TMB

The below gives a detailed background of the principal players in the fraud perpetrated by Rajat Gupta, Ramesh Vangal, Gokul Patnaik and Standard Chartered Bank. To understand the conspiracy, we have to move back in time. ENTRY OF PEPSI In 1989, when Pepsi came into India, it set up a potato processing plant for snacks business and a tomato processing plant in Punjab for exports. The latter was primarily set up to meet the export obligations. Pepsi‘s entry into contract farming was triggered by the need to make available sufficient quantities of tomatoes & potatoes of the right quality for their domestic plant. PepsiCo India has the government here to thank—at least, partly—for being the envy of its peers. A condition that New Delhi set for the entry of the multinational into India in 1989 was that Pepsi (the name changed to PepsiCo in 2000) would operate through a joint venture with the Punjab government and export goods worth half its turnover for 10 years. The crucial person who facilitated Pepsi‘s joint venture was Gokul Patnaik, then MD of Punjab Agro Industries. The person who headed Pepsi‘s foray into India was Ramesh Vangal. The relationship established between Patnaik and Vangal continued over the years and when Gokul Patnaik was not empanelled as Secretary, he quit Government and joined Vangal. PMO at Rajat Gupta’s disposal blessed American PE investor Rajat Gupta‘s various ventures in India, most notably Public Health Foundation of India (PHFI) and Indian School of Business (ISB), but also put at Gupta‘s disposal the services of the PMO, Planning Commission, and the Ministries of Health and HRD. The Finance ministry sanctioned a grant of Rs 65 crore to PHFI‘s initial corpus and approved the appointment of four senior bureaucrats, including TKA Nair, to the governing board of PHFI, which was chaired by Rajat Gupta. Describing itself as an ‗independent foundation‘ and a ‗public-private partnership‘ (PPP), PHFI has so far received over Rs 100 crore in budgetary support from the Centre. There is no information in the public domain on how this money is being spent. Since the launch of PHFI in March 2006, neither the private partners nor the government have published any report on the organisation‘s finances. Rajat Gupta is seeking to turn education into a huge profit-yielding business, in violation of the law of land which does not allow commercial organizations, let alone private equity (PE) firms, to run educational institutions. Apart from running and expanding his ―non-profit‖, money-spinning ISB and PHFI with generous cash-and-kind help from the government, Gupta has been using New Silk Route Partners (NSR), his $1.4 billion (Rs 6,300 crore) private equity firm, to look to control various kinds of educational institutions in the country.

He is reportedly close to invest $70 million (Rs 315 crore) in Hyderabad-based Sri Chaitanya educational group, which is one of the largest networks of private schools and colleges in India. Sri Chaitanya runs about 160 institutions, mostly in Andhra Pradesh. Gupta and other corporate investors flout the regulations by getting the non-profit managements of the educational institutions to outsource most of the work to their profit-making companies; the trusts or societies thus pay fees to the corporate investors for providing various services. This ‗two-tier arrangement‘ invariably results in violations of laws governing public trusts/societies and the Income Tax Act, which mostly go unpunished due to the connivance of the regulatory authorities. Gupta has violated the law by founding and investing in Vienova, a Gurgaon-based company that runs a chain of five schools in western Uttar Pradesh and is aiming to expand its operation to over 50 schools in the next three years. Vienova also provides online tutoring services. Gupta’s PE firm to buy big into India After stepping down from Mckinsey in 2007, Gupta has been spending most of his time striking private equity deals in India. He has so far invested in about 15-20 companies, including Coffee Day Resorts, Ascend Telecom Infrastructure, Reliance Infratel, INX Media, KS Oils, Destimoney, Rolex Rings, Aster, and Ortel Communications. Gupta has also invested in a pharma company, Chandigarh-based Nectar Lifesciences – another instance of direct conflict of interest between his business ventures and his Prime Minister-supported campaign to control India‘s public health policy. New Silk Route Partners (NSR), Gupta‘s $1.4-billion private equity firm, has let it be known that the 01 March charge-sheeting of their boss will have no impact on its operations. Sure enough, the day US SEC brought charges against Gupta, NSR announced the merger of Ascend Telecom Infrastructure, an NSR-owned telecom tower operator, and India Telecom Infra Ltd (ITIL). With about 4,000 towers across India, the merged entity will have a nationwide footprint. It was reported on 04 March 2011 that NSR is expecting to strike deals worth $150 million (Rs 675 crore) in the coming weeks, including a $70 million (Rs 315 crore) investment in Sri Chaitanya educational group and $40 million (Rs 180 crore) in restaurant chain Ohri's, both Hyderabad-based. Gupta colludes with friends to control bank In an order dated 12 October 2009, RBI found that Rajat Gupta acted illegally and in collusion with other foreign investors, including Ramesh Vangal, in buying shares in Tamilnad Mercantile Bank, a Tuticorin-based bank that has traditionally been controlled and patronized by the Nadar community. (Gupta and Vangal had jointly founded in the mid-1990s IT firm Scandent Group.)

Gupta and other investors acquired a 24.92 percent stake in the bank by buying shares from the four companies belonging to C. Sivasankaran of the Sterling group. Banking regulations require prior RBI approval for any trade in five per cent or more of the equity of a private bank. If the shares change hands without regulatory clearance, RBI has the power to cancel voting and dividend rights on the bloc of shares. A complaint from C Kanagaraj, a shareholder, led to an RBI investigation into the share transfer, which concluded that Gupta and other investors were ―acting in concert‖. ―The investors had a clear understanding and co-operation among themselves and had a common purpose of obtaining substantial acquisition of shares/ representation on the bank‘s board and thereby gain control of TMB,‖ the RBI found. In its order dated 14 October 2010, the Bombay High Court issued a directive to the RBI to decide on the transaction in question by February 2011. The court also directed the bank not to take any major policy decision until the RBI‘s decision. Insider trading again! Gupta‘s another connection with C Sivasankaran is through KS Oils, the Madhya Pradesh-based edible oil company, which, according to media reports, was being investigated in December 2010 by the Intelligence Bureau (IB) for share price rigging and insider trading. NSR is represented on the board of KS Oils by Vivek Sett. Sivasankaran had purchased a block of shares of from Citi Venture Capital, another PE investor. Notably, the income tax department had raided KS Oils offices across Madhya Pradesh in March 2010 on reports of massive tax evasion. Gupta Pak link: national security issues The role of NSR and Rajat Gupta also has national security implications considering that New Silk Route Partners (NSR) has Abdul Hafeez Shaikh, Pakistan‘s finance minister, as a founding General Partner, and substantial investments in the neighbouring country. So far nothing has been heard as to how the government has been treating NSR‘s growing investments in India, such as those in the telecom sector, from national security angle. In June 2010, Augere Mauritius, in which Gupta‘s NSR is one of the investors, won a licence to operate broadband wireless access (BWA) services in Madhya Pradesh. Interestingly, there was no report of the home ministry raising national security concerns despite the fact that Augere operates in Pakistan, providing ‗Qubee‘ broadband internet services in Islamabad, Rawalpindi, Lahore and Karachi. Augere launched the service in Pakistan in July 2009 and in Bangladesh in October 2009. The same ministry had objected to UAE-based Etisalat acquiring a majority stake in Swan Telecom on the ground, among others, that the former had substantial presence in Pakistan. NSR‘s other investments in Pakistan include Beaconhouse School System, which is

controlled by Lahore-based Kasuri family whose most prominent member is former Pakistan foreign minister Khurshid Mahmud Kasuri. Beaconhouse claims to be one of the world‘s largest primary and secondary education (K-12) chains, with schools in Pakistan, the UK, Oman, the UAE, Bangladesh, Malaysia, Indonesia, the Philippines and Thailand. Aster Private Ltd, another NSR company, has dealings with Huawei, the Chinese telecom company that had prompted the home ministry to raise national security concerns in the Etisalat and other cases. Gupta pulls strings in the financial capital Being PMO‘s blue-eyed boy, Gupta also has the confidence to influence India‘s most important financial regulators. In June 2008, Sberbank, Russia's largest state-run bank, inducted Gupta in its supervisory board, making him the first ever foreigner to be so appointed. Sberbank also made Gupta its highest-paid director with a $524,700 paycheck for 2009. (The maximum that other directors got was $112,200.) Reason: Gupta‘s connections in India which Sberbank brought to bear on its plan to enter Indian banking sector in a big way. Successfully so. In August 2009, Sberbank received clearance from the RBI for opening a full-service branch in New Delhi. Mission accomplished, Gupta quit the Sberbank supervisory board in June 2010 but remains a ‗strategic adviser‘ to the bank

Suffice to say, the role of Vangal, Gokul Patnaik and Standard Chartered will come under scrutiny of FEMA since RBI itself has noted that the shares were being transferred in the names of the parties who did not have requisite approvals. The corporate veil if lifted will clearly hit Standard Chartered and Vangal. Surprisingly, Patnaik got huge sums of money from abroad to buy shares of TMB. This too will lead to income tax and ED to probe the transactions. But the information is sufficient to implicate Standard Chartered in not only squeezing Vangal but also a back door entry into TMB. Secondly the 20 million dollar loan against TMB shares by Standard Chartered to Vangal will create problems for both of them under FEMA. The case will now go to high court since the affected parties will file an appeal against the order. Not acknowledging the holdings above 5% means that the entities holding these shares will have to divest the excess shares, thereby restricting the scope for the take over and given the political situation in Tamil Nadu, the RBI and the government are not likely to agree to hostile take over the TMB. Two issues came up yesterday afternoon - Patnaik is close to TK Nair, who was his boss. Also someone said they were surprised Vangal would default on a loan of around $17m - they thought he was worth $100 million. Are there any good estimates of his current wealth?

