Ricoh India’s Deposed MD Denies Involvement in Fraud, Points Finger at Other Company Officials
Manoj Kumar joined Ricoh India Ltd. in 1995 as a field controller. His rise through the ranks was slow but steady and in April 2015 he was appointed managing director and chief executive officer of the subsidiary of Ricoh Company Ltd., Japan. It took him 20 years to climb to the top and less than a year to lose his job.
In March 2016, Manoj Kumar and three of his colleagues, Chief Financial Officer Arvind Singhal, Chief Operating Officer Anil Saini and Senior Executive Operations Smriti Pandey were asked to step down after two failed audits, one forensic audit and a nine- month delay in filing quarterly earnings.
Since then Manoj Kumar has been replaced by another Ricoh India old-timer AT Rajan. Kumar has also been named in a petition filed by the Japanese parent at the National Company Law Tribunal seeking to investigate and punish those responsible for a Rs 1,123 crore fraud.
Kumar’s employment with Ricoh India comes to an end on October 1, 2016 and he fears he will be made a scapegoat in the fraud investigation. In an exclusive interview with BloombergQuint, Kumar says he’s not involved in the fraud. Instead he points a finger at other employees, including previous management.
I was appointed as managing director and chief executive officer from April 1, 2015. I was not a board member before March 13, 2015. Six months is a very short period for me to pull off such an alleged fraud. After joining as MD & CEO, I barely had time to settle. I did not bring out any new business policy, new business model, new vendors and new contracts during that period. I just inherited everything from my predecessor Tetsuya Takano who ran this company for four years.Manoj Kumar, Former MD & CEO, Ricoh India
Tetsuya Takano was the Managing Director and Chief Executive Officer of Ricoh India from 2011 to 2015. Last year in April he moved up to chairman but was replaced a month ago by Ian Winham.
Ricoh India saw most of its growth in business, during Tetsuya Takano’s period as MD and CEO. The company’s share price rose 1,562 percent, on the back of a quadrupling of revenue and a thirty three times increase in profit.
But soon after Kumar was appointed, these very numbers came under scrutiny.
In July 2015, Ricoh India appointed BSR & Co. as its statutory auditors, after a 10-year audit tenure of Sahni Natarajan & Bahl. The first sign of trouble showed up in November that year, when the company did not file its quarterly financial results. In December, Ricoh India informed the Bombay Stock Exchange that it was considering the recommendations & observations of BSR.
In its filings with the stock exchanges Ricoh said BSR had listed many concerns including,
- A large number of irregularities and fraudulent transactions related to net sales, expenses, assets and liabilities to report higher profits or to cover previous year’s losses.
- Over-stated revenues. The company had recognised revenue on the basis of orders in hand whereas accounting standards permit revenue recognition only when the good or service has been transferred.
- Inconsistencies in product pricing, a large number of related party transactions, inappropriate, unsupported and backdated transactions, and few customers with untraceable addresses or unrelated backgrounds.
Two further audits later, one by SS Kothari Mehta & Co. that proved to be inconclusive and a forensic audit by PWC that confirmed the findings of BSR, Ricoh India informed the stock exchange of a potential fraud at the company and a related loss of Rs 1,123 crore. Effectively casting a shadow on most of the revenue earned in FY15.
A source close to Manoj Kumar says, in an interview with BloombergQuint, that the loss of Rs 1,123 crore is too big for a one-year period, given Ricoh India’s balance sheet size of Rs 1,861 crore. He says the amount suggests the alleged financial fraud must have taken place over several years.
Interestingly, PWC and BSR have been allowed to review and audit the books of accounts only for financial year 2016. And Ricoh India’s spokesperson did not respond to our query seeking information on the full period of financial irregularities.
The source suggests the alleged fraud took place over many years and involved many people at Ricoh India - maybe even 300-400 people, that’s nearly a third of the total employee strength. While Ricoh India would not comment on this, parent Ricoh Company’s lawyer did mention in court that it was a cleverly disguised fraud and that every time someone within the company found out about it, he was co-opted into it.
Manoj Kumar also points a finger at other board members.
Again, Ricoh India offered no comment.