Tag: whistleblower

SC Order on Reward for Whistleblower Puts Focus on News Agency’s ‘Settled’ Tax Dues

The news agency ANI has said, ‘There has been an attempt to mischaracterize an order passed by the Supreme Court in unrelated proceedings where ANI is not even arrayed as a party.’

New Delhi: A recent Supreme Court case regarding whistleblowers’ right to be appropriately rewarded has put the spotlight on India’s leading video news agency ANI in a matter of tax evasion. The Supreme Court recently directed the Union Ministry of Finance to reconsider the amount of reward to be given to a person who informed the agencies about alleged tax evasion by ANI. 

The whistleblower had moved the top court alleging that he was not paid his legitimate reward by the finance ministry despite the fact that his information about ANI turned out to be correct and which forced the news agency to clear its tax dues. The appellant complained that he had informed the tax sleuths that ANI had not paid its service tax dues of around Rs 2.59 crores.

His information was used to send a non-compliance notice to the ANI, following which the news agency cleared its pending taxes. However, the appellant contended that he was paid only Rs 5.50 lakhs as a reward for his information, despite the fact that he was entitled to get Rs 51.80 lakhs according to clause 4.1 of the “Reward to Informers” policy issued by the revenue department of the Union finance ministry. 

Clause 4.1 of the policy states that whistleblowers are entitled to get up to 20% of the amount of tax evaded and fines and penalties imposed on the defaulters. The appellant had moved the Bombay high court in 2015 but received an unfavourable order from the court. He moved the Supreme Court later, which has now said that the reward committee did not apply its mind while granting the award. LiveLaw reported that the apex court also directed the finance ministry to “take a fresh decision” on how much the informant  has to be paid as a reward for the leads against ANI within six months. 

The court cited that there were no reasons given to the appellant by the authorities for restricting his reward money to Rs 5.50 lakhs instead of 20% as stated in the policy. It also said that the Additional Solicitor General in 2018 had raised the reward money for the appellant to Rs 9.45 lakhs without stating any reason – a point which the court believed is reflective of the non-application of mind and arbitrary nature of the way the reward money was allocated. 

As social media users highlighted ANI’s tax evasion since the news broke, the news agency issued a statement. 

“ANI Media Pvt. Ltd. (‘ANI’) has been a multimedia news agency for over five decades. In 2010, ANI had received a demand from the appropriate authority for payment of deficient service tax. This demand was voluntarily and duly complied without contest by ANI forthwith. This was duly accepted by the competent authorities and the matter stood closed. ANI is in full compliance with all applicable laws and there is no outstanding tax demand against it as on date. There has been an attempt to mischaracterize an order passed by the Supreme Court in unrelated proceedings where ANI is not even arrayed as a party. Any insinuation or suggestion of any wrongdoing is mischievous and defamatory,” it said. 

Tek Fog and a Dangerous New World

This story has been removed from public view pending the outcome of an internal review by The Wire.

This story has been removed from public view pending the outcome of an internal review by The Wire, as one of its authors was part of the technical team involved in our now retracted Meta coverage. More details about the Meta stories may be seen here.

Imagine a World Where False Supporters of the Emergency Drowned Out the Real Opponents

Facebook whistleblower Sophie Zhang says that democracy cannot function if the voices of the people are drowned out by a swarm of fictitious voices.

In early January, The Wire’s  story on ‘Tek Fog’ (now withdrawn from public view pending an internal review) reminded ordinary Indians about the possibility that their everyday reality was shaped not by the Indian public but the whims of shadowy political operatives pushing party-line propaganda. The allegations resembled those of an authoritarian dictatorship like the People’s Republic of China (PRC) and their 50 Cents Army (五毛党), than the world’s largest democracy.

I have no special insights on the claimed details of Tek Fog, and was not involved in the technical investigation (my involvement was limited to advising the authors regarding potential backlash from Facebook and its associated organisations, which were strongly opposed to publication.) But the claimed findings rang true to me, based on my experience at Facebook in catching inauthentic accounts and state-sponsored IT cells before I became a whistleblower.