----------------------------------------------------------------------------------------------------------The RBI had issued instructions that if any individual/company acquired more than 1% shares in a bank, reference should be made to RBI. This was increased to 5% in 1999. A reference in regard to acquisition was made in regard to following NRI‘s and Indian individuals for the following entities. Caisse de depot at placement de quevoo Centre COP Capital - Canada, Ravi S Trehan of New York, Ramesh Vangal, Rajat Kumar Gupta, KamehamehaSchool, Federal Insurance Company, Cuna Mutual Group, Swiss Re Partnership Holding AG, Katra Holdings, RST Limited., GHI Limited., Kamehameha Mauritius Limited., Cuna Group (Mauritius) Limited., FI Investments (Mauritius) Limited., Swiss Re Investors (Mauritius) Limited Shri Gokul Patnaik, M/s Vector Program Limited., Shri MGM Maran, Shri B Ramachandra Adityan and 205 other Indian residents. The RBI acknowledged the reference since none of them were crossing the limit of 5%. The TMB later restricted the rights of the shareholders which went into litigation and Bombay high court told RBI to deal with the matter. The RBI observed that the intention of the new shareholder was to take over the bank and told TMB to furnish information for due diligence. The 18 principal shareholders mentioned above did not cooperate. Subsequent enquiries gave clean chit to the following: Kamehameha Mauritius Limited, Cuna Group (Mauritius) Limited, FI Investments (Mauritius) Limited and Swiss Re Investors (Mauritius) Limited. Comments were also sought from Standard Chartered Bank (SGB), Mumbai on the allegations of Shri Ramesh Vangal indicating that since M/s Subcontinental Equities Limited, is a subsidiary of Standard Chartered Holdings, London, and due to the inherent conflict of interest, Standard Chartered Bank which is acting as an escrow agent, is colluding with M/s Subcontinental Equities Limited in trying to transfer away his shares to the subsidiary of SGB. All the 18 investors named in the RBI Speaking Order dated October 12,2009, except two viz. M/s RST Limited and M/s GHI Limited, have submitted their representations to RBI as well as to TMBL between November 2010 and February 2011. All the 16 investors have stated that the shares have been acquired in their independent capacity out of their own funds and that they do not form part of any group. Further, from the information received from the bank and the investors, it is observed that while Hemangini Finance and Leasing P Limited, Shanmuga Financial Services P Limited, Shri R. Chinnakannan and Smt C. Chandrammal are still the shareholders as per the bank's records, all the four have indicated that they no longer hold the shares as the same have been disposed of in favour of M/s Katra Holdings Limited. Shri Sathiyaseelan has also indicated that he has disposed major portion of his shares in favour of M/s Katra Holdings Limited (1492 shares out of his 3255 shares), while he is still the shareholder as per the books of the bank. Further, in respect of shareholdings of Shri Gokul Patnaik, M/s Vector Program Private Limited, M/s GHI Limited, M/s RST Limited and M/s Katra Holdings Limited (Mauritius) there seems to be purported sale of shares to 4 new foreign investors. However, the same appears to be under dispute since the sellers have not confirmed the sale.

Shri LSridharan, Shri N.Ganesan, Shri MGM Maran and Shri MG Muthu appear to be still holding the shares. However, payment of consideration towards purchase of shares could not be traced from their bank accounts. Four foreign investors viz. Kamehameha Mauritius Limited, Cuna Group (Mauritius) Limited, FI Investments (Mauritius) Limited, Swiss Re Investors (Mauritius) Limited appear to be still holding the shares in violation of FEMA provisions and have stated that they have no common source of funds with the others and have given common proxies in favour of M/s Katra Holdings Limited for the 83rd and 85th AGM's of the bank on June 5, 2008 without any voting instructions or other related details and hence should be treated as distinct and not part of the group. However, since the question of the investors 'acting in concert' and them being a part of the group was already discussed and decided in the RBI Speaking Order dated October 12, 2009 and since no additional fresh information has been submitted by any of the investors, re examination of this aspect is not warranted. TMBL has identified 7 individuals/entities9 as belonging to one Katra and Shri B Ramachandra Adityan Group, whose acquisition reflects attempts of takeover or destabilisation of the management. • TMBL has identified 2 entities 10 belonging to Katra Group, whose acquisition reflects attempts at takeover or destabilisation of the management. • TMBL has identified 4 individuals/entities 11 as belonging to one Sterling Group who however, does not require acknowledgment. Shri M G M Maran, Shri M G Muthu, Shri L Sridharan, Shri N Ganesan, Mis Katra Holdings Limited., Shri Gokul Patnaik and M/s VectorProgram P Limited M/s RST Limited and M/s GHI Limited Sm. C Chandrammal, Shri R Chinnakannan, M/s Hemangini Finance & Leasing P Limited., and M/s Shanmuga Financial Services P Limited. TMBL has identified 4 foreign investors as distinct entities and has sought confirmation for the transfer of shares effected in May 2007. • TMBL has concluded that Shri P S Sathiyaseelan is not associated with any group and transfer of shares appears to be in the nature of genuine investment. • TMBL has identified another 3 foreign investors 13 (the purported purchasers) as distinct entities, whose acquisition does not reflect attempts of takeover or destabilisation of the bank. M/s Subcontinental Equities Limited, a foreign investor, had reported to TMBL and RBI that they had purchased shares from Katra Holdings Limited. M/s Subcontinental Equities Limited vide its letter dated November 10, 2010, had claimed to have acquired 10364 shares and enclosed a copy of letter dated May 31, 2010 issued to it by SCB, Mumbai indicating that USD 14,611,958 was paid to M/s Katra Holdings Limited for purchase of 10,364 shares. However, M/s Katra Holdings Limited has denied the purported sale transaction. In view of the dispute relating to the sale, TMBL had called for the original documents to verify the facts relating to the purported sale. Consequently, the original share certificates and blank transfer deeds signed by M/s Katra Holdings Limited were stated to have been produced by M/s Subcontinental Equities Limited to TMBL on February 5, 2011. However, TMBL has reported that M/s Katra Holdings Limited has disputed that they have sold the shares to anybody and stated that there is no requirement to take a physical verification of shares to demonstrate the shareholding. As per a letter dated September 15, 2010 received from SCB, it is observed that M/s Katra Holdings Limited was extended a facility of USD 20 million to enable M/s Katra

