Govt auditor alleges harassment by RCOM

SLANGING MATCH: CHARGES & COUNTER-CHARGES
Parakh & Co, which had found under-reporting of revenues by RCOM in its audit, seeks protection from telecom ministry

AJAIPUR-based auditor that had examined the books of Reliance Communications, or RCOM, as part of a government-ordered investigation has sought protection from the telecom ministry, alleging a campaign of "harassment" by the Anil Ambani Group company.
    The auditor, Parakh & Co, wrote on October 1 to telecom minister A Raja and several senior officials of his ministry, saying it had received a notice from the anti-extortion cell, crime branch, Navi Mumbai, asking for documents and records relating to the RCOM audit. The police was acting after a criminal complaint from RCOM, the audit firm added.
    The auditor has told DoT that it had examined RCOM's books on the department's directions as part of its professional commitment. "In doing our duties as directed by the government, we have become unwillingly become victim of personal stigmatisation by a big industrial house," its communication added.
    ET has seen a copy of the audit firm's communication to Mr Raja. The letter claimed that the firm had been at the receiving end of a barrage of allegations from RCOM and the police notice was the last straw.
    A spokesman for RCOM said the company was merely following through on a statement made by chairman Anil Ambani while addressing the media and analysts on October 15, 2009.
    Mr Ambani had said at the time that the company was taking all steps to counter what he described as a "vicious and mala fide campaign of falsehoods and disinformation conducted against the group". These steps included "lodging a formal complaint with Sebi to probe the hammering of group stocks", as well as "lodging a formal complaint with the cyber crime police authorities to investigate the dissemination of false and malicious emails against the group from bogus IDs".
    Mr Ambani had also promised to take up "the conduct and actions of the special auditors with the Institute of Chartered Accountants of India through our statutory auditors".
    Following Mr Ambani's pronouncements, RCOM filed voluminous complaints with DoT, ministry of corporate affairs and other agencies in October and December 2009.
DISPUTED CALL
ABOUT THE AUDIT
DoT appointed Parakh & Co as special auditor after COAI alleged under-reporting of revenues by RCOM.
Parakh & Co said RCOM had failed to show revenues of 2,799.19 cr, causing losses of 315 crore to the government .
It had also accused RCOM of stating a different set of numbers to shareholders.
A 4-member DoT panel had endorsed Parakh & Co's findings .
AUDITOR'S ALLEGATIONS
Parakh & Co says it has been served a notice by anti-extortion cell, crime branch, Navi Mumbai, asking it to submit all documents and records of the special audit it had undertaken on RCOM's books.
It has alleged RCOM had filed 'false complaints' against it with ICAI in an attempt to harm the reputation of the firm and its partners. DoT advice sought on sharing audit info
    THEgist of these complaints is that "the entire report was drafted for the purpose of sensationalising irrelevant matters". This was done "apparently at the instance of its corporate rivals to hammer down its stocks".
    On Friday evening, RCOM provided copies of these filings to ET. Though the police complaint was filed in October 2009, Parakh & Co received the police notice in the middle of September this year, said an official who spoke on condition of anonymity. RCOM officials had earlier accused Parakh & Co of leaking the report. The police had been asked to nail the culprits, said an official of the Anil Ambani Group.
    In its letter, the audit firm has asked the telecom department if it should hand over the documents sought by the Navi Mumbai police as the agreement it had signed with the government bars sharing any audit-related information with third parties.
    A DoT official confirmed that the department had received a complaint from Parakh & Co, but declined to divulge any details or the government's stand.
    The Jaipur-based firm has alleged that RCOM had filed 'false complaints' against it with the Institute of Chartered Accounts of India in an attempt to harm the reputation of the firm and its partners. Its October 1 letter further goes on to say RCOM had filed complaints against it with the Registrar of Companies, terming it 'yet another attempt by the telco to play with the professional integrity of the firm and its representatives'.
    An RCOM executive who declined to be named trashed the charge of harassment because the company and its chairman had publicly announced that it would seek action against Parakh & Co. "The auditors' move to approach the government on this issue now is an attempt at sensationalising it. How can they claim harassment when we have publicly announced our intention to counter the auditors' attempts at levelling baseless allegations against us?" this executive said.
RCOM AUDIT
The auditor had examined the books of Reliance Communications at the behest of the department of telecommunications, or DoT, and had come to the conclusion that India's second-largest telecom company had under-reported revenues in 2006-07 and 2007-08, causing losses to the exchequer.
    The report said RCOM had failed to show revenues of 2,799.19 crore, causing losses of 315 crore to the government in terms of licence and spectrum fees.
    The telecom department had appointed the special auditor after the Cellular Operators' Association of India, a grouping of GSM mobile operators, had alleged under-reporting of revenues by RCOM. The audit was later extended to RCOM's rivals, including Bharti Airtel, Vodafone Essar, Idea Cellular and Tata Teleservices.
    But, a four-member telecom department committee set up to examine the special auditor's report on RCOM in August 2010 had endorsed Parakh & Co's findings that the country's secondlargest telco had under reported revenues in 2006-07 and 2007-08, causing losses to the exchequer. This telecom department panel, headed by its member finance Vijayalakshmi K Gupta, has asked the ministry to refer its findings to the ministry's legal wing before raising any demand on RCOM.
    In December '09, the telecom minister had told Parliament that RCOM under-reported revenues by up to 1,500 crore to sector regulator Trai for 2006-07 and 2007-08, and DoT was examining the issue. "There was an under-reporting of 1,000-1,500 crore by RCOM to avoid payment of licence fees and the government may have lost about 250 crore due to this," Mr Raja had then told Lok Sabha during Question Hour.