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STUDY AND ANALYSE IN DETAIL DIFFERENT SCAMS HAPPENED IN INDIA

SUBMITED TO: MR. RIDDHISH JOSHI ASST. PROFESSOR SUBMITED BY:GROUP NO: - 8 SEM-4 SHIFT-1 F2 PALAK NARANG (66) PALAK PATHAK (69) JINAL PATEL (82) SUMAN PRATHWANI (94) PRATIK PUJARI (95) MOHNISH THAKKAR (117)

MLM SCAMS

Multi-level marketing (MLM) is a marketing strategy in which the sales force is compensated not only for sales they personally generate, but also for the sales of the other salespeople that they recruit. This recruited sales force is referred to as the participant's "downline", and can provide multiple levels of compensation. some MLM plans get their benefit from exploiting other members of the network, and they are illegal pyramid schemes. Some people use direct selling as a synonym for MLM, although MLM is only one type of direct selling, which started centuries ago with peddling.

CASE 1: SPEAKASIA ONLINE SCAM

SPEAKASIA ONLINE SCAM


The company name is SpeakAsia Online Pte Ltd Speak Asia is a survey driven website, where you can participate in surveys and Earn Online from Bangladesh. It came in 2010 Speak Asia gives you an opportunity to make your opinion heard by different organizations and making money for your honest opinions. Speak Asia has eliminated the need of executives for conducting surveys and who got benefit out of it, prospective customers like us. Speak Asia online gives an opportunity to everyone to raise their opinion and whats more they have a value to their opinion. Based on a subscription model, Speak Asia collected Rs 11,000 from each member. The members were then paid for completing the surveys commissioned by various companies. The flexibility of the Speak Asia Pay Plan offers you the opportunity to maximize your income from your referral group. Because of this the plan is unique and revolutionary. Upon opening an online Speak Asia account, an online tracking center is established under your name to keep track of your bonuses. There are two types of reward, direct and indirect.

SPEAKASIA ONLINE SCAM (con..)

Criticism has focused on


Their similarity to illegal pyramid schemes, Cult-like behaviour, price fixing of products, High initial entry costs (for marketing kit and first products), Emphasis on recruitment of others over actual sales, Encouraging if not requiring members to purchase and Use the company's products, exploitation of personal relationships as both sales and recruiting targets, Complex and sometimes exaggerated compensation schemes, The company making major money off its training events and materials, Cult-like techniques which some groups use to enhance their members' enthusiasm and

devotion.

Advantage
SPEAKASIA Low Start up costs No Maintenance costs Can work from home Friends and family can work with you Can be done in free time Incredible earning potential Simple compensation structure No experience required

SPEAKASIA ONLINE SCAM (con..)


WHAT WENT WRONG?? An MLM company that claims to be Asias largest online survey company, does not even have an office address or a telephone number but is offering to pay $10 just for filling out online surveys! Speak Asia Online, which claims to be based in Singapore, is spreading its multi-level marketing (MLM) wings in India under the pretext of online surveys. The company asks new customers or subscribers to pay $120 (standard) or $220 (premium) for becoming a panellist for one year.

It clearly says: "You can remain a panellist and earn from Speak Asia only as long as your subscription to E-Bulletin is in force." This means, before earning a single penny, you need to pay the company upfront.
After the one-year period, one needs to renew the subscription. There is no mention of renewal fees.

SPEAKASIA ONLINE SCAM (con..)

Speak Asia Online sends its surveys mostly on Wednesday to all subscribers. Each survey takes around 40 minutes to complete.

The company assures that it will make the payment in local currency through direct bank transfers. The catch here is that one has to pay bank transfer charges of 3% or minimum $7.5 per payment.
Speak Asia Online says it points (one reward point is $1). provides income in reward

The company website does provide links for all countries and major cities but directs all queries to its Singapore address only, which neither has a telephone number nor any email ID.
Speak Asia Online shows no evidence about the legality of its business or any registration certificate issued by government authorities. In addition, there is no mention of its promoter or top management on the site. In fact, there are no names on the website. All one can see is just names of its 'dealers' and their bank account numbers.

SPEAKASIA ONLINE SCAM (con..)