Holdings Limited to refinance a loan it had previously received in order to acquire shares in Tamilnad Mercantile Bank Limited. As per SCB's letter dated March 14, 2011, the mechanism under the Escrow Agreement is that M/s Katra Holdings Limited will be given a loan which will be used to acquire 10,364 shares in TMBL, which will be held temporarily prior to a sale to the purchaser nominated by Corsair. The purchaser then will payoff the loan of M/s Katra Holdings Limited at SCB, Mauritius and the 10,364 shares would be lodged for transfer in the name of the purchasing entity. Further, SCB has stated that as per the Escrow agreement, Corsair has the sole discretion to instruct SCB, Mauritius to deliver an amount from the Escrow Account in satisfaction of the loan advanced to M/s Katra Holdings Limited. Accordingly, on April 29, 2008, Corsair exercised its rights and requested SCB, Mauritius to transfer USD 14,611,958 in satisfaction of the loan advanced to M/s Katra Holdings Limited. SCB has stated that at this point of time, M/s Katra Holdings Limited ceased to have any beneficial ownership in the TMBL shares registered in its name. Further, a few complaints have been received from shareholders of TMBL pointing out that Evolvence India Holdings have filed an application of default judgement in New York, USA for recovery of the full amount lent to Katra Holdings Limited in July 2009. The latest position on the same has been obtained from internet searches which have indicated that the litigation was settled by Shri Ramesh Vangal in June 2010 by paying an amount of USD 2.5 million before legal expenses and direct costs (USD 0.3 m). Main observations during the due diligence exercise The transfer of shares in favour of M/is Katra Holdings Limited, instead of Shri Ramesh Vangal, is in contravention of the provisions of FEMA. M/s East River Holdings Limited vide its representation dated November 10, 2010 made to RBI, has claimed to have paid consideration to Shri Gokul Patnaik towards purchase of 10589 shares. East River Holdings Limited has also enclosed an FIRC indicating that a foreign inward remittance amounting to Rs.25,61 crore was remitted into Shri Gokul Patnaik's account on May 15, 2007 towards advance consideration for purchase of TMBL shares. East river Holdings is floated by sovereign wealth funds Kuwait Investment Authority and Brunei Investment Agency. A scrutiny of the account of Mis Vector Program Private Limited indicated that it had received a foreign inward remittance amounting to Rs.32.54 crore from Mis Starship Equity Holdings Limited on May 15, 2007 towards advance consideration for purchase of TMBL shares which was transferred on the same day to Mis Mansiri Investment & Leasing Private Limited and HiTech Traders Private Limited, the sellers of the TMBL shares ( Companies belonging to Sivasankaran). However, M/s Vector Program Private Limited has neither declared to us anything relating to sale of shares nor receipt of foreign funds. As per the information gathered, the shares of the investor are in the custody of SCB, Mumbai under the 'Project Windmill Escrow Account'. While forwarding the representation of M/s Cuna Group (Mauritius) Limited, TMBL has stated that M/s Cuna Group (Mauritius) Limited is a distinct entity and has sought confirmation of registration of shares made in the name of M/s Cuna Group (Mauritius) Limited. FED ( Foreign Exchange Department of RBI) has stated that it had permitted transfer of shares in the name of M/s Cuna Mutual Group, Wisconsin, USA, but the shares have been transferred and held in the name of M/s Cuna Group (Mauritius) Limited in contravention of the provisions of FEMA. Main observations during the due diligence exercise

The transfer of shares in favour of M/s Cuna Group (Mauritius) Limited, instead of M/s Cuna Mutual Group, Wisconsin, USA, is in contravention of the provisions of FEMA. As per the information gathered, the shares of the investor are in the custody of SCB, Mumbai under the 'Project Windmill Escrow Account'. TMBL has stated that M/s Swiss Re Investors (Mauritius) Limited is a distinct entity, and has sought confirmation of registration of shares made in the name of M/s Swiss Re Investors (Mauritius) Limited. FED has stated that it had permitted transfer of shares in the name of M/s Swiss Re Partnership Holding AG, Switzerland but the shares have been transferred and held in the name of M/s Swiss Re Investors (Mauritius) Limited in contravention of the provisions of FEMA. Main observations during the due diligence exercise The transfer of shares in favour of M/s Swiss Re Investors (Mauritius) Limited, instead of M/s Swiss Re Partnership Holding AG, Switzerland is in contravention of the provisions of FEMA. As per the information gathered, the shares of the investor are in the custody of SCB, Mumbai under the 'Project Windmill Escrow Account'. TMBL is an old private sector bank with a small share capital base of Rs.28.44 lakh and total number of shares at 2,84,454. Out of the total 2,84,454 shares of the bank, 1,12,151 shares (i.e 42.59% of the total shares of the bank) are held in the 'Project Windmill Escrow Account' with SCB and out of the 112,151 shares, 51,293 shares are under dispute where the investors have claimed that they have not sold the shares while 3 of the foreign investors have reportedly been able to produce certain documentary evidence of payment of consideration and that they are in possession of original documents relating to sale. That is shares of 12 out of 18 investors in the group are part of the 'Project Windmill Escrow Account' and shares of 5 other investors have reportedly been sold to an associate of an investor whose shares are already in the above Escrow account. Further, the arrangements under which such substantial portion of the shareholding is held under the Escrow arrangement is not clear and lacks transparency. However from the available material it appears that Corsair, a foreign Private Equity firm has the discretion to operate the Escrow account and source purchasers for substantial portion of TMBL shares. RBI Order As noticed above, substantial portion of the shares of TMBL are held in the 'Project Windmill Escrow Account' at SCB. The arrangement under which the shares are kept in the above Escrow account is not clear and lacks transparency. However, the available material indicates that a little below half of TMBL's shares are under Escrow account with a foreign private equity firm, against which there are allegations of trying to wrest control over TMBL shares, having the discretion to source purchasers for the TMBL shares. Some of the sale transactions purportedly entered into by 3 foreign entities, 7 resident individuals I entities and submission made by a shareholder to a High Court in respect of 2 individuals indicate a possibility that the shares held in 'Project Windmill Escrow Account' are temporary holdings awaiting transfers to third parties. Under the circumstances, conducting due diligence exercise on the temporary shareholders would have no meaning. Further, the information available in respect of the foreign investors is either bare minimum or not satisfactory. In any case, the share transfers in favour of 7 foreign investors were in violation of FEMA provisions. Shareholding in respect of few of the resident investors would also require FED clearance due to receipt of foreign inward remittance towards advance consideration

for purchase of TMBL shares. Further, some of the investors have either not provided any information towards the acknowledgement process or have not responded to the specific information sought by RBI. A few investors have also not been forthcoming in declaring details in respect of their transactions and made inconsistent statements to RBI regarding the source of funds and purchase of shares making it difficult to establish the source of funds for the transfer of shares. Further, holding of shares by certain persons for further distribution to others, receipt of foreign inward remittances from third parties towards transfer of TMBL shares even in 2008 i.e after the original transfers in May 2007 and transfer of such funds to an associate of another investor in the group, disputes relating to share transfers in spite of receiving consideration and yet not availing legal remedy to resolve the disputes and complaints and allegations of lodging of shares of a resident by a foreign investor before transfers have been effected by the bank, acquisition of shares by an associate of a foreign investor that is a shareholder as per the books of the bank, indicate that the matter is indeed very complex and that the investors have non transparent dealings and agreements / understanding. The existence of allegations and counter allegations relating to subsequent transfer of shares and the transactions being declared only recently, in 2010, i.e after 3 years from the date of foreign inward remittance in 2007, leaves a credibility gap in their submissions. On the whole, the transactions and the shareholding by these 18 investors is not inspiring confidence to the Regulator for granting acknowledgement. In the circumstances, I do not consider that the investors mentioned in the order dated October 12, 2009 have satisfied the criteria fixed by RBI for acknowledgment purpose. Therefore, I have no other choice but to decline to acknowledge the holding of 5% or more of the paid up capital of TMBL by the group consisting of M/ s RST Limited, Katra Holdings Limited, GHI Limited, Kamehameha Mauritius Limited, Fl Investments (Mauritius) Limited, Cuna Group (Mauritius) Limited, Swiss Re-investors (Mauritius) Limited, Shri Gokul Patnaik, Vector Programme Private etc should be below 5%.

Ramesh Vangal who acted for a group of foreign, including British investors, through his Mauritius-registered Katra Group, in buying the Tamilnad Mercantile Bank in Chennai. He has since claimed to be the key shareholder and controller of the bank, which has led to disputes with six other Indian shareholders and the foreign shareholders. What is the current position of Ramesh Vangal, and that of his company Katra Holdings and other commercial organisations in which he is involved. In 2006, he borrowed $20m from the Standard Chartered Bank, using UK-based equities and land in Bangalore as collateral. In the event of default, the debt fell on the foreign shareholders in TMB. He did indeed default, still owes $17m. The Reserve Bank of India and the courts have made rulings that the original share certificates which favour the foreign investors are valid. But they also appeared to have changed their position on whether domestic collateral can be used to secure offshore loans. What is Standard Chartered Bank‘s assessment of Katra holdings and Vangal, are they confident of getting their hands on the collateral? Or that the RBI will allow them to? Who is former Indian civil servant Gokul Patnaik, who is advising Vangal on retrieving control of the TMB shares? Who is he linked to etc?

