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The SpeakAsia Story: E-commerce Innovation or Fraud?

o Zafar Anjum
17.01.2014 kl 20:04 | MIS Asia

On December 24 last year, when most people in Singapore carried on with their lives in a festive mood, preparing to celebrate Christmas, I was walking towards a hospital to meet a terminally-ill patient.

 

On December 24 last year, when most people in Singapore carried on with their lives in a festive mood, preparing to celebrate Christmas, I was walking towards a hospital to meet a terminally-ill patient.

The patient in question was Manoj Kumar Sharma, 53, the CEO of SpeakAsia. SpeakAsia, a Singapore-registered e-commerce company, has been in the eye of a scandalous storm in India since 2011.

Most precisely, it is the company's business model that is at the centre of a controversy. SpeakAsia claims its business is about 'creating a panel community of empowered consumers, which earns rewards points by participating in various companies (sic!) activities'. These activities include e-zine sales, survey fillings, product referrals and sales, advertising based surveys, and training programmes. These activities are carried on (or they used to be) partly on SpeakAsia's website, and partly through affiliates and authorized agents in the real world. As a result of these activities, consumers earn reward points that they can use to purchase products (mobile phones, TVs, etc) and services from the company. However, according to Indian police, this foreign-registered company has violated the law of the land by indulging in money circulation schemes.

At a global level, SpeakAsia's's case presents a new dilemma for a new century: how do global e-commerce companies operate from outside the geographical bounds of a country and what if they break the law of the land?

WHO IS MANOJ KUMAR SHARMA

The Mumbai Police's special branch, the Economic Offence Wing (EOW), registered a case against SpeakAsia on July 28, 2011 when a complainant, Navniit Tarachand Kkhosla, Managing Director, TFIC Consultant Pvt. Ltd. Bandra (E), alleged that some investors (named in the charge sheet) had cheated him by acting in a criminal conspiracy with SpeakAsia Online Pte. Ltd., Singapore and its CEO Haren Kaur, CEO Manojkumar, COO Tarak Bajpai, Regional Managers Ashish Dandekar and Abhishekh Kulshreshtha and other concerned officers/personnel of the accused Company "by inducing him to invest money around Rs. 5.43 Lacs (roughly US$9,000) in a Money Rolling Scheme of Speak Asia Online Pte. Ltd knowingly (sic!) very well that the Company is a fraud and having no product or any sort of business and cheated the complainant and his Company."

The police charge sheet further said that the above accused persons also induced the people in India to invest their hard earned money in the same Money Scheme and cheated around 20 Lac (2 million) innocent Indian investors for unaccounted huge amounts. During the period many of other complaints/applications were received from various victim of alleged money rolling scheme floated by Speak Asia Online.

Acting on the complaint, the Indian Police jumped into action. In the last two years, they have arrested most of the office-bearers of SpeakAsia in India on charges of defrauding people of millions of rupees (Rs 2,276 crores or about US$368 million). They have also issued lookout notices for Sharma. As soon as he turns up in India, he will be arrested.

Sharma had contacted me a year ago and we had met at a café in Orchard Road. My nonfiction book, The Resurgence of Satyam, had just been published in India and Sharma wanted me to write a book on the SpeakAsia story.

Sharma is a tall and lanky Mumbai-man who has an oval face with a prominent moustache. Sharma's contention was that while the government had hastily moved in on his company and was in a hurry to declare it an illegal outfit, he wanted to tell his story-explain his business model and prove that it was not a Ponzi scheme. India's people, and especially the 2.4 million of his company's panellists (consumers and supporters), deserved to hear his side of the story as, so far, Indian media had not given him a fair chance, he said.

At that time, I had not heard of SpeakAsia at all. What was his story exactly? And was it worth telling? I was not so sure about it.

A sensational scam?

In our first meeting, Sharma tried to convince me that his story deserved a telling and that more than anything else, he wanted to restore his reputation. His family, he said, did not deserve to live with the ignominy of being related to a swindler.

His wife was in Mumbai and police had impounded her passport. He could not travel to India for fear of getting arrested. All his companies' bank accounts in India had been frozen. And he did not have much longer to live. He was in a limbo, a man on the run, living on borrowed time. It had all the elements of a compelling narrative.

I was hooked to the story. I wanted to hear more about it. However, right after doing the Satyam book, I was not keen to spend a few more months doing another book on another scam in India. The timing also did not seem to be right as the police were still investigating the case.

After the police filed the provisional charge sheet against SpeakAsia on 19 December, Sharma contacted me again to provide an update.

