Mumbai: A former employee of personal care products maker Godrej Consumer Products Ltd (GCPL) faces charges of embezzlement after allegedly placing fake orders for gold coins in the firm’s name for his personal benefit, in a case reflecting the rising tide of white-collar crime in India.
The misdemeanour, which is being investigated by the economic offences wing (EOW) of the Mumbai police, came to light after some city-based jewellers weren’t paid by GCPL. The former employee, identified as Amit Gaine, is in judicial custody.
Financial fraud by insiders remains the single greatest fear of Indian companies, according to the results of a survey by audit and consulting firm KPMG released in April that showed the incidence of white-collar crime had almost doubled in 2009 from 2008. Weak internal controls, eroding ethical values and lack of legal action against fraudsters create an environment conducive to such crimes, KPMG said.
GCPL buys gold coins to give them to retailers and distributors as an incentive to boost sales. Mumbai-based Orra Diamond Jewellery, Cygnus Jewellery, Asmi Jewellery, Basanti Gold Pvt. Ltd, Hiralal Jain Enterprises and Kolkata-based PC Chandra Jewellers are together claiming a total Rs25 crore from GCPL.
A Mint reader, who requested that his name be not used, provided information about the case in an email sent on Sunday. The fraud surfaced when the jewellers approached GCPL after Gaine couldn’t be reached in February, prompting the firm to seize his laptop and start an investigation, a company spokesperson said.
GCPL has refused to pay the dues as the orders were placed “illegally without any authority” by Gaine.
“(He) falsely projected himself as acting on behalf of the company. Upon further investigation, it also came to our knowledge that he had forged signatures of some of our officials and created false purchase orders, emails, etc.,” the company said in a statement.
GCPL said it wasn’t liable to pay the dues.
“The company specifically disowns all such illegal acts committed by Amit Gaine and states that Amit Gaine is himself responsible for these purported transactions with outsider parties,” GCPL said in response to queries. “The company is not liable for the claims arising out of the dispute between the outsider parties and the individual who has committed the fraud.”
The jewellers say Gaine was a deputy general manger through whom orders were always placed.
Sunil Jain, proprietor at Hiralal Jain Enterprises, a company that supplies corporate gifts, said Godrej owes him Rs2.5 crore for gold coins supplied in January. “I have been supplying coins to the company since September and there was no problem in payments. But in the last instance, the payment did not come till the second week of February,” he said.
The company called the jewellers for a meeting on 18 February and “they also sent us a letter by their advocates on 19 February saying that they were looking into the matter,” Jain said. “But after sitting over the issue for a month they wrote to us on 15 March that they have nothing to do with purchases made by Gaine. They also filed a complaint with EOW on 18 February, without telling us when we met them. We are shocked at the way GCPL has treated us.”
The jewellers in turn approached EOW against Godrej, claiming payment.
GCPL has filed a complaint against Gaine. “The company has already issued a notice to Basanti Gold Pvt. Ltd. and Hiralal Jain Enterprises for making incorrect, wrongful and defamatory statements against us,” GCPL said.
P. Ugle, deputy commissioner of police (DCP) at the EOW, confirmed that his department was investigating cases involving GCPL.
Two other jewellers, Asmi and Basanti, said they have been supplying coins to the company since 2008, with Gaine being their sole contact.
Hitesh Sanghvi, a lawyer representing Basanti, said GCPL owed his client Rs8 crore and is preparing to send the company a legal notice to recover his dues. “I have already drafted the notice and will send it to the company tomorrow or the day after. If they don’t pay up within a month, we will approach the Bombay high court,” he said.
A senior official from Asmi Jewellery said Godrej owed it Rs6.5 crore.
Arpinder Singh, partner and national director, fraud investigation and dispute services, at consultancy and audit firm Ernst and Young, said the case wasn’t surprising given that Indian businesses mostly work on trust and that confirmation processes are weak. “In this case, a third-party arbitrator should check the evidence like whether the purchase order was a formal one, whether the arrested employee has any disproportionate assets and whether there was anyone else dealing with the jewellers,” he said.
Singh said such frauds may rise unless vigilance is stepped up because “economic growth brings more spending and more business”.
Late last year, a similar case at software company Wipro Ltd came to light after some bankers alerted the company in December about the lack of funds in an account. Anup Kumar Agarwal, a chartered accountant who had joined the company as an intern in 2006, and was later promoted as an assistant manager in a division of the finance department, was said to be behind the fraud. On 23 December, Agarwal, 28, was found dead on a railway track in east Bangalore.