As a new employee barely out of graduate school with no training and minimal expertise, I caught two world governments (Honduras and Azerbaijan) red-handed. Both governments ran IT cells without even hiding their own involvement, to manipulate and deceive their own citizenry. I know what I found was the low-hanging fruit – those who had no reason to hide, as no one had bothered to look for them before. Despite their claims of benevolence, Facebook feels no responsibility to protect Indian democracy, any more than Dow Chemical feels responsible for making amends to the people of Bhopal.

I first learned the term “IT cell” half a year after joining FB, when an Indian policy lead explained to me that their use was common in India – especially among the BJP. In January 2020, when I found a pro-Aam Aadmi Party (AAP) IT cell manipulating voters for the then-upcoming Delhi elections, Facebook policy thought they understood what was going on. “These guys are trying to imitate the BJP and beat them at their online game,” I was informed.

While IT cells are now endemic in Indian politics across parties, I was repeatedly told by FB’s own Indian leadership that the BJP were the primary innovators in this area; the company knew that the BJP had access to an organisation in broad strokes similar to The Wire’s report. As such, I was surprised most not by any of the individual findings, but by the fact that an insider had appeared to come forward.

I’ve spoken at length about my experiences at Facebook in late 2019 and early 2020. In that time period, I found five networks of fake accounts across the Indian political spectrum: two pro-Congress, two pro-BJP, and the aforementioned pro-AAP cell in Delhi. While the company initially agreed to take all five networks down as clear violations of their rules and policies, they only took down four; the last was stalled indefinitely after it was discovered to be run by a sitting BJP member of the Lok Sabha (Facebook has changed their story multiple times while denying my veracity.) Later in 2020, FB India head Ankhi Das resigned after controversial decisions and statements favouring the BJP.

Democracy cannot function if the voices of the people are drowned out by a swarm of fictitious voices. Allowing a small group of shady insiders to overwhelm public spaces with fake personas is anathema to free speech and discourse – just as stuffing ballot boxes with fictitious votes is anathema to fair elections. This is a matter of fairness and principle, not partisanship. Many Indians agree. The Parliamentary Committee on Information Technology voted unanimously to seek my testimony (pending approval by the Speaker), and I’ve been interviewed by news outlets from NDTV to Republic TV – a strong statement of nonpartisan agreement in these polarised times.

Illustration: Pariplab Chakraborty

While Facebook holds increasing influence over the state of public discourse in India, it has focused on the needs of Indian power players rather than the needs of the Indian people. At Facebook, the leaders deciding individual cases are the same as those charged with buttering up politicians – a conflict of interest that would force any Indian judge to recuse herself. Social media has built a world where the influential and powerful enjoy relative impunity, while “justice” is reserved for the lowly. Such a paradigm reminds us of an infamous quote from Peruvian dictator Óscar R. Benavides: “For my friends, everything; for my enemies, the law.” In corrupt dictatorships such as the PRC, lawlessness among officials is common – a perk enjoyed by friends and families of the dictator. This is the society being built by Facebook in India as well.

When Mahatma Gandhi began his satyagraha, it was ordinary Indians who joined him in protest to win India’s freedom and democracy. When Indira Gandhi ruled by decree during the Emergency, it was ordinary Indians across parties who came together in protest to restore democracy.

If public protests are the language of the dispossessed, one of the first moves by any autocrat is to restrict freedom of speech and assembly. This stifles protests because in the real world, there’s no way for a single person to impersonate a crowd.

In the digital world, however, the opposite is true, so autocrats use a different strategy to push their agenda. Imagine a world where false supporters of the British Raj drowned out the real opponents, and India never gained her independence. A world where India remained under Emergency forever, as false supporters of the government drowned out the real voices. That is the risk of IT cells – a world in which autocrats are empowered, the minority able to rule over a majority with far greater ease.

The ongoing IT cell arms race across parties is no more beneficial for the Indian people than the US-Soviet nuclear arms race was for the world. If India’s leaders cannot agree to end this madness, it will be up to the Indian people to stand up and call for sanity to return.