What is the RBI/Indian govt position is on raising foreign loans/funds secured with domestic assets, What Vangal's game plan for TMB was - was he trying to take control himself, trade stakes to 3rd parties for profit or acting as a front for Standard Chartered etc? If so, how do we explain his default on the $17 million loan balance? What is Vangal's current financial position? Insider trading was just one of his numerous shady deals, many in India, which have remained under the radar. Among them were Scandent Technologies which no regulator dared ask any question about; he bought a stake in Tamilnad Mercantile Bank bypassing procedure; and an investment in KS Oils Sucheta Dalal Hearing the tape where Rajat Gupta tells the Galleon Fund boss, Raj Rajaratnam, that Goldman Sachs was likely to acquire a commercial bank like Wachovia or an insurance company like AIG, was the turning point. Until the tape was played on a business TV channel, the honchos of India Inc, mainly the power elite connected with the Indian School of Business (ISB), remained steadfast in their support for the former McKinsey & Co chief. They had hurriedly declared that he needn‘t step down. Until then, those of us, who have wondered about many of Rajat Gupta‘s strange affiliations and investments, didn‘t dare to question someone with such phenomenal achievements and a seemingly impeccable reputation. All that has changed. Maybe, Mr Gupta‘s legal team will beat the insider trading charge; there may even be a settlement with the regulators. But one thing is certain—Mr Gupta has lost his demigod status. All his actions and deals will now be scrutinised and the government, which is being slammed by different scams everyday, will have to think twice about outsourcing, without scrutiny, the formulation of its health and education policies to opportunistic operators driven by the profit motive. When it comes to Rajat Gupta, I have two questions. One is: Why? And two: Was his equation with Mr Rajaratnam really such a surprise? The answer to why would someone, who has reached the pinnacle of achievement, use his position to trade inside information, has been best analysed by the article, ―When Rich People Do Stupid Things‖. It says: ―When people like Gupta and Madoff (Bernie Madoff is serving a prison sentence for running a Ponzi scheme that went spectacularly bust in December 2008), who were already rich beyond belief, steal from others (indirectly or literally), you have to ask: What is the motive? Is it power? Maybe, but both already had layers of power before they misbehaved. Maybe they feel above the law?‖ The answer is probably that ―For some reason, these people don‘t feel like they have enough… How much is enough money? How much is enough success? There‘s no right answer; everyone‘s different.‖

The answer to whether we should have been really surprised is more complex. Many of Rajat Gupta‘s investments have been downright dubious, but his reputation acted like a Teflon shield. The fact that India‘s prime minister (PM) and the Planning Commission (WikiLeaks has now told us how the US loves its chairman Dr Montek Singh Ahluwalia) invited Mr Gupta, a foreign national (US citizen since 1984) to frame our health and education policy ensured that his various investments and businesses partnerships in India were above question. This remained so, despite reports that the SEC (Securities and Exchange Commission, the US market watchdog) was investigating Mr Gupta for insider trading, surfaced in early 2010. Yet, right until the SEC played the tape of his conversation in court, Mr Gupta did not resign his Indian directorships (except GVK EMRI (Emergency Management and Research Institute), a not-for-profit organisation based in Hyderabad). He resigned from his US directorships as soon as the SEC filed charges on 1 March 2011. Let us look at some of Mr Gupta‘s investments, actions and connections that ought to have raised red flags. • Mr Gupta and Mr Rajaratnam have had a long personal and business relationship. In 2006, they had set up Taj Capital Partners. Mr Rajaratnam was also a trustee of Mr Gupta‘s American India Foundation. His other pal and McKinsey colleague, Anil Kumar, has already pleaded guilty to securities fraud and profiting from supplying inside information to Mr Rajaratnam. Anil Kumar was a director of the ISB, Hyderabad, which was founded by Mr Gupta with support from the who‘s who of Indian industry. Mr Kumar had to resign ignominiously after the insider trading charge. Earlier ISB‘s dean, M Rammohan Rao, resigned for failing to perform his fiduciary role as an independent director of the Satyam Computer Services. • Rajat Gupta along with Ramesh Vangal (former chief of PepsiCo and Seagram in India) was the promoter of Scandent Technologies. While Mr Vangal took the lead in that deal, Scandent entered a series of shady overseas deals with Dinesh Dalmia of the now defunct DSQ Softwareto acquire its most lucrative global software contracts. Once the contracts had moved to Scandent, DSQ Software was reduced to a shell. Dinesh Dalmia himself fled to the US but came scurrying back after duping a set of US companies for $150 million. He has been languishing without a trial in a Chennai jail for almost four years. Meanwhile, Scandent got listed through a reverse merger with a tiny Indian company and, within a few years, Mr Vangal had quit and moved on. So powerful were Scandent‘s promoters that no Indian regulator or investigation agency asked any question, let alone act, although I reported extensively on the scam for several years in the Indian Express. • The Ramesh Vangal-Rajat Gupta duo surfaced again in Tamilnad Mercantile Bank (TMB). They, with others, acquired a 25% stake in TMB from C Sivasankaran of the Sterling group. Mr Sivasankaran is not someone who is likely to be a nominee for corporate governance awards. In October 2009, a Reserve Bank of India (RBI) report said that Vangal-Gupta and others had ‗acted in concert‘ to acquire a stake without getting RBI approval. This, too, did not dent Rajat Gupta‘s aura nor diminish his ‗open door‘ access to the Prime Minister‘s Office.

• Later, the Rajat Gupta-promoted private equity fund, New Silk Route, acquired shares in KS Oils, a company in which C Sivasankaran had an interest. An Intelligence Bureau report of December 2010 reported massive price rigging and insider trading in KS Oils. The company has also been accused of tax evasion. So what did the philanthropic Mr Gupta find attractive about this investment? Far from raising any red flags, the Indian government was so completely enamoured of Mr Gupta that it never once worried about potential conflict of interest in allowing him a key role in framing India‘s health and education policy, or that his lucrative private sector investments may be the ultimate beneficiaries of these policies. Mr Gupta had the PM‘s blessings and support as head of the prestigious Public Health Foundation of India (PHFI) which received over Rs100 crore (Rs65 crore+Rs36.15 crore in two years) in budgetary support. The PHFI, with a powerful group of supporters (including the Bill & Melinda Gates Foundation), wasn‘t so much a public-private partnership as one between the government and a bunch of private and foreign institutions/entities. Little is known about the functioning of this Foundation launched in 2006 by the PM, despite worries that PHFI‘s many investors and business partners (Fortis, Pfizer and Microsoft) will benefit from its policy decisions. Incidentally, Mr Gupta resigned from ISB Hyderabad, PHFI and New Silk Route only after 10th March. The question now is: Are we, even today, attempting to put in place systems to ensure that there is no conflict between investments made through private equity funds by those who help the government draft policy? Unfortunately, no; we are not even bolting the stable doors even after the horse has fled. Nine Rivers Capital invests US$ 7 million in Global AgriSystem Private Limited.( Gokul Patnaik‘s company. To capitalize on the strong growth opportunities in the Food & Agriculture sector, New Delhi based, Global AgriSystem Private Limited (GAPL) has raised US$ 7m growth capital from Nine Rivers Capital Limited (NRC), a Mauritius based private equity fund focused on India centric opportunities. Alongside the investors, the Promoters of GAPL have also participated in this funding round to strengthen the capital base of the Company. GAPL is promoted by Katra Group of Mr. Ramesh Vangal along with Mr. Gokul Patnaik, a veteran in Agriculture supply chain; and is amongst India‘s premier agribusiness firms focused on fruits &vegetables supply chain. The Company offers procurement, storage, processing and distribution for fresh fruits & vegetables through a unique combination of technology and domain expertise built over a decade. The company presently operates 6 agri-hubs in various parts of the country and plans to expand its footprint to 20+ agri-hubs over the next 3 years. GAPL recently acquired a company having a brand as well as distribution for exotic vegetables supplying to more than 150 leading hotels in the country. Commenting on the infusion of growth capital by NRC, Gokul Patnaik, Chairman, GAPL said ―With rising discretionary spending in India, consumers are demanding all season availability of quality fresh produce and GAPL is well positioned to act as a smart supply chain enabler for its clients, be it organised retailers, processors or others, such as hotels. GAPL‘s SCM programs reduce wastages and also increase yields thereby empowering the farming fraternity as well. GAPL, with its network of ‗state-of-the-art‘ pack-houses, has also emerged

as a leading exporter of fresh fruits and vegetables from the country. The Govt has also recognised the need for creating world class post harvest infrastructure in the country and the impetus provided in the recent budget to this area augurs well for the Company. We currently have a strong presence in north and west India and the funding from NRC will enable us to create a Pan India presence.‖ According to Kunal Kumthekar, Founder-Director, Nine Rivers Capital Holdings Pvt. Ltd. advisors to NRC, "We are pleased to be associated with GAPL and believe that the company is uniquely positioned to benefit from the opportunities in the Food & Agri space. Where majority of market participants are focused on creating Cold storage infrastructure, we found GAPL‘s business model far differentiated. GAPL can aspire to grow manifold as a leader and provide strategic direction to the fresh produce SCM business in the country.‖ Nine Rivers Capital is an India centric Private Equity firm focused on providing growth and expansion capital to niche & differentiated Small & Medium Enterprises (SMEs). Corporate Finance Associates (CFA), India acted as exclusive advisors to GAPL for this transaction.