Conclusion

Speak Asians compensation package is a pyramid scheme disguised by a token disguise of surveys. Speak Asia's corporate structure was revealed to be a fraud held by shell company on the other side of the globe. Speak Asia's headquarters in Singapore was revealed to be a sham. Speak Asia CEO admitted that their clients do not exist, and any claim of large income are misunderstandings. Speak Asia claimed to be either a survey company or a market research company, then denied being either. Its lawyer claimed it is a magazine publisher. However, its business registration shows it to be none of the above. Speak Asia is being investigated by multiple government agencies. Speak Asia used cult techniques to whip up support for itself Speak Asia delayed the Indian government from freezing its assets, resulting in 104MILLION USD transferred out of India, where Indian government cant touch. Speak Asia's COO was arrested along with others for financial irregularities and forgery.

CASE 2: EXCEL COMMUNICATION INC.

EXCEL COMMUNICATION INC.

EXCEL Communications Inc. calls itself the fourth largest residential long distance carrier in the United States. Its $506 million in 1995 sales is still dwarfed by leaders AT&T, Sprint, and MCI, which together control roughly 85 percent of the market. EXCEL buys time at wholesale prices, and then resells long distance calls to its subscribers at discount prices. Principal suppliers of these blocks of long distance time are Frontier Corp., WorldCom, Inc., and MCI Telecommunications Corp. EXCEL markets its domestic and international long distance services. In October 1996, EXCEL expanded its service offerings by adding paging through PageMart Wireless Inc.'s paging network.

EXCEL COMMUNICATION INC.(con..)

EXCEL went public in May 1996, selling ten million shares, or approximately nine percent of the company's stock, on the New York Stock Exchange.

Founder and CEO Kenneth Troutt hold approximately 65 percent of the company.
With shares trading in late 1996 at around $20 per share Troutt's worth was estimated at $1.4 billion. EXCEL plans to pump part of the $150 million in proceeds generated by its initial public offering into building the company's own long distance network. In 1996, there were more than one million independent EXCEL representatives

Approximately 25 percent of the company's revenues are generated by signing up new independent representatives, at a rate of about 250,000 per month.

EXCEL COMMUNICATION INC.(con..)

EXCEL was founded by CEO Kenneth Troutt in 1988 and began operations in 1989.

Initially, Troutt planned to attend law school. But Troutt's ability as a salesman began to show while he was still in college.
Working part-time as a life insurance salesman, Troutt became the insurance company's top seller by his senior year. He gave up the idea of law school, telling Forbes simply, "found out I was good in sales." From college, Troutt moved to Nebraska, where he started up a real estate and construction business. The business ran into trouble, however, during the recession of the early 1980s. By 1983, with interest rates reaching 20 percent, Troutt dissolved his construction company.

EXCEL COMMUNICATION INC.(con..)

Troutt set out in search of his vision of the perfect business: A product that everyone needs; that requires no inventory and has a distribution structure already in place. Troutt's brother, an accountant, suggested the recently deregulated telecommunications industry. In the mid-1980s, Sprint was running its own direct marketing venture, called Network 2000, which allowed that company to join AT&T and MCI at the top of the industry. Troutt formed his own company, EXCEL Telecommunications, in December 1988, receiving regulatory approval to enter the long distance services industry. The company started operating in 1989, initially serving only the regional Texas market.

EXCEL COMMUNICATION INC.(con..)

Then Troutt was introduced to Stephen Smith, who had experience with a company using network marketing techniques in the early part of the decade. April 1989, EXCEL had its own multilevel marketing plan in place. Companies using multilevel marketing techniques signed up independent representatives, instead of hiring employees. The representatives in turn sold the company's products to other individuals, receiving a commission on each order. But a representative's real interest lay in creating a "downline. Moving up the pyramid, a representative would receive a commission and/or percentage for each recruit he or she brought into the network, as well as for recruits signed on as representatives into the first representative's downline.

EXCEL COMMUNICATION INC.(con..)

Troutt and Smith, who joined the company as executive vicepresident, at first employed a scattershot strategy, reasoning that since everyone used long distance services, everyone was potentially an EXCEL customer. As its network grew, EXCEL quickly expanded into providing long distance in neighbouring states, and soon on a nationwide scale as well.