Photo credit: Liza Danz

Sophie Zhang became a whistleblower after spending two years and eight months at Facebook failing to fix the company from within. She personally caught two national governments using Facebook to manipulate their own citizenry, while also revealing concerning decisions made by Facebook regarding inauthenticity in Indian and US politics. Formerly a data scientist, she currently stays home to pet her cats.

November 4, 2022: This article has been edited to take note of the fact that The Wire’s Tek Fog stories have been suspended from public view pending an internal review.

Parliamentary IT Panel Wants to Call Facebook Whistle-Blowers to Depose Before It

Sophie Zhang and Frances Haugen have flagged bias and lack of proper regulation on the social media platform Facebook.

New Delhi: Some members of a parliamentary panel looking into the issue of hate speech on Facebook on Monday expressed the view that whistle-blowers Sophie Zhang and Frances Haugen, who have flagged bias and lack of proper regulation on the social media platform, be called to depose before it, sources said.

Top officials of Facebook India, including its public policy director Shivnath Thukral, on Monday deposed before the panel on the subject of “safeguarding citizens’ rights and prevention of misuse of social/online news media platforms including special emphasis on women security”.

In the meeting, some members of the Parliamentary Standing Committee on Information Technology asked them questions about hate speech in reference to the dossiers shared by Zhang with the committee, sources said, adding that the parliamentarians did not get convincing response from the executives of the social media giant.

The members asked specific questions about the kind of mechanism and system the company has in place to identify and remove hate speech content from its various platforms, they said.

During the meeting, many members took the view that both whistle-blowers be called before the panel to brief it about their findings, they said.

The panel is exploring the possibility of calling the whistle-blowers and is likely to seek the Lok Sabha Speaker’s permission, they said.

Haugen, a former Facebook data scientist-turned-whistle-blower, has alleged that the social network giant’s products harm children and fuel polarisation in the United States. She had testified before the US Senate Committee.

Zhang, also a former Facebook data scientist, has reportedly shared a dossier with the panel about the company’s alleged unethical working. She also reportedly had alleged that there was a politically sophisticated attempt to influence the February 2020 Delhi elections.

Responding to the charge that neither Parliament nor the government has called the Facebook whistle-blowers, panel chairman Shashi Tharoor had said in a series of tweets last month that the committee would hold its first meeting after its constitution in November.

As video-conferencing is not permitted under the procedures, testimony in person by witnesses from abroad requires the Speaker’s consent and it is being sought, he had said.

(PTI)

Facebook Saw Spikes in Hate Speech in India After CAA Protests and During First Covid Lockdown

A year before ‘inflammatory prevalence’ shot up by over 300%, an internal review meeting noted that India had ‘comparatively low prevalence of problem content (hate speech)’.

New Delhi: Is it possible to put a number to how bad the hate speech problem has gotten in India in recent years?

In 2019-2020, Facebook’s data scientists found that there were big spikes in the prevalence of inflammatory content in three languages — English, Hindi and Bengali — that coincided with the start of the CAA protests and the start of the first pandemic lockdown in India.

In early 2020, “inflammatory prevalence” shot up by over 300% compared to previous levels, according to internal research conducted by the company.

Internal research reviewed by The Wire shows the company documented spikes in December 2019-January 2020 (CAA Protests) and then another rise in March 2020 (first COVID-19 lockdown).

For Bengali content, a hate speech spike was documented in December 2019-January 2020, while for English hate speech content, an increase was seen in March 2020-April 2020.

“Recent inflammatory prevalence in India has been elevated compared to most ARC [at-risk countries]… Hindi and Urdu inflammatory prevalence have spiked to as high as 1% in India, comparable to Pakistan but higher than most other ARC,” researchers wrote in a July 2020 report titled “Communal Conflict in India Part-1” that was reviewed by The Wire.

The researchers also noted that consistent with this finding, the company also saw spikes in user-reported hate speech in December 2019, March 2020 and May 2020.

“Both the late 2019 and late March/early April spikes were increases of over 80% relative to baseline,” the report noted.

