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In the midst of #RebuildingKerala, did Kerala Government selectively forget the KPMG Scam?

 Monday, September 3, 2018  |  No Comments

The efforts taken by Kerala government to deal with the disaster-stricken state was well appreciated. But is it that it totally forgot to check on the companies that offered help? Or is it that the state selectively forgot the KPMG Scam? Is the flood situation just another PR campaign for the MNC to regain the credibility it lost? Well, these are questions one still have to find answers for as the situation unravels.

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Trivandrum:

Kerala is slowly stepping back to normalcy after one of the biggest floods that the state witnessed in the last century.  The process of rebuilding Kerala discussions has just begun after the gigantic rescue operational efforts. It was in the midst of these that Pinarayi Vijayan, in his press conference on Friday (31st August) declared that the state would rope in a top-notch multinational service company KPMG as a project consultant partner.

KPMG for Consultancy

Chief Minister’s announcement came at a time when the state is going through a turbulent phase, disaster-stricken, devastated and totally neglected by the BJP led Central Government. The project to rebuild the state is not an easy one starting from infrastructure to health care especially when there is a deficiency of funds. It is at this point that KPMG has offered its help to the state, free of cost.

As the Facebook page of KPMG India suggests, the Chairman and CEO of the company, Mr. Arun M Kumar has met the CM and also donated 2 crores towards flood relief. Over 100 volunteers of the company are currently working in the field. KPMG is expected to use its global expertise and resources to help the state.

As said by the company website, KPMG member firms operate in 154 countries, collectively employing more than 200,000 people, serving the needs of business, governments, public-sector agencies, not-for-profits and through member firms’ audit and assurance practices, the capital markets. The company was established in India back on September 1993. The Netherlands based multinational consulting company has its second largest client base in India, with more than 2700 clients.

Accusations Related to the Firm

However, what goes unnoticed in all the ruckus is the authenticity of the firm. Past one year had been pretty tough for the company with numerous scandals that unraveled from its various global centers. KPMG India had to sack a Kolkata based partner and 6 executives for manipulating the outcome of a dispute with the tax department.

It was on February 2018, that Paranjoy Guha Thakurta and Abir Dasgupta reported in “The Caravan” the allegations made by an IAS officer against the firm. “In the letter, which is dated 5 December, a senior bureaucrat—who claims to be a member of the elite  Indian Administrative Service (IAS) and holds the post of a director in the union government—accuses the group of exercising influence over key government officials by, among other means, recruiting their children and relatives. It alleges that there is a pattern of influence among senior officers in the central and state governments and top executives in KPMG India. Other allegations stated in the letter include the purported offer of a bribe to a bureaucrat, and the awarding of crucial government contracts to international firms, to the detriment of domestic industry,” Caravan reported. The jobs are well remunerated amounting to 40 crores.

The letter had also accused Mr. Arun Kumar of favoring American firms for the contracts in government mission. “Prior to his appointment to KPMG, Kumar served as the Assistant Secretary of Commerce for Global Markets and the Director General of the US and Foreign Commercial Service during US President Barack Obama’s second term. The director claims that in his role as the chairman and CEO of KPMG India, Kumar has favored American firms for contracts in government missions.

The letter claims that American firms such as Cisco, IBM, Dell, Hewlett Packard, Honeywell, United Technologies and Otis have bagged equipment contracts under the prime minister’s flagship Smart Cities programme, to the disadvantage of Indian firms and costing India lacs of jobs,” writes Paranjoy and Abir. The letter also says that the MNC is associated with government projects that are involving a total outlay of 5000 crores. “A quick investigation will reveal that government projects worth over Rs 300,000 crore are being handled by US consulting firms and that at least 100 top bureaucrats have their children or relatives working in these consulting firms,” the letter read. Major projects that KPMG is involved with are Make In India, Smart Cities, Startup India, Bharat Mala, Sagar Mala, HRIDAY and AMRUT among others.

Six employees of KPMG USA was sacked last year in April after a major ethics breach was found out. The company was found out to have manipulated an audit. As Stratstime reports, the company was sued for using stolen information to cheat on inspections for corporate audits. Earlier in 2003, the company was involved in a tax-shelter scandal in the USA where it admitted that they helped in creating fraudulent tax shelters to help wealthy clients dodge $2.5 billion in taxes and agreed to pay $456 million in penalties

It suffered a major setback in China as well where its executives have been charged in the U.S. with defrauding investors out of over $400 million. In UAE, the company is undergoing investigation for its audits of Abraj, a private equity firm.

It hasn’t been long that KPMG lost its name for one of the biggest scams in South Africa. It was one of the biggest scandals in the history of South Africa. A similar case of manipulation of audit happened in South Africa wherein the company helped the Gupta family in tax evasion. Gupta family is a close friend of the then president Jacob Zuma. The company had to sack its major officials as a result of the same. They are also currently banned from auditing public-sector entities.

Uncanny Silences: A Government Sponsored PR Campaign?

The numerous scandals, some of which are already proven and some still investigated are raising a major question on the work ethics and work culture of the company. It is when the company is under so much scrutiny that the Pinarayi Vijayan led government decided to partner with the MNC which raises questions on the state government as well.

What is clear as well from the entire situation is that the consultancy services are in a bad shape. The donation to CMDRF and the proposal to offer free consultancy towards the situation in Kerala doesn’t sound as innocent as it seems in the given situation. As a company that has lost its very name, the responsibility shown towards ‘Kerala Floods’ is for sure going to earn them some brownie points. However, what is even more disturbing is the fact that the work is given to an unreliable and corruption accused firm. The misleading accounting trends of KPMG pose more of a harm than help in the Kerala situation.

The absolute silence of the highly critical opposition parties in this regard is equally strange. How is it that an opposition that constantly blames the state government for their faults that allegedly resulted in the flood situation, forgets to raise criticism on the legitimacy of such an important post-disaster decision?

The efforts taken by Kerala government to deal with the disaster-stricken state was well appreciated. But is it that it totally forgot to check on the companies that offered help? Or is it that the state selectively forgot the KPMG Scam? Is the flood situation just another PR campaign for the MNC to regain the credibility it lost? Well, these are questions one still have to find answers for as the situation unravels.

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