Deloitte under scanner in Jagan case

Hyderabads tryst with accounting scandals persists. After accounting firm PricewaterhouseCoopers got into trouble with Satyam in 2009,it is now the turn of Deloitte Touche Tohmatsu.

Deloitte’s Senior Director P N Sudarshan’s revelation in a Hyderabad court that the audit firm had been under pressure to inflate the value of Jagati Publications has created a big stir in the state.

Jagati Publications is a media company owned by Jagan Mohan Reddy,son of former Andhra Pradesh Chief Minister Y S Rajashekar Reddy and sitting MP from Kadapa in Andhra Pradesh. Jagan is currently being probed by the Central Bureau of Investigation (CBI) in a disproportionate assets case.

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Sudarshan was summoned by CBI on Friday for further questioning. On Wednesday,the Deloitte employee had admitted that the company’s value had been overstated by Rs 1,000 crore at Rs 3,500 crore when it was assessed to be Rs 2,500 crore. Besides,he said he was asked to show the date of the report as November 2007,though the assessment was completed in April 2008.

Sudarshan said he was under pressure from Jagati’s former auditor Vijay Sai Reddy to overvalue the company and that he was led to believe the report was for internal audit purposes. Jagati,however,later made the report public to prospective investors.

CBI has named Jagati Publications vice-chairman Vijay Sai Reddy an accused in the case while Sudarshan’s statement was recorded as a witness. The investors have told CBI that they went by the Deloitte report. Sudharshan also stated that the valuation report was based on documents provided by Vijay Sai Reddy and that they did not verify the details.Vijay Sai Reddy said in a letter,which is available with FE: The statement reported to have been made by Sudarshan before a magistrate was selectively leaked by some vested intereststo the media openly opposed to us. The statement reported to have been made by Sudarshan is absolutely false …if Sudarshan has really made such a statement before the magistrate,it is obviously under pressure from some people with vested interests,who are losing no opportunity to implicate us in one case or the other.”

“Any valuation of an enterprise are indicative figures for market forces to apprise themselves of the viability of operations of a company and cannot be seen as pressure tactics of any individual,which,if accepted,would cloud every transaction and render such transactions investigation worthy,” he clarified in the letter.

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