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The Satyam Computer Services fraud is neither the first nor will it be the last corporate scam to have hit India, so investors must be on guard and ask for more information before making any investment decision, says former Sebi chairman M Damodaran. Sound advice. But with corporates, brokers, banks, politicians, regulators colluding at times, many a multi-crore scam has hit India. And the saga is likely to go on. India has seen some of the most high-profile scandals where investors have lost billions of rupees just because a few people in high places could not control their greed.The Satyam Computer Services fraud is neither the first nor will it be the last corporate scam to have hit India, so investors must be on guard and ask for more information before making any investment decision, says former Sebi chairman M Damodaran. Sound advice. But with corporates, brokers, banks, politicians, regulators colluding at times, many a multi-crore scam has hit India. And the saga is likely to go on. India has seen some of the most high-profile scandals where investors have lost billions of rupees just because a few people in high places could not control their greed.
Here's more about India's biggest scams...
1. Ramalinga Raju
The biggest corporate scam in India has come from one of the most respected businessmen. Satyam founder Byrraju Ramalinga Raju resigned as its chairman after admitting to cooking up the account books. His efforts to fill the "fictitious assets with real ones" through Maytas acquisition failed, after which he decided to confess the crime. With a fraud involving about Rs 8,000 crore (Rs 80 billion), Satyam is heading for more trouble in the days ahead.
95 on the Bombay Stock Exchange.040 crore (Rs 50. Mehta has siphoned off huge sums of money from several banks and millions of investors were conned in the process. while giving details of how the profits were inflated over the years and his failed attempts to "fill the fictitious assets with real ones. the markets crashed and he was arrested and banned for life from trading in the stock markets.61 billion) reflected in the books. The NYSE-listed firm could also face regulator action in the US. "I am now prepared to subject myself to the laws of the land and face consequences thereof. Harshad Mehta worked with the New India Assurance Company before he moved ahead to try his luck in the stock markets.361 crore (Rs 53. and six others." 2. Harshad Mehta He was known as the 'Big Bull'. including four bank officials. He died in 2002 with many litigations still pending against him. He was later charged with 72 criminal offences. pushing down the scrip by 78 per cent to Rs 39.On Wednesday. Mehta soon mastered the tricks of the trade and set out on dangerous game plan." Raju said in a letter to SEBI and the Board of Directors.40 billion) as against Rs 5. India's fourth largest IT company lost a staggering Rs 10. Harshad and his associates triggered a securities scam diverting funds to the tune of Rs 4000 crore (Rs 40 billion) from the banks to stockbrokers between April 1991 to May 1992. to rigorous imprisonment (RI) ranging from 1 year to 10 years on the charge of duping State Bank of India to the tune of Rs 600 crore (Rs 6 billion) in connection with the securities scam that rocked the financial markets in 1992. his bull run did not last too long. He triggered a rise in the Bombay Stock Exchange in the year 1992 by trading in shares at a premium across many segments. His scam was exposed.000 crore (Rs 100 billion) in market capitalisation as investors reacted sharply and dumped shares." Raju said the company's balance sheet as of September 30 carries "inflated (non-existent) cash and bank balances of Rs 5. Harshad Mehta's brother. However. A Special Court also sentenced Sudhir Mehta. Taking advantages of the loopholes in the banking system. .