By 1990, despite revenues of more than $6.5 million, the company was losing money. By 1991, the company's losses mounted to $400,000.
Troutt and Smith changed tactics to a "warm market" strategy. Independent representatives were encouraged to sign on family, friends, co-workers, and others with whom they had personal bonds. The company's fortunes slowly improved, from a loss of $300,000 in 1992 to a gain of $2.4 million in 1993. By that year, too, EXCEL's revenues had begun to take off. Its $30.8 million in 1993 revenues represented a gain of more than 800 percent over the previous year.

EXCEL COMMUNICATION INC.(con..)

Multilevel marketing plans became increasingly attractive to people seeking additional incomes.

EXCEL's product carried much less risk than the typical multilevel marketing venture.
To become a representative authorized to sell EXCEL's services, the prospective representative was required to pay $50. That amount, however, provided for no additional sales training or marketing support from the company. To receive training and sales and marketing materials, a prospective representative paid $195 and received the title of managing representative Representatives received monthly commissions based on the total of these subscribers' long distance calls. In addition, for $395, a prospective representative could become an area coordinator. Area coordinators were authorized to hold training sessions for the representatives and received a $40 commission for each representative they trained.

EXCEL COMMUNICATION INC.(con..)


By May 1996, the company went public, selling ten million shares. Founder Troutt, who sold none of his shares in the offering, was now worth more than $1 billion, and earned more than $3 million in salary and bonuses. EXCEL was forced to revise its training materials after some states charged that they encouraged representatives to recruit more representatives, rather than new long distance subscribers.

In September 1996, the Dallas Better Business Bureau revoked EXCEL's membership because of the increasing numbers of complaints that agency had been receiving.
In late 1996, EXCEL, despite a forecasted rise in revenues to more than $1 billion, faced other difficulties. Its attrition rate among representatives hovered around 86 percent, while the number of new representatives applying to join began to slip. The largest share of the company's more than one million representatives, in fact, received little to no commissions at all.

CASE 3: QNET

QNET

Asias leading direct selling companies, offering meaningful products in diverse markets. Borderless opportunities through ecommerce platform to everyday people in more than 100 countries. Independent Representatives. At QNET, employees driven by two important philosophies:
RYTHM. In Service.

QNET (con..)

What went wrong??? The idea ,as per an article in a leading newspaper, says was for each individual joining the network to buy Rs 500,000 worth of goods that were overpriced - so-called expensive watches, a pendant that aligned energies, a coaster that gave water magical properties and so on. When you buy, your "uplines" - the person that referred you, and his upline and so on - get upto 50 percent of your payment. And then, when you find a sucker who will pony up his five lakh, you get a good chunk of that as his upline,

QNET (con..)

Drawback of policies for agents:


Membership fees. Overpricing products for agents. Time bound after sale services. Recovery of amount. Illegal possession. Loss of investment due to customer loss.

QNET (con..)

The problem with QNet was that it ensnared people who were desperate to make such recurring income, but had to stretch them tremendously to make the initial payment. But eventually, you have suckered all those who can be suckered, and the house of cards comes crashing down. QNet managed to get to Rs 425 crore in size before it imploded.

QNET (con..)

Gold Quest and Quest Net sold 'limited edition' gold coins eventually closed down in 2009 . The Singapore-registered company has already been banned by countries such as Saudi Arabia. Last August, the CBI's Economic Offenses Wing (EOW) finally registered a case against Qnet for duping thousand of investors by selling them plastic and glass products terming them miraculous objects for treating severe disease like cancer. The Indian authorities are also supposed to be after QNet founder Vijay Eswaran. This month, the EOW has issued lookout notices against 10 people, including Vijay Eswaran and Michael Ferreira.

CASE 4: SATYAM SCANDAL

SATYAM SCANDAL

On 7 January 2009, company Chairman Ramalinga Raju resigned after notifying board members and the Securities and Exchange Board of India (SEBI) that Satyam's accounts had been falsified. Inflated figures for cash and bank balances of 5,040 crore as against 5,361 crore reflected in the books. An accrued interest of 376 crore which was non-existent. An understated liability of 1,230 crore on account of funds was arranged by himself.

