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We have never touched one rupee of black money : Pranoy Roy

* Indian Express reports

NDTV co-founder Prannoy Roy said the CBI’s allegations of bank fraud were a “ridiculous, concocted set of facts” and that the move was a “signal to the entire free press of India”. Addressing a gathering of mediapersons at Press Club of India on June9, four days after raids were conducted on properties of NDTV founders Radhika and Prannoy Roy, he said, “This is not about NDTV. This is a signal to all of us and the fact that there is no case — there is a ridiculous, concocted set of facts — makes it an even bigger signal. They are trying to tell us — we can suppress you even if you have done nothing wrong.”
Roy was joined by senior journalists such as Kuldip Nayar, Om Thanvi, Raj Chengappa, Shekhar Gupta, Rajdeep Sardesai, former minister, author and journalist Arun Shourie, journalist and former Rajya Sabha member H K Dua and jurist Fali Nariman. Speakers criticised the CBI raids as an attempt to curb freedom of the press, while cautioning media organisations against becoming instruments in the hands of the government.
Roy said their fight was not against the CBI, I-T Department or the ED but against politicians who he alleged were using these institutions and “ruining and destroying our country”.
Asking for a time-bound and transparent probe into the case, he said, “Here today I commit that we will answer every one of these false charges openly and transparently…. Radhika (Roy) and I, and NDTV have never touched one rupee of black money. We have never bribed one person in our lives.”

Against fraud? Or against freedom, Mr Roy?

*By S Gurumurthy in New Indian Express

The government has finally acted against Mr and Mrs Prannoy Roy and NDTV Ltd for fraud and deceit, which has been the subject matter of litigation in courts. Before the high financial rise of NDTV began, one must remember that when the UPA assumed office in 2004, NDTV had a huge cash loss of Rs 248 crore. It had no funds even to pay salaries, and its shares were trading at less than par. Its fortunes soared after the UPA came to power, and it received funds through a host of shell companies floated by it after 2004.

Tax evasion, suspected money-laundering

Between 2006 and 2010, NDTV India floated some 20 wholly-owned subsidiaries in different parts of the world – seven in Mauritius, eight in India, two in the Netherlands, one in London, one in UAE, and one in Sweden. All of them were letter-box companies, resting only on the valuation of NDTV Ltd. These subsidiary companies raised $417 million. Of this, $310 million was raised through a wholly-owned subsidiary, NDTV Network PLC UK, and $117 million through the sale of the channel NDTV Imagine to GE Corporation controlled by Universal Studios – all through private negotiation and private placement. Out of the $417 million, $267 million was invested by GE Corporation directly or indirectly.

Just a reference to the emails obtained by the Income Tax authorities shows how the Roys and the other directors of NDTV were struggling to camouflage the huge monies received, not knowing how to camouflage the funds before the tax authorities. All this happened in 2008.

E-mail dated 22.05.2008 at 3.06 P.M. by Vivek Mehta from Price Waterhouse Coopers to Pronnoy Roy: “Subject: Re: FW: Pres Announcements etc “Dear Pronnoy, Here is a shot at it, based on your draft appreciate your problems but honestly the problem could become worse if we give a handle to the tax authorities. I am concurrently discussing with other partners now the draft below. Let’s get on a call ASAP, Regards Vivek”.See the warning about giving a “handle to the tax authorities”.

E-mail dated 21.05.2008 at 10.16 P.M. (by Vivek Mehta from Price Waterhouse Coopers to Pronnoy Roy): “Subject: Press Announcements etc. Dear Pronnoy & all above. Now that we are reaching the conclusion I wanted to remind everybody that all press releases… stock exchange releases etc etc both by NDTV & NBCU should be whetted by us. We must ensure that what is stated is that NBCU is subscribing for a sum of & 150 m in NDTV Networks group company Overseas for an effective 26 percent stake. We must not mention that NDTV is receiving the 150 m as dividend or otherwise. If asked a question what will the money be used for??? We need to decide how to answer this question carefully. Thanks Vivek”.