Ketan however had bigger plans in mind. Aftek Infosys and Padmini Polymer.3. Lupin Laboratories. He first launched the finance company CRB Capital Markets. and bought shares in fictitious names. C R Bhansali The Bhansali scam resulted in a loss of over Rs 1. followed by CRB Mutual Fund and CRB Share Custodial Services. Zee Telefilms. A chartered accountant he used to run a family business. SBI was one of the banks to be hit by his huge defaults 5. His dealings revolved around shares of ten companies like Himachal Futuristic. According to RBI regulations. The money was transferred to companies that never existed. HFCL. However. He targetted smaller exchanges like the Allahabad Stock Exchange and the Calcutta Stock Exchange. DSQ Software. Global Tele-Systems. It became difficult for Bhansali to sustain himself. SSI Ltd. Bhansali tried borrowing more money from the market. Ketan Parekh Ketan Parekh followed Harshad Mehta's footsteps to swindle crores of rupees from banks. after 1995 he received several jolts. In 1994 CRB Mutual Funds raised Rs 230 crore and Rs 180 crore came via fixed deposits.200 crore (Rs 12 billion). NH Securities. a broker is allowed a loan of only Rs 15 crore (Rs 150 million). Ketan alongwith his associates also managed to get Rs 1. Silverline. bonds and debentures.000 crore from the Madhavpura Mercantile Co-operative Bank. He ruled like a financial wizard 1992 to 1996 collecting money from the public through fixed deposits. Zee Telefilms. Bhansali also succeeded to to raise about Rs 900 crore from the markets. 4. There was evidence of price rigging in the scrips of Global Trust Bank. his good days did not last long. This led to a financial crisis. The Reserve Bank of India (RBI) refused banking status to CRB and he was in the dock. Pentamedia Graphics and Satyam Computer (K-10 scrips). Ketan borrowed Rs 250 crore from Global Trust Bank to fuel his ambitions. Cobbler scam . CRB Capital Markets raised a whopping Rs 176 crore in three years.
son of a former Sheriff of Mumbai. Key operators used a total of 12. The retail portion was oversubscribed 6. 2004). Rafique Tejani of Metro Shoes. Key operators used 1186 fake accounts for cornering 20.134 billion) public offer (Aug 19-23. The retail portion was oversubscribed 3. The retail portion was subscribed 2. including Indiabulls and Karvy Stock Broking.47 crore (Rs 47. and Bank of Bahrain and Kuwait were also charge sheeted. 6.3 per cent of the total number of shares allotted to retail investors.99 times and the non-institutional portion by 12.74 per cent of the total number of shares allotted to retail individual investors. Development Credit Bank. 2004).496. was the main accused in the multi-crore shoes scam.93 times. The accused created a fictitious cooperative society of cobblers to take advantage of government loans through various schemes.34 crore (Rs 14. Suzlon Energy Ltd's Rs 1.692 fictitious accounts to corner 323.853 afferent accounts for cornering 2.368. 2005). It also banned 85 financiers from capital market activities. Key operators used 21. They availed loans of crores of rupees on behalf of these fictitious societies.993 billion) public offer (Feb 18-24. Tata Consultancy Services's Rs 4. The retail portion was oversubscribed 2.681 billion) IPO (Oct 7-14.899. Bank of Oman.86 times and the non-institutional portion . 2005).730 shares representing 1. Citibank. National Thermal Power Corporation Ltd's Rs 5.963 billion) public issue (September 23-29. The scam was exposed in 1995.750.901 shares repersenting 0. Dena Bank.73 times and the non-institutional portion by 11.14 crore (Rs 53.IPO Scam The Securities and Exchange Board of India barred 24 key operators. and Kishore Signapurkar of Milano Shoes were arrested for creating several leather co-operative societies which did not exist.04 times and the non-institutional portion was oversubscribed 40.3 crore (Rs 18.Sohin Daya. from operating in the stock market and banned 12 depository participants from opening fresh accounts for their involvement in the Initial Public Offer scam. Jet Airways's Rs 1. Saraswat Co-operative Bank. Daya of Dawood Shoes.5 times.023 shares representing 3.52 per cent of the total number of shares allotted to retail investors.713.27 times. Officials of the Maharashtra State Finance Corporation.
