The Enforcement Directorate (ED) has arrested Vuppalapati Satish Kumar, managing director (MD) of Prithvi Information Solutions Ltd (PISL) in connection with a Rs3,316 crore bank fraud case.
An ED official told IANS that it arrested Mr Kumar on 12th August and got his custody for six days.
The official says the MD of PISL was arrested under the Prevention of Money Laundering Act (PMLA) for causing a loss of around Rs3,316 crore to a consortium of public sector banks (PSBs) in connivance with Hima Bindu B, MD of VMC Systems Ltd. Bindu is the sister of Satish Kumar and was arrested by ED on 5 August 2021.
Moneylife has been writing on Prithvi Information Solutions for more than a decade. But more about it later.
ED initiated a money-laundering investigation against the company and its top executives based on a first information report (FIR) filed by the Central Bureau of Investigation (CBI).
VMC Systems took loans from a consortium of PSBs and, at present, the outstanding is about Rs3,316 crore. "Forensic audit also revealed that the PISL, a related entity, was given 3% commission by the VMC Systems for all receipts from the BSNL without any specific role of the PISL in BSNL tenders," the ED official told the agency.
The forensic audit further revealed that VMC Systems had created various letters of credit (LCs) worth Rs692 crore in the name of fake or dummy entities which were subsequently devolved.
To dodge the banks, Satish Kumar, through Prithvi Information Solutions and Ennar Energy Ltd and with the active assistance of his sister Hima Bindu created alse or exaggerated operational revenues by generating fake sales or purchase invoices through the companies controlled by their family members.
They then siphoned off a part of the proceeds of crime by remitting it to the overseas entities controlled by their family members.
While Satish Kumar denied any links with the non-performing assets of VMC Systems, last month, the search by ED found 40 hard disks at his residence. "On forensic examination of digital devices, it was found that he indulged in benami transactions and involved in efforts to transfer fraud amounts to off-shore entities. He was non-cooperative during the investigation and was not supplying documents of his own business entities on one pretext or the other," the official from ED says.
Over the past few years, Hyderabad-based Prithvi Information Solutions had lurched from one extraordinary scandal to another. Prithvi Information Solutions was a one-time high flier stock with an all-time high of Rs503 in 2006. It dropped to Rs1.28 on 14 September 2015.
Trading in the company was suspended, which ultimately resulted in Prithvi Information Solutions getting delisted from stock exchanges on 21 August 2018. Subsequently, the company promoters, directors and group units are barred from accessing the securities market for 10 years.
As reported by Moneylife, in November 2018, the Pennsylvania Federal Court has issued summons to 13 including Prithvi Information Solutions, Value Team Corp (VTC), SSG Capital, Madhavi Vuppalapati as well as Shyam Maheshwari, Andreas Vourloumis, and Edwin Wong over alleged fraud, money laundering and racketeering.
The lawsuit filed by Koko Global Inc sought damages of $92 million from SSG Capital and its principles Mr Maheshwari, Mr Vourloumis, Mr Wong, Ira Noor Vourloumis and Dinesh Goel.
The case related to the alleged siphoning of funds worth $35 million out of $50 million raised in February 2007 by Prithvi Information Solutions Ltd (PISL) as zero-coupon convertible bonds due in February 2012, which were able to be converted into shares of PISL.
Consistent with the bond offer circular, PISL and Prithvi Solutions Inc (PSI), a 100% unit of PISL, entered into an agreement where the bonds were issued for the benefit of PSI and the bonds funds were to be used solely by PSI to execute business operations in the US.
In February 2007, Lehman Brothers, through Kingfisher Capital CLO Ltd invested in the bonds issued by PISL. Lehman Brothers then placed $50 million in an escrow account at UCO Bank in Hong Kong.
As per the agreement between PISL and PSI, the Bank transferred about $15 million out of the $50 million to PISL to provide bond funds to PSI.
However, on 15 September 2008 Lehman Brothers filed a bankruptcy petition in the US and bankruptcy and insolvency petitions overseas.
Later on 3 August 2010, Lehman Brothers sold its interest in the PISL bonds to VTC and SSG Capital Partners for about $15 million. Next month, SSG Capital Partners and PISL, headed by Madhavi Vuppalapati signed an agreement to restructure the bonds.
On the same day, both parties restructured the agreement, which required PISL to pay $4 million as a non-refundable deposit to SSG Capital Partners to confirm its commitment for restructuring the bonds.
The suit filed by Kyko stated, "The requirement to have PISL pay a non-refundable deposit to restructure the bonds under the SSG Capital Partners’ Agreement is illegal under applicable Indian law, rules, and regulations. The non-refundable deposit served no purpose other than to further Defendants’ fraudulent scheme as set forth herein." (Read: US Lawsuit Against Prithvi Information Solutions Alleges Rampant Siphoning of Funds)
UPDATE: On 22 December 2020, Kyko Global and Ares SSG Capital Management reached a mutually agreeable resolution to a long-running legal dispute, with both parties dismissing all legal actions against each other.
In a joint statement issued at that time, both Kyko Global and Ares SSG Capital Management stated, "The dispute related to issues about SSG's investment interests in corporate bonds issued by Prithvi Information Solutions, an Indian corporation, more than a decade ago. Recent exchange of information and discussion among the parties have clarified those issues to the mutual satisfaction of the parties with each party determining that no wrongdoing was committed by the other. As a result, Kyko has withdrawn its legal claims and past public statements and SSG has rescinded its countersuit."