These insights and more come from documents which are part of disclosures made to the Securities and Exchange Commission and provided to Congress in redacted form by Frances Haugen’s legal counsel. The redacted versions received by Congress were reviewed by a consortium of news organizations, including The Wire.

The documents are part of an extensive array of internal research reports and internal corporate communications that offer an unparalleled look at how Facebook and WhatsApp serve as the canvass on which deep-rooted problems of conflict play out in a country.

At-risk, but not a big problem

Curiously, a year before the research on inflammatory content was conducted, an internal review meeting in early 2019 with Chris Cox (now the chief product officer of Facebook) did not classify India as being particularly high on a list of what it viewed as critical countries.

Notes from this meeting point out that in India, there is a “comparatively low prevalence of problem content (hate speech, etc)” on the platform.

“Survey tells us that people generally feel safe. Experts tell us that the country is relatively stable,” the report notes, but adds that problems at a regional level may be masked by metrics measured at the country-level.

In internal company reports, India is generally referred to as an “at-risk” country, alongside Brazil and many others.

Action on hate speech in India

The research report from a year later however note that “actioned hate content per daily active users in India” increased substantially between June 2019 and June 2020, primarily driven by English and Hindi content.

This metric is driven by the number of reports that Facebook takes action upon when juxtaposed to the total number of user reports.

Researchers noted that for India, the English increase was driven by higher action rates.

While the hate action rate for Bengali content increased in early 2020, it slowly reduced after March 2020 amid a larger increase in overall reporting rates.

In past statements Facebook has noted that it invested significantly in technology to find hate speech in various languages, including Hindi and Bengali.

“As a result, we’ve reduced the amount of hate speech that people see by half this year. Today, it’s down to 0.05 percent. Hate speech against marginalized groups, including Muslims, is on the rise globally. So we are improving enforcement and are committed to updating our policies as hate speech evolves online,” a Facebook spokesperson  said in response to media queries.

MobiKwik, Cybersecurity and a Tradition of Going After the Messenger 

It is easier for companies to question the motives of security researchers, than actually spend time and money in improving their security.

India’s latest privacy controversy is growing particularly gnarly by the day, even by the standards of past incidents in the country. 

Well-known fintech start-up MobiKwik is currently locking horns with security researchers and its customers over claims of a potentially massive data leak. Reports over the last month have indicated that the data of millions of customers was up for sale on the dark web. The company has denied this, saying it has investigated and found nothing wrong. Its denials have been independently countered by others, who say there is evidence to provide credibility to the allegations.

In India, the lack of action from private companies and regulators like the Indian Computer Emergency Response Team (CERT-In) forces security researchers to go public, often becoming a target themselves in the process. This is what is happening with Rajshekhar Rajaharia, the security researcher who initially alerted MobiKwik about a potential data breach. 

Rajaharia first reached out to MobiKwik in the last week of February and responsibly disclosed the issue by pointing out how a malicious actor was trying to sell data over the dark web. 

MobiKwik not only issued swift denials, it also implicitly threatened Rajaharia with legal action. MobiKwik’s official Twitter account issued a statement as early as March 4 claiming their legal team will be going after a “media-crazed” security researcher as he is maligning their brand. 

With no special protections, cybersecurity researchers often face legal threats accusing them of unauthorised access and defamation. 

After the hackers who apparently breached MobiKwik presented more evidence by allowing anyone to search their data, Rajaharia shared details over a tweet of his interactions with the MobiKwik team and how they ignored his alerts.

Since then, multiple researchers, experts and customers have independently pointed out why there may be genuine cause for concern. MobiKwik however continues to maintain that there has been no breach and instead appears to have blamed users for their data ending up on the dark web. 

Over the last week, MobiKwik also appears to have issued legal notices to Twitter to pull down Rajaharia’s tweets. Twitter temporarily made his tweets inaccessible and locked him out of his account; restoring it later only after he deleted the offending tweets. 

Email from Twitter Legal confirming the legal notices received by MobiKwik.

