Anil Ambani's status as a ‘mega client' and his ‘enormous influence' in India led a senior UBS banker to waive the rules and give the go-ahead for the creation of an off-shore investment entity in Mauritius to help his business group invest in India illegally, according to evidence reportedly produced before a tribunal here.
The tribunal is hearing a case brought by Britain's financial regulator, the Financial Services Authority (FSA), against Sachin Karpe, a former head of UBS's London-based India desk who, with another colleague whose identity cannot be disclosed for legal reasons, attempted to set up the Mauritius structure, called ‘Pleuri Cell E'.
It would have enabled Mr. Ambani's ADAG (Anil Dhirubhai Ambani Group) funnel money into India bypassing domestic laws which bar Indian nationals and companies from investing through foreign institutional investors
It is alleged that Mr. Karpe and his colleague, both of whom have since left the bank, misled its compliance team claiming that Pleuri was owned by a French couple.
The senior banker, who reportedly gave the go-ahead, was named as Kurt Kumschick, former marketing head for wealth management in the India-Pacific region. He died recently, it was stated.
The Financial Times on Thursday reported that in an email to Mr. Karpe and his colleague, Mr. Kumschick justified waiving the rules for establishing the Mauritius-based entity, despite doubts about its legality, on grounds that it would be a ‘business decision' for the bank given Mr. Ambani's ‘key relationship' with it.
In the email, dated March 20, 2007, Mr. Kumschick wrote: “I would support the decision to go ahead based on the following: the client is a mega client for wealth management and a key relationship account for the investment bank...Our mega client is among the top three industrialist (sic) in India with enormous influence in the country and able to interact with regulators and authorities as required.''
Ultimately, however, the bank refused to sanction Pleuri. The FSA imposed a £1.25 million fine on Mr. Karpe, which he is challenging. His counsel acknowledged that his client ‘enabled' the transaction but denied any misconduct.
Mr. Ambani is not accused of any wrongdoing. A spokesman for his group was reported as saying that the case had already been settled with Indian regulators and the funds invested with UBS repatriated back to India.