That's when I met him again in a Singapore hospital. When I entered his room, he lay supine on a bed, reading a book. He welcomed me with a smile and sat back. He seemed to have lost more hair and looked thinner.

"We are glad that the police have filed a charge sheet," he says. "Now we have the opportunity to explain our case before the judges."

Why did it take the economic offences wing (EOW) of Mumbai Police more than two years to file a 5,000-plus page charge sheet against the 13 office-bearers and franchisees of SpeakAsia and eight other companies?

"The charge sheet contains all the evidence that we have collected during the investigation. It was a lengthy probe. The money was collected in India, laundered in Dubai and other countries, and hence, it took time to file the charge sheet. We will be filing supplementary charge sheets too," Rajvardhan Sinha, city EOW chief told the Times of India.

The charge sheet names SpeakAsia COO Tarak Bajpai; director of Tulsiyat Tek Rajiv Mehrotra; SpeakAsia prime franchisee Deepankar Sarkar; panellists Ashish Dandekar, Raeesh Shaikh, Rahul Shah, Sanjiv Dandona among others; and eight firms-SpeakAsia Online, Haren Ventures Pvt Ltd, Tulsiyat Tek, Tulsient Info System, Kritanj Management and Allied Services, Seamless Outsourcing, Seven Rings Education and Seven Rings International.

"The accused have been booked for forgery, criminal conspiracy and cheating among other charges under the Indian Penal Code and Prize Chit and Money Circulation Banning Act. The maximum punishment for these offences is up to seven years' jail," B P Shelke, investigating officer, told media.

How did an e-commerce company become a hunted organization in India? What was wrong in its business model? And what are the lessons for other companies in this case?

E-commerce or Ponzi scheme?

The police have said in their charge sheet that SpeakAsia is a Ponzi scheme. Their main charge against SpeakAsia is this: As per the scheme, each investor (panellist) would be given two surveys a week to complete on an annual fee of Rs 11,000. If the investor successfully completed all the surveys, he or she would be entitled to Rs 52,000 a year (Rs 1,000 per week or Rs. 4,000 per month).

Sharma denies this characterization. According to Sharma, the business of SpeakAsia is not an 'investment scheme'. "There is not even an iota of evidence to suggest that SpeakAsia had asked any person to invest any money with a promise of any return. It is completely misleading and incorrect to suggest that SpeakAsia had propagated that upon investing Rs.11,000, one would get a return of Rs.52,000. At no place, SpeakAsia had made any such statement," says Sharma.

Sharma claims that the Company's business model is valid and legal. "Since there is no element of investment and there being various external sources of income, there is no question of this business model being considered as Ponzi or Money circulation scheme which is banned under Prize Chits and Money Circulation Scheme (Banning) Act, 1979," he says.

However, authorities in India have not seen SpeakAsia's business as legitimate. One, the company is registered outside of India[1], and two, in the past there have been many cases of companies luring people into easy investments and then duping them of their money.

According to a report in the Outlook magazine, there are nearly 600 unregistered multi-level marketing (MLM) schemes in India and frauds involving Rs 2 lakh crore to date have taken place in India. Besides SpeakAsia, companies like PACL, TVI Express, GoldQuest, Questnet, and Qnet have been busted by the Indian authorities.

Examples like this led leaders like Kirit Somaiya, president of Investor Grievance Forum (IGF), to lodge a written complaint against Speak Asia Online Ltd with the EOW of the Mumbai Police. In his complaint, he had asked EOW to initiate inquiry against the company SpeakAsia, with an allegation of dubious modus operandi in India.

In July 2011, India's Corporate Affairs Ministry asked the Registar of Companies to inspect the books of accounts of Speak Asia and submit its report to the government by July 10[2].

Fraud or innovation?

First, Sharma says the figure of Rs. 2,276 crores spelled out in media reports is not right. "As per the charge sheet and our bank statement a total of 722 crore was remitted from India," he says. "And a total of 714 crore was sent to India. This was for earnings of panellists and other costs. In a nutshell, a mere 8 crore has been net outflow from India."

Mumbai Police, in their charge sheet, however, have quoted the figure of Rs. 2276 crores (US$ 368 million) being swindled in the SpeakAsia case.

According to Sharma, SpeakAsia's business model can't be understood without understating concepts like global e-commerce, customer aggregation, social media, and factoral organisation.

"SpeakAsia adopted a business model wherein it first acquired a captive consumer base and then approached various vendors for transacting the business," says Sharma.