An understated debtors' position of 490 as against 2,651 crore in the books


This gap in the balance sheet led to a fraud of Rs 7,800 Crore

SATYAM SCANDAL (con..)

Raju claimed that neither he nor the managing director had benefited financially from the inflated revenues. He claimed that none of the board members had any knowledge of the situation in which the company was placed. He stated that What started as a marginal gap between actual operating profit and the one reflected in the books of accounts continued to grow over the years. It has attained unmanageable proportions as the size of company operations grew over the years.

The aborted Maytas acquisition deal was the last attempt to fill the fictitious assets with real ones.

SATYAM SCANDAL (con..)

Raju and his brother, B Rama Raju, were then arrested by the CID Andhra Pradesh police headed by Mr. V S K Kaumudi, IPS on charges of breach of trust, conspiracy, cheating, falsification of records. Satyam's shares fell to 11.50 rupees on 10 January 2009, their lowest level since March 1998, compared to a high of 544 rupees in 2008. On 22 January 2009, CID told in court that the actual number of employees is only 40,000 and not 53,000 as reported earlier and that Mr. Raju had been allegedly withdrawing INR 20 crore rupees every month for paying these 13,000 nonexistent employees .

SATYAM SCANDAL (con..)


Final punishment by law : The Economic Offences Court convicted and sentenced to imprisonment ranging from six months to one year 84 directors of 19 companies floated by the relatives and friends of Satyam Computers founder B Ramalinga Raju. Ramalinga Raju's wife Nandini Raju, sons Teja and Rama, and the wives of Ramalinga Raju's younger brothers were among those convicted for evading paying income tax of around Rs 30 crore relating to the Maytas Hill County housing project. All the male directors were sentenced to a one-year jail term and ordered to pay a penalty of Rs 10,000, the female directors were sentenced to six months in jail and asked to pay a similar penalty. All of them paid the penalty and furnished the sureties after the pronouncement of the order.

SATYAM SCANDAL (con..)


Acquisition by Mahindra Group:

On 13th April 2009, via a formal public auction process, a 46% stake in Satyam was purchased by Mahindra & Mahindra owned company Tech Mahindra, as part of its diversification strategy. From July 2009, Satyam rebranded its services under the new Mahindra management as "Mahindra Satyam" with a new corporate website www.MahindraSatyam.com.

CASE 5: 2G SCAM

2G SCAM
Mobile and allied networks work on specific frequencies allotted to each operator in a band of frequencies known as a spectrum. In the year 2008 , such allocation in the 2G network spectrum took place in India under Telecom Minister A. Raja, which today we all identify as the 2G spectrum scam. The TIME magazine lists it as the 2nd Worst Abuse of Power right next to the Water Gate Scam of the United States. Loss of Rs. 1.76 Lakh Crore in 2G spectrum scam , is the revenue that the Government would have generated had it done proper auction of the spectrum frequencies.

2G SCAM (con..)

The first fallacy that came to light in the procedure of auction was the fact that the frequencies were allotted in the year 2008 at prices supposed to be in the year 2001. In 2001, the customer base of mobile phone companies was a mere 4 million, where in 2008, it grew to 350 million, that the basic loss that has been incurred has been through this faulty and fraudulent auction. The Government has been following system of auction based on first come, first serve policy ever since 1994 in the process of allocation of resources this has been recently confirmed by the Supreme Court through its Advisory authority. The cut-off date till which the interested companies could apply for licenses date was anticipated randomly and the website of the Department of Telecommunications (DoT) stated that those who applied between the time 15:30hrs till 16:30hrs would be given the licenses.

2G SCAM (con..)

Like Unitech and Swan, who before hand have information regarding the same amendment to the procedure, kept their documents ready in line, and eventually got the licenses. The question is not yet answered as clearly and convincingly, but of what is known, he has been said to have received a bribe of Rs. 214 Crores to Ms. Kanimozhi, who owns around 80% of stake in the channel Kalaignar TV, which in turn was used by Raja and his associates to route the money that he was to obtain. In this case, A. Raja might just be a pawn in the army of the lead conspirators. It is obvious that there are many more beneficiaries to this, though they will remain under the mask, as they did during all other scams we have ever known, be it Bofors or the Tatra Truck scam.

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