Report on

Ethical Issues

Submitted to
Prof. Majalkar

BY
Ankita Alwe

Roll.no : 01

MMS : IV

PTVA’s Institute of Management

Rs.300 Crore Citibank Fraud

Mr. Shivraj Puri, an employee of Gurgoan branch had siphoned of money from 40 high net-
worth investors (HNI) amounting to Rs 400 crore.He is a Senior Relationship Manager in
Citibank Gurgoan branch. He used a forged notification of Securities & Exchange Board of
India (SEBI) stating that few select clients would earn higher returns (18% to 20%) if they
invested in his suggested schemes.

He invested the money obtained from HNI in the stock market in his personal capacity over a
period of few months. He invested money in share market through brokage firms Religare
and Bonanza

The main client affected by the fraud is Hero Honda group and the amount diverted is to the
tune of Rs 200 crore (USD 44.67 million). Mr. Sanjay Gupta, Assistant Vice President in the
accounts office of Hero Corporate Services have formed two finance companies BG Finance
and G2S Consultancy and diverted Hero group promoter funds in these two companies.
These funds were then fraudulently invested by Mr. Shivraj Puri of Citibank.

Mr. Sanjay Gupta has allegedly taken Rs 20 crore (USD 4.46 million) as commission from
Mr. Shivraj Puri for diverting these funds.  It is suspected that Mr. Sanjay Gupta was aware
of the forged SEBI letter but recommended the investment to a number of people.

Ethical issues:

 Lack of control and supervision on the activities of the Relationship Manager.

 The fraud department was alerted by the customer complaints. This raises questions on
fraud detection and monitoring procedures implemented at the bank.

Banks & financial institutes should monitor suspicious transactions with special emphasis on
HNI accounts. There should be adequate control over relationship managers activities.

Religare and Bonanza should have questioned the source of funds of Mr. Puri as he is a
salaried employee.

2G Spectrum Scam
 It is Rs.1.76-lakh crore worth of scam. The amount is approximately 2% of national GDP
or 1/3 of current tax revenue of India. It is also equals to annual income of telecom
service sector.
 The former Telecom minister A Raja who according to the CAG, has evaded norms at
every level as he carried out the dubious 2G license awards in 2008 at a throw-away price
which were pegged at 2001 prices.

Beneficiaries:
Reliance Communication allegedly had stake 10.7% of in swan telecom. But according to
rule a telecom operator cannot own more than 10% stake in another telecom operator
company operating in same area.
Unitech had no experience in telecom sector but according to rule the license should be given
to those who have experience in telecom sector. They got license for throw away price of Rs.
1661 crore. It sold its 60% stake to Telenor at Rs. 6200 crore.
Other beneficiaries include Datcom solution, Loop Telecom, Tata teleservice, STel ltd, Idea
cellular & spice communication.

Ethical issues:
With outbreak of 2G scam following ethical issues on the part of Government, Regulatory
bodies, Media & industry came into forefront.

Industry & Media:

Spirit of fair competition not observed.
Middlemen used for access to those in power.
Neutrality of media is under question.

Regulation:
Toothless with only advisory powers.
Insufficient manpower worsens the situation
Appointment process aid conflict of interests

Proper decentralization of powers & implementation of existing rules may have prevented
this scam. Media should understand its responsibility towards people of India. adequate
power & resources should made available to regulatory bodies.

Adarsh Scam
A tall building is built in Colaba area of mumbai just adjacent to lands of Indian navy, now as
per navy this building is security threat for its assets and as per law it is illegal to build such
structures near defence land.

Now another issue is that the land on which the Adarasha society ( building) has been built is
allocated for relocation of families of Kargil war Martyrs. but thing happened is that the
society was granted permission under name of Kargil war heroes and most of the flats were
allocated to relatives of maharashtra ministers

Now from looking to a facts it gives impression that biggest culprits in this scam are
ministers of maharashtra who sanctioned the permission, bureaucrats who had sufficient
money to purchase flats in the society on the name of their relatives,

Thus this scam is result of joint Venture of bureaucracy and politicians of Maharashtra.

Ethical issues:

Government should bring more transparency in process of giving land at discounted rate.
They should monitor whether housing societies or organizations are following rule applicable
to them.

Common Wealth Games Fraud

The Delhi Common Wealth Games (CWG) investigations by Central Vigilance Commission
(CVC) revealed irregularities and fraudulent practices adopted by the organization committee
members.

