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Exposing FRAUD4 Nexus With Bureaucrats, Vendors, OEMs, C-Suite Executives: Time To Audit The Big4(20)

NEW DELHI: Swanky offices, high-paying jobs, big government and corporate contracts but among these rosy pictures lies a dirty secret of cheat and deceit. The corruption factory managed by a few operators is not only killing the real talent but slowly hollowing the system. 

Yes, we are talking about a handful of foreign auditing companies which entered India for doing audit and taxation consultancies but now have been involved in every possible consultancy on earth. From local transportation to civil aviation and agriculture to high-tech food processing, they have entered everywhere.

We call them Fraud4. It is not only us but there have been several court ruling and action by regulatory authorities which points out clear violation of the law and severe lapses and corruption. Not only in India, but actions have been initiated against them in many foreign countries for glaring negligence and malpractices.

ALSO READ: Notice to Big 4 exposes the ugly side of doing auditing business in India 

These Fraud4 firms are under scrutiny for breaches in large corporate frauds, yet its forensics businesses are fiercely competing for assignments from banks, regulators, and corporations. They are venturing into cyber security to cyber forensics, from data collection to data analytics, from data centers to cloud offerings. They offer consulting services from security guards to National Security Strategy from local bodies to central and state departments. 

According to a highly placed source, now these firms have diversified into procurement manipulation, so virtually they are into bid rigging and bid manipulation and procurement frauds and project manipulation.

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Modus Operandi

Direct auditing work by foreign businesses is not permitted in India. They generally have an associate firm for such purposes, which sources allege is technically part of the foreign firm. “While domestic subsidiaries of overseas audit companies may have alternative names, this is just an eye-wash. The auditing arm functions from the same premises and partners in auditing practice frequently have two visiting cards,” a source added.

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– Through their powerful liasioning and bribing the Fraud4 has access to all the government departments and offices. They beforehand know the requirement and budget for the project.

– The source pointed out these foreign firms create association work with original equipment manufacturers (OEM)s and use OEM resources and draft the proposals along with OEMs to create specifications.

– The project specifications are drafted as per the local vendors’ needs so that they can be benefited. RFP – Request For Proposal will have a certain specification which is functionally not important for the project but is introduced to benefit their partnered vendors and hence becomes a tool for bid rigging.

– For a successful tender minimum of three bids are required. The Fraud4, along with their associates also manages to introduce dummy companies which are not a competition but working in nexus to bag the contract.

ALSO READ: S. Sukumar v. Institute of Chartered Accountants of India

Big Cheque But Zero Responsibility

Interestingly, just being a consultant or the mediator in the process manages the entire show on any project. Doing this, they make millions as consultancy fee, which ranges from 5-10% of the project cost. This is too high just to create or rename some presentations and documents by English-speaking representatives. On top of this, they draft the condition of the project in such a manner that there is no liability at their end if the project gets messed up.

ALSO READ: Cyber Forensic Industry Needs Price Regulation And Product Standardisation To Stop Rampant Bid Rigging And Cost Manipulation: RTI Activist

WHY GOVERNMENT AND PUBLIC SECTOR OFFICIALS ARE PUNISHED AND COPYCAT CONSULTANTS SCOT FREE

Before assigning a project, a technical committee is formed. This technical committee is again an eyewash as it has people as member who has no technical expertise on the subject. And if the technical committee was competent enough, then why did they need a consultant? 

So members of the technical committee approve the project and sign all the documents. The Fraud4 takes no responsibility or signs a document where they can be held liable. This is why it is often seen in the matter of corruption or irregularities, people signing the documents are charged and investigated.  

ALSO READ: 21 Scandals, Settlements and Corporate Crimes of Big 4 Accounting Firms in 2019

Corruption & Criminal Activities

It is a well-known fact that the Fraud4 have liasioning with many central PSU and state PSU to influence their priorities. They have also created offices with all state capitals to do similar liasioning with many government departments and state bodies. 

ALSO READ: How corrupt are the Big Four accounting firms?

Sharing example, an insider, wishing anonymity, said in the case of digital forensics services they engage some local vendors for the digital cloning and hashing activities. For these services, they pay Rs 10,000 to 15,000 to the local vendors and then raise bills almost up to 20 times to the government or to the corporate sector. In all such cases, local vendors are the real service providers.

ALSO READ: Is PwC The Next Arthur Andersen? ICAI Suspended PwC Auditor for Misconduct and Malpractices

The Fraud4 rigging and manipulation game is not restricted to malpractice in tendering but they go beyond and are involved in criminal activities to hide their wrongdoings. Source known to such manipulation said Fraud4 are behind many criminal activities. 

A whistleblower highlighted that these Fraud4 influence corporate frauds cases where they help them to hide big corporate frauds through data tampering and deletion of logs which creates challenges for law enforcement agencies to investigate later.   

They have hundreds of cases against them in different countries where they have been found involved in criminal in civil cases. They do not form a company rather create a partnership firm to limit the liabilities. 

ALSO READ: ICAI Suspends PwC Auditor For One Year For Professional Misconduct

As Fraud4 keep itself safe from any legal liability in RFP itself so ultimately when tender malpractices are investigated then only members of the departmental technical committee are held guilty whereas everything is designed by ‘copycat consultants’.

SOP ON HOW TO INVESTIGATE THE COMPLETE NETWORK OF FRAUD4

– Tracking money flow between the vendors, OEMs and Fraud4 and kins of bureaucrats can reveal their dirty game. 

– CDR and IPDR analysis of vendors, OEMs, PSUs and consultants to identify their frequent meetings prior to bid and project RFP.

– Their meeting locations are specifically in restaurants, five-star hotels and out-of-office premises.

– Investigation of WhatsApp and VOIP calls among them, which is the preferred mode of communication between the cartel.

– Computer Forensics of vendors and OEMs offices will reveal the entire nexus.

– Technical interviews of these Fraud4 companies will easily expose their expertise around the project. These specifications are actually created by OEMs and vendors.

– If proxy supporting bids are investigated genuinely then the entire nexus may be exposed easily.

– If property details, other investments and travels details of lead employees of consulting firms, money flow from vendors and OEMs are investigated within a month after the budget is disbursed, then clear nexus can come into the picture.

Despite their influence and strength of money, several courts and regulators have strongly commented against their role in such bidding process and in a few cases they have been persecuted by regulators and other legal authorities. 

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