Harshad Mehta: From Pied Piper of the markets to India's best-known scamster
December 31, 2001
In the wee hours of December 31, just before the year 2001 came to a close, Harshad Mehta passed away in a jail in suburban Mumbai. It was a tragic and unceremonious end to the man who was the first broker to become a mega-star of the Indian capital markets and fire the greed and imagination of every middle class Indian in the early 1990s.
He promised the ultimate rags to riches story -- from the small town Raipur boy who was once rusticated from school to Sultan of Dalal Street with all the trappings of wealth such as a fabulous house, a fleet of cars and multiple stock exchange memberships.
Charismatic, ebullient and recklessly ambitious, Harshad Mehta set out to be a role model for investors. "I thought I'd be like Pied Pier", he had told a newspaper in 1992, "I thought I can sell dreams... that asset-creation is not a crime, that if you wanted to be Harshad Mehta come to the stock market".
In June 1992, when he was released after 107 days in custody, he told me "Congratulations, you have broken the story of the decade". That was Harshad again - willing to revel even in negative publicity. He made a triumphant exit from court, a la Laloo Yadav's recent jail yatra, amidst a mob of cheering and slogan-shouting investors, who wanted him back in the market, igniting another never-ending bull run.
Instead, his disdain for the means the he employed to achieve his mega ambition, left behind a shattered dream and a tarnished image. He ended his days in judicial custody, and will forever be known as the main architect of the Rs 50-billion scam - India's biggest securities scandal.
Instead of fawning epithets such as the Big Bull, or the Amitabh Bachchan / Einstein of the market that were showered on him by his investor fans, he ended his days as a tired scamster, who could not stop trying to pull off the same old quick money schemes.
For a few months after the scam, it almost seemed as though Harshad and his brother Ashwin would remain at center-stage and dominate events. Within weeks after his release he was hogging headlines as the first man ever to claim that he had bribed a sitting Prime Minister. That too was done in typical Harshad fashion - press conferences at the Taj and the Oberoi, high profile lawyers, an editor-turned-MP acting as emcee, the release of audiotapes and the bizarre demonstration of Rs 10 million being stuffed into a large suitcase.
That too fizzled out, with the Mehta brothers perjuring themselves. However, they clearly got themselves a deal to avoid further harassment by other government agencies in charge of money laundering and such offences. Did the aftermath of the investigation change Harshad's attitude to business? No way.
Almost every year after 1992, Harshad Mehta has never ceased to attempt a comeback. The problem was that he never changed his formula. He failed to realize that his old magic was not working with investors anymore. At least nowhere near enough to move the market. If the Central Bureau of Investigation is to be believed, Harshad was also continuously funding himself by selling part of his 1992 stock portfolio, which he had not declared to the Custodian appointed by government. In fact, it is the sale of these benami shares (shares that were held in street names when he and 19 other entities were notified by the Custodian and their assets impounded) that had put him back in police custody at the time of his death.
Harshad's problem has always been his flashiness. In 1992, when I broke the story about the Rs 6 billion that he had swiped from the State Bank of India, it was his visits to the bank's headquarters in a flashy Toyota Lexus that was the tip off. Those days, the Lexus had just been launched in the international market and importing it cost a neat package.
Even before that he was featured in a video newsmagazine feeding peanuts to bears at a Mumbai zoo to symbolize his victory over the bear-cartel in the stock market.
In fact, for weeks after the scam, he was convinced that he would never have been caught but for the bear cartel.
1997 saw Harshad Mehta making another big comeback attempt. This time as a new age stock market guru. He was among the first to set up his own website to dispense tips. He had also built up a network of senior media managers who gave him the publicity and commissioned him as a columnist.
He also had powerful friends at the helm of the Bombay Stock Exchange with close connections to the regulator. Some of the largest newspapers in the country, including the Times of India where I first wrote the story of the securities scam, were convinced that a Harshad Mehta column was sure to send circulation figures soaring.
Typically, Harshad did not stop at dispensing tips. He had struck a deal to ramp up the prices of several stocks - among these were BPL, Videocon and Sterlite. He had managed to build up quite a speculative bubble and was again the cynosure of investor attention when India's nuclear tests caused a sudden collapse in prices and his bubble burst.
Brokers who operated for Harshad Mehta were then infamously bailed out at the behest of the Bombay Stock Exchange authorities by opening the trading system in the middle of the night to insert synchronized trades at manipulated prices.
Investigations by the Securities and Exchange Board of India have revealed that Harshad had set up an entire network of investment companies, known as the Damayanti Group to front his market operations. That investigation led to SEBI imposing a lifetime bar against him (he had filed an appeal against the SEBI order).
It is a pity that Harshad's eternal optimism and furious stream of get-rich ideas were never channeled to more productive use.
When the end came, he had a score of cases filed under different stages of trial and one conviction by the Special Court in the Maruti Udyog case. But the last decade had certainly taken its toll. The sunny optimism and good cheer, was replaced by a more pensive and tired visage.
He not only looked defeated but sources close to him say that he was steadily running out of funds. Most of this was probably due to the realisation that with one conviction by the Special Court and another by SEBI, his dreams of coming back to the capital market had ended forever. Now it is truly over.