Sarvesh Mathur, the main whistle-blower in the case against Pricewaterhouse Coopers (PwC) India, has told the Enforcement Directorate (ED) that an incomplete investigation against the accounting firm could cause ₹3,100- crore loss to the state exchequer.

Mathur was a former key employee of PwC.

His complaint to the ED and a petition in the court led to an investigation against the PwC.

It also led to a fine of ₹230 crore by ED for illegally routing foreign funds to India as grants.

Now, PwC has challenged the fine.

In a recent complaint, dated September 23, seen by BusinessLine , Mathur has now alleged that the ED has also not complied substantially with Supreme Court directions.

It further stated that since no investigation has been against the audit firms which together with PwC India form the network of firm and despite there being compelling evidence, the provisions of Prevention of Money Laundering Act, 2002 have not been invoked by ED.

“The specific inputs provided by me included information pertaining to funds illegally received by PwC India from PwC Services BV, Netherlands for non permitted investments and payment of non compete fee for acquisition of tax practice of RSM & Co. and the consulting business of ECS Private Limited (reported in the section of media). ED’s reluctance to investigate the audit firms for violations of similar amounts is inexplicable despite being put on notice several times by me, Justice AP Shah, former Chief Justice of Delhi High Court highlighting the various violations committed by PwC India,” Mathur’s letter says.

Section 13(1) of FEMA, 1999 states that the amount of the penalty can be up to three times the sum involved. Further Section 13(2) of FEMA, 1999 provides that in addition to the penalty, the money or property in respect of which the contravention has taken place can be confiscated and handed over to the Central Government. But the ED has failed in doing this and even the penalty levied by the agency is only one time the sum involved, Mathur has said.

“All the illegal funds allegedly came through (a large foreign bank) involving more than 25-30 high value transactions spread over 2-3 years. The said bank has been PwC India’s banker for decades and would have therefore held regular review meetings with PwC. Did the bank at any time question PwC about the use of funds or raise any alarm. It is not known if anyone from the bank was investigated by ED,” Mathur said.

The letters further give out details of lack of investigation with regard to camouflaged investment of around ₹220 crore by PwC Services BV, Netherlands in audit firms: Price Waterhouse, Lovelock and Lewes, Dalal & Shah Mumbai and Price Waterhouse Bangalore in blatant violation of FEMA 1999 and Chartered Accountants Act,2002 (CA Act). Grants were ostensibly received to enhance level of skill of PwC India resources.

"Price Waterhouse, Bangalore, the tainted auditor of Satyam, who never had even a single employee on its rolls, also received a million US dollars," Mathur has alleged.

Foreign Professional Indemnity Insurance (PII) of $60 million (₹280 crore) was paid by PWC taken without RBI approval. Out of this, $15.5 Million was remitted to the US to settle a Class Action suit arising out of Satyam. At the time of the remittance, RBI had specifically asked PwC if it had a foreign policy in which case the remittance would have required specific RBI approval. PWC misled RBI by confirming in writing that it had an Indian Insurance policy. Also, insurance premium of around ₹100 crore was paid over several years for the PII without RBI approval, the letter says. In total, the letter addressed to the Prime Ministers Office and the Finance Minister, highlights violations worth more than ₹3,100 crore, which needs to be investigated by the ED.

Mathur confirmed that in his recent letter he had provided further links and details of PwC money laundering matter. Email query sent by BusinessLine to ED and PwC remained unanswered.

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