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An ED official told IANS that it arrested Mr Kumar on 12th August and got his custody for six days.
The official says the MD of PISL was arrested under the Prevention of Money Laundering Act (PMLA) for causing a loss of around Rs3,316 crore to a consortium of public sector banks (PSBs) in connivance with Hima Bindu B, MD of VMC Systems Ltd. Bindu is the sister of Satish Kumar and was arrested by ED on 5 August 2021.
Moneylife has been writing on Prithvi Information Solutions for more than a decade. But more about it later.
ED initiated a money-laundering investigation against the company and its top executives based on a first information report (FIR) filed by the Central Bureau of Investigation (CBI).
VMC Systems took loans from a consortium of PSBs and, at present, the outstanding is about Rs3,316 crore. "Forensic audit also revealed that the PISL, a related entity, was given 3% commission by the VMC Systems for all receipts from the BSNL without any specific role of the PISL in BSNL tenders," the ED official told the agency.
The forensic audit further revealed that VMC Systems had created various letters of credit (LCs) worth Rs692 crore in the name of fake or dummy entities which were subsequently devolved.
To dodge the banks, Satish Kumar, through Prithvi Information Solutions and Ennar Energy Ltd and with the active assistance of his sister Hima Bindu created alse or exaggerated operational revenues by generating fake sales or purchase invoices through the companies controlled by their family members.
They then siphoned off a part of the proceeds of crime by remitting it to the overseas entities controlled by their family members.
While Satish Kumar denied any links with the non-performing assets of VMC Systems, last month, the search by ED found 40 hard disks at his residence. "On forensic examination of digital devices, it was found that he indulged in benami transactions and involved in efforts to transfer fraud amounts to off-shore entities. He was non-cooperative during the investigation and was not supplying documents of his own business entities on one pretext or the other," the official from ED says.
Over the past few years, Hyderabad-based Prithvi Information Solutions had lurched from one extraordinary scandal to another. Prithvi Information Solutions was a one-time high flier stock with an all-time high of Rs503 in 2006. It dropped to Rs1.28 on 14 September 2015.
Trading in the company was suspended, which ultimately resulted in Prithvi Information Solutions getting delisted from stock exchanges on 21 August 2018. Subsequently, the company promoters, directors and group units are barred from accessing the securities market for 10 years.
As reported by Moneylife, in November 2018, the Pennsylvania Federal Court has issued summons to 13 including Prithvi Information Solutions, Value Team Corp (VTC), SSG Capital, Madhavi Vuppalapati as well as Shyam Maheshwari, Andreas Vourloumis, and Edwin Wong over alleged fraud, money laundering and racketeering.
The lawsuit filed by Koko Global Inc sought damages of $92 million from SSG Capital and its principles Mr Maheshwari, Mr Vourloumis, Mr Wong, Ira Noor Vourloumis and Dinesh Goel.
The case related to the alleged siphoning of funds worth $35 million out of $50 million raised in February 2007 by Prithvi Information Solutions Ltd (PISL) as zero-coupon convertible bonds due in February 2012, which were able to be converted into shares of PISL.
Consistent with the bond offer circular, PISL and Prithvi Solutions Inc (PSI), a 100% unit of PISL, entered into an agreement where the bonds were issued for the benefit of PSI and the bonds funds were to be used solely by PSI to execute business operations in the US.
In February 2007, Lehman Brothers, through Kingfisher Capital CLO Ltd invested in the bonds issued by PISL. Lehman Brothers then placed $50 million in an escrow account at UCO Bank in Hong Kong.
As per the agreement between PISL and PSI, the Bank transferred about $15 million out of the $50 million to PISL to provide bond funds to PSI.
However, on 15 September 2008 Lehman Brothers filed a bankruptcy petition in the US and bankruptcy and insolvency petitions overseas.
Later on 3 August 2010, Lehman Brothers sold its interest in the PISL bonds to VTC and SSG Capital Partners for about $15 million. Next month, SSG Capital Partners and PISL, headed by Madhavi Vuppalapati signed an agreement to restructure the bonds.
On the same day, both parties restructured the agreement, which required PISL to pay $4 million as a non-refundable deposit to SSG Capital Partners to confirm its commitment for restructuring the bonds.
The suit filed by Kyko stated, "The requirement to have PISL pay a non-refundable deposit to restructure the bonds under the SSG Capital Partners’ Agreement is illegal under applicable Indian law, rules, and regulations. The non-refundable deposit served no purpose other than to further Defendants’ fraudulent scheme as set forth herein." (Read: US Lawsuit Against Prithvi Information Solutions Alleges Rampant Siphoning of Funds)
UPDATE: On 22 December 2020, Kyko Global and Ares SSG Capital Management reached a mutually agreeable resolution to a long-running legal dispute, with both parties dismissing all legal actions against each other.
In a joint statement issued at that time, both Kyko Global and Ares SSG Capital Management stated, "The dispute related to issues about SSG's investment interests in corporate bonds issued by Prithvi Information Solutions, an Indian corporation, more than a decade ago. Recent exchange of information and discussion among the parties have clarified those issues to the mutual satisfaction of the parties with each party determining that no wrongdoing was committed by the other. As a result, Kyko has withdrawn its legal claims and past public statements and SSG has rescinded its countersuit."
Source