Given the rate by which frauds are brought to light these days, new scams now fail to alarm the public. A real estate investment company that partnered with the USA's Trump Organization on an office tower project in India, has been accused of defrauding its foreign investors of at least $147 million. Documents obtained by The Washington Post reveal that two global investment companies based in New York and London that have invested nearly $300 million in Indian real estate development company IREO, filed a criminal complaint with the New Delhi police last month.
The Children's Investment Fund Foundation, a charity run by British billionaire Christopher Hohn, and Axon Partners, an equity firm run by former Goldman Sachs executive Dinakar Singh, alleged that the fund's Indian managing director Lalit Goyal, co-founder Anurag Bhargava, and others have committed a “large-scale fraud” by “illegally siphoning off” at least $147 million of investor money. They add that the actual sum could, however, be around $200 million. Delhi police said they have received the complaint but declined to discuss the matter further. While Goyal refused to comment on the allegations, in a March 13 letter to IREO investors, he wrote, “As far as the allegation of fraud, diversion and misappropriation of funds is concerned, this is false, baseless, and devoid of any merit.”
The IREO group of funds was founded in 2004 by Goyal and Bhargava- who is a US resident on the board of the University of Pennsylvania's engineering school. The organisation manages over $1.6 billion from sovereign wealth and university endowment funds, a portfolio of 1,485 acres in the Delhi area and in the state of Punjab, and 18 million square feet of commercial and residential projects in development.
According to a 2017 letter written to investors, Singh and Hohn were becoming increasingly frustrated that IREO's managers seemed difficult to reach and had shown no indication that they were going to return investor money as scheduled, along with what they promised would be significant profits. “After roughly 10 years, we estimate that investors have received distributions of only $259 million, while management has collected over $300 million in management fees, and to this day, management does not have a plan for returning out capital before the end of various funds' lives,” they wrote.
Both the companies allege that Goyal and others established a fraudulent web of companies and entities and phony charges to diver over $147 million into their own pockets. They allege in one case, a project in an undeveloped area in the state of Rajasthan, where no licenses or land certificates were ever obtained was “nothing but a sham... to misappropriate about $62 million.” A former CEO of the company, Ramesh Sanka alerted the investors to potential fraud. He said he saw “various acts of cheating, fraud and misappropriation of money” at his onetime employer that created “huge wrongful gains” for the company's managing director and his associates.
The documents however, make no mention of the Trump Organization, and stress primarily on two real estate deals that began years before the global group signed a 2016 agreement with IREO to partner on an office tower in Gurgaon.
