PwC reported, the ED said, that from FY 15-FY19, sales of Rs 3,908 crore were made to 15 non-existent or fictitious customers.

Yes Bank case ED probe reveals Cox Kings used fictitious customers to launder money
Money Money Laundering Wednesday, June 10, 2020 - 16:11

The Enforcement Directorate’s (ED) probe into the Yes Bank money laundering case has revealed that global tours and travel company Cox & Kings made payments to fictitious or non-existent customers in order to siphon off money worth thousands of crores. The ED on Monday raided five premises of Cox and Kings, including its promoter Peter Kerkar and former senior executives, in Mumbai in connection with the probe.

The agency, in a statement, said the group and its companies have outstanding loans amounting to Rs 3,642 crore.

Agency sleuths searched the premises of Ajay Ajit Peter (Peter Kerkar), Directors Pesi Patel and Abhishek Goenka, former chief financial officer (CFO) Anil Khandelwal and internal auditor Naresh Jain as part of the action undertaken under the Prevention of Money Laundering Act (PMLA), it said.

Cox and Kings was one of the top borrowers of Yes bank and as per the ED, Cox and Kings Ltd (CKL) had an outstanding loan of Rs 563 crore and its linked firms like Ezeego One Travel & Tours Ltd India (EOTTL) Rs 1,012 crore, Cox and Kings Financial Services Ltd Rs 422 crore, Prometheon Enterprise Ltd, UK Rs 1,152 crore and Malvern Travel Ltd, UK Rs 493 crore.

The total unpaid loan amount stands at Rs 3,642 crore.

The searches are aimed at gathering more evidence in the case, agency officials said.

The ED alleged that the travel and tours group "had created multiple layers of on-shore and off-shore subsidiaries across the globe through which the money was siphoned off".

The agency is probing Yes Bank and a number of other large corporate groups in connection with an alleged fraud case where huge loans issued by the bank became non-performing assets (NPAs).

It arrested Yes Bank co-founder Rana Kapoor in March this year followed by DHFL promoter Kapil Wadhawan and his brother and RKW Developers Director Dheeraj Wadhawan. 

The ED recently also filed its first chargesheet in the case before a special PMLA court in Mumbai.

The agency explained the role of Cox and King Group (CKG) travel company in perpetrating the alleged bank loan fraud.

Malvern Travel Limited, UK is an entity of CKG and was having outstanding of Rs 493 crore, which submitted "forged" bank statement of RBS Bank, UK and SBI, UK and then forged the end-use certificates of BDO LLP (statutory auditor of the UK-based entity) to avail loan from Yes Bank, it said.

"This forgery was pointed out by KPMG, which is the administrator of this UK-based entity. In relation to CKL, the company manipulated its consolidated financials by forging the balance sheets of the overseas subsidiaries," the ED charged. 

The statutory auditor for Prometheon Enterprise Limited, UK (also a subsidiary of CKG), the ED said, was Raffingers UK LLP and the financials of PEL were sent to India by fictitious domain name "impersonating" the current officials of Raffingers UK LLP. 

It said after CKL defaulted on the loans, Yes Bank brought in PricewaterhouseCoopers (PwC) for a forensic audit job but the travel company's management "did not cooperate" with it.

"However, based on the limited data available with them, PwC confirmed falsification of accounts, overstating the sales figures and understating the debt figures, fictitious transactions among others," the ED said. 

PwC reported, it said, that from FY 15-FY19, sales of Rs 3,908 crore were made to 15 non-existent or fictitious customers. 

"Majority of collection shown in ledgers from Ezeego (another group entity) was not found in the bank statements and 147 sets of customers are also suspicious and not existent, as per PWC report," it said. 

As per the report, the ED said, CFO Anil Khandelwal "diverted" Rs 1,100 crore to Alok Industries Ltd without any approval of the board.

The agency also alleged that CKG sold its subsidiary firm, Holiday Break Education Limited, UK for Rs 4,387 crore and instead of discharging the liability of bank, it "siphoned off" majority of the money. 

"From this siphoning, USD 15.34 million was transferred to Kuber Investment Mauritius Pvt Ltd which was controlled by Peter Kerkar," it said.

Kerkar was summoned by the ED in the past for questioning in the case after it similarly questioned Reliance Group Chairman Anil Ambani, Essel Group Chairman Subhash Chandra among other corporate honchos.

The agency further alleged that from Ezeego Rs 150 crore was "diverted" to Redkite Capital Private Limited which was promoted by ex-CFO Khandelwal and auditor Naresh Jain.

"This fund diverted to Redkite was used to buy controlling stake in Tourism Finance Corporation Of India Ltd, a listed NBFC," the ED charged.

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