18 December,2017 12:40 PM IST | Mumbai | Vinod Kumar Menon
Following an American federal court's indictment order, the Dept of Justice will seek extradition of Hyderabad- based accused
In a case of brazen fraud involving $18 million (Rs 121 cr) committed by an Indian BSE-listed company in the United States, the Federal Court in Seattle, Washington, on December 13, issued an Indictment Order against four Indians. They are wanted for duping a company run by an NRI in the USA.
Wanted accused Satish and Madhavi Vuppalapati are believed to be in Hyderabad
The indictment order (a copy with mid-day) is a result of an extensive investigation carried out by both the Federal Bureau of Investigation (FBI) and Department of Justice for past three years to expose a meticulously planned and executed multi-million white collar crime in the USA, before the perpetrators fled and returned to India.
Kiran Kulkarni, the complainant, and founder of Kyko, which was duped
The Department of Justice will soon be approaching the Indian government to seek extradition of wanted accused Madhavi and her brother Satish Vuppalapati, believed to be in Hyderabad. Of their associates, Srinivas Sista is believed to be in India. Guru Prasad Rao is believed to be in the US. Both are also likely to be arrested shortly.
Satish Vuppalapati represented to Kyko that PISL serviced many prominent US customers such as Microsoft, Huawei etc
Speaking to mid-day from USA, Kiran Kulkarni, the complainant in the case, expressed his satisfaction with the outcome of the court order. He said, "While the Indian government is keen to extradite business tycoon Vijay Mallya from London for duping banks, the US government is also serious about getting back master mind Madhavi and Satish for committing fraud on their soil. The noose will get tighter in coming days and arrest of all wanted accused is imminent."
Case background
In 2009, Kulkarni consolidated his family activities of financing and private equity under Kyko Global Inc. and Kyko Global GmbH (collectively, Kyko), which are trade facilitation companies offering accounts receivable factoring services, which is a form of commercial financing. Prithvi Information Solutions Ltd. (PISL) is an IT services company incorporated in India, providing technology services and software development to various American companies.
PISL is a BSE-listed company. Satish Vuppalapati is the managing director of PISL and his sister, Madhavi Vuppalapati is the chairperson and director.
According to Kulkarni, in mid-2011, Vijay Kumar, a chartered accountant in Hyderabad, approached Kyko for financing for PISL and introduced Satish to Kyko. As a public-listed company, Satish represented to Kyko that PISL was a growing, vibrant and successful IT-staffing firm, servicing many prominent US customers such as Microsoft, Huawei etc.
Kulkarni claimed that Kyko agreed to provide receivable financing to Prithvi, particularly in respect of five customers availing themselves of its services.
Kulkarni further added, through late 2011 and early 2012, Prithvi represented that it had substantial relationships with several multi-billion dollar US customers and offered for factoring, the receivables from five in particular.
A factoring relationship started, whereby when the customers would confirm invoices from Prithvi, Kyko would advance the funds to it (Prithvi) for each such invoice. The customer would pay Kyko directly when the invoice was due.
This cycle continued without incident until February 2013, when the payments to Kyko stopped. Customers owe Kyko $18 million.
When the payments ceased, Kyko investigated and found that PISL's relationship with these five customers was fictitious. Prithvi had created sham entities, set up bank accounts in these companies' names, all to dupe and deceive Kyko. Kyko spoke to the real companies and was told that they had not worked with Prithvi for years, and there was no current business relationship, explained Kulkarni.
The other side
Numerous attempts to contact PISL did not yield results. Attempts to contact Madhavi and Satish through social media were also unsuccessful.
Real Cos. and sham firms floated by accused
>> Dick's Sporting Goods: A publicly listed national retailer with over 600 stores and revenues of annual S$5.8 billion; sham company floated - DCGS, Inc
>> Enterprise Product Partners: A publicly listed energy asset company with revenues of US$42 billion; sham company floated - EPP, Inc
>> Financial Oxygen: A provider of technology for the financial services industry based in California; sham company floated - Financial Oxygen, Inc
>> Huawei investment & Holding Co. Ltd: A global networking and telecommunications equipment company with revenues of US$35 billion; and sham company floated - Huawei Latin American Solutions, Inc
>> L3 Communications Holdings, Inc: A publicly listed defence contractor with sales that year of US$13 billion; sham company floated - L3Cs4, Inc
Noose tightens
Kiran Kulkarni, the complainant
'While the Indian government is keen to extradite business tycoon Vijay Mallya from London for duping banks, the US government is also serious about getting back mastermind Madhavi and Satish for committing fraud on their soil. The noose will get tighter in coming days, and arrest of all wanted accused is imminent'
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