Ramesh Vangal, the 'serial entrepreneur', whose deals barely skirt controversy, is on the defensive again. The man who helped bring Pepsi to India is making news over whether or not he has sold his holding in Tamilnad Mercantile Bank (TMB). Mr Vangal was on television claiming emphatically that he had not sold his shares to Standard Chartered Bank. In May 2007, Mr Vangal led a group of six powerful investors who acquired a 25% stake in TMB from C Sivasankaran's Sterling group. (Mr Sivasankaran, in turn, had bought the shares from several Essar group entities after it failed to obtain RBI permission to acquire the Bank.) The Economic Times says that Mr Vangal's 3.6% of this shareholding (held by the Katra group) has been transferred to an entity called Subcontinent Equity, with Stanchart as the beneficial owner. It reports that a couple of other investors have also transferred their holdings similarly. Mr Vangal, of course, denies it. Interestingly, this is not very different from how Mr Vangal acquired the most lucrative contracts and properties of DSQ Software from Dinesh Dalmia. The contracts were first transferred to several separate entities; their names were changed; then mirror companies created in multiple tax havens like Mauritius and British Virgin Islands to obfuscate the trail. In that case, assets were transferred through a company called Globetech Worldwide Ltd (PO Box 146, Wickhams Cay). Dinesh Dalmia, who has spent the last four years in jail, turned DSQ Software into a shell company and vanished to the US as Nick Mittal. He fled back to India after creating another fraud of over $150 million in US and Europe. Mr Vangal along with Satyen Patel acquired DSQ's assets and set up Scandent Solutions, which got listed through a reverse merger with SSI, rather than a public offering that requires detailed disclosures. It is now Cambridge Solutions. Meanwhile, Mr Vangal moved on from Scandent and set up the Katra group. Mr Vangal's key strength is his ability to network and partner with a rich, powerful and influential group of global Indians in his investments. He did that again in TMB. Given his past record, Mr Vangal's claim that he has not sold his TMB holding is

viewed with scepticism. Quietly transferring a chunk of equity in a bank to a potential acquirer who requires RBI approval is a lot different from buying out Dalmia's assets. So it will be interesting to watch his next move. Meanwhile, shouldn't RBI be investigating the dubious goings-on at TMB that Mr Vangal claimed so openly on television? — Sucheta Dalal In May 2007, six foreign investors and two Indian investors together picked up 24.93% stake in TMB. The new investors are Ramesh Vangal (Katra Holdings) (3.64%), Rajat Gupta (4.95%),(INTERESTING!!!) Ravi S Trehan (1%), Kamehameha Mauritius (0.71%), Cuna Group Mauritius (0.71%), FI Investments Mauritius, (1.90%), Swiss Re Investors (3.56%), Gokul Patnaik (3.72%) and Vector Program (4.73%). Ramesh Vangal is the Founder and Chief Executive of Scandent Group, an 800 man global organization focused on Business Process Outsourcing, Enterprise Solutions and IT services. Prior to this he has set up AT INDIA LLC, co-managing a VC fund. He also served on the Board of Infosys between 1997 and October 2001 and was its first overseas Director. Mr. Vangal was the past Chairman of Seagram Asia Pacific (now Pernod Ricard)- a leader in the Asian spirits and wine business between 1997 and 2001. In addition to this, he had been the company's joint venture partner in India. Both businesses witnessed great turnarounds and explosive growth during his tenure. Prior to Seagram, Mr. Vangal was President, Asia Pacific for PepsiCo Foods and also a Member of PepsiCo's Worldwide Council. He led PepsiCo's entry into India, an initiative that became the basis of a Harvard Business School case study. In 1992, he was the first recipient of Pepsi-Cola International's High Performance Leadership Award. Mr. Vangal received an engineering degree from the Indian Institute of Technology. Mumbai in 1977. He completed his MBA from the London Business School in 1979 and became the first Asian to be awarded the school's "Alumni of the Year" honor in 1996. He started his career with Procter & Gamble in Geneva, Switzerland and subsequently completed several operations and marketing assignments in Europe, the Middle East, Central America, the Caribbean and West Africa. Mr. Vangal is a Charter Member of TiE Silicon Valley, and on the Advisory Board of London Business School. He is also the Chairman, Marketing & Brands Committee with Confederation of Indian Industry (CII) and its member on the National Council. CHENNAI: The ownership imbroglio at Tamilnad Mercantile Bank has taken a fresh twist with the Reserve Bank of India (RBI) finding Ramesh Vangal-led overseas investors and some influential individual investors from the Nadar community to have acted in concert and worked as a group while picking up a substantial stake in the closely-held Tuticorin-based bank couple of years ago.

The apex bank is of the view that its February 2004 guidelines on acknowledgment of transfer and allotment of shares vis-À-vis to any group in private sector banks will have to be applied to these foreign and Indian investors in TMB. Consequently, TMB has been asked to approach the apex bank afresh ―with full details in the enclosed format for acknowledgement of transfer of shares‖ in favour of the non-resident investors and entities purportedly spearheaded and promoted by Ramesh Vangal, Chairman of Katra Holdings Ltd., and also a few Indian individuals from the Nadar community. ‗Concerted action‘ The RBI move comes in the wake of an inquiry conducted by its Executive Director Anand Sinha into complaints of ‗concerted action‘ by these select individuals and entities to corner the shares of TMB. In all, these individuals and entities together hold 32.62 per cent of the shares in TMB. The RBI inquiry itself was a fall-out of a representation filed by one C. Kanagaraj in pursuance of an order by the Bombay High Court in April this year. In May 2007, TMB had transferred 46,862 shares of the bank to seven non-resident investors. This followed a no-objection letter from the foreign exchange department of the RBI in March 2007. In May 2007, TMB had also transferred 48,556 shares of the bank to M.G.M. Maran, B. Ramachandra Adityan, Gokul Patnaik, Vector Programme and a few others. Besides the aforementioned foreign and Indian investors, the dispute also pertained to share transfers to a few other Indian investors. All these involved 32.62 per cent of TMB shares. These shares were picked up from the companies of C. Sivasankaran-promoted Sterling Group. These share transfers were subsequently challenged in the Madras High Court. The bank has a paid-up capital of Rs.28.45 lakh and reserves worth Rs. 1,000 crore. Voting rights The TMB imbroglio has since seen one new twist after another. First, there was this board resolution of March 2008, which restricted the voting rights of the aforementioned seven non-resident investors and two resident investors — Gokul Patnaik and Vector Programme Ltd. — (who held a combined holding of 24.89 per cent shares in TMB) to 10 per cent of the total voting rights. The board of TMB had citied ‗perceived linkages among these investors‘ while freezing their combine voting rights to 10 per cent of the total voting rights. A fresh board resolution in May 2008, however, had sought to keep in abeyance all rights vis-À-vis the 24.89 per cent shares held by these entities and individuals. The apex bank had declined to take a view on the TMB board‘s decision on the plea that the matter was sub-judice. Subsequently, the 83rd, 84th and 85 the annual general meetings of TMB were held under the directive of the Madras High Court on June 5, 2008 and the results of the polls were submitted to the Madras High Court. In the meanwhile, the Bombay High Court had directed the petitioner to make a representation to the RBI on these issues. The RBI Executive Director in his order dated October 12 said that ―concerted action is normally difficult to obtain beyond a reasonable level‖. He, however, went on to add that ―the circumstantial evidence available in a given case has to be considered as a whole in reaching a conclusion‖. In a detailed report, he said ―the investors had a clear understanding and cooperation among themselves and had a common purpose of obtaining substantial acquisition of shares\ representation on the bank‘s board and thereby gain control of TMB‖. Hence, the RBI guidelines in respect of a group needed to be applied, he said in directive.