SpeakAsia is a 100% owned company by a PE firm called Podium Rings International, which is based out of the British Virgin Islands. Harendar Kaur is the director responsible for management of the operations of the company on a day to day basis. Wong Chuen Shya is the secretary, according to ACRA documents. Both are citizens of Singapore.

When asked why the company was registered in the British Virgin Islands, he says: "Podium Rings is the holding company which owns the shares of Speak Asia Online Pte Ltd, Singapore. Podium Rings is registered in British Virgin Island as it is a neutral country with clear tax laws and structure. Since we are a new generation factoral organisation, the shares of SpeakAsia will get owned by suppliers, manufacturers, service providers, consumers and employees. Podium Rings is just a custodian. Harendar Kaur or Myself or any of our family members or companies don't own any share in SpeakAsia."

The police charge sheet, however, reveals that during the relevant period in 2010, Manoj Kumar Sharma was holding 90% shares of Speak Asia Online Pte Ltd. (Earlier, the company was known as Haren Technologies Pte. Ltd)

The company's various activities are managed by different organizations (the factoral organization model), which has raised suspicions in the minds of the Indian authorities. For example, Haren Ventures Pte. Ltd, (HVP) managed the ezines parts of the business. Tulsiyat Tek Pvt Ltd. Mumbai was its collection agent in India and La Marca Advisory Pvt Ltd provided content for its training programmes and so on.

The company's earning potential included components such as ezine sales, survey filing, product referrals and sales, and advertising-based surveys[3]. When the company was about to be shut down, Sharma says he was negotiating with some news TV channels to buy them.

"The idea was very simple," says Sharma. "Aggregate the consumer first, understand their need and requirements, and then offer them a choice of brands in the same product category. The logic was that if SpeakAsia had a confirmed expression of interest for a product from a consumer then it could drive a hard bargain for a better price and commercial terms with the manufacturer directly." The company wanted to sell mobile phones and TV sets, for example, after sourcing them from China (from Hisense) with the SpeakAsia brand.

According to Sharma, the company sold a total number of 26,500 TV sets ( 21000 - 22" LCD and 5,500- 32" LED sets). "These TV's are currently lying in customs incurring huge demurrage costs and facing obsolescence," he says. "The total number of Smart Phones sold were around 48,500. This was our sale in first 10 days. If we were allowed to function, mathematically we would have sold more flat screen TVs than Samsung, LG, and Sony put together. Hisense is one of the largest TV makers."

The company's stated mission is to create the largest community of well-informed consumers, who can collectively leverage their consumer power for mutual benefit.

SpeakAsia started its first operations in India in 2010 and was in phase 1, till June of 2011. It had acquired 1.2 million panellists by then. With tremendous success under its belt, SpeakAsia had laid out ambitious plans for itself for the next 24 months, with the grand aim of enrolling 10 million panellists.

Sharma says that until May 11, 2011, there was not even a single complaint against SpeakAsia or its employees by Panellists or government authorities either with respect to any payment or with respect to its business model.

All went wrong on May 11, 2011 when the company was organising a grand exhibition in Goa called Gen-X Bazzar, where it invited its panellists to see a range of products to be sold through the SpeakAsia network.

Bad news about SpeakAsia News broke on Star News (formerly ABP News) and completely changed the fate of the company. India's electronic media said that SpeakAsia was a fraudulent company which was cheating the public by seeking an investment of Rs. 11,000 with a promise of repaying Rs. 52,000 per year.

They showed statements from an employee of SpeakAsia making these alleged claims on record.

"This was done with an ulterior motive," says Sharma. "The media leveled false and baseless allegations."

In response, SpeakAsia issued defamatory notices against some media companies and also initiated a suit for defamation against one of the media channels before the Bombay High Court.

Sharma had a press conference organized on 15 May to explain the business model of the company to the media. On 14 May, he had requested Kaur to appoint him as CEO of India until the allegations were cleared.

In a May 2011 interview with Indian news channel Headlines Today, Sharma said that his company had not been given a chance to explain its business model to the regulating agencies and the government. He suggested that his company's business model had been misunderstood, that it was not a ponzi scheme. He gave the example of Galileo who was hanged because he said that earth was not flat but round-a fact not understood during those days.

To clarify its stand, SpeakAsia wrote letters, seeking a hearing to explain its business model, to various Central and State authorities including to Prime Minister, Home Ministry, RBI Governor, Economic Offences Wing, among others. There was no response whatsoever from any of the authorities, says Sharma.

