commerce Innovation or Fraud

commerce Innovation or Fraud

On December 24 last year, when most people in Singapore carried on with their lives in a festive mood, preparing to celebrate Christmas, I was walking towards a hospital to meet a terminally ill patient.

The patient in question was Manoj Kumar Sharma, 53, the CEO of SpeakAsia. SpeakAsia, a Singapore registered e commerce company, has been in the eye of a scandalous storm in India since 2011.

Most precisely, it is the company’s business model that is at the centre of a controversy. SpeakAsia claims its business is about «creating a panel community of empowered consumers, which earns rewards points by participating in various companies (sic!) activities». These activities include e zine sales, survey fillings, product referrals and sales, advertising based surveys, and training programmes. As a result of these activities, consumers earn reward points that they can use to purchase products (mobile phones, TVs, etc) and services from the company. However, according to Indian police, this foreign registered company has violated the law of the land by indulging in money circulation schemes.

At a global level, SpeakAsia’s’s case presents a new dilemma for a new century: how do global e commerce companies operate from outside the geographical bounds of a country and what if they break the law of the land?

The Mumbai Police’s special branch, the Economic Offence Wing (EOW), registered a case against SpeakAsia on July 28, 2011 when a complainant, Navniit Tarachand Kkhosla, Managing Director, TFIC Consultant Pvt. Ltd. Bandra (E), alleged that some investors (named in the charge sheet) had cheated him by acting in a criminal conspiracy with SpeakAsia Online Pte. Ltd., Singapore and its CEO Haren Kaur, CEO Manojkumar, COO Tarak Bajpai, Regional Managers Ashish Dandekar and Abhishekh Kulshreshtha and other concerned officers/personnel of the accused Company «by inducing him to invest money around Rs. 5.43 Lacs (roughly US$9,000) in a Money Rolling Scheme of Speak Asia Online Pte. Ltd knowingly (sic!) very well that the Company is a fraud and having no product or any sort of business and cheated the complainant and his Company.»

The police charge sheet further said that the above accused persons also induced the people in India to invest their hard earned money in the same Money Scheme and cheated around 20 Lac (2 million) innocent Indian investors for unaccounted huge amounts. During the period many of other complaints/applications were received from various victim of alleged money rolling scheme floated by Speak Asia Online.

Acting on the complaint, the Indian Police jumped into action. In the last two years, they have arrested most of the office bearers of SpeakAsia in India on charges of defrauding people of millions of rupees (Rs 2,276 crores or about US$368 million). They have also issued lookout notices for Sharma. As soon as he turns up in India, he will be arrested.

Sharma had contacted me a year ago and we had met at a caf in Orchard Road. My nonfiction book, The Resurgence of Satyam, had just been published in India and Sharma wanted me to write a book on the SpeakAsia story.

Sharma is a tall and lanky Mumbai man who has an oval face with a prominent moustache. Sharma’s contention was that while the government had hastily moved in on his company and was in a hurry to declare it an illegal outfit, he wanted to tell his story explain his business model and prove that it was not a Ponzi scheme. India’s people, and especially the 2.4 million of his company’s panellists (consumers and supporters), deserved to hear his side of the story as, so far, Indian media had not given him a fair chance, he said.

At that time, I had not heard of SpeakAsia at all. What was his story exactly? And was it worth telling? I was not so sure about it.

In our first meeting, Sharma tried to convince me that his story deserved a telling and that more than anything else, he wanted to restore his reputation. His family, he said, did not deserve to live with the ignominy of being related to a swindler.

His wife was in Mumbai and police had impounded her passport. He could not travel to India for fear of getting arrested. All his companies» bank accounts in India had been frozen. And he did not have much longer to live. He was in a limbo, a man on the run, living on borrowed time. It had all the elements of a compelling narrative.

I was hooked to the story. I wanted to hear more about it. However, right after doing the Satyam book, I was not keen to spend a few more months doing another book on another scam in India. The timing also did not seem to be right as the police were still investigating the case.

