(Gra RYe-TaTe 1) co of Credit and Commerce International (UK) 1991] The bank was established in 1972 by Agha Hassan Abedi, a Pakistani banker who envisaged a bank focused on the third world, and was incorporated in Luxembourg,| with |headquarters in London; Abedi had financial help in setting up the bank from Abu Dhabi, which became tere Tairua The bank primarily focused on serving! Mustim|and|third-world clients! eC eee e eMC RSL Ch crc Teeter y producers. As a result, BCCI expanded rapidly in the 1970s. Coenen~~ aa ei hielo cal ok ail aie tell BCCI entered the African markets in 1979, and Asia in the early 1980s. ee RU ea CUED ee een cunn ey eecay SUT ey eur eee By 1980. BCCI was reported to have assets of over $4 billion with over Pe ental eeu Rel ee eco au cT | CPA eR CRU eM LULA t el ed oe CoenenIf the late 1970s, the Gulf shipping group owned by| Abbas Gokal|(who Wee ee ee Mack En nae Rue money at Gulf to keep it going and(falsified the books at the same time. He tried |proprietary trading’ but the results were further huge losses. Bank kept going by fraudulent accounting and massive misappropriations Coe ees From the early 1980s BCCI's|Panama branch|acted as money-launderer Sg LL RL are Eene 3) In March-1991, the( BoE ordered an investigation by Price Waterhouse, which found that there was ‘evidence of massive and widespread fraud’. 24 In June 1991 for BCCI by Price Waterhouse at the behalf of Bank ‘of England code named |'Sandstorm Report|revealed that BCCI was involved in massive money laundering and other financial crimes, and illegally gained controlling interest in a major American bank. Cerne3.) July 1991, with liabilities of $14 billion, later reduced to/$10) billion. Its collapse caused over 6,500 depositors to lose their money, including the Emirate of Abu Dhabi, which is believed to DEN (w olay 4.) July 5, 1991 customs and bank regulators in seven countries PRs en WR CR SPE Rel eee eee em aC ROL ee US, France, Spain, Switzerland. Luxembourg and the Cayman TCTs ‘ EeeBCCI made large loans to companies and individuals without proper security which incurred huge losses. Bank covered it up with new deposits and not recorded straightly in the books. The Board of Directors of BCCI CAUCE UM e CRUE Umi RU Le Ra CR CULl (le by its founder Abedi and the CEO Nagvi, 248 managers and general managers of the bank at different locations were reporting directly to Rta EeeBee ROR CC ME i ‘Way that no single country had overall regulatory supervision over it. : - BCCI had an unusual annual auditing ‘system. While Price Waterhouse was the accountants for BCCI Lee Ee nee Young jaudited BCC! and BCCI Holdings (London and Luxembourg). Other companies (such as KIFCO and ICIC) were audited by neither. In 1990, a Price Waterhouse audit of BCCI revealed Etre CMe ee a eee Peel mal eee ete eee)Yj Re ya) i) THe N CaS, GOVERNANCE TOA ama TT Tt, ““ “COBY CAAJAYS ar < PO a © 9873580469 Contact for more details // SHIKSHADHAM »©&Maxwell Communication Corporation and Mirror Group Newspaper (UK) 1991 Robert Maxwell was born in Ukraine (then part of Czechoslovakia) in 1923. He escaped to France during World War Il and he joined the British _Army. After buying the rights to distribute} German academic papers} he took over a small academic publisher, which later became During the 1980s he his business empire, with the result that, by the end of the decade, he owned a string of companies, including|Macmillan Publishers, the [Daily Mirror] and|New| York Daily News.cues Maxwell was reduced to shunting money between his companies to give the impression they were profitable, repeatedly changing the dates on which they reporte earnings, in order to fool auditors. Sans this wasn’t enough to keep his empire going, he looted money from the|p of the Mirror Group in an attempt to prop up its share price. CG BY CA AJAY SIRpaw! was reported missing from his yacht on 5 November 1991. His body was later discovered in the Atlantic Ocean, an apparent suicide (officially considered an vik bankers called in their loans, and his looting of the pension fund was discovered. yer 1992 his sons|Kevinland lan|were forced to declare bankruptcy. oa PCAN Ue M eel 1ccee mie Meee Leal trial for fraud (they were ultimately acquitted). CG BY CA AJAY SIRFlows in Corporate Governance | : Maxwell was acting as the chairman and the anni ra both. Maxwell personally controlled the movement of funds and decision making. , fecti ard: All the non-executive directors did not stop Maxwell Teta controlling all the processes of the company. This resulted in excessive borrowings, pledging of securities and shares to raise fund, etc. CG BY CA AJAY SIR3) No Transparency: All the funds were mixed together, for example, the fund raised in the name of pension fund was not shown differently with other assets. Maxwell tried to open trusts WR Role m AUR oleae Ss were not strict. laws: The auditors failed to spot the malpractices and stop T= owner from raising funds. An inquiry on the auditors of the firm was also raised. The auditors have then accepted and admitted errors of judgement in their work. CG BY CA AJAY SIR4 ee sues aiEnron (2001) was formed in 1985 by [Kenneth Lay| after merging the natural gas pipeline companies of Houston Natural Gas and [Inter North |— “Dickibter, In the early 1990s de-regulation of sale of natural gas in the US made it possible for Enron to sell energy at higher prices, thereby significantly Tate gare M1 aM A Lee The company owned and operated a variety of assets including gas pipelines, electricity plants, pulp and paper plants, water plants, and broadband services across the globe. CG BY CA AJAY SIRee Pa mid of year 2000, Enron's stock was priced at[$90|from its initial price |$20| and its market capitalization exceeded aor ion-70 times of the Py and six times of the book value. ot surprising, Enron was rated the most innovative large company in America in|Fortune's Most|Admired Companies survey. y the end of 2000, Enron had losses of [$591 million| and had|$628 [million in debt.|The final nail in the coffin was put by|Dynegy] which had \ previously announced it would merge with Enron but backed the deal on 28 November 2001. Enron filed for bankruptcy on 2 December 2001 amid all crises 2 CG BY CA AJAY SIRy | In this model the entire sales value “was reported as revenue and products costs as cost of goods sold. This approach is considered much more aggressive in the accounting interpretation than Nay Cae taeeoU WaoiK only trading and brokerage fees are recognised as revenue, not the full value of the transaction. Mark-to-market accounting requires that once a long term contract was signed, income was estimated as the present value of net future cash flows. And Assets should be recorded at market value on each Balance Sheet date.Cxncaca oe = Sn Se ee & aa - @)3.) Special Purpose Entities/Vehicle: Enron created special purpose entities to fulfil a temporary or specific purpose of providing fund associated with specific assets. The investors were lacking to understand the fact that the special purpose entities were actually using the company's own stock and financial guarantees to finance these hedges. This allowed large losses to be concealed and created false impression that company's investments were hedged. The motive clearly was financial rather than transfer of risk. re)ee OO “performance management system was focused only on short-term earnings to maximize bonuses. In addition, accounting results were recorded as soon as possible to keep up with the company's stock price. Employees had large expense accounts and many executives were paid sometimes twice as much as the competitors. Fhe siuspiisal te al Risk management was crucial to Enron because Of its long-term fixed commitments which needed to be hedged to prepare for the inevitable fluctuation of future energy prices. By hedging its risks with special purpose entities which it owned. Enron retained the risks associated with the transactions instead of hedging it.