NEW DELHI: The Enforcement Directorate , or ED, is investigating foreign entities that bought stake in new telecom companies that were given permits in 2008, to determine if the money received from these stake sales can be classified as criminal proceeds.
The agency, which investigates violation of India’s foreign exchange laws, has also written to countries from where money was received by the Indian firms for details on the investors and source of funds.
“Prima facie, it appears that money was routed through several tax havens and we have written to these countries for details,” said an ED official who did not wish to be identified. “If the procedure for allotment of licences is found to be faulty or inappropriate, then the money received by these companies could be treated as criminal proceeds,” the official added.
India’s national auditor, in its report submitted to the government on Wednesday, had indicted telecom minister A Raja for selling scarce airwaves to nine new entrants in 2008 using a faulty and outdated policy, and costing the exchequer between Rs90,000 crore and Rs140,000 crore. The report has resulted in a political firestorm, with Opposition parties calling for Mr Raja’s resignation.
In its report, CAG has said mobile permits given to five of the new entrants were illegal. It has slammed the telecom department for not rejecting the applications of Loop Telecom , Unitech, Swan (Etisalat DB), Datacom (Videocon) and S Tel and added that these firms had failed to meet the eligibility criteria for obtaining telecom licences. The nub of ED’s case is that if the licences awarded were illegal, then the money received from selling stakes in them could also be tainted.
ED is probing money allegedly received by two companies from Cyprus and Dubai, respectively. “We have sent letters of rogatory to these countries and are examining whether foreign exchange laws were violated by these fund transfers and also the source of these funds,” said the official quoted earlier. The agency is also learnt to have informed the Supreme Court of these developments.
The nine firms that got licences in 2008 for a mere Rs1,651 crore include Essar Group-owned Loop Telecom, realty firm Unitech, Datacom (Videocon), Swan (Etisalat), Sistema Shyam, Spice and S Tel.
Some of these firms immediately sold stakes to foreign companies for huge valuations.
Unitech ceded control to Norwegian telecom major Telenor for $1.1 billion; UAE-based telco Etisalat bought a 45% stake in Swan for $900 million; and S Tel, which had permits for only six circles, sold 49% stake to Bahrain’s Batelco for about $225 million. These deals were clinched even before the companies set up a single tower or any other infrastructure to roll out services.
The Comptroller and Auditor General of India (CAG) in its report said “based on the foreign equity attracted by them, the value of a pan-India mobile permit could be anywhere between Rs7,442 crore and Rs47,918 crore”. It added that Mr Raja acted in an “arbitrary” manner and deliberately followed faulty policies to “benefit” a few operators.
ED recently told the Supreme Court that it has registered an Enforcement Case Information Report (ECIR) earlier this year under the Prevention of Money Laundering Act, or PMLA, on the basis of the FIR registered by CBI in the spectrum allocation scam.
ET had earlier reported that the agency has registered complaints against Unitech and Loop under the Prevention of Money Laundering Act or PMLA. Another ED official, who declined to be named, said the agency is also examining the role of a prominent corporate lobbyist who is alleged to have played a role in influencing the way the licences were awarded to new companies. The agency has summoned this lobbyist for questioning under the provisions of PMLA, this official added.
ED officials are also studying the comments by the national auditor that companies such as Swan, Unitech and S Tel were able to attract huge foreign investments soon after getting mobile permits. Sources in the agency pointed out that the auditor has questioned the motivation of Telenor, one of Norway’s largest firms, for acquiring stake in Unitech, stating that the high value it paid for the stake in the communication venture was primarily for spectrum and not for “other inputs claimed to have been infused by Unitech”.
“The value which should have accrued to the public exchequer went as a favour to the new licensees in the form of capital infusion for enriching their business,” the chief auditor has said. The extension of the ED probe could spell more trouble for Mr Raja, whose decisions related to awarding mobile licences in 2008 are also being investigated by CBI, CVC and the Parliamentary Affairs Committee . Cases related to these are being heard in the Supreme Court. CBI in its FIR has said the loss to the exchequer from the spectrum scam is about Rs22,000 crore.
