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Journalism of Courage
Indian Chartered Accountants do have a point when they complain about the clout of multinational accountancy firms. For instance, there is Ernst 038; Young, even though its own reputation has taken a battering during the American corporate scandals forcing it to fork out millions of dollars as penalties. Now you have Grant Thornton, not exactly among the Big Four, but still among the top global accounting firms. Grant8217;s role in the massive, Enronesque scandal raging over Italian giant Parmalat is under scrutiny by global regulators, and the parent firm has officially distanced itself from its Italian outfit Grant Thornton SpA, whose two officials are in jail. Last week The Financial Times reported that US Securities and Exchange Commission SEC was suing GT for its role in fraud at MCA, a small Michigan mortgage company that has gone bankrupt. The SEC charged GT with having 8216;8216;caused, aided and abetted8217;8217; the fraud due to which investors lost around 49 million. Yet, it is a senior partner of GT who is accompanying a World Bank team on a Bharat-darshan to a 8216;Review of Standards and Codes in the Indian Accounting and Auditing8217;.
Fund issues
Indian investors are currently making far too much money through their mutual fund investments to worry about whether their Fund Managers are overcharging them. But the American Mutual Fund business continues to shock and awe with revelations about fund shenanigans. Reuters reports from New York that 30 leading funds are still not providing full details of expenses, especially trading costs. An academic study has revealed that actively churned funds only end up paying hefty brokerage fees and don8217;t perform as well as more passive funds, over a longer time. That is because they have to outperform their own high expenses, with brokerage fees sometimes touching 27 per cent of costs. No wonder brokers are willing to do whatever it takes to win over fund managers. While on the subject of costs, Peter Scannel, a whistleblower working at the call centre of the giant Putnam Funds, told the US Congress last Tuesday that he was 8216;dragged from his car and beaten with a brick8217; after confronting an investment fund executive over trading abuses. Incidentally, even the SEC brushed aside his complaint. Later, New York Attorney General Eliot Spitzer took up the matter, with devastating results.
Companies planning initial public offerings IPOs are working on several shady strategies, in line with the priorities of their management, to utilise the large inflow of unearned money. Unfortunately, these are mostly against investor interest and signal a return of the 1990s style mischief. Some companies are working hard to puff up their order book and exaggerate profits in order to claim a huge premium to the market price; and a well-known software firm has paid nearly Rs 20 crore for a posh, 11,000 sq ft apartment by the sea in Mumbai for its head honcho in anticipation of raising new money. Since the top management of public sector undertakings PSUs is keener on foreign trips, they plan a global tour to sell their IPO although no shares are to be issued overseas and their balance sheets are not even recast according to US General Accounting standards. Finally, there is a bunch of companies that is adding stealing blue-chip names to fool investors and make themselves more attractive.
Trademark caution
The mini initial public offering IPO boom of the year 2000 saw several companies adding 8216;Infosys8217; to their names to attract gullible investors; but the original Infosys Technologies didn8217;t seem to mind. Apparently, the company was only readying itself for battle. This time around, with another IPO boom around the corner, Infosys has issued a 8216;trade mark8217; caution notice warning that its name 8216;Infosys8217; cannot be used either alone or in conjunction with another name. The Infosys trademark is either registered or pending registration under all 42 classes of the Trade Marks Act, 1999 and in 27 other countries. It also has an order from the Calcutta High Court restraining the government from allowing companies to be incorporated with the Infosys name. Clearly, a blue-chip brand built through a long and hard struggle, it is worth every effort to protect its 8216;good name8217;.
Tailpiece
While on initial public offerings IPOs, the war of the television soap operas is acquiring a new dimension with several television companies planning to go public. As things stand, it appears that Sony8217;s bespectacled and brace-toothed Jassi has not only stolen the thunder of the over-painted saas-bahu witches from the Balaji stable, but has taken the Karishma out of Sahara8217;s much publicised opus too. Its next big bet was Malani Iyer; and although the jury is still out on its popularity rating, it is already clear that Sridevi will not quite do an Amitabh Bachchan for the network.
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