BharatPe set to claw back ESOPs from Madhuri Jain
Premium- Investigators and lawyers questioned Jain for close to six hours, a person with direct knowledge of the matter said
NEW DELHI : Fintech firm BharatPe is set to claw back equity from the head of controls Madhuri Jain for indulging in “fraud", a person with direct knowledge of the matter said.
Investigators and lawyers questioned Jain for close to six hours, said a second person, also requesting anonymity.
“The investigators are understood to have reached a decision regarding her role in the so-called financial fraud. Therefore, the equity is getting clawed-back under the provisions of articles of association," said the first person.
Mint has written to Jain, BharatPe, for an official response. The report will be updated with their responses.
This comes after a report by Alvarez and Marsal’s prima facie found instances of fraud at BharatPe, which Mint had first reported on 4 February. The report highlighted two instances of fraud at the three-year-old fintech firm, one is the irregularities in recruitment, and the second revolves around paying non-existent vendors, and Jain is linked to both the fraudulent schemes. She headed BharatPe’s procurement, admin and HR departments since 2018.
The findings of PwC are crucial if the board wants to remove a founding partner for cause and claw back their equity, Mint had reported on 9 February. The Articles of Association’s (AoA’s) provisions for removing a founding partner or an employee can be invoked if the cause involves gross negligence or willful misconduct as determined by a Big Four accounting firm. This is why the board had brought in PwC to conduct a forensic audit of its accounts.
The AoA has the provision for removing a founding member or an employee for a cause, and the company can repurchase equity at a fair market value.
Jain’s firing has been decided based on the PwC report, said the first person cited earlier in the story.
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“Her stocks are likely to be clawed back since the firing is with a “cause". The company is expected to intimate Madhuri early this week and come up with an official statement soon on this," said the first person.
“The PwC report on Madhuri, Deepak Gupta and Shwetank Jain has been submitted, while the investigation on Ashneer is still ongoing," the person added. Gupta is Jain’s brother-in-law, and he was responsible for procurements at BharatPe; while Shwetank is Jain’s brother.
In January, in the meeting of BharatPe’s board, Grover offered that his wife Jain would resign. However, the board declined to take a call on the matter as it was the management’s prerogative, the second person said.
“Jain is an employee. Her offer to resign has to be tabled before the management," said the second of the two people cited earlier.
On 30 January, Mint had also reported that BharatPe asked 15 employees, including Jain, who is married to BharatPe’s MD and co-founder Ashneer Grover, to leave the company amid a preliminary internal investigation that indicated financial fraud.
For this, Ashneer, his wife Madhuri, and five others (relatives of the couple, all of whom were not employees) were being investigated. Bharatpe, through its legal firm Shardul Amarchand, appointed a risk and advisory firm Alvarez and Marsal (A&M) and audit firm PwC to conduct the investigation.
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