MobiKwik’s legal team also appears to have gone after Rajaharia on every other platform where he published details of the incident. For instance, his post on LinkedIn was also blocked after a notice was issued claiming infringement of intellectual property. 

This trend adopted by Indian companies to silence anyone speaking against their organisation by using obscure legal allegations is a problem that stifles free speech and pulls a curtain down on accountability. By locking Rajshekar out of his accounts, and threatening to go after him legally, it is clear that a disservice has been done on an issue that potentially affects the privacy of millions. 

Why work so hard to silence reportage and discussion of an incident of interest to millions of users? Why not instead provide as much clarity as you can? This tradition of ignoring security alerts and blaming whistleblowers for bringing the issue to the attention of the larger public is common among Indian companies. The premier champion of this policy is the Indian government itself, which has a habit of ignoring every alert pointed to them and goes after researchers for pointing out cybersecurity issues.

In the past few days, both the Reserve Bank of India and CERT-In have woken up to the MobiKwik issue, with the former ordering a forensic audit. 

The larger issue

While we await the results of this audit, the larger issue of openly talking about potential security issues remains. It is easier for companies to blame security researchers than actually invest in security. With no economic costs associated with breach of data, companies ignore it. Even with a fundamental right to privacy, without any regulatory interest to act, citizens’ concerns are being ignored for the economic interests of private companies. 

One of the reasons a lot of security reports from India are released publicly through the Twitter account of French researcher Robert Baptise (Elliot Alderson) is because Indian researchers are afraid of retaliation from the private sector and government. Responsibly disclosing cybersecurity incidents in India is near impossible without the risks of legal actions when it involves big corporations or the government. 

A key part of the data protection law debates in India is whether protections should be given to researchers who point out genuine concerns related to cybersecurity. This issue was presented on multiple occasions to the Srikrishna committee and has been ignored by them. 

The draft data protection law proposed by the committee proposes penalties for anyone even attempting to de-identify data, even when they are responsibly reported to authorities. 

A key part of the data protection law debates in India is whether protections should be given to researchers who point out genuine concerns related to cybersecurity. Photo: Reuters

Security researchers across the world have been trying to improve and work with authorities to point out the need for responsible security disclosure programmes. It has been long established that security through obscurity does not help anyone and actually harms everyone as it ignores the vulnerabilities at large only to be exploited in future. Large companies understand the importance of these exercises and are already working with researchers by promoting these activities. 

Countries which understood the importance of security disclosure tried to include them in the law by giving protections to researchers doing responsible disclosure under a time limit. In the case of the UK draft data protection Bill in 2018, amendments were proposed to protect security researchers if they conduct research in public interest and report their findings in no less than 72 hours. In India, there is no discussion at all in this direction. This criminalisation of security researchers helps no one and indeed makes us more vulnerable. 

Srinivas Kodali is a researcher with Free Software Movement of India

Vyapam Scam: Whistleblower Claims ‘Unlawful’ Detention; HC Issues Notice to Madhya Pradesh Govt

Justice S. A. Dharmadhikari of the high court’s Gwalior bench on Tuesday gave four weeks to the state government and other respondents to reply to a writ petition filed by the scam whistle-blower, Ashish Chaturvedi.

Gwalior: The Madhya Pradesh high court has issued a notice to the state government on a petition of a whistle-blower of the multi-crore Vyapam admission and recruitment scam, after he alleged that he was unlawfully detained for 18 hours in connection with the case in 2018.

Justice S. A. Dharmadhikari of the high court’s Gwalior bench on Tuesday gave four weeks to the state government and other respondents to reply to a writ petition filed by the scam whistle-blower, Ashish Chaturvedi, seeking compensation.

On August 9, 2018, police produced Chaturvedi (29) in a special court here following a warrant issued against him for not deposing in the Vyapam case, Chaturvedi’s advocate D.P. Singh told PTI on Thursday.

Chaturvedi did not record his statement at that time, saying he was the complainant in the case.

He had told the court he would depose only after the investigation into the case is over, Singh said.

The court imposed a fine of Rs 200 on him, saying if he fails to pay it, he should be sent in judicial custody for 15 days, Chaturvedi’s lawyer said.