Loan guarantor Vangal ordered to pay $4m Oct 29 2009 Tags: EIH, New York, Supreme Court, Vangal liable, Companies The supreme court of the New York state has found Ramesh Vangal liable to pay $4,153,118 to EIH plc, a company that lent $2.5 million to the Mauritius-based Katra Holdings against a personal guarantee by him. Katra got the loan by pledging its entire stake in Kerala Ayurveda. Vangal, the man who brought Pepsi and Seagram to India and has since become a serial entrepreneur, is now left holding the can as Katra defaulted on repayment, due by September 4, 2007. Katra, an investment vehicle floated by Vangal, is the main promoter of the BSE-listed Kerala Ayurveda. The court decision further complicates the planned merger of Kerala Ayurveda with its bigger peer, Arya Vaidya Pharmacy (Coimbatore). Deloitte Touche Tohmatsu India, commissioned by Kerala Ayurveda to study the merger, has sought clarifications from Katra on the status of the pledged shares. On June 29 the board of Kerala Ayurveda (annual turnover Rs 35 crore) approved a plan to seek merger with Arya Vaidya (turnover a little over Rs 18 crore). The merged entity would have become the world‘s largest Ayurveda company. ―Deloitte has sent a letter to Katra, seeking clarification on the pledged shares. We have urged them to speed up the process of studying the deal,‖ an Arya Vaidya official, who wished not to be identified in this report, told Financial Chronicle. A Deloitte official only said, ―All merger deals are exotic for us and we are bound by client confidentiality agreement.‖ On August 6 FC reported that the merger plan might be in jeopardy because of the Katra default. The loan default led EIH to sue Katra in a New York court and begin legal proceedings to enforce the guarantee furnished by Vangal. A statement issued by EIH said, ―We have substantial resources which we intend to deploy to ensure our loan is repaid in full.‖ Asked if the pledged shares would be sold, William Knight, EIH chairman, said the judgment opened up a number of options. He added that the ruling against Vangal was personal and no permission for appeal was granted. The Arya Vaidya official said the judgment would also be referred to Deloitte. Vangal did not reply to queries e-mailed to him through a Katra spokesman. According to EIH‘s financial report for 2008 filed with the Alternative Investment Market, Katra had pledged 6,493,435 shares of Kerala Ayurveda (61.52 per cent of its capital) as security for the loan, which was personally guaranteed by Vangal. Dalmia's journey to this world of masked identities and numbered accounts began in the teeming streets of Calcutta at the start of the 1990s, where he set up an outsourcing body shop they called Square D Software Ltd. In the decade that followed, Square D Software expanded across Europe and the U.S. until, by the end of the decade, it was racking up revenues that approached $64

million annually — bringing in investors ranging from Bank of America and Merrill Lynch, to Credit Suisse First Boston and the Templeton funds. Yet neither the investors nor any regulators seemed even the slightest bit concerned as more and more of the company's soaring revenues began sluicing through a multiplying array of Dalmia-owned or controlled "associate" firms. Nor did they seem to mind that the companies in this bewildering network kept changing their names as the tech boom roared on. In the U.S., a Texas-incorporated entity that Dalmia's Indian operation owned under the name D Square Software Inc., changed its name eight times between 1993 and 2003, but Texas regulators dutifully processed the paperwork without ever asking why. The name changes for Dalmia's U.S. operations reflected similar activity elsewhere in the network. In Britain, the authorities seemed equally uninterested when Dalmia set up a private company, which he himself controlled, and, began using it to channel business to India. The U.K. company underwent five separate name changes of its own during the period. Only when the shares of Dalmia's public company in India — by then known as DSQ Software Ltd. — soared a stunning 341% during the first three months of 2000 did Indian authorities at last take notice. In the probe that followed, they wound up uncovering the pump-and-dump scheme as well as four separate offshore shell companies in Mauritius and Tortola that the plot revolved around. But Dalmia was hardly sitting on his hands, and while the regulators were investigating him, he was busy secretly transferring DSQ's worldwide assets into some of the same offshore shell companies he had used for his pump-and-dump. In early 2002, Dalmia began negotiations to sell this buried treasure to a Singaporebased outsourcing company called Scandent Group. Founded the year before by an Indian businessman named Ramesh Vangal, Scandent boasted a board of advisers that knew little about the body shop business but whose members had been longtime friends of Vangal. Included among them: the former CEO of Pepsi Cola, Christopher Sinclair; Geier of Interpublic; and Bronfman and father, Edgar Sr., who once employed Vangal as head of Asian operations for the Seagram Co. empire The timing is uncanny. India‘s notorious financial swindler, Dinesh Dalmia, got bail in a third case at the end of September and, barring a couple of cases in Chennai that will come up for bail hearings in the coming weeks, he seems set to roam free (but on bail) for the next couple of decades. After all, that is how long it takes for court cases in India to wind their way through the excruciatingly slow process of litigation and appeals. Meanwhile in the US, he has already been indicted in absentia for a $19 million equipment leasing and wire-financing fraud; he and a couple of his associates were indicted on 10 separate counts of money laundering. The slickness of Dalmia‘s sales pitch to financiers is evident from the list of companies that he has defrauded. These included GE Capital Finance of Danbury, CitiCapital Technology Finance of Mahwah, New Jersey, and Fifth Third Leasing Company of Cincinnati, Ohio.

Dalmia had acquired a new persona in the US and went by the name of Nick Mittal. He is also rumoured to have traded through Kolkata brokers under that name. The leasing fraud itself was perpetrated through three companies — Allserve, Vanguard Info Systems and B2B. One of Dalmia‘s tricks has been to register what he calls ―mirror companies‖ in different countries to confound and trick people. For instance, he registered Allserve and Vanguard in India, US and UK. The US companies fraudulently leased equipment, but stopped paying creditors and filed for bankruptcy within months of signing the lease deals with financiers. In January 2006, the British and Indian operations also folded up. It is pertinent that Indian investigation agencies made little attempt to track down their operations or link them to Dalmia despite repeated reports, certainly by this newspaper, on their multi-location operating centres. Dalmia seems to have fooled US companies regarding his high net worth through a fancy lifestyle. This included a $1.9 million home in New Jersey and a red Ferrari, which was also financed. The court is now trying to recover $19 million and has had his luxury mansion forfeited. This is apparently just the tip of Dinesh Dalmia‘s laundering activities in the US. He is, in fact, believed to have defrauded financiers to the tune of $130 million or more, of which over $30 million is owed to British financiers. Some of these frauds are already the subject of a trial in a federal court following a criminal complaint against him in March. The elaborate scheme to defraud lenders involved assembling worthless equipment obtained from used computer dealers to represent hi-tech offices and creating fraudulent documents, contracts and invoices for large business orders. Dalmia, it may be recalled, came into the limelight at the turn of the century for his brazen manipulation of the shares of DSQ Software and DSQ Biotech, initially in cahoots with scamster Ketan Parekh. He was then involved in a series of shenanigans on his own, which included an illegal 50% increase in the capital of DSQ Software, without informing shareholders or stock exchanges; dubious placement of shares, repeated restructuring of the companies, clandestine alienation of their overseas operations, frequent name changes and, finally, selling off the most lucrative contracts of DSQ Software to Ramesh Vangal‘s Scandent Technologies, again without informing his board of shareholders. After that, Dalmia fled to the US and the Central Bureau of Investigation (CBI) issued a ‗red corner‘ notice against him. However, he seems to have taken enough money out of India to start a fresh series of scams, this time to defraud several US companies. The US indictment is a major The US indictment is a major embarrassment for embarrassment for Indian Indian investigators. Especially for the investigators, especially for the Enforcement Directorate (ED), CBI and the ED, the CBI and the Serious Serious Fraud Investigation Office (SFIO), which Fraud Investigation Office have done precious little to track Dalmia or investigate his activities, despite repeated reports by this columnist. After Dalmia‘s indictment in the US, the agencies have set up a multi-disciplinary committee to investigate his dealings. Since Dalmia has already been indicted following a detailed investigation, this only seems like a cover-up exercise and may include some foreign trips for the investigation officials. So far, Sebi has slapped crippling penalties on

Dalmia. The ED has also slapped penalties on DSQ Software and DSQ Biotech, but did precious little to take its action forward in obvious directions. Only the Kolkata police have been doggedly and persistently following up the illegitimate preferential allotment of 1.3 crore DSQ Software shares to his own companies. While Dalmia and his associates face a prison term of up to 30 years in the very first indictment, his troubles in the US may be just beginning. The elaborate fraud that he conceived and executed was recently reported to a House Sub-committee on Oversight and Investigation of the US Congress. While the hearings at an open forum on September 29 were mainly on outsourcing and pretexting, US journalist Christopher Byron, who exposed several of Dalmia‘s swindles in that country, drew the committee‘s attention to his astonishingly brazen scams. If the Congressional sub-committee takes this seriously, it would not only mean more problems for Dalmia, but serious embarrassment for India‘s outsourcing operations in general. It is one good reason why the government must ensure a proper investigation into Dinesh Dalmia‘s doings, as well as a clean-up of the BPO industry, whose reputation has taken a repeated bashing in recent times.

