Sucheta Dalal :The Other Side
Sucheta Dalal

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The Other Side  

Jul 19, 2004

There is an entirely different side to the Topline Shoes case that has hit the headlines over the criminal charges filed against its celebrity director Sunil Gavaskar. Far from having "vanished," its promoter H.M.G. Murthy has been fighting a tough battle with two public sector banks that pushed it to ruin, instead of hand-holding it through its first patch of trouble. In fact, this is the other side of how draconian powers under the Securitisation Act can kill small industrialists. Far from vanishing, Murthy (see Financial Express, April 12, 2004) had written to Dr Montek Singh Ahluwalia (then member, Planning Commission) who forwarded the case to the Reserve Bank of India. Nothing happened. Murthy has also filed criminal cases against two public sector banks for backing out of financial commitments.

He also has a letter from the CBI, closing the case against him and wishing him luck. The Topline Shoes story is extremely well documented; and if Finance Minister P. Chidambaram is serious about his government's mandate to help small people, then Topline Shoes would be a case study for not rushing to amend the Securitisation Act.

E&Y aftermath  

The merger of the Indian operations of the ill-fated Arthur Andersen with Ernst & Young (E&Y) is near collapse. Former CEO Bobby Parikh and Amet Parikh (head of Risk and Business Practice) left last year and three other partners - Mukesh Butani, Lalit Ahluwalia and Sanjay Mehta -quit last week. E&Y's managing partner Rajiv Memani, who took over from his father K.N. Memani, calls the exits "multi-faceted and complex".  

In a "dear colleagues" letter he expresses regret about the three exits, but enigmatically says: "Some of you know that these events have co-inclined with a continuing dialogue between Ernst & Young Global and senior Andersen equity partners on some outstanding issues. The matter is under discussion and I am optimistic that the conversations will conclude successfully at the earliest." Our sources say that the 'outstanding issues' relate to 'undistributed profits' of the erstwhile Arthur Andersen that came into E&Y after the merger.  

Apparently, "all hell broke loose" when E&Y proposed that the profits be merged with them as part of "income harmonisation." The Andersen partners believe that the profits rightfully belonged to them and this triggered the resignations and more may follow. Others say that the sheer incompatibility of the two corporate cultures had worsened after Bobby Parikh's departure and is leading to a slow break up.  

Rich and richer  

The Business Standard report last week that Delhi has a higher percentage of rich people is making many Mumbaikars see red but not because Delhi is ahead of the commercial capital at the wealth stakes. A Market Information Survey of Households by the National Council of Applied Economic Research (NCAER) reportedly says: "Contrary to popular perception, Mumbai is not the country's richest city, either in terms of the total number of people earning more than, say, Rs 1 crore a year, or even in terms of their density (the number of rich per million in the city)."

If a research agency can estimate the number of rich people, why does the Income Tax Department fail to spot them, ask Mumbaikars? After all, Mumbai remains the highest taxpayer in the country. "If one looks at the actual figures of the Income Tax Department, then those quoted by the survey would make one laugh," says a reader. On the other hand, Delhi's extremely conspicuous consumption suggests that the tax department has its eyes tightly shut. Maybe the Finance Minister can increase revenues by improving tax compliance right under his nose.

Market verdict  

That American icon Martha Stewart has been awarded a five-month jail sentence plus probation is a bizarre example of America's twisted morality and peculiar justice system. The woman bought 4,000 shares of Imclone, based on information that wasn't quite accurate and only came from an intermediary. The regulator threw the book at her but didn't even charge her with inside trading. Nevertheless she was found guilty and sentenced for various offences, the biggest being lying to the authorities.  

Compare this with former President Bill Clinton who lied to his family and the nation but went scot-free. Instead, he is raking in millions of dollars by writing about it. High profile research analysts who lied and fudged corporate information during the bubble merely lost their jobs. They weren't jailed. promoters walked away with millions despite wildly exaggerated projections in their IPO documents, but weren't disgorged of their dubious wealth. But, Martha Stewart gets jail and a $30,000 fine, which is probably worse that what CEOs of scandalous corporate giants such as Enron, Tyco, WorldCom, Global Crossing and Adelphia have faced.  

Interestingly, the market clearly disagrees with what they see as a witch-hunt against Martha and on the day of her sentencing it pronounced a different verdict. After hearing defiant Martha declare that she "will be back" the stock jumped a whopping 30 per cent.  

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-- Sucheta Dalal