Note the caution “not to mention NDTV is receiving 150m as dividends or otherwise”. Even the question what the money will to be used for will have to be answered carefully.
E-mail dated 22.05.2008 at 02.09 P.M. (by Pronnoy Roy to Vivek Mehta from Price Waterhouse Coopers): “Subject: Re: FW: Pres Announcements etc. For everyone …..this is very important…Could we please have a draft press release Vivek….which we can use & send to nbcu……If possible, it’s important that the press release should make clear that the money comes in to NDTV and does not stay in Networks”.

Note the caution that “the money comes to the networks [subsidiaries] but does not stay there.”
E-mail dated 22.05.2008 at 3.06 P.M. (by Vivek Mehta from Price Waterhouse Coopers to Pronnoy Roy). “Subject: Re: FW: Pres Announcements etc Pronnoy….I need to start with a base draft…can somebody give that to me. Your second requirement is something I would avoid saying…. let’s discuss after I have seen the base draft. BR Vivek”

Note that Prannoy Roy’s second requirement would be avoided in drafting the press release.

E-mail dated 22.05.2008 at 05.30 P.M. (by Radhika Roy to KVL Narayan Rao). “Subject: Re: FW: Pres Announcements-Final? Dear Narayan, But this doesn’t really address prannoy’s concerns arising from our earlier communication and it would be a pity to miss this opportunity to correct any misconceptions. Just to remind you Prannoy’s four points below: 1. Everyone thought the money was to be put into Networks….As a result we got no shareholder value for the Rs. 600 crs in NDTV. 2. It’s very important to state that the money is not in Networks…. But in NDTV…. As this affects the valuation analysts give to the deal…. And it’s a big boost if they know it’s not in Networks and it is in NDTV…. I know we can’t say stake sale (which it is not anyway)… But we do need to clarify that the money is not in Networks”

Dark Loan Trail And Breach Of Trust

*Swarajya reports

Prannoy Roy, co-founder and executive co-chairperson of New Delhi Television (NDTV) along with his wife Radhika Roy, have been accused of carrying out covert financial transactions related to the operations of the network, and are now being investigated for a Rs 48 crore loan default. Dragged into the red, the controlling shareholders of the company had entered into several smokescreen share sale agreements in a serious breach of trust that hoodwinked investors and effectively giving up a significant control of a media network to unknown entities.

While the main case relates to a loan default of Rs 48 crore to ICICI Bank, for more than a year now, the Enforcement Directorate (ED), Income Tax, Delhi Police Economic Offences Wing (EOW) have been raking up Prannoy Roy’s clandestine financial transactions and money laundering in the operation of NDTV, a Stock Exchange Listed company. Radhika Roy Prannoy Roy Holdings Private Limited (RRPR) is cardinal to the string of transactions that were executed from 2007 onwards.

The Roys today face bank/tax fraud and money laundering charges, which the channel has rejected as a ‘witch-hunt’.

The case against the Roys

The Central Bureau of Investigation (CBI) has filed a case against the couple and a private company RRPR (Radhika Roy Prannoy Roy) Holding for allegedly causing a loss of Rs 48 crore to ICICI Bank. As a result, Roy’s Delhi residence was searched by the CBI in the early hours of this morning (5 June). Four other places including Delhi, Dehradun and Mussourie have also been raided.

The case before the Delhi High Court: In January this year, stockbroker and director of Quantum Securities, Sanjay Dutt, who holds 125,000 shares in NDTV, representing a 0.2 per cent stake, filed a writ petition in the Delhi High Court against the enforcement directorate, or the ED, and the directorate general of income tax investigation and other government bodies for not acting on the complaints he filed in 2013 against NDTV and its promoters for violating a number of laws. Along with the government bodies, Radhika and Prannoy Roy are also named as respondents in Dutt’s petition.

In the affidavits filed in response to Dutt’s petition the two agencies told the court that investigations into NDTV and its promoters have been underway since 2011, in response to a complaint by BJP parliamentarian Yashwant Sinha. The documents reveal that the Roys are being probed for violating tax laws and foreign money regulations. However, NDTV has not been charged with any of the violations identified in the documents.

What led to the case?

A vortex of transactions starting in 2007 opened the can of worms for the Roys, when they also seemed to have started losing their control over the network’s editorial policy and business strategy.

