World Bank ban on Wipro, Megasoft too

shailesh agarwal (professional accountant) (7642 Points)

13 January 2009

While analysts said Wipro was above board, they questioned the logic behind the company’s decision to not disclose the World Bank’s action that dated back to June 2007

Bangalore/Hyderabad: The World Bank on Monday disclosed that apart from Satyam Computer Services Ltd, it had barred Wipro Ltd and Megasoft Ltd from doing any work for it for “providing improper benefits to bank staff” in the first instance, and “participating in a joint venture with bank staff while also conducting business with the bank” in the second.

“Satyam’s senior executives were openly denying reports of World Bank debarring the firm from doing any work for the bank. That forced the bank to make a public announcement and set the record straight. Following that incident, the bank took a policy decision, in the interest of fairness and transparency, to disclose the names of all affected vendors, who have been barred through our corporate procurement programme,” said Carl Hanlon, the bank’s Washington, DC-based spokesperson.

Last week, Satyam’s former chairman B. Ramalinga Raju confessed to fudging the company’s books to the tune of Rs7,136 crore.

Wipro’s co-chief executive Girish Paranjpe said the alleged “improper benefits” were not any form of illegal inducement and were in keeping with US law.

“When Wipro listed its ADR (American depository receipt) on the NYSE in 2000, we allotted shares to several people including (some employees) of prospective clients as advised by our managers to the issues Morgan Stanley and Credit Suisse,” Paranjpe said. “This was not barred under the SEC (Securities and Exchange Commission, the US stock market regulator) regulations and this is standard practice in the US.”

Executives at SEC couldn’t immediately be reached for comment.

Mint couldn’t immediately ascertain whether Wipro’s allotment was in keeping with the World Bank’s policy in 2000 and whether this had subsequently been changed.

While analysts said Wipro was above board, they questioned the logic behind the company’s decision to not disclose the World Bank’s action that dated back to June 2007. Wipro has been barred by the bank till 2011 and Megasoft till December 2011.