A C Muthiah, cousin of former Finance Minister P. Chidambaram, has been charge sheeted by CBI for cheating Syndicate Bank of an amount of Rs 102.87 crore. A C Muthiah is Chairman Emeritus of Southern Petrochemicals Industries Ltd (SPIC) and former President of the Board of Control for Cricket in India. He comes from a wealthy industrialist family, with his grandfather Sir Annamalai Chettiar being the most prominent industrialist in south India before independence.
The charge sheet was filed against A C Muthiah and 23 others including Farouk Irani, the then Director of the First Leasing Company of India (FLCI) through which the fraud was carried out. Syndicate Bank has alleged that the company manipulated the bank’s accounting database, maintained in Oracle, through back-end processes. The bank also alleged that the company showed inflated income and assets over the years (since 1998) by showing fictitious income and non-existing assets.
The CBI has charged A C Muthiah and 23 others of cheating, fraud and destruction of evidence in a document filed before a Chennai Special Court. According to the CBI release, the bank has alleged that most of the loans shown as given by the company to its clients were actually just on paper as they did not have capital to give real loans. Loans taken from Syndicate bank were diverted to shell companies (A non-trading company used as vehicle to carry out illegal transactions and transfer of funds to save taxes) controlled by Irani to acquire shares of First Leasing. It was also alleged that NPAs of First Leasing were shown as taken over by these shell companies through bogus agreements to avoid NPA provisions, resulting in inflated profits for the company, but causing a loss to the bank’s Corporate Finance Branch in Chennai. In simpler terms, the company was running in losses but posted huge profits on paper which helped it to get loans from banks.
The CBI found in the investigation that Muthiah and Irani along with seven shell companies, in a conspiracy with statutory and internal auditors, had cheated the bank by submitting forged financial statements to obtain “undue credit limits and siphoned off the money for commercial operations which were not related to company”. The investigation has also revealed that the promoter-directors had used loaned money to donate annually to a trust run by A K Muthiah causing wrongful loss to the bank.
Like former Finance Minister P Chidambaram, his cousin A K Muthiah is very close to ex- Congress president and chairman of UPA Sonia Gandhi. Senior Bharatiya Janata Party (BJP) leader and Rajya Sabha MP Subramanian Swamy has alleged many times that the shell firm AE Services had received and passed off kickbacks to Italian middleman Ottavio Quattrocchi in the Bofors scandal. Ottavio Quattrocchi was considered very close to Rajiv and Sonia Gandhi and was suspected to have been helped by Gandhis financially and legally many times. The company QE Services first floated by Muthiah and during the scam period the firm’s ownership was handed over to foreigners. Muthiah was an Honorary Consul of Belgium in India and awarded one of the highest civilian awards of Belgium to Sonia Gandhi.
There are ongoing investigations against P Chidambaram himself as well is as his son Karti Chidambaram, who is also facing several charges of fraud and illegal transactions. It is quite clear that Chidambaram abused his position in the cabinet and gave several kickbacks to his own family members. The next few months should be interesting to see which Chidambaram family memver gets sent to jail first.