1. The Roys bought back GA Global Investments’ stake in 2007: Radhika and Prannoy Roy bought back a 7.73-per cent stake held by another shareholding entity, GA Global Investments. NDTV’s stock was hovering at around Rs 400 at the time, but the Roys bought shares back at Rs 439, which is often the case when shares are bought at a price higher than the market rate when promoters buy back shares for reasons including an aim to strengthening their holding in the company. In turn this sparks an “open offer” as per Indian stock market regulations, permitting other shareholders to sell stake — up to a ordained limit —to the promoters at the same price.

2. The Roys sold stake to Goldman Sachs in 2008: The Roys entered into another deal, in March 2008, with Goldman Sachs to sell the investment bank up to 14.99 per cent of the NDTV stake they held. The deal also entitled Goldman Sachs special rights in the company, including the right to nominate a director on the board. This deal, which probably violated capital markets regulations, was not announced to authorities or shareholders concerned, and the transactions were presented as open-market sales.

3. The Roys borrowed Rs 501 crore from India Bulls Financial Services in 2008: The reckless stock buy-back led to a shortage of money. To correct this, the Roys borrowed Rs 501 crore from India Bulls Financial Services. This loan kicked off a string of borrowing that had trouble and debt staking the Roys to this day.

4. The Roys took a Rs 375 crore loan from ICICI: To repay the India Bulls loan, the Roys took a loan from ICICI, of Rs 375 crore, at an annual interest rate of 19 per cent, against a collateral that made up their entire personal shareholding, as well as that of RRPR, accounting for a total of 61.45 per cent of NDTV’s stock.

5. The Roys borrow Rs 350 crore from VCPL in 2009: To repay ICICI, on 21 July 2009, the Roys took another loan, of Rs 350 crore, from an entity named Vishvapradhan Commercial Private Limited (VCPL) on bizarre terms. The loan, sourced from Mukesh Ambani’s Reliance Industries, was routed to VCPL through a subsidiary. The terms of the agreement signed between RRPR and VCPL stipulated that the Roys divest a significant portion of their personal stock in NDTV and transfer it to RRPR, raising its total shareholding of the network from 15 per cent to 26 per cent. Then, control of RRPR was effectively handed over to VCPL. Radhika and Prannoy sold their shares to RRPR at a questionable Rs 4 per share when the market price was more than Rs 130. Why? An explanation would be sale at market price would have fetched the Roys substantial profit that in turn would have attracted huge taxes, which they were keen to avoid. After the Roys’ shares were transferred to RRPR, NDTV received Rs 350 crore from VCPL, which they used to repay the ICICI loan.

The RRPR-VCPL deal spree

The Roys didn’t stop there. On 9 March 2010, the Roys together transferred an additional 3.18-per cent of their personal stake of NDTV, to RRPR, at Rs 4 per share, taking RRPR’s total shareholding in the company to 29.18 per cent. VCPL then paid Rs 53.85 crore more to RRPR, with the total loan to NDTV topping Rs 403.85 crore. The deal gave VCPL the right to convert the loan into 99.99 per cent of RRPR’s equity which would mean complete ownership. This also meant VCPL could officially take over RRPR at any time it wanted with or without repayment of the loan.

Under the agreement, RRPR was to have three directors, one of whom was to be appointed by VCPL. NDTV could not sell or raise further equity, file for bankruptcy, or do anything that would affect RRPR’s shareholding, without VCPL’s consent. These conditions ensured the Roys no longer had any control over RRPR, which owned nearly one-third of NDTV’s stock; effectively their control over NDTV itself was seriously weakened.

During the quarter ending 31 December 2016, NDTV had reported a consolidated revenue loss of Rs 18 crore following a fall in advertising revenue. Stalked by financial losses, the channel had put its assets on sale. Incidentally, the CBI raids on the Roys home come on a day the broadcaster was taking its English business news channel NDTV Profit off air.

NDTV, primarily a left-leaning television news channel, was launched by the journalist couple in 1988. Prannoy Roy shot to fame with the news programmes, The News Tonight and The World This Week. The poised moderator, a specialist in election coverage, broke government-run Doordarshan’s monopoly over television news coverage. The company, which went public in 2004, however had to in later years fend off stiff challenges from rival channels, some of them led by former employees. Financial crisis got the better of the network and it even resorted to layoffs. Now, the debilitating crisis has grown to monstrous proportions over the series of financial transactions that the Roys have carried out from the mid 2000s.