There is a company Arudrama developments private limited which is linked to Vector Program Private limited.Arudrama is also having AT Jacob and R sundrajan as its directors. This company has not started its normal business operations till 2010 its an old company incorporated in 1995.Its Main shareholders till 2008 were Ramesh Vangal(HUF) holding 49998 shares and M/s Lalbhai realty Finance pvt ltd holding 50000 shares.Mr.Ramesh Vangal is a foreign citizen from Singapore. On 26 Sep2008 shareholding of Lalbhai was transferred to M/s Arvind Limited. Since 2006 there are not much changes in the account of this company.In 2006 it has taken loan from HDFC Bank worth 7,50,000,00 and given advance to someone.Loan was paid back by 2008 as the party to whom advance was given paid it back. Starship Equity Holding Limited-(Declaring that Beneficial Owners are AXA Group and W&S Group) Date of incorporation 23-04-2007 Registered Address 608, St. James Court,St. Dennis Street,Port Louis, Mauritius M/s Starship Equity Holding Limited is saying that it has purchased 13455 shares from M/s Vector Program Private Limited by paying consideration through Escrow agent and the original share certificates and transfer deeds executed by M/s Vector Program Private Limited were to be kept in escrow for the purpose of this transaction. It has enclosed a copy of the Foreign Inward Remittance Certificate (FIRC) dated May 23, 2007 indicating a foreign inward remittance of RS.32.54 crore to M/s Vector Program Private Limited on

May 15, 2007 towards purchase of shares of TMBL by M/s Starship Equity Holding Limited. Vector Program is denying the sale. East River Holding Limited-(Declaring that Beneficial Owners are- M/a Kuwait Investment Authority and Burnei Investment Agency) Date of incorporation 10-04-2007 Registered Address 608, St. James Court,St. Dennis Street,Port Louis, Mauritius M/s East River Holding Limited has purchased 10549 shares from Shri Gokul Patnaik by paying considerations through Escrow agent and the original share certificates and transfer deeds executed by Shri Gokul Patnaik were to be kept in escrow for the purpose of this transaction. It has enclosed a copy of the FIRC dated May 23, 2007 indicating a foreign inward remittance of RS.25.61 crore to Shri Gokul Patnaik on May 15, 2007 towards purchase of shares of TMBL by M/s EastRiver Holding Limited. Gokul Patnaik is denying the sale.

Windmill Investors Limited-(Declaring that Beneficial Owners are Liberties Strategic Services) Date of incorporation 1-06-2007 Registered Address 608, St. James Court,St. Dennis Street,Port Louis, Mauritius Windmill Investors Limited has beneficially acquired 14080 shares from GHI Limited by making full payments and the original share certificates and transfer deeds were handed over to it The original share certificates and blank transfer forms are stated to be in its possession. However, Windmill Investors Limited has not furnished the same to TMBL for verification as the sale has not been disputed by GHI Limited. Subcontinental Equities Limited-(Declaring that Beneficial Owners are Standard Chartered Holdings) Date of incorporation 1-06-2007 Registered Address 608, St. James Court,St. Dennis Street,Port Louis, Mauritius Subcontinental Equities Limited has acquired 13209 shares (2845 currently registered in the name of RST Limited and 10364 in the name of Katra Holdings Limited) by paying considerations through SCB, Mauritius. The original share certificates and transfer deeds executed were handed over to Subcontinental Equities Limited.

It is an independent investor. It has enclosed a copy of SCB, Mumbai letter dated May 31, 2010 addressed to itself indicating that USD14,611,955 was paid to Katra Holdings Limited for purchase of 10,364 shares Katra Holding denying the above sale

With all the above controversies and details one thing is common among the above Mauritius companies –Their Registered address and almost same time and date of incorporation. Does that mean that there was a master plan for all the above deals of sale and purchase of shares of TMBL. Further for the company GHI Limited no information could be retrieved from Connecticut.But it is accompany owned by Rajat Gupta for sure as its address is same as Rajat Gupta house address.ie 59, Beach Side Avenue Sport, Connecticut-06880 USA Among 18 suspicious investors there are five companies incorporated in Mauritius.Registered address of all these companies are same. Katra holding is the main company and other five are Kamehameha Mauritius Limite FI Investment(Mauritius) Ltd Cuna Group(Mauritius) ltd Swiss Re Investor (Mauritius) Ltd All the above five companies are sharing the same registered office address. Surprisingly except Katra Holdings other four were having same date as there date of incorporation ie 23-04-2007.Date of incorporation of katra holding is 5-08-2004. On 4-12-2006 list of 9 NRI investors selected by two of the directors (MGM Maran and B. Ramachandra Adityan)of TMBL were submitted to RBI.RBI gave its permission on 30-03-07 for 8 NRI Investors. It is very contradictory that four companies to whom shares were allotted were registered on 23-04-2007 and permission for them came on 30-03-07.That clearly proofs that permission has been given for some other entities. The entities/individuals for whom permission was given by RBI were. Caisse de depot at placement de quevoo CDP Capital-Canada Ravi S Trehan of New York Ramesh Vangal Rajat Kumar Gupta Kamehameha School Federal Insurance Company

Cuna Mutual Group Swiss Re Partnership Holding AG

Further sharing of same address also indicates that all the five companies belong to one Katra group. There shareholding in TMBL in aggregate comes to 10.70%. Further It has been also proved that Mr Gokul Patnaik ,Vector Program and Mr Ramesh Vangal also belong to one group. Gokul Patnaik and Ramesh Vangal are working in team is very much obvious from the fact that both of them are directors in so many common Companies. Annual Accounts of Katra Holdings Pvt Limited which is flagship Company of Ramesh Vangal shows that Mr Gokul Patnaik is director and shareholder in this company. Further Mr.A T Jacob and Mr. R Sundarajan. Who are director and shareholder of Vector Program Private Limited are also director and shareholder in almost all the Katra group companies. That shows that Mr Ramesh Vangal,Mr.Gokul Patnaik and Vector Program Private Limited are part of same group. Accounts of Global Agri a company owned by Mr.Gokul Patnaik also shows close connection with Mr Ramesh Vangal and Katra Group. So total Shareholding of all the Mauritius companies including Mr Vangal,Mr Gokul Patnaik and Vector Program comes to 19.42% Gokul Patnaik and Ramesh Vangal are working in team is very much obvious from the fact that both of them are directors in so many common Companies. Annual Accounts of Katra Holdings Pvt Limited which is flagship Company of Ramesh Vangal shows that Mr Gokul Patnaik is director and shareholder in this company. Further Mr.A T Jacob and Mr. R Sundarajan Who are director and shareholder of Vector Program Private Limited are also director and shareholder in almost all the Katra group companies. That shows that Mr Ramesh Vangal, Mr.Gokul Patnaik and Vector Program Private Limited are part of same group. Further in Ministry Of Company Affairs data Vector program Private Limited has not filed Balance Sheet for the year 2007-08, instead they attached data of the company Arudrama Developments Private Limited. To the great surprise Ministry of Company affairs even approved these data without any objection. Accounts of Arudrama shows that Directors in this company are Mr Ramesh Vangal Mr Gokul Patnaik Mr.A T Jacob Mr. R Sundarajan

Mr Jagdish Dalal Mr.KE Venketachalapathy Last two directors are the people who belong to Lalbhai Group (Arvind Mills) Shareholders in Arudrama are Ramesh Vangal (HUF) and Lalbhai Realty Finance Private Limited

So Vector program Private Limited Presentation in RBI that they are not connected with any of the Investors of TMBL is false. As Mr. Ramesh Vangal, Mr. Gokul Patnaik And Vector Program are forming a team in so many other existing old companies. It all started in 2004 when NRI businessman C. Sivasankaran's agreed to sale his stake in Tamilnadu Merchantile Bank to Nadar Community for Rs. 130 Crores, but deal didn‘t complete. But later Sivasankaran sale of nearly 33% stake in the private sector Tamilnad Mercantile Bank (TMB) to Indian and foreign investors four years ago. A. Foreign and Indian Investors- 24.93% in total  Seven foreign investors – i. Vangal's Katra Holding, ii. Ravi S Trehan's RST, iii. Rajat Gupta's GHI, iv. Kamehemaha Mauritius, v. FI Investments (Mauritius), vi. Cuna Group (Mauritius), and vii. Swiss Reinvestors (Mauritius) and 

Indian investors i. Gokul Patnaik and ii. Vector Programme

These investors paid 24,182 a share for the 10 paid-up share of bank. Besides the new non-Nadar investors, another 8% was picked up by influential Nadar businessmen and Indian investors such as MGM Maran and MG Muthu, PS Sathiyaseelan, Hemangini Finance and Leasing, Shanmuga Financial Services, L Sridhar, and N Ganeshan. R Chinnakannan and C Chandammal, the parents of Sivasankaran, were also part of this group. These investors had paid 6,050 a share. The shares where bought from four companies belonging to Sivasankaran's Sterling group. Now, Katra Group, Vector Program Private Limited and Shri Gokul Patnaik has entered into an escrow agreement with Standard Chartered Bank which allows M/s Corsair Capital of New York to find suitable buyer and sold the shares to them.

