Investigations into the $100-million ITC Fera violation case have taken a significant turn with the enforcement directorate cross-checking details gathered so far with two UK-based buyers of leaf tobacco -- Standard Commercial and Intabex.
All the employees summoned are based in Guntur. No one from UK has been summoned as yet. The week before last, ED officials questioned Jogeswar Rao from Standard Commercial and Peter Barret Leonard, liaison officer for Intabex, in order to corroborate facts with evidences already in possession.
The department has meticulously gathered enough material over the last one year through interrogations and searches.
The only person arrested in relation with the case is R Ranganathan, an employee of Indian Leaf Tobacco Division (ILTD) in Guntur. He was later released on bail.
While the investigating authorities refused to comment on the future course of action, most of them maintained that they are resorting to a holistic approach as most of the cases relating to subsidiaries and associate firms cannot be considered in isolation.
Sources feel that this is the beginning of the end of the investigations. Although the media would like to break up the investigation process into phases characterised by active interrogations, ED authorities say that the investigations are continuous and there has been no let up at any point of time.
Very few cases have stirred up as much media hype in corporate history as this one. For the investigating agency, it has all the makings of a perfect case: approvers in the form of the Chitalia father-son duo and a special internal audit report prepared by renowned firm Lovelock & Lewes, pointing out clearly which transactions amounted to Fera violation.
Previously, only ITC officials were summoned. They were quizzed on alleged dubious overseas deals related to associate firms and divisions of the cigarette major. Under the microscope are the following: ILTD, the International Business Division, ITC Bhadrachalam, Tribeni Tissues and the Singapore-based subsidiary ITC Global.
The department seems to possess written evidences in the form of statements of ITC officials and the rich haul of papers seized during the nation-wide crackdown on the company's premises on October 30, 1996.
While the heat has been turned on transactions made through ILTD, the authorities are expected to study documents related to alleged options trading between ILTD and ITC Global. It has been alleged that ITC Global worked out a negotiated price with the ILTD and the difference between procurement and negotiated price was sent abroad.
ED officials refused to comment on the course of investigation in March for reasons of confidentiality. "Any comment from us will hamper the investigation process," they said.
But sources said that the Chitalias are scheduled to make their much- awaited visit in March to testify against the tobacco major. Things are expected to hot up then.
The first thing that strikes observers about the case is its unparalleled degree of transparency. At the outset, the public was able to know every detail about the case as government officials called conferences regularly.
This practice was stopped after the finance ministry issued a circular to the enforcement directorate asking it not to reveal any details about the case. The circular was issued following strong pressure from the trade and industry lobby.
In letters written to the finance minister, various chambers of commerce complained that innocent people were being hanged without being proven guilty.
According to information available with Business Standard, there was pressure from the London Chamber of Commerce to curb information leaks as it was embarrassing ITC's British parent BAT Industries.
Some ITC-watchers say that the investigations were instigated by information provided by BAT Industries which was trying to discredit the ITC management in a bid to increase its own brand presence in the Indian cigarette market. However, this view is negated by the fact that BAT is negotiating a joint venture with ITC to launch its own brands -- State Express 555, Dunhill, and Benson and Hedges. During his visit to Calcutta last month, BAT nominee Simon Smith on ITC's board told Business Standard: "It is pure and absolute rubbish. BAT has no involvement in any case against ITC."
Nevertheless, the investigations continue. Corporate watchers are eagerly waiting for April 30 by which the chargesheet will be prepared. It will be some time before the investigations are wrapped up. An ITC source said: "Every company is vulnerable to Fera, but if evidences are placed before the government agency on a platter, the directorate obviously has to react."