“On August 9, 2018, Chaturvedi deposited the fine before the close of the court’s working at 4.30 pm and hence, the court ordered that Chaturvedi be let off,” he said.

Even after the court’s direction, Chaturvedi was sent to jail, where some of the accused in the Vyapam scam are also lodged, he alleged.

He walked out of the jail the next day after “18 hours”, Singh said.

In his petition filed in the high court, Chaturvedi has said the “unlawful” detention has tarnished his unblemished character and career.

“My client is seeking a heavy compensation,” Singh said.

The scam refers to irregularities in exams held by the Madhya Pradesh Professional Examination Board, also called Vyavasayik Pareeksha Mandal or Vyapam, for admission in professional courses and state services.

Multiple criminal cases related to the scam have been filed in different parts of the state. Initially, a special task force of the state police had conducted an investigation into the scam.

In 2016, the Supreme Court directed the Central Bureau of Investigation to conduct a probe into the scam

(PTI)

Watching the Whistleblowers: Two New Spy Films Tailor-Made For An Age of Paranoia

Official Secrets and The Report dramatise a historical event and offers an implicit commentary on the current political climate.

The revelations surrounding US President Donald Trump’s telephone conversation with the president of Ukraine, Volodymyr Zelensky, is raising serious questions about attempts to solicit outside interference in US domestic affairs. The erupting impeachment scandal has placed whistleblowers firmly back on the international agenda.

In a scene from director Gavin Hood’s 2019 film Official Secrets, journalist Martin Bright (Matt Smith) meets a source in an underground car park. “Very Deep Throat,” he comments drily, referencing the famous source in the 1970s Watergate conspiracy that brought down then US president, Richard Nixon. His informant holds up her mobile phone: “No signal,” she replies, indicating the real reason for her choice of location.

In a single moment, the film – which is set in 2003 – both acknowledges its generic heritage and positions itself in the technological context of early 21st-century spycraft. The pervasive fear of surveillance has been updated for the digital age.

Official Secrets is the first of two films released in the UK in autumn 2019 that reflect on the events that took place in the lead up to, and aftermath of, the 2003 Iraq War. It follows the decision of 27-year-old GCHQ translator Katharine Gun (Keira Knightley) to leak a memo that her employer received from the US National Security Agency (NSA) in January 2003.

The memo asked the British listening station for its cooperation in a US “surge” against selected members of the UN Security Council. The aim was to gather material designed to influence voting intentions and secure a second resolution (ultimately unsuccessfully) in support of the Iraq War.

The film dramatises Gun’s journey from loyal civil servant to whistleblower and court defendant, charting the personal and professional fall out of her actions as she finds herself pitted against the might of the British establishment – and its judicial wrath. In parallel, the film follows the painstaking processes of the investigative journalists (Martin Bright, Peter Beaumont, and Ed Vulliamy) who broke the story.

Official Secrets offers a passionate and damning assessment of UK government collusion in a US dirty tricks campaign designed to sway international opinion in favour of the Iraq War. It champions the efforts of individuals who stand up for their moral principles, whether through whistleblowing, journalism, or legal activism.

While ostensibly commenting on these historical actions, the film also illuminates contemporary concerns about government secrecy, accountability, and factual manipulation.

In the UK, the alleged suppression of the Parliamentary Intelligence Security Committee (ISC) report into Russian covert activity recently prompted suspicions about what (if anything) the British government is hiding about external meddling.

The temporary brand switch of the Conservative Party Press Office Twitter account to “FactCheckUK” during a debate of party leaders in the run-up to a December general election provoked complaints about an act of deliberate deception designed to muddy the (already murky) waters of online discourse. By fictionalising historical attempts by the British government to manipulate the court of public opinion, Official Secrets invites parallels to be drawn with the current erosion of trust in the political elite.