Dalmia's group included DSQ Holdings Ltd. In 1994.09 per cent of the total shares allotted to retail individual investors. Dinesh Dalmia Dinesh Dalmia was the managing director of DSQ Software Limited when the Central Bureau of Investigation arrested him for his involvement in a stocks scam of Rs 595 crore (Rs 5. UK. in the name of New Vision Investment Ltd.15 times. .294 shares representing 2. A lone key operator used 2541 afferent account for cornering 127. Key operators used 14. Patni Computer System Ltd's Rs 430. Dalmia resorted to illegal ways to make money through the partly paid shares of DSQ Software Ltd. and Powerflow Holding and Trading Pvt Ltd. it was initially pegged to be Rs 30. which was later clarified by the CBI as an exaggerated figure. Abdul Karim Telgi acquired a stamp paper license from the Indian government and began printing fake stamp papers. Investigation showed that 1. 8.33 crore (Rs 1.22 times. He is today famous (or infamous) for being he man behind one of India's biggest scams.306 billion) public issue (Jan 27-Feb 5 2004). Abdul Karim Telgi He paid for his own education at Sarvodaya Vidyalaya by selling fruits and vegetables on trains. Telgi bribed to get into the government security press in Nashik and bought special machines to print fake stamp papers. and unallotted shares in the name of Dinesh Dalmia Technology Trust. The loss is estimated to be Rs 171.619 'benami' accounts to corner 261.30 crore (13 million) shares of DSQ Software Ltd had not been listed on any stock exchange. The Telgi case is another big scam that rocked India. The retail portion was oversubscribed 9.71 billion). The fake stamp racket involving Abdul Karim Telgi was exposed in 2000.71 per cent of the total number of shares allotted to retail investors.by 19.65 crore (Rs 4. 7.36 times and the non-institutional portion by 39.95 billion).000 crore (Rs 300 bilion).050 shares representing 2. Hulda Properties and Trades Ltd.
Kapur and Basu had changed their stance on an investment advice of the equities research cell of UTI. 1. Goyal conned investors to the tune of over Rs 210 crore (Rs 2.and a stockbroker Rakesh G Mehta. . The CBI said that five companies.18 crore (Rs 11. The UTI Scam Former UTI chairman P S Subramanyam and two executive directors -. whose directors were the four Rastogi brothers -Subash. The CBI said it was the conspiracy of these four people which resulted in the loss of Rs 32 crore (Rs 320 million).Telgi's networked spread across 13 states involving 176 offices. was yet another fraudster who cheated investors promising high returns through plantations. Uday Goyal Uday Goyal. were arrested in connection with the 'UTI scam'.000 employees and 123 bank accounts in 18 cities. The market price was around Rs 830.3 million) from Rakesh Mehta when there were no buyers for the scrip.33 crore (Rs 33. 2000.8 million) from the company through a circuitous route for possible rigging the Cyberspace counter. 11. The promoter of Cyberspace Infosys. UTI had purchased 40.000 shares of Cyberspace between September 25.M M Kapur and S K Basu -. He was finally arrested.Virendra Rastogi Virendra Rastogi chief executive of RBG Resources was charged with for deceiving banks worldwide of an estimated $1 billion. Subramanyam. The officals were paid Rs 50 lakh (Rs 5 million) by Cyberspace to promote its shares. 10.10 billion). He also received Rs 1. and September 25. He was also involved in the duty-drawback scam to the tune of Rs 43 crore (Rs 430 milion) in India. Arvind Johari was arrested in connection with the case. managing director of Arrow Global Agrotech Ltd.exported bicycle parts during 1995-96 to Russia and Hong Kong by heavily over invoicing the value of goods for claiming excess duty draw back from customs. Virender. 9. Ravinde and Narinder -. 2000 for about Rs 3.
The government securities (gilt) scam of 2001 was exposed when the Reserve Bank of India checked the acounts of some cooperative banks following unusual activities in the gilt market. Sanjay Agarwal Home Trade had created waves with celebrity endorsements.The plantation scam was exposed when two investors filed a complaint when they failed to get the promised returns. Ketan Sheth (a broker). 12.300 persons had fallen into Goyal's trap. Nandkishore Trivedi and Baluchan Rai (a Hong Kong-based Non-Resident Indian) were behind the Home Trade scam. But Sanjay Agarwal's finance portal was just a veil to cover up his shady deals. In this case. Over 43. Sanjay Agarwal. A sum of about Rs 92 crore (Rs 920 million) was missing from the Seamen's Provident Fund. The company's directors and their relatives had misused the investors' money to buy properties. The High Court asked the company to sell its properties and repay its investors. even the Public Provident Fund (PPF) was affected. Co-operative banks and brokers acted in collusion in abid to make easy money at the cost of the hard earned savings of millions of Indians. He swindled a whopping Rs 600 crore (Rs 6 billion) from more than 25 cooperative banks. . Several criminal complaints were filed with the Economic Offences Wing.
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