It was the day the Sensex crossed the 4,000-mark and showed no signs of any slowdown in the bull charge. At a reputed five-star hotel in North Mumbai, a thoroughly discredited bull-operator had booked a suite of rooms to celebrate his recent gains. Specially ordered for the evening were dancing girls to entertain his guests, who included fund managers (especially those from an aggressive bank-owned mutual fund) and other minor scamsters. That such entertainment was allowed to be conducted at an exclusive suite of room is testimony to the money-power displayed by the operator — after all this hotel chain prides itself on being among the finest in the country. Missing yet, from this party scene, were politicians, film stars and industrialists. But it is probably only a matter of time. As the money pours in, the scamsters’ creditors also seem disinclined to press recovery and it will only be a matter of time before he begins to flaunt his connections even more openly.
Already the scamster is openly ramping up some shady software stocks and an auto company that cheated thousands of depositors.
One of the guests that evening was Mr M, who owns a lampshade company. In the last three years, he has filed several police complaints and litigation against the scamster, which were acted upon with great alacrity. He used to operate the account of an Overseas Corporate Body (OCB), which finds frequent mention in the Joint Parliamentary Committee Report (JPC).
Despite his well-known connections with the scamster, the regulators have never probed the Power of Attorney that he holds, or bothered to trace the beneficial ownership of the OCB. The RBI too has never been pressured to investigate the OCB or pulled up for its supervisory failure. This allowed Mr M to pursue the scamster for nearly three years, have him arrested and roughed up and even lobby a powerful Maharashtra politician to help recover the money lost by the OCB’s shady dealings.
But the bull market has a way of changing foes to friends. The scamster and his persecutor have teamed up again, perhaps hoping that they can recoup their losses by ramping up stock prices all over again. The usual collaboration between scamsters and investigative agencies is also at its best. While the government is ready to set up another JPC to examine the pesticide content in soft drinks manufactured by the two multinational companies — a job that belongs to expert laboratories – one must revisit the JPC on Scam 2000 and the follow up if any, on its meagre recommendations. Lets start with UTI.
Now that UTI is marketing itself as a turnaround story, the Central Bureau of Investigations (CBI), which has a pathetic record of completing investigations has safely gone to sleep. It has yet to file a charge sheet in the Cyberspace Infosys case — the only one it bothered to act upon. Market sources say that the promoter of Cyberspace Infosys, who hails from the Prime Minister’s constituency, is back in the software business. UTI had referred four other cases to the CBI, but it is making no efforts to act on the information, let alone file charges.
As for Ketan Parekh, he has five sets of investigations and allegations against him that are all, more-or-less in limbo. Bank of India entered into a strange settlement that allows Parekh several years before he begins to pay the Rs 100 crore that he still owes the bank. His nexus with UTI, before its collapse, is not even being investigated. The police investigation into the transfer of funds to the illegal market in Kolkata is the only one that made some progresses. He also owed Global Trust Bank (GTB) over Rs 266.87 crore as of March 2001, some of which has reportedly been recovered. But he still owes a hefty Rs 888.25 crore to the Madhavpura Mercantile Cooperative Bank (MCCB) whose collapse had a domino effect on the entire cooperative bank sector in Gujarat. That investigation too is moving at a snail’s crawl, although Parekh hasn’t adhered to the repayment commitment that the made as a condition for his bail.
In the meanwhile, brokerage firms associated with him are making a quiet exit. Last week, The Financial Express published a notice on behalf of four brokerage firms that had applied to surrender their trading membership on the NSE. One of them was Milan Mahendra Securities Pvt Ltd, a company that the JPC report mentions as abetting Ketan Parekh in his price manipulation and which has been barred by the Sebi from dealing in GTB shares. In three months from now, the firm would have shut shop and vanished.
The JPC report also mentions a few other companies to whom Ketan Parekh ostensibly owes money (he total outstanding was placed at approximately Rs 3323 crore at one time). These companies included the DSQ group (Rs 75 crore), Shonkh Technologies (Rs 37 crore) and Kopran (Rs 28 crore). A few weeks ago, I received a call from Dinesh Dalmia of DSQ Software and his wife. They were calling to request me to stop writing against Dalmia and his companies. Dalmia assured me that he is now focussed on his business, much of which, we learn, has been sold to Ramesh Vangal and his partners. DSQ Software, is registering high volumes and its price is up 30 per cent to just above Rs 10 and nobody knows the fate of the many cases filed against him. Shonkh Technologies has moved up to Rs 17 after having languished for a long time at well below par, while Kopran is traded up at around Rs 42.
In fact, the only evidence of outrage on behalf of investors, widows and pensioners who lost their life-savings in Madhavpura Bank was in the order of the Chief Metropolitan Magistrate of Ahmedabad who denied bail to a couple of brokers. But a lower court order in Ahmedabad, that goes unreported by the national media, hardly has enough impact to contain the manipulation that has now begun to push the bull run into dangerous territory.