Indian-origin CEO embroiled in $500 million US financial scandal, BlackRock seeks recovery
New York (The Uttam Hindu): A US telecommunications company has suddenly found itself in the headlines for a $500 million (approximately Rs. 4,000 crore) financial scandal. At the center of this controversy is Indian-origin CEO Bankim Brahmbhatt, who owns companies called Broadband Telecom and Bridgevoice in the US.
According to a report in the US newspaper "Wall Street Journal" (WSJ), a unit of BlackRock Inc., one of the world's largest investment firms, and several other major lenders are now trying to recover millions of dollars from Brahmbhatt. These lenders filed a lawsuit in August, claiming that Brahmbhatt's companies owe them more than $500 million.
According to media reports, major French bank BNP Paribas also played a role in this deal. It is said that the bank helped a BlackRock affiliate with Bankim Brahmbhatt's debt financing. However, BNP Paribas has not commented on the matter.
This entire matter involves a specific type of loan transaction called "Asset-Based Financing." In this system, companies borrow money by putting up certain revenues from their businesses or receivables from customers as collateral.
This method is generally considered safe, as the lending institution has a collateral in the form of real property. However, in recent years, this sector has seen rapid growth, and with it, incidents of fraud and losses have also emerged.
Meanwhile, Bankim Brahmbhatt has categorically denied all these allegations. His lawyer maintains that the matter is merely a "business disagreement," and there is no fraud or intentional wrongdoing. The case is currently pending in a US court and the investigation is ongoing.
The controversy is also in the news because it involves the world's largest investment company, BlackRock, the French giant BNP Paribas, and an Indian-born entrepreneur. The incident also raises questions about a segment of the US debt market that has largely remained outside regulatory oversight.