After the police filed the provisional charge sheet against SpeakAsia on 19 December, Sharma contacted me again to provide an update.

That’s when I met him again in a Singapore hospital. When I entered his room, he lay supine on a bed, reading a book. He welcomed me with a smile and sat back. He seemed to have lost more hair and looked thinner.

«We are glad that the police have filed a charge sheet,» he says. «Now we have the opportunity to explain our case before the judges.»

Why did it take the economic offences wing (EOW) of Mumbai Police more than two years to file a 5,000 plus page charge sheet against the 13 office bearers and franchisees of SpeakAsia and eight other companies?

«The charge sheet contains all the evidence that we have collected during the investigation. It was a lengthy probe. The money was collected in India, laundered in Dubai and other countries, and hence, it took time to file the charge sheet. We will be filing supplementary charge sheets too,» Rajvardhan Sinha, city EOW chief told the Times of India.

The charge sheet names SpeakAsia COO Tarak Bajpai; director of Tulsiyat Tek Rajiv Mehrotra; SpeakAsia prime franchisee Deepankar Sarkar; panellists Ashish Dandekar, Raeesh Shaikh, Rahul Shah, Sanjiv Dandona among others; and eight firms SpeakAsia Online, Haren Ventures Pvt Ltd, Tulsiyat Tek, Tulsient Info System, Kritanj Management and Allied Services, Seamless Outsourcing, Seven Rings Education and Seven Rings International.

«The accused have been booked for forgery, criminal conspiracy and cheating among other charges under the Indian Penal Code and Prize Chit and Money Circulation Banning Act. The maximum punishment for these offences is up to seven years» jail,» B P Shelke, investigating officer, told media.

How did an e commerce company become a hunted organization in India? What was wrong in its business model? And what are the lessons for other companies in this case?

The police have said in their charge sheet that SpeakAsia is a Ponzi scheme. Their main charge against SpeakAsia is this: As per the scheme, each investor (panellist) would be given two surveys a week to complete on an annual fee of Rs 11,000. If the investor successfully completed all the surveys, he or she would be entitled to Rs 52,000 a year (Rs 1,000 per week or Rs. 4,000 per month).

Sharma denies this characterization. According to Sharma, the business of SpeakAsia is not an «investment scheme». «There is not even an iota of evidence to suggest that SpeakAsia had asked any person to invest any money with a promise of any return. It is completely misleading and incorrect to suggest that SpeakAsia had propagated that upon investing Rs.11,000, one would get a return of Rs.52,000. At no place, SpeakAsia had made any such statement,» says Sharma.

Sharma claims that the Company’s business model is valid and legal. «Since there is no element of investment and there being various external sources of income, there is no question of this business model being considered as Ponzi or Money circulation scheme which is banned under Prize Chits and Money Circulation Scheme (Banning) Act, 1979,» he says. One, the company is registered outside of India[1], and two, in the past there have been many cases of companies luring people into easy investments and then duping them of their money.

According to a report in the Outlook magazine, there are nearly 600 unregistered multi level marketing (MLM) schemes in India and frauds involving Rs 2 lakh crore to date have taken place in India.

Examples like this led leaders like Kirit Somaiya, president of Investor Grievance Forum (IGF), to lodge a written complaint against Speak Asia Online Ltd with the EOW of the Mumbai Police. In his complaint, he had asked EOW to initiate inquiry against the company SpeakAsia, with an allegation of dubious modus operandi in India.

In July 2011, India’s Corporate Affairs Ministry asked the Registar of Companies to inspect the books of accounts of Speak Asia and submit its report to the government by July 10[2].

First, Sharma says the figure of Rs. 2,276 crores spelled out in media reports is not right. «As per the charge sheet and our bank statement a total of 722 crore was remitted from India,» he says. «And a total of 714 crore was sent to India. This was for earnings of panellists and other costs. In a nutshell, a mere 8 crore has been net outflow from India.»