February 2015

ONEALLIANCE INVESTIGATED FOR CARRIAGE FEE KICK-BACKS


Is All Well With The Sony Operations In India??

In press reports appearing across several media last month, Multi Screen Media (MSM) India was reportedly under investigation last year for possible legal violations including bidding fraud and kickbacks; by its parent company in the USA - SONY Corp., for alleged "...wrongdoings...".

Reportedly, an e-mail from Sony Corp in response to a query from Bloomberg on alleged malpractices at MSM, confirmed the investigation stating "......this investigation is ongoing… Sony Pictures is strongly committed to business ethics and the investigation of allegations of wrongdoing that might arise anywhere in the world. If wrongdoing is identified, we take appropriate action."

The Bloomberg report stated that Sony then enlisted Ernst & Young to look into its businesses in India & uncovered potential evidence of wrongdoing, according to the e-mails. According to a memo sent to the Chief Financial Officer of Sony Pictures Entertainment, investigators reportedly found that a joint venture between Sony and Discovery Communications Inc. may have engaged in fraudulent bids, kickbacks and excessive handouts to government officials.

The venture in India between Sony's Multi- Screen Media Pvt. Ltd and Discovery is in the process of legally being dissolved for different reasons, partly due to the changed laws for distribution of channels in the country.





'TALKING POINTS'

In an early October 2014 e-mail sent by Cindy Salmen, senior V.P. & Compliance counsel outlined "areas of concern" at the MSM Discovery Indian venture. The memo recommended further investigations be conducted, employees be re-trained and that some workers face disciplinary action, including termination.

In the competitive bid fraud allegations, a review of practices at MSM Discovery's marketing group pointed to instances in program purchases where losing vendors either didn't exist or were tied to the winning vendor, and that some employees were aware of the practice, according to the one-page memo entitled "MSM Discovery Talking Points."

In the probe into alleged kickbacks involving carriage fees, Ernst & Young said it received allegations that MSM and MSM Discovery were receiving kickbacks ranging from 10 to 15% of the fees, according to the memo. Additionally, some employees who were fired for carriage-fee kickbacks at another company were employed at MSM Discovery, according to the memo.


PROBE RECOMMENDED

E-mails show that in late September, Raymond Smith, Sony Pictures senior vice president for global investigative and forensic services, recommended that a full investigation of MSM Discovery be conducted for alleged policy violations. Smith wrote that he and Mike Ornelas, executive director for global investigative and forensic services, would travel to India for 2 weeks in mid-October to investigate allegations of carriage-fee kickbacks and competitive bid issues at MSM Discovery. The final report after their visit is not yet available.


COLLUSION ALLEGATIONS

A separate probe was triggered after a person claiming to be an MSM employee sent an anonymous letter to Andrew Kaplan, President for worldwide networks at Sony Pictures Television, and Man Jit Singh, president for Sony Pictures Home Entertainment, alleging "large scale corruption" at MSM.

The Oct. 6 letter alleged that the head of MSM's motion-pictures unit was colluding with an agent to raise the cost of movies that Sony bought to air on TV by as much as 35%, in return for kickbacks.

The writer alleged that Sneha Rajani, a deputy president at MSM, was routing the company's movie purchases through Manish Shah of Goldmines Telefilms, raising prices of the films. According to the letter, Rajani also instructed producers, who offered to sell their films to MSM, to direct their proposals to Shah.

Goldmines Telefilms owner Shah dismissed the allegations stating that "it was a bunch of crap. Let the investigations continue. I have been dealing with all the broadcasters not just Sony. So I am not worried. We have been very transparent." He stated that his company has been working with Sony and Zee since 2004, with Doordarshan since 2005 and with Star since 2006. "Once I have the rights, I am the owner of the movie and so I decide who will get it based on price," he said. "But this process does not involve kickbacks at all so how can I get kickbacks? I totally deny any of allegations that have been made against me."

With heavy charges of malpractice and company policy violations, it remains to be seen what the outcome of the probe throws up and more importantly, what it means for the companies & people, whose names are involved.