Cover up

The second film released in November to chronicle historical efforts to hold officialdom to account is Scott Burns’ The Report. While also containing the near obligatory car park informant scene, The Report is an altogether darker, denser thriller. It follows US Senate assistant Dan Jones (Adam Driver) as he is assigned by the Senate Intelligence Committee to investigate the CIA’s programme of Enhanced Interrogation Techniques (EITs) during the post 9/11 War on Terror.

Enhanced interrogation, it is rapidly made clear, is a euphemism for torture. Waterboarding, sleep deprivation and cramped confinement (false burial) were among 16 techniques designed to break the resistance of terror suspects. With mounting intensity and moral purpose, Jones meticulously pieces together the stories of each of the 119 detainees, eventually producing a 6,700-page report (reduced to a 700-page executive summary).

Interspersed with flashbacks of dehumanising violence, the film charts Jones’ increasingly obsessional pursuit of the truth. It is uncompromising in its denunciation of the CIA as perpetrators of torture, and of the US government for authorising its use and colluding in the cover-up.

The criticism, however, is not restricted to the Bush-Cheney regime. Also in the firing line is the hypocrisy of the Obama presidency (represented in the film by John Hamm as the White House chief of staff) who, it is suggested, was only too happy to reap the benefits of CIA propaganda when it came to the 2012 re-election campaign.

Real-life dramas

In a similar way to Official Secrets, The Report both dramatises a historical event and offers an implicit commentary on the current political climate in the Anglo-American sphere. By showing a recording of the actual speech given by the late John McCain on publication of the report, the film drags the recent past firmly into the present. It provides a glaring contrast between the bipartisan values that motivated the Senate investigation and the wilful disinformation that continues to emerge from the Trump administration.

In the present febrile political climate, the tagline of The Report could be read as a clarion call to politicians on both sides of the pond: Truth Matters. If only they would listen.The Conversation

Catherine Edwards is a doctoral researcher at the University of York.

The article was originally published on The Conversation. You can read it here.

New Whistleblower Complaint Accuses Infosys CEO of ‘Unethical Practices’

The company has said that the allegations will be examined by the audit committee as per established practice.

New Delhi: A whistleblower group that calls itself ‘Ethical Employees’ has complained to the Infosys board of directors that its CEO Salil Parekh has indulged in “unethical practices” and fudged the company’s financial numbers.

Copies of the letter authored by the anonymous group, who claim to be Infosys employees, were recently sent to the US Securities and Exchange Commission and the company’s board. 

The story was first reported by the Economic Times on Monday morning. The Wire has also reviewed the letter, but could not independently verify any of the allegations that have been made.

“He (Parekh) directs them to make wrong assumptions to show margins. CFO is compliant and he prevents us from showing in board presentations large deal issues…Several billion-dollar deals of last few quarters have nil margin,” the letter states.

“Please ask auditors to check deal proposals, margins, undisclosed upfront commitments made and revenue recognition,” the letter stated.

In a statement put out on Sunday night, Infosys has said that the whistleblower complaint will be examined as per established practice. 

“The whistleblower complaint has been placed before the Audit Committee as per the Company’s practice and will be dealt with in accordance with the Company’s whistleblowers policy.”

Over the last two years, the IT services major has faced questions over corporate governance, with markets regulator SEBI even setting up a probe committee to enquire into other allegations made by a previous whistleblower. 

Following differences between the board and former boss Vishal Sikka, the latter stepped down and was replaced by current CEO Salil Parekh. Company co-founder Nandan Nilekani also made a dramatic return to the company and took over as non-executive chairman. 

Salil Parikh. Photo: Facebook/Infosys

New allegations?

This time, an anonymous whistleblower group claims it has “recordings and mails”  to show that Parekh has over-looked reviews and approvals for large deals.

Specifically, the complaint alleges that the company’s top management has presented a rosy financial picture by ignoring visa costs in one quarter, and not immediately recognising $50 million in reversals in one contract. 

It has also alleged that Parekh and CFO Nilanjan Roy were pressuring the finance team to show more profits in their treasury management by taking risks and making changes to policies. 

Deloitte Faces SFIO Probe in IL&FS Case After Whistleblower Letter

The whistleblower alleged that IL&FS group’s auditor deliberately ignored several red flags in the company’s books, recommended creating complex structures, and in a quid pro quo received high fees from the bankrupt company.