On May 23, 2011, Reserve Bank of India issued a Circular to all the banks mentioning that the business of SpeakAsia to be akin to Money Circulation Scheme and Multi-level Marketing.

The company was doing bulk inward remittances to its Panellists from Singapore to their bank accounts directly. "From May 22, 2011, such inward remittances were not processed by the Singapore banks and when it was enquired with the banks, it was orally informed that, they have received a communication from Indian authorities in this regard," says Sharma. These banks however refused to disclose who exactly were these authorities?

As a result of this Circular, banks refused to do bulk remittances from Singapore, and the payments to Panellists were stopped temporarily for the first time since their commencement of business, says Sharma[4].

In June and July 2011, more complaints were filed against SpeakAsia. For example, as case was registered by CBCID, Hyderabad against SpeakAsia on the basis of a complaint by an NGO named Corporate Fraud Watch.

SEE THE TIMELINE

In August, 2011, the Economic Offences Wing, Mumbai seized the complete operations of servers of SpeakAsia from Tulsient Information Systems Private Limited, a company which was providing BPO services to SpeakAsia and hence business came to a virtual standstill.

Once the police started the investigations against SpeakAsia, most of his company's employees and partners were harassed, he alleges. His own two companies, Tulsient Information Systems Pvt Ltd and Tulsient Consultancy Pvt Ltd, were shut down.

"These guys will not understand what is factoral organization," Sharma says[5]. "Internationally, we work as a factoral organization. My dependency for example to make surveys was in Dubai. Production of the magazine was somewhere else. There was a poor small company which was doing html work for us. All the magazine pages that we had, they used to turn them into html, so that it was fast. And the poor company was paid Rs 1.35 lacs every month. Owner (of that company) was arrested for two months."

"Right now, my business is destroyed completely which had nothing to do with SpeakAsia. I have been in business for donkey's years. What has impacted me more is internationally. Internet news travels. It has impacted the image everywhere. People get worried. Bankers get worried. Clients get worried. Must be something wrong somewhere."

The nature of the crime

"We represented to RBI," Sharma says. "RBI's answer is very clear. It doesn't fall under money circulation."

In September 25, 2012, RBI did consider the validity of business model of SpeakAsia in India but eschewed to express a final opinion on the matter citing the reason that the police were still investigating the case.

On the question of SpeakAsia indulging in multilevel marketing (MLM), he says:

"You see multilevel (marketing) by itself, there is nothing wrong (in it). You are only distributing commissions at multiple levels. Money circulation means you pay the previous guy by taking the money from the next guy. So they are trying to declare the scheme as that, which is Ponzi. Now if you declare it as a Ponzi, it is money circulation. So every participant, poor guys, who is just a consumer is also a criminal because Chit fund and Money Circulation Act of India says that anyone even participating in it would be a criminal."

India's direct selling industry, however, welcomed the Speak Asia probe by the police. 'The Speak Asia controversy had raised doubts over the modus operandi of other direct and multi-level marketing companies that have been flourishing in India for 15-20 years,' reported the Business Standard. India Direct Selling Association (IDSA) secretary general Chavi Hemanth told the newspaper, "We have long been requesting the Ministry of Commerce to frame a clear definition of a direct selling company to bring out clarity in the industry. The way the Department of Industrial Policy and Promotion (DIPP) had formulated a detailed wholesale policy in 2010 and set FDI limits for retail in 2005, why can't we have a similar policy for the direct selling industry as well? We need the government to come out with a policy to regulate the industry."[6]

"We are saying only one thing-please hear our business model," Sharma says. "Don't keep on harassing us. Hear us what do we do. We are not being given a chance yet."

There have been several Candlelight marches, motorcycle rallies, and demonstrations by consumers to support the company. "Will anybody do that for the Tatas? The most respected company?" he asks rhetorically. "No."

Even consumer leaders have been arrested for "colluding with the company", he says.[7]

Sharma says it is difficult to estimate how many panellists are still with SpeakAsia but when they gave them the exit option, only around 94500 panellists responded for exit. "Our yearly closing in Singapore is 31st March. As of 31st March 2011, about ten lac or one million panellists were there," he says.

India's highest court, the Supreme Court had appointed Retd Justice Lahoti (ex Chief Justice of India) as a mediator in 2011 for ascertaining the amount and help the court in disbursal of the amount to the panellists who wished to exit as per the exit policy of the company.

