Sources say he is alleging that a multi-billion-dollar fraud was committed by former top executives of his companies.
BR Shetty, the founder and former chairman of the embattled NMC Health and Finablr, has sought an investigation by federal Indian agencies into a multi-billion-dollar fraud allegedly committed by former top executives of his companies, sources very close to the businessman confirmed in Bengaluru on Thursday.
In a 55-page detailed complaint, a copy of which was made available to Khaleej Times by the source, Shetty said: “I am filing the present complaint against a large, complex and sophisticated corporate and financial fraud perpetrated by Prasanth and Promoth Manghat, brothers who were the former CEOs of NMC and Finablr.”
Speaking to Khaleej Times, the source, who is very close to Shetty, said they are expecting an immediate positive action from the investigating bodies. “Mr Shetty has been the victim of a complex fraud amounting to $6.6 billion involving his former senior executives and some bank officials. Ultimately, the truth will prevail and we are confident that BRS will come out clean from this mess,” he said.
Shetty, who has been in India since February when scandals of financial irregularities and fraud rocked both Finablr and the NMC Group, stated that through his complaint, he was calling for a probe into “the embezzlement, corruption, and laundering of money of his companies on the basis of my personal knowledge and the basis of my examination of documents and records obtained by me.”
He noted that he had filed a complaint dated 27 April 2020, with the Federal Attorney General of the UAE, seeking a detailed investigation into the affairs of the group companies “in view of the forgery, fraud, and embezzlement” described in his petition.
While the Manghat brothers topped the list of 10 accused in the complaint, others included Prasanth Shenoy, the former chief financial officer of NMC, Suresh Kumar, former head of treasury, NMC; Sabina Shamsundar Salgaokar (secretary to Prasanth Manghat – NMC; Pradeep Kumar and Rahul Ranjit, of Unimoni and Finablr respectively, and Suresh Kumar Nandiraju of Neopharma. Two Indian banks, Bank of Baroda and Federal Bank, also figure in the list.
“Banks make false implications against me and attempt to usurp my properties as a consequence of my complaint,” he alleged in his letter.
“Based on the records that I have been able to gather so far, my understanding is that that the fraudulent scheme was perpetrated over the course of at least seven to eight years i.e. since 2012 – 13 onwards,” he said in the complaint filed with Mangaluru East (Kadri) Police Station, and copies shared with the Prime Minister and the Serious Fraud Investigation Office of the Ministry of Corporate Affairs, the Central Bureau of Investigation and Enforcement Directorate.
Shetty claimed that at its peak, the fraud scheme utilised a large pool of funds, estimated to exceed $5 billion and approximately 50 to 60 banking credit and/or trade finance facilities that Prasanth and Promoth were able to illegally obtain over time from international banks, local lenders in the UAE as well as ‘shadow bankers’ and ‘factoring firms’.
“The operations of the fraud scheme involved a massive amount of round-tripping payments masked as payments to purported suppliers, purported intra-group payments and loans, the routine falsification and forgery of banking/trade finance documentation and personal guarantees in my name, the falsification/duplication of invoices and purchase orders, falsification of inventories and goods receipt notes with false descriptions and pricing of goods, equipment and services,” he said in his complaint.
Shetty has alleged that the round-tripping payment scheme resulted in inflating the balance sheets of the Group Companies including NMC, Finablr, ‘improving’ their creditworthiness, and facilitating access to additional funds and credit lines which could be embezzled, until the ‘implosion’ and consequent discovery of the scheme in early 2020.
Shetty said from 2017 to 2020, banks provided and kept ever-greening loans, worth hundreds of crores, to the group companies, “in violation of applicable guidelines and statutes, without creating any meaningful security and without enquiring about the end use of such loans.”
As per his complaint, the Manghat brothers “deceptively” took over the business group in early 2017 by “exploiting the trust bestowed on them”, and had a “nearly hegemonic power” in the companies founded by him.
Shetty has claimed that by 2017, he had lost “all visibility” into the affairs of his group companies due to his resignation and “deception” by the Manghat brothers. He has further claimed that he had no access whatsoever to the records of the group companies from 2017 and was receiving “general misleading financial and corporate reports” prepared by Manghat brothers.
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