The Enforcement Directorate (ED) on Tuesday arrested four persons, including a Chinese National and the managing director of Lava International mobile company, in connection with a money laundering probe against smartphone maker Vivo.
In its remand application, the ED alleged that the accused had cheated the government by entering India in a “disguised and fraudulent manner to set up an elaborate Chinese-controlled network throughout the country… carrying out activities prejudicial to the economic sovereignty of India”.
The four arrested — Hari Om Rai, MD, Lava International Company, Chinese national Andrew Kuang, and chartered accountants Nitin Garg and Rajan Malik — were sent to three-day ED custody by Additional Sessions Judge Devender Kumar Jangala.
It was further alleged by the ED that Vivo employees worked without appropriate visas and were acting in a way that was in grave violation of the employment visa rules for entry into India.Charged with criminal conspiracy, cheating, using forged documents and money laundering, the ED accused the four of concealing Chinese control over Indian entities from the government of India. It was further alleged that the accused used forged documents to open bank accounts.
The ED alleged that the Chinese control of the company was revealed via the email — @Vivoglobal.com — which China gave to its Vivo employees. A company called GPICPL (Grand Prospect International Communication Pvt. Ltd.) was made to conduct fraudulent activities, the agency alleged. According to the ED, GPICPL is “not reported to be a subsidiary of Vivo in official records but projects itself publicly to be a subsidiary of Vivo”.
According to the ED, its investigation revealed that “huge sums were siphoned out of India”. The agency further alleged violations of FDI norms by Vivo from 2014 to 2018. It said that since wholesale cash and carry businesses don’t require government approval under the 100% automatic FDI route, Vivo “under the garb” of a wholesale cash and carry business concealed its ownership. The ED found out during its investigation that remittances over Rs 1 lakh crore were allegedly transferred outside India to “trading companies” so that Vivo couldn’t be noticed by the government of India. It was noted by the agency that zero profits were shown from 2014 to 2020 and no income taxes were paid in India. The ED entered the probe following a complaint lodged by the Corporate Affairs Ministry alleging that GPICPL and its shareholders used “forged” identification documents and fake addresses at the time of its incorporation in 2014.
In July last year, the ED raided Vivo in relation to money laundering offences. The ED had then alleged that Rs 62,476 crore was “illegally” transferred by Vivo to China in order to avoid payment of taxes in India — this figure was almost half of their turnover. These transfers, according to the ED, were made to show losses and to avoid paying taxes in India.