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Singapore Tribunal’s Order Exposes Ranbaxy’s Calculated Fraud

In 2013, Ranbaxy was forced to pay $500 million to settle an ongoing case with the US Department of Justice.

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In April 2016, former promoters of Ranbaxy – Malvinder Mohan Singh and Shivinder Mohan Singh – had been ordered by an arbitration court in Singapore to compensate Japan’s Daiichi Sankyo for concealing facts at the time of sale of their 34.82 percent stake in Ranbaxy to the latter for $2.4 billion in 2008. The compensation will be to the tune of Rs 3500 crore.

This order, which shows the Ranbaxy’s former top brass in poor light, details how they “deliberately” concealed crucial data with the intention of hiding their own irregularities – alleged fraud and falsehood.

The former promoters have until 22 August to challenge the verdict, but a study of the copy of the order, don by The Indian Express, reveals just how deep the web of fraud runs.

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Company’s Self Assessment Report (SAR) at the Heart of the Indictment

A Self Assessment Report (SAR) prepared by Rajinder Kumar in 2004 – then head of Ranbaxy’s R&D – for the company’s internal use reveals many skeletons tucked neatly away in the company’s closet.

It is an extraordinary set of circumstances where the CEO of the company has material information about FDA and DOJ investigations, which he deliberately withholds from the board and majority shareholders. 
Excerpt from the Tribunal Report

Rajinder Kumar, dissatisfied with the state of affairs in the company, resigned a day after the report was submitted.

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In 2013, Ranbaxy was forced to pay  $500 million to settle an ongoing case with the US Department of Justice.
The arbitration court in its order observed that Malvinder Singh had been hiding facts from the Daiichi since the beginning of the negotiations. (Photo Courtesy: Twitter/FollowCII)

US FDA Steps In

In 2005, Kumar’s principal assistant Dinesh Thakur forwarded the damning SAR to the US drug regulator Food and Drug Administration (USFDA).

The USFDA reacting to the contents of the SAR opened an investigation into the matter against Ranbaxy in 2006. It later raided its offices, seizing crucial documents that shed more light on the fraud that was happening under its nose.

The investigations also led to Ranbaxy – then under Daiichi’s management control – being asked to pay $500 million in settlement to the US Department of Justice.

Arbitration Court’s Observations

The existence of SAR in the hands of US authorities meant that Ranbaxy shares were ‘pregnant with disaster’ at the time they were acquired by Daiichi... But for the misrepresentations (by Malvinder Singh and others), the transaction would not have been entered into all by Daiichi… had Daiichi been aware of the SAR it would not have paid any price for (Ranbaxy) shares.
Arbitration Court’s Observation

The arbitration court in its order further observed that Malvinder Singh had been hiding facts from the Daiichi since the beginning of talks for negotiations.

Malvinder Singh misguided Daiichi, with “carefully crafted language,” claiming that the DOJ investigations were merely a “fishing expedition.” and that it was a conspiracy initiated by its competitor Pfizer.

The court observed that these were not “honest answers”, and were aimed at coercing Daiichi into entering the consequent agreements.

The tale of lies and deceit, however, does not end there. As revealed by the order, earlier this year, the Singh brothers took it upon themselves to give the story a new spin. Responding to the tribunal, the brothers claimed that documents disclosed to Daiichi before the signing of share purchase revealed enough information to give them“cause” for concern about Ranbaxy being “corrupt.”

The promoters, trying to wash their hands off the problem, claimed that Daiichi ignored fraud concerns and decided to proceed with the purchase.

A claim that was shot down by the court by slapping the slapping of a Rs 3500 crore fine.

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Topics:  Ranbaxy   US FDA   Fraud 

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