Mumbai: The Serious Fraud Investigation Office (SFIO) has initiated investigations into a whistleblower complaint sent by a Deloitte employee and will summon its top officials for questioning to find out whether the Infrastructure Leasing & Financial Services (IL&FS) group’s auditor deliberately ignored several red flags in the company’s books, recommended creating complex structures, and in a quid pro quo received high fees from the bankrupt company.

A top SFIO official said the probe agency had received a communication from a Deloitte Haskins & Sells whistleblower, but declined to comment further. A few Deloitte officials have already been asked to join the enquiry, an SFIO source said, adding it was aware of the audit shortcomings and was now looking into IL&FS books of the last five years.

The whistleblower has sent the letter to other regulatory bodies like the Reserve Bank of India, Securities and Exchange Board of India (SEBI), and Ministry of Corporate Affairs. The letter has also been shared with Grant Thornton, which is conducting a special audit of the IL&FS group. On April 4, the new board of IL&FS said gross NPAs (non-performing assets) of IL&FS Financial Services (IFIN) were at 90% of the total loans as of December 2018.

Also read | IL&FS Mess: SFIO Investigation Throws Up New Leads on Insolvent Bank’s Dealings

The IL&FS group started defaulting on loans worth Rs 94,000 crore late last year, putting a question mark over its debt repayment capacity. The government sacked the old board and put a new board in charge of the company.

An external spokesperson for Deloitte said: “Deloitte takes issues such as these seriously, and is conducting a review regarding the allegations. There are several ongoing investigations. These agencies are in contact with us, being the previous auditors. We will continue to provide full support to their investigations.”

In the complaint, the whistleblower alleged that Deloitte’s senior leadership was aware of the financial mismanagement and impropriety of the IL&FS group. “Deloitte has audited the group over a period of 10 years and has been an integral part of its unmitigated growth, benefitting in several ways in terms of being a preferred advisor as well as favouring Deloitte by awarding several advisory work on a single sourced basis with substantially high fees,” the whistleblower said, and added that the person, a senior member of the client team, had no faith in the current leadership of the auditing firm and, hence, the letter had been sent to the regulators.

The whistleblower said that in order to protect the auditor’s position, the modus operandi was whenever there were any dubious findings, Deloitte agreed to rely on the management’s explanations and comfort letters. “Internally several views in matters of audit opinion were watered down by Deloitte leadership in the first instance. Over years, this has led the entire audit susceptible to legacy positions and compounded the financial mis-reporting. In many cases, the language of the management response was agreed beforehand by Deloitte to close its internal reviews,” the communication said.

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Financially, the IL&FS group provided additional fees as consultancy services for mutual benefit, the letter added. The letter alleged that in Deloitte’s internal review meetings, observations and all adverse remarks would be taken behind closed doors by the audit partner Udayan Sen and discussed one on one with the top management and then “managed” by way of explanations and opinions. “Several times over the past three years, there had been enough facts discovered which would have qualified the report but these were deliberately overlooked,” the whistleblower wrote, asking the regulators to make sure that Deloitte keeps records of all the internal emails and minutes of meetings.

As compensation, it was agreed that the IL&FS group would remunerate Deloitte by way of consulting and advisory fees and as a part of this arrangement, several crores worth of engagements were given to the consulting division of Deloitte, a separate legal entity, under the guise of strategic study for diversification.

“Deloitte charged a very large sum of fees to recommend creating more complex financial services business and grow its already stressed book. This was under the guidance of Udayan Sen along with consulting partner Sanjoy Dutta,” the letter said. In fact, Dutta had been given the responsibility to manage the IL&FS account and earn Rs 20 crore as annual consulting fees,” the letter said, adding that the round-tripping of loans was evident in several cases but overlooked. As a favour to both parties, Deloitte appointed senior tax advisor to IL&FS, Dilip Lakhani at a very high salary for the services rendered to the IL&FS group and to ensure that he would earn revenue for Deloitte.

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