The agency, which investigates violation of India’s foreign exchange laws, has also written to countries from where money was received by the Indian firms for details on the investors and source of funds.
“Prima facie, it appears that money was routed through several tax havens and we have written to these countries for details,” said an ED official who did not wish to be identified. “If the procedure for allotment of licences is found to be faulty or inappropriate, then the money received by these companies could be treated as criminal proceeds,” the official added.
India’s national auditor, in its report submitted to the government on Wednesday, had indicted telecom minister A Raja for selling scarce airwaves to nine new entrants in 2008 using a faulty and outdated policy, and costing the exchequer between Rs90,000 crore and Rs140,000 crore. The report has resulted in a political firestorm, with Opposition parties calling for Mr Raja’s resignation.
In its report, CAG has said mobile permits given to five of the new entrants were illegal. It has slammed the telecom department for not rejecting the applications of Loop Telecom , Unitech, Swan (Etisalat DB), Datacom (Videocon) and S Tel and added that these firms had failed to meet the eligibility criteria for obtaining telecom licences. The nub of ED’s case is that if the licences awarded were illegal, then the money received from selling stakes in them could also be tainted.
ED is probing money allegedly received by two companies from Cyprus and Dubai, respectively. “We have sent letters of rogatory to these countries and are examining whether foreign exchange laws were violated by these fund transfers and also the source of these funds,” said the official quoted earlier. The agency is also learnt to have informed the Supreme Court of these developments.
The nine firms that got licences in 2008 for a mere Rs1,651 crore include Essar Group-owned Loop Telecom, realty firm Unitech, Datacom (Videocon), Swan (Etisalat), Sistema Shyam, Spice and S Tel.
Some of these firms immediately sold stakes to foreign companies for huge valuations.
Unitech ceded control to Norwegian telecom major Telenor for $1.1 billion; UAE-based telco Etisalat bought a 45% stake in Swan for $900 million; and S Tel, which had permits for only six circles, sold 49% stake to Bahrain’s Batelco for about $225 million. These deals were clinched even before the companies set up a single tower or any other infrastructure to roll out services.
The Comptroller and Auditor General of India (CAG) in its report said “based on the foreign equity attracted by them, the value of a pan-India mobile permit could be anywhere between Rs7,442 crore and Rs47,918 crore”. It added that Mr Raja acted in an “arbitrary” manner and deliberately followed faulty policies to “benefit” a few operators.
ED recently told the Supreme Court that it has registered an Enforcement Case Information Report (ECIR) earlier this year under the Prevention of Money Laundering Act, or PMLA, on the basis of the FIR registered by CBI in the spectrum allocation scam.
ET had earlier reported that the agency has registered complaints against Unitech and Loop under the Prevention of Money Laundering Act or PMLA. Another ED official, who declined to be named, said the agency is also examining the role of a prominent corporate lobbyist who is alleged to have played a role in influencing the way the licences were awarded to new companies. The agency has summoned this lobbyist for questioning under the provisions of PMLA, this official added.
ED officials are also studying the comments by the national auditor that companies such as Swan, Unitech and S Tel were able to attract huge foreign investments soon after getting mobile permits. Sources in the agency pointed out that the auditor has questioned the motivation of Telenor, one of Norway’s largest firms, for acquiring stake in Unitech, stating that the high value it paid for the stake in the communication venture was primarily for spectrum and not for “other inputs claimed to have been infused by Unitech”.
“The value which should have accrued to the public exchequer went as a favour to the new licensees in the form of capital infusion for enriching their business,” the chief auditor has said. The extension of the ED probe could spell more trouble for Mr Raja, whose decisions related to awarding mobile licences in 2008 are also being investigated by CBI, CVC and the Parliamentary Affairs Committee . Cases related to these are being heard in the Supreme Court. CBI in its FIR has said the loss to the exchequer from the spectrum scam is about Rs22,000 crore.
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