According to Sharma, SpeakAsia had voluntarily deposited $10 Million (around Rs 55 Crores) with SC Registry towards reimbursement of unused subscription of panellists who wanted to exit. "Since EOW opposed tooth and nail and refused to give the data of the panellists for verification before payments, the mediator gave a report back to the court citing its inability to mediate due to EOW approach," he says. "Then EOW filed an affidavit in SC where the Judges relied upon the affidavit and passed orders quoting the contents of the affidavit, without giving any opportunity to the company to file a counter. In the order the SC allowed the company to send the money back since the mediation had failed."

Going forward-the future of social media and e-commerce

According to Sharma, the model that SpeakAsia is putting forward is the future of e-commerce in the world, given the backdrop of factors such as countries rising as brands, the demise of the traditional media, and IPTV being too fragmented in nature.

"What I see from SpeakAsia point of view is redefinition of social networking," Sharma says. "What makes SpeakAsia so successful? Why people were so together? It was not social networking only on the net. It also was on the ground: interaction between the people, regular meetings of the people. So, it was global because it was Internet, yet very local, very very local also to each region. Now this is what most of the social media lacks today."

"Here, what makes SpeakAsia so different?" he asks. "One, consumers make money with it, they save with it, they train with it. Lot of people are there in SpeakAsia just because they are trained well. They just love it. They feel that they are becoming better human beings, better speakers and better presenters. They also get to interact with like-minded people in social environment, which no social site allows them to do. So they laugh together, do business together, that has built the community very strong, which no other Internet company offers-which is click and brick together, which is missing whether it is eBay or anyone else."

While the fate of SpeakAsia hangs in balance, Sharma says he will keep on fighting for justice. "I am not worried about myself," he says. "I am worried about India and whether the system will allow new businesses to flourish in the country."

Now the courts in India will decide whether SpeakAsia is a Ponzi scheme. The Mumbai Police's EOW has worked hard on the case for more than two years, despite having a general shortage of manpower in the disposal of fraud cases[8]. Unfortunately, things often move slowly in India and as an EOW official told media, the conviction rate is quite low. Cases filed in 1991-2001 are being heard now. So, it might take a while before we hear the end of this matter.[9]

(EOW in Mumbai did not respond to our calls)

[1] "Speak Asia is not registered in India so we cannot do any investigation against it. MCA (Ministry of Corporate Affairs) does not have any database of the company," Corporate Affairs Secretary D K Mittal told reporters on 9 June 2011. http://www.business-standard.com/article/companies/govt-lacks-authority-to-probe-speak-asia-flaws-111060900176_1.html

[2] http://www.business-standard.com/article/companies/roc-probes-speak-asia-to-submit-report-by-july-10-111070300065_1.html

[3] Speak Asia had refused to divulge the names of companies from which it earned revenue by conducting surveys, reported The Business Standard on 8 June, 2011. "We have been doing commissioned reports. However, it would not be possible to share names of the company due to non-disclosure agreement with clients," Speak Asia India Chief Executive Officer Manoj Kumar said. http://www.business-standard.com/article/companies/speak-asia-refuses-to-disclose-names-of-survey-clients-111060800233_1.html

[4] Speak Asia to move court against bank accounts' freezing http://www.business-standard.com/article/companies/speak-asia-to-move-court-against-bank-accounts-freezing-111052700138_1.html

[5] Sharma likens a factoral organization to a company that maintains a very skeletal structure and conducts its business by outsourcing all its work to different organizations.

[6] Direct selling industry welcomes Speak Asia probe http://www.business-standard.com/article/technology/direct-selling-industry-welcomes-speak-asia-probe-111052200036_1.html

[7] 'Panelist' of Speak Asia's multi-level scheme held http://www.business-standard.com/article/companies/-panelist-of-speak-asia-s-multi-level-scheme-held-111073100040_1.html

[8] "With just 76 officials and a staff of 176, EOW is regularly pursuing its proposal of deploying an additional 50 officials and staff. The agency's units include those for banking, housing, cheating, job rackets, shares, stamps, investor-related frauds under the Maharashtra Protection of Interests of Depositors Act, multilevel marketing and intellectual property right. It also has separate units for training, research and intelligence." BS. http://www.business-standard.com/article/current-affairs/personnel-expertise-crunch-hurts-mumbai-eow-113122100593_1.html

[9] EOW filed charge sheets in 80 cases in 2010, 84 cases in 2011 and 122 cases in 2012. The official added in 2012, a proposal was sent to the state law and judiciary department for the establishment of a special court to try EOW cases. However, this is yet to be cleared. http://www.business-standard.com/article/current-affairs/personnel-expertise-crunch-hurts-mumbai-eow-113122100593_1.html

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