money, you would expect a company to be fair and transparent with you. But as an investor, can you just invest your money and forget about it? Of course not!

It is your right and responsibility to find out what is happening inside the company you’ve invested in. You should know where your money is going and is being used for what purpose.

All it took to trigger this active investigation into the case was the awareness and smartness of two normal investors, who spotted the irregularities and decided to find out about the matter. These whistle-blowers did blow out the whistle against this massive fraud, sparking an alarm about how the top management of a reputed company is capable of misusing investors’ trust and, of course, money.

The Kochhar Videocon case throws light on the ‘always-said’ but ‘rarely-understood’ concept of investor alertness and awareness.

Classic Bollywood movies often portray towns which are controlled by one powerful politician or a scary goon or sometimes, a mixture of both. The people of the town are sometimes aware but too scared to expose their illegal activities or sometimes are just too ignorant to identify them. Then something bad happens, and it becomes too late for the town to do anything against the powerful until a hero arrives. But couldn’t that ‘something-bad’ be avoided in the first place? Why does the town always wait for a hero?

In the Kochhar Videocon case, the aware investors (whistle-blowers) were the heroes who exposed the fraud and saved the day for their fellow investors. So, what do you want to be? The gullible town or the hero?

About the Author: Anuja Khandelwal | 18 Post(s)

Anuja Khandelwal is a finance content writer at Finology. With a bachelor’s degree in Management and a master’s in mass communication and journalism, Anuja started writing blogs as a hobby, which later turned into passion. Together, with her passion for writing and interest in Finance, she wishes to create unique infotainment through her words.

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