Mumbai EPFO fraud losses estimated at up to Rs 1,000 cr; a senior social security assistant suspended

Employees’ Provident Fund Organisation (EPFO) has initiated a probe into a possible malfeasance by its staff at a Mumbai suburban office, which could involve estimated losses of up to Rs 1,000 crore for the retirement body, people familiar with the matter said.
The modus operandi is said to be creating bogus accounts and transfer funds or settle claims in defunct companies including erstwhile Jet Airways that later went into the National Company Law Tribunal (NCLT) for an ownership change, they said.

“We expect EPFO losses due to this particular fraud to mount up to Rs 1,000 crore, arising across rule violations and tax evasions,” said Prabhakar Banasure, a member of EPFO’s central board of trustees. “Offenders should be punished for doing injustice to members’ life savings and maligning this apex retirement body,” he told ET.

An internal inquiry is underway to ascertain the actual quantum of losses as the vigilance department is examining past records, officials said. A final report will soon be submitted to the EPFO central body, they added.

EPFO central office in New Delhi and the new management at Jet Airways did not respond to ET’s queries until press time Monday.

The fraud was allegedly committed in Mumbai’s Kandivali office, using employments of then pilots and crew members of Jet Airways, including many expats, people cited above said.

Machindra Bamne, senior social security assistant of Kandivali PF office, was reportedly suspended over the alleged settlement of illegal PF claims of then Jet employees before the airline was admitted to NCLT for debt resolution.

Bamne was found to have “received illegal gratification from some members into his bank account for settlement of PF claims related to employees of M/s Jet Airways”, regional provident fund commissioner-1 RO, Kandivali East, wrote in an order dated August 18.

PF accounts of many pilots or crew members of Jet Airways were allegedly misused to siphon off funds, which allegedly benefited some EPFO officials working at Kandivali office.

“They were hand in gloves with select manipulators on the Jet side before the airline company went to NCLT,” Banasure alleged. “I have been raising this matter to competent authorities including EPF chairman,” he added.

Nilesh Kapadia, another senior social security assistant has also been dragged into the controversy, had left the organisation a few years ago, before the scam came out, people cited above said.

Kapadia could not be reached for comments.

The multi-crore scam was perpetrated in 2019 but deepened its tentacles during the pandemic, sources alleged.

“We have demanded forensic audit of the whole episode,” Banasure said.

Jet Airways employees’ provident funds, according to the EPFO member, have been settled without complying with standard regulations. This has also resulted in losses to the exchequer as income tax has been evaded.

EPFO’s Kandivali office was also mired in another fraud case in February when the Central Bureau of Investigation (CBI) filed an FIR against eight EPFO employees who reportedly siphoned off Rs 21.5 crore via 817 migrant workers’ bank accounts.