EXIT DOOR STAKEHOLDERS WHO HAVE SOLD 13.09% SELLER: Katra Holdings (Ramesh Vangal): 3.64% RST Ltd (Ravi S Trehan): 1% BUYER: Subcontinental Equities Ltd (Standard Chartered Holdings SELLER: Vector Program (Ramesh Vangal): 4.73% BUYER: Star Ship Equity Holdings (AXA Group SELLER: Gokul Patnaik: 3.72% BUYER: East River Holdings (Kuwait Investment Agency) Brunei Investment Agency

Now, above mentioned buyers are being identified by M/s Corsair capital as purchaser of the shares basically being held by Katra Group, M/s RST Ltd. (Ravi S. Trehan), Vector Program Private Limited and Shri Gokul Patnaik. It is interesting to note that Ramesh vangal, M/s RST Ltd. (Ravi S. Trehan), Vector Program Private Limited and Shri Gokul Patnaik has taken loan from SCB which will be repaid by selling these shares. The job to find the suitable purchaser was given to M/s Corsair Capital. In 2007, M/s Corsair Capital, a prominent New York based Private Equity firm, had introduced seven foreign investors who had interest in investing in TMBL shares. The seven foreign investors include Swiss Re Investors (Mauritius) Limited, FI Investments (Mauritius) Limited, Kamehameha (Mauritius) Limited and Cuna Group (Mauritius) Limited, in whose names transfer of shares was effected by TMBL on May 13, 2007 and another 3 foreign investors (i.e Subcontinental Equities Limited, East River Holdings Limited and Starship Equity Holding Limited) who have applied for transfer of shares. Out of the above mentioned 7 foreign investors 4 managed to purchase shares in Tamilnadu Mercantile Bank directly from C. Sivasankaran's. Now, Corsair comes into picture and got the shares for remaining 3 investors. Corsair did it by enforcing Escrow agreement. There is common directorship among Corsair and Swiss Re, Corsair and Standard Chartered Bankplc (where Subcontinental Equities Limited is a subsidiary of Standard Chartered Holdings, London). It can be further observed that M/s Corsair Capital has been attempting unilaterally to wrest control of all the shares of TMBL through the above named 7 entities. Now, Standard Chartered Bank‘s three branches of different countries are involved, as mentioned below:

a. SCB Mumbai, b. SCB Mauritius & c. SCB London.

SCB, Mauritius has extended a facility of USD 20 million to enable M/s Katra Holdings Limited to refinance a loan it had previously received in order to acquire shares in Tamilnadu Mercantile Bank Limited. SCB, Mauritius is not regulated by RBI guidelines. In May 2000 RBI advised banks to promote an amendment to their Articles of Association to the effect that acquisition of shares by a person / group which would take his / its holding to a level of 5% or more of the issued capital (subsequently modified to total paid up capital) of the bank should be with the prior approval of RBI.

Corsair Capital, a US-based private equity group, has emerged as the missing link connecting the foreign shareholders, who according to Reserve Bank of India, acted in concert to acquire over 16% stake in Tamilnad Mercantile Bank. Earlier this week, RBI rejected a 2007 sale of shares by NRI businessman Sivasankaran to foreign investors including, FI Investments, Cuna Group, Kamehemaha Investors and Swiss Reinvestors—all incorporated in Mauritius— through which the investors arranged by Corsair Capital invested, sources said. Although the sale represented over 16% stake in the bank, none of the investors individually bought more than 5% as RBI does not permit any investor or investors in concert to hold more than 5% stake in a bank. However, it now emerges that the seemingly disparate entities were all investors of Corsair Capital which may be one of the reasons for RBI to conclude that they were acting in concert. This connection is not denied by the group. “Corsair arranged for several highly reputable world-class non-Indian investors to purchase shares in TMB in a manner consistent with all applicable Indian regulations. Corsair believes TMB is a high-quality financial institution,” said Robert Siejfried, a spokesperson for Corsair Capital, told TOI, when contacted. Interestingly there is a Stanchart connection to the investors as well. Standard Chartered Bank, besides being a custodian of all these foreign investors, is a limited partner in Corsair along with the foreign investors. StanChart’s former CEO Lord Mervyn Davies joined Corsair Capital after retirement and is serving as its vice chairman currently. Sources close to India’s banking regulator said Standard Chartered’s name figuring in this development was possibly incidental. “We were convinced prima facie that some of the foreign entities were acting in concert and we have, therefore, annulled the transaction. We did not go to the next level on whether they would have transferred these shares to anybody else at a later date,” added one of these sources who did not wish to be named as the details of the probe has not been made public. RBI guidelines do not allow any investor to buy more than 5% stake in a bank. Any proposal for a stake of 5% and above by an

individual investor or by persons acting in concert has to go to the regulator for approval. RBI grants approval only if the investors match the ‘fit and proper’ criteria. StanChart officials did not comment on the development. However, sources in the UK-headquartered bank said that StanChart had investments in a number of private equity funds but did not have a say in their investment decisions. The Nadars dominated TMB has been in the throes of a takeover dispute ever since investors from outside this community—a powerful caste of wealthy landlords and money lenders from the southern region of Tamil Nadu—acquired the shares from serial entrepreneur Sivasankaran’s Sterling Group in 2007. Foreign investors, including Katra Group chairman Ramesh Vangal and former McKinsey managing partner Rajat Gupta, picked up 24% stake while Indian investors bought around 8% of the stake held by Sterling Group previously. TMB MD A K Jagannathan declined to comment on the RBI report. He did not answer specific queries on whether the bank was aware that some of the foreign investors were linked to Corsair Capital. The foreign entities named by the banking regulator will have to bring down their cumulative stake to below 5%. When contacted, Katra Group’s Vangal said the RBI report was in the right direction. “This will go a long way in unwinding a complex transaction. It will be good for TMB and its other shareholders,” he said. Vangal, who holds just under 4% stake in the bank, added he was a longterm investor and not a seller. It is not clear whether Rajat Gupta, who acquired 4.9%, is still an investor in the bank as sources claimed that he has been in discussions to transfer his stake held through offshore entities. • Standard Chartered Bank, besides being a custodian of all these foreign investors, is a limited partner in Corsair along with the foreign investors • Sources close to RBI said StanChart’s name figuring in this development was possibly incidental The RBI and ED have to address the following issues 1. What is this escrow agreement that SCB has entered into with Ramesh vangal, M/s RST Ltd. (Ravi S. Trehan), Vector Program Private Limited and Shri Gokul Patnaik. 2. Why Corsair was the only facilitator who will find the suitable purchaser for the shares. 3. Why didn‘t RBI examine the accounts of Vector Program to ascertain the equity structure of the company. There was also misrepresentation to RBI regarding the shareholding of Vangal and Gokul Patnaik in Vector Program.

4. RBI has not questioned the pledging of shares of TBM as collateral for borrowings of 20 million dollars by Vangal, rajat gupta and patnaik and others who were part the consortium. 5. Why was Standard Chartered not questioned in regard to the transfer of the shares to its subsidiary. . The role of Standard chartered bank has not been examined or exposed in its conniving in the fraud. 6. How can RBI order in regard to dilution of shares be implemented when Vangal and gang have no control over the shares; the Standard Chartered Bank has transferred the shres to its subsidiary, claiming that Vangal and company have defaulted in the repayment. 7. Gokul Patnaik got 25 crores from abroad to buy the shares, how did Income tax not question him. 8. Nearly 43% shares of TBM are now held in an escrow account in a subsidiary of Standard Chartered. This escrow is probably a front of Corsair fund. 9. RBI ought to have lifted the corporate veil of the acquirers of TBM shares, including Corsair. 10. Enforcement Directorate has yet to move in the matter in spite of RBI pointing out FEMA violations in the acquisition of TBM shares. 11.

Gokul Patnaik and Ramesh Vangal are working in team is very much obvious from the fact that both of them are directors in so many common Companies.

12.

Annual Accounts of Katra Holdings Pvt Limited which is flagship Company of Ramesh Vangal shows that Mr Gokul Patnaik is director and shareholder in this company.