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December 2, 2020

PwC banned from IT dept projects for 2 years by Kerala SG

by facelesscompliance in Compliance Law, Corporate Law

PwC banned from IT dept projects for 2 years by Kerala SG

The Kerala state government has banned Pricewaterhouse and Coopers (PwC) from participating in the Electronics and Information Technology department projects for two years. The ban on PwC was placed after the appointment of unqualified persons for the Kerala State IT Infrastructure Limited (KSITL) ’s Space Park Project came to light. PwC is among the leading professional services networks in the world. They help organisations and individuals create the value they are looking for, by delivering Assurance, Tax and Advisory services.

What was the Space Park project?

  • The Space Park in Kerala, which was slated to be the first state-of-the-art space systems in India was announced in July 2019 for which the government has leased nearly 20.00 acres of land.
  • The project was being monitored and implemented by the Electronics and IT Department of the state government.
  • It was executed to attract global start-ups working in space sector and also make it as a major manufacturing hub for space-related technology, research and development.

What was PwC banned from?

  • PwC is banned from participating in any project of the Electronics and Information Technology for a period of two years.
  • The state government also refrained from renewing its contract with the PwC on the Kerala Fibre Optic Network Ltd (KFON) Project which was stated to expire on 30th November.
  • Earlier, PricewaterhouseCoopers was also removed from the consultancy contract in Kerala’s e-mobility project.

Why was PwC Banned?

  • It was stated that the Kerala state government found that PwC had committed serious lapses in the selection of resource persons for the Space Park project, which led to the 2-year ban. 
  • Kerala State Information Technology Infrastructure Limited (KSITIL) had appointed PricewaterhouseCoopers (PwC) Private Limited as the PMU in Space Park Project and executed an agreement with them.
  • As per the terms of the contract, the entire responsibility to satisfy the credentials and integrity of the resource persons lied upon PwC.
  • However, it was noticed that PwC did not perform a comprehensive background check including educational qualifications in case of appointing an individual in the PMU of Space Park which was a serious breach of contractual obligations on the part of PwC
  • PwC had cleared the appointment of Swapna Suresh, who was a key accused in the Kerala gold smuggling scandal. Swapna Suresh was appointed as the Operations Manager of the Space Park based on the alleged recommendation of then Principal secretary to the CM M Sivasankar.
  • Investigations were initiated against PwC following the appointment of gold smuggling case accused Swapna Suresh. Swapna’s appointment became a controversy after she was named an accused in the gold smuggling case. Later, it was found that her certificates were fake.

Who were booked by the State Government?

  • In July this year, Swapna Suresh and PwC were booked by the Kerala Police on the charges of cheating and forgery over submission of fake degrees to secure a job in the state’s IT department. 
  • The police had charged Vision Technologies along with PwC after the Kerala State Information Technology Infrastructure Limited (KSITIL) filed a formal complaint.
  • The trio were charged under IPC sections 406 (criminal breach of trust), 420 (cheating), 465 (forgery) and 471 (using as genuine a forged document).
  • Also, Suresh was sacked from the IT department after she was accused of smuggling over 30 kg of gold using diplomatic baggage. 
  • Apart from this, Kerala’s Congress faction had also alleged corruption in the decision by the LDF government to rope in PwC in a consultancy project related to e-mobility.
  • The state government had appointed PwC to prepare a Detailed Project Report (DPR) on electric vehicle manufacturing in the state, in a bid to put out one million electric vehicles on the road by 2022.
  • Leader of Opposition in Kerala, Ramesh Chennithala had alleged in June 2020 that PwC was appointed for the project without inviting any tenders and also when the firm was blacklisted by the Securities and Exchange Board of India (SEBI).

On July 17, M Sivasankar, the former principal secretary to the Kerala chief minister was suspended for going out of his way to get the gold smuggling accused Swapna Suresh the job of ‘operations manager’ at Space Park under KSITIL. PwC, in short, has finally been punished for colluding with Sivasankar. PwC had to be roped in because a joint venture of HESS and government-owned Kerala Automobiles Limited (KAL), with controlling stake for the foreign company, had to be called off after the then Chief Secretary Tom Jose and additional chief secretary (finance), with the approval of Finance Minister T M Thomas Isaac, had opposed the deal. As part of the E-Mobility project, there was also a plan to open an office for PwC inside the Secretariat. This was later dropped. It was said that the HESS deal, too was orchestrated by Sivasankar.

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