Bengaluru: A primary investigation by Alvarez and Marsal (A&M) commissioned by BharatPe’s board has found fraudulent transactions including payments to non-existent vendors as well as irregularities of invoices being produced to substantiate spends. The finding comes amid mounting pressure from BharatPe’s board on the company founder Ashneer Grover to exit the fintech firm permanently.
The findings of the report by A&M, dated January 24, said the company (BharatPe) pays recruitment fees to a number of ‘consultants’ for employees recruited through them. ‘In five sample cases, the employees have confirmed their date of joining as slated in the vendor invoice. But they have denied being recruited or engaged through the stated consultant or any knowledge of them’, the report said.
The report mentions BharatPe’s founder Ashneer Grover’s wife Madhuri Jain received at least three of these invoices herself and forwarded them to the company for payments. The invoices were created by Shwetank Jain, Jain’s brother, the report added. ‘As per the document, the creator of all these invoices is ‘Shwetank Jain’. We understand from public domain sources that the brother of Madhuri Jain is ‘Shwetank Jain’. ‘We noted invoices of three other vendors related to recruitment expenses. These have the same commonalities as mentioned above and all have the ‘author’ in document properties as ‘Shwetank Jain’, read the preliminary findings of A&M. Grover is temporarily on leave from the company, in the aftermath of a leaked audio clip where he’s allegedly abusing an employee of Kotak Mahindra Bank.
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BharatPe used to pay recruitment fees to HR consultants for employees recruited through them. The investigation has found that the company was recruiting staff but fraudulently paying a network of staffing companies that had nothing to do with the hiring and appear to be linked to each other as well as to Madhuri Grover. A&M reviewed the invoices of fees paid to these consultants. The employees confirmed their date of joining as stated in the vendor invoice. But they denied being recruited through the stated consultants or any knowledge of them. It at least three instances, A&M noted that Madhuri Grover had directly received the invoices from the vendors and forwarded these to the accounts team for payment.
These companies were mostly sole proprietorships and the invoices were created by Shwetank Jain, the brother of Madhuri Jain, the report said. Besides, the firms involved had commonalities such as similar email addresses, similar physical addresses, similar formats, same bank branches, etc. And most importantly, they were all based in Panipat. The report notes that Madhuri Grover is originally from Panipat. An examination of just two of the vendors pegged the amount paid by BharatPe for undelivered services at close to Rs 4 crore. The report found close to Rs 51 crore was paid to 30 vendors who appeared to be non-existent. These vendor payments were caught by the Directorate General of GST Intelligence (DGGI). And the company instead of contesting the demand for service tax, paid close to Rs 11 crore in dues along with penalties.
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These irregularities came out post a search by DGGI on 21 October 2021, just ten days before Grover got into a legal tussle with Kotak Wealth Management over not being able to secure financing to bid for the public offer of Nykaa. DGGI which investigates into tax evasions had issued summons to a company official on 1 November. On 11 November 2021, the company sent a communication to the DGGI on this issue. The letter was signed by Deepak Jagdishram Gupta. The Alvarez and Marsal report says Gupta was responsible for procurements at the company and is Madhuri Grover’s brother-in-law. In this letter, Gupta said it is on the basis of DGGI investigation they have come to know that some of the vendors of their company do not exist or never operated at their principal place of business. He further requested the department to waive off the show cause notice in lieu of paying the dues and associated penalties.
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The prelim investigation found that this involved overall expenditure related to the 30 vendors of Rs 53.25 crores (under validation) The company reversed the claimed input credit of Rs 9.54 crore and paid a penalty of Rs 1.54 crores. A&M has recommended to the board that this requires deeper investigation as to why the company was dealing with ‘non-existent vendors’. In addition, to correct its accounts post DGGI’s investigation, BharatPe reversed input credit of Rs 9.54 crore and additionally paid a penalty of Rs 1.54 crore. In its probe, A&M has now raised questions on BharatPe’s dealings asking the company about why it was engaged with non-existent vendors and why it was unable to provide proof of delivery of materials.
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