ED summons senior executives of Deloitte in IL&FS money laundering case

Current Affairs
Trouble is mounting for audit firms as the Enforcement Directorate (ED) issued summons to senior executives of Deloitte Haskins and Sells in connection with an ongoing money laundering probe against Infrastructure Leasing & Financial Services (IL&FS). According to enforcement sleuths, audit firms and auditors are likely to be called for probe soon.
Confirming the development, an ED official said Deloitte’s senior management was asked to appear before the agency on June 12. “We have asked the audit firm to get relevant documents required in the case and indicated that all the related firms and individuals will be rounded up.”
Sources said those likely to be rounded up would include former auditors of IL&FS and its subsidiaries. An email sent to Deloitte remained unanswered.
The move comes after the ministry of corporate affairs (MCA) launched a prosecution against Deloitte Haskins and Sells as well as BSR and Associates LLP and their former auditors for their alleged role in perpetuating the fraud at IFIN, a subsidiary of IL&FS.
The ministry also recommended debarment of these audit firms and their audit partners. It sought interim attachment of their properties, including bank accounts and lockers.

 ED is examining the charges put up against the audit firm in the Serious Fraud Investigation Office (SFIO) prosecution complaint, filed last week. “We are currently looking at all aspects that led to a fraud in the company. The agency will examine the role of auditors in the proceeds of crime and the complex structure allegedly created so that a fund could be easily siphoned off,” said the official.Last month, enforcement sleuths conducted search operations at the business premises and residences of four former directors at IFIN.

IL&FS financial arm's GNPAs touch 90% in Dec against 5% in Mar 2018: Board

Company News

The Infrastructure Leasing & Financial Services (IL&FS) board on Wednesday presented a status report on the group’s financials and the asset monetisation plan, six months after the government-appointed panel took over the reins of the company. The board said the asset monetisation plan for the beleaguered infrastructure finance player was in good shape as far as the assets put up for sale were concerned, and that it expected the resolution process to accelerate.

The board also said the financial arm of the group had posted gross non-performing assets (GNPA) of 90 per cent in December 2018 as against 5.3 per cent in March 2018, and the group’s net worth had seen significant erosion. IL&FS Financial Services’ (IFIN’s) GNPA as a percentage of advances would be the highest by any financial institution involved in lending.

“I have heard of double-digit NPAs but 90 per cent GNPA is very unusual by any standards. That's the challenge that we have faced,” said Kotak Mahindra Bank MD & CEO Uday Kotak, who is also non-executive chairman of the IL&FS group.

The total external exposure of IFIN was estimated at Rs 10,656 crore at the end of March 2019, of which its exposure to group companies stood at Rs 6,849 crore. The board said it was exploring all options, including legal process and one-time settlement, to recover the dues.

The net worth of the group, which was around Rs 9,000 crore in March 2018, has reduced sharply. “It is reasonable to assume that there is significant erosion to net worth and in many many cases there could be a significant in negative value," said Kotak.


 At consolidated level, the IL&FS group had an outstanding debt of Rs 99,354 crore at the end of September 2018. About half of this, or Rs 48,470 crore, was in just four holding companies -- ILFS, IFIN, IL&FS Energy Development Co, and IL&FS Transportation Networks (ITNL)...Read More