» Exclusive »
Did Kerkar Rob The Taj?
IN January this year, finance minister P. Chidambaram and Tata group chairman Ratan Tata received letters from a former employee of Indian Hotels Company Ltd (IHCL), better known as the Taj group, India's largest hotel chain. The letter accused IHCL's then-chairman and managing director Ajit B. Kerkar and senior executives like Lenny Menezes, chief of the Taj's international operations, of gross financial mismanagement and the siphoning off of funds to the tune of Rs 100 crore a year. The Central Economic Intelligence Bureau (CEIB) got on the case.
The investigations are still on. The CEIB has sent a questionnaire to the Reserve Bank of India (RBI) which has not yet replied. S. Ramakrishna, newly-appointed deputy managing director, told Outlook that IHCL had received queries from the RBI and would be replying soon. In the meantime, Kerkar was ousted from IHCL in messy acrimony amid allegations about FERA violations by IHCL and hinted-at charges of Kerkar enriching himself at IHCL's expense. Outlook got hold of the letters to Chidambaram and Tata and also the supporting documents.
Among the allegations made:
That Kerkar created a complex web of companies across the globe. Ostensibly involved in buying and setting up hotels, these companies actually existed only on paper to move money around, so that Kerkar and his cronies could skim off the top of a jumble of fund transfers among these companies. Most of these transfers were based on oral requests with no supporting documents. Accounting norms were constantly flouted. And neither the Government of India nor the Tatas were informed about the existence of these companies.
That Kerkar's executives, especially Menezes, accumulated assets massively disproportionate to their incomes, while Kerkar turned a blind eye. Menezes, the letter accused, owned a $3.5-million bungalow in New York, and a house in London.
That many financial transactions violated Indian laws. For instance, two of Taj's Washington DC hotels were paying $20,000 every month to Ramada Corporation and Choice Hotels to stay on their reservation lists without informing the RBI.
That added to financial mismanagement were sexual escapades: Neena Helms, a US-based Taj executive, sued Menezes for sexual harassment, and the company paid up $75,000 as out-of-court settlement to her to hush up the affair.
That Kerkar's Taj was constantly investing in projects outside India without the minimum by-your-leave from the Government of India. Example: IHCL invested Rs 3.5 million in the Bentota resort project in Sri Lanka in 1981 and told the RBI about it only in 1996.
Could this letter have played a significant role in what happened next? Maybe even in what happens next in the Tata-Taj story? Consider, after all, the fact that Kerkar had been jostled out of the company, seemed to imply that there could have been something very rotten at the core of Kerkar's empire. Also rumours that it was a vengeful Kerkar who had set Assam chief minister Prafulla Mahanta on Tata Tea's tail for "funding ULFA militants". Recall too the story that come October 10, when IHCL will hold its first post-Kerkar AGM, the man will bounce back on the board as a shareholders' nominee. Outlook contacted Kerkar, and the new management at IHCL. Both replied.
Ramakrishna, however, emphasised that the new management has been in IHCL only for a month, and they were still "not fully aware of all the operations of the international companies as these were handled under the exclusive direction of A.B. Kerkar, the previous chairman and managing director." Said he: "We are objectively looking at many of the things and if we find anything that is untoward, we shall be approaching the concerned authorities." And he told Outlook that he would welcome any documents that would shed more light on the allegations being bandied about. What follows will remind you of Rashomon .