The estimated figure for misappropriation of funds is Rs 8000 crore (Rs 80,000 million). The
investigations have recently commenced and the problems reported are as follows.

 Purchase contracts signed with varying rates for the same product
 Prices over-inflated in some contracts
 Contracts given to relatives and friends
 Sub-standard products purchased
 Vendor payments made without confirming quality and delivery
 Payments made to non-existent vendors

The organization committee members ignored the Prevention of Corruption Act and

government procedures for contracts and tenders. A periodic audit by government agencies
could have highlighted these issues at an earlier stage. As Comptroller and Auditor General
(CAG) group is required to conduct periodic audits of all government expenses, it is
surprising that these issues were not discovered earlier. This clearly indicates miss-utilization
of public funds

Ethical issues:

From the perspective of purchasing process, the following ethical issues are evident:

 Improper and inadequate vendor selection and evaluation procedures were followed.  

 Tenders were not given to bidders quoting lowest price of the product.
 Vendors did not deliver the contracted quality and quantity as per the delivery schedule.
 Vendors were not penalized for sub-standard quality or late delivery.
 There was no segregation of duties. The same officials authorized the contract and
approved payments.

 An independent evaluation of contracts by risk managers may have prevented

misappropriation of funds.

The loan scam

The economic offences wing of the Central Bureau of Investigation on unearthed a major
fake housing loan racket and arrested eight officials from various banks on graft charges.

CBI arrested CEO of LIC Housing Finance Ramachandran Nair and seven others senior
bankers in connection with a housing finance racket. Apart from Nair, those arrested are
Naresh K Chopra, Secretary (Investment), LIC, R N Tayal, General Manager of Bank of
India (Delhi), Maninder Singh Johar, Director (Chartered Accountant) of Central Bank of
India, Venkoba Gujjal and Dy General Manager of Punjab National Bank (Delhi). Rajesh
Sharma, CMD of Mumbai based firm Money Matters Ltd and two of its employees Suresh
Gattani and Sanjay Sharma were among those arrested.

The bank officials allegedly colluded with the firm to sanction large scale corporate loans,
overriding mandatory conditions for such approvals along with other irregularities.
The Finance Ministry said it would explore the possibility of instituting a departmental
inquiry into the housing finance racket that led to arrest of senior officials of the LIC Housing
Finance and public sector banks.

Ethical issues:

 Role of intermediaries such as money matters is suspicious in entire scam.

 Too much power in the hands of a very few.

There should be greater transparency in giving loan by financial institutes.

India’s latest rice scam

 The latest of the scam series in India, the UP rice scam could be the biggest of them all
involves Rs 200,000 crore, even outdistancing the so called 2G Spectrum scam

According to reports, a huge stock of food grain meant for distribution under the
Antyodaya, Annapurna and Mid-Day Meal schemes was smuggled outside the state and
even the country to Bangladesh, Nepal and other nations. This food grain was for poor
people either free or at highly subsidies rate.

The scam involves goofing up of rice worth Rs 200,000 crore. It was a scam that stretched
to almost 7 years and 300 FIRs. The scam was reported in Uttar Pradesh in the period when
Samajwadi Party leader Mulayam Singh Yadev was the chief minister of the UP.

Ethical issues:
Food grains meant for poor had been smuggled into the open market and also into the
neighboring countries and none of that could have happened without the involvement of
higher authorities.

Transportation by goods trains to far off corners of the country indicated that smuggling
happened in collusion with different authorities.

Distribution system of food grain for poor people should be more transparent. it should be
more accountable. There is need for frequent checks. It is necessary to break such
rackets in public distribution system to avoid national loss.

Air India charged double fare to rescue Indians in Egypt.

The 320 Indians who were evacuated on the special Air India (AI) flight had to pay more than double
the cost of a single ticket from Cairo to Mumbai. A one-way ticket in this sector averages at Rs
17,000-20,000, but stranded travelers said they had to pay Rs 45,000 before they were assured of a
seat on the AI 160 flight to Mumbai. For a few people, the fare was as high as Rs 55,000.

Tourists and honeymooners, many of whom were on a budget and did not have access to immediate
funds, were the worst hit. Many fliers complained that they had to pay cash on the spot to be able to
procure a flight ticket.

AI flight was a boon because our earlier flight had been cancelled. But they had to pay double money
on the spot to get on the plane. At the end of a holiday, most people do not have so much cash in
hand.

Ethical issues:

 AI took undue advantage of Emergency situation.

 Air India should understand the responsibility towards Indians.