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MUMBAI/NEW DELHI: A billion-dollar-plus money trail to British Virgin Islands has returned to haunt former United Spirits chairman Vijay Mallya and its new owner, drinks giant Diageo Plc, with the Paradise Papers alleging that it waived about $1.5 billion, or Rs 10,000 crore, extended by United Spirits Ltd to multiple subsidiaries and other entities tied to Mallya.
The allegation is that four United Spirits subsidiaries – one in the British Virgin Islands and three in the UK – were used for laundering $1.5 billion raised as debt between 2008 and 2014. Diageo, after acquiring United Spirits in 2012, restructured these subsidiaries and wrote off the money.
A study of the money trail by TOI suggests that the leaked information alludes to the fully-leveraged buyout of Scotch whisky maker Whye & Mackay by United Spirits in 2007.Mallya had borrowed $1.2 billion for the acquisition, routed through several intermediate subsidiaries.
Later, United Spirits deployed more money to service the debt. After acquiring United Spirits, Diageo divested Whyte & Mackay at a deep discount possibly leading to a substantial write-off in 2014.
“These intra-corporate loans pre-dated Diageo acquiring its interest in United Spirits in July 2013. After Diageo took control of United Spirits, all outstanding loan amounts have been disclosed and adequately provided for in company accounts,” said a Diageo spokesperson.
While the money siphoned off in the latest allegations is more, the narrative is familiar: Mallya used United Spirits to finance F-1 racing, Kingfisher Airlines, and his jet setting lifestyle, and Diageo was aware of these money flows.
Enforcement Di rectorate (ED) sourc es said Mallya, be fore selling the company “siphoned off” around Rs 1,200 crore and “diverted” it to several companies and his accounts abroad. An inquiry by Diageo had found that “there were improper transactions and diversion of funds to entities linked to… Mallya”.
In an emailed response, Mallya said these claims were false and baseless. He wouldn’t comment further, saying the matter was subjudice. “Diageo turned a blind eye to diversions by Mallya,” said a source.
A Diageo spokesperson said that was incorrect. “It has been clearly stated in our enquiry that there were diversions,” she added.
Asked about the latest revelation, ED officials said a decision would be taken only after studying all the documents. ED sources added that they cannot go ahead with a money-laundering probe without an FIR by the local police or a Central agency.