Corporate frauds: How MNCs fail in India

An internal corruption probe leads Walmart to suspend associates in India and Reebok is writing off losses due to corporate fraud in India.

Do multinationals, in a rush to open stores and grab business, end up lowering their corporate governance standards in emerging markets? Or, do countries such as India and China perplex them with their unique challenges?

An illustrative list of allegations of corporate governance failure by MNCs in India...

Bharti Walmart

Bharti Walmart joint venture suspended its CFO and members of the legal team last month after an anti-corruption probe.

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Reebok-India

Reebok India alleged a Rs 870 crore corporate fraud by ex-India head and coo of Indian operations in September 2012.

Investigating authorities blamed it on the gross mismanagement and collapse of business planning and ruling of the company. Ex-Indian MD Subhinder Singh Prem denied any commercial mismanagement.

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Akzo Nobel India

Akzo Nobel India merged three unlisted Indian subsidiaries into listed parent entity in February 2012. Minority shareholders, a clutch of institutional investors and Asian Paints raised questions on the valuation parameters of these unlisted entities.

Akzo Nobel India said valuations of the listed and the unlisted entities were done by two third-party agencies.

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Siemens India

Siemens' Indian IT division, with a revenue of Rs 994 crore (as of September 2008) was sold to parent Siemens AG for Rs 449 crore (Rs 4.49 billion).

Institutional investors alleged profitability of companies or divisions that Siemens India sold deteriorated significantly before sell off. Siemens AG refuted the allegations and said the valuations were done by third-party agencies.

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MphasiS

Analysts raised a red flag after MphasiS, an HP Company and also its biggest customer, cut prices on contracts awarded to its parent. Mphasis said it treated HP as a shareholder and as a customer at arm's length.

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Daewoo Motors

Daewoo Motors India was referred to SFIO in 2003 on charges of financial mismanagement, then estimated at Rs 1,000 crore (Rs 10 billion).

In 2005, SFIO pressed charges in a court alleging siphoning of funds to related companies, transfer of funds to parent, and over-invoicing.

Daewoo is under liquidation and managed by Asset Reconstruction Company.

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Cadbury India

Minority shareholders took Cadbury India to court in 2003 after its de-listing over a dispute involving the value of share buyback.

A spokesperson said, "The matter is sub judice. We hope for a speedy resolution."