Sucheta Dalal :Indian national faces fraud charges in U.S.
Sucheta Dalal

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Indian national faces fraud charges in U.S.  

Mar 11, 2006



Feds say call center was $100M shell game

 

Indian national faces fraud charges in U.S.

 

Friday, March 10, 2006

BY JOHN P. MARTIN

Star-Ledger Staff

 

Charles Stanziale stood yesterday in the "cool room," a climate-controlled, glass-enclosed corner office in North Brunswick where a cluster of cables was designed to link a bank of 6-foot-tall, flashing computer servers to clients across the globe.

 

When Stanziale and his associates pulled the plugs on the machines a few weeks ago, a funny thing happened: nothing.

 

"Nobody called," he said.

 

The hardware represented the crumbs left behind from a memorable feast. The host, authorities say, was Dinesh Dalmia.

 

Using aliases, subordinates and shell companies, Dalmia allegedly persuaded seasoned U.S. financial companies to invest more than $100 million in his plan to equip call centers in India.

 

Had they looked closely, the investors would have discovered the hardware was outdated, useless machinery.

 

And they might have realized Dalmia, a well-dressed 44-year-old who lived in a riverfront mansion in Fort Lee and drove a red Ferrari, negotiated the deals at the same time he was wanted for a multibillion-dollar fraud that rattled India's stock market.

 

Yesterday, federal prosecutors in Newark filed fraud charges against Dalmia as FBI agents continued to unravel the scheme. The Indian national, who fled the United States late last year, was in a jail cell in his homeland on charges related to the India stock scam.

 

The money, more than $83 million of it, is missing.

 

Stanziale, the bankruptcy trustee assigned to sort through creditors' claims, has identified barely $300,000 in assets. He was also trying to sort out how so many smart people lost so much money.

 

It's apparent to me that if anybody came out to see what was there, they would recognize that there was very little going on," he said. "Nobody came out to kick the tires."

 

More than 80 companies have stepped forward as creditors, and some of the largest victims include banks, investment houses and hedge funds. Few want to explain what happened.

 

"At this point, we're conducting an investigation into our relationship with Allserve and it's really not appropriate for us to comment at this time," said Deborah Pulver, a spokeswoman for Sovereign Bank, which lost $5 million.

 

"Because it is pending litigation, we don't comment," said Debra DeCourcy, a spokeswoman for Fifth-Third Bank of Ohio, which lost $12 million. "We're going to take a pass on this one."

 

The biggest loser was CIT, a century-old finance company, which has claimed more than $18 million in losses to Allserve Systems Inc. CIT did not respond to a call seeking comment.

 

CIT's corporate offices are in Livingston, a short drive from the central New Jersey office park where Dalmia made his mark.

 

A balding, eloquent man with a mustache, he arrived in the country about five years ago, after the collapse of his previous company, DSQ Software. That fraud, widely reported in the Indian press, is believed to have cost investors close to $13 billion and made Dalmia the focus of a worldwide manhunt by Indian authorities.

 

The North Brunswick site was originally a local branch of DSQ Software, public records show. By 2003, Dalmia converted it to the U.S. headquarters of Allserve.

 

On its Web site, Allserve claimed to be a British company with a decade of experience equipping and organizing call centers, and said it had branches in six countries and an exploding client base.

 

Investigators say it was a shell game.

 

"In retrospect, it looks almost too simple to get away with, but at the time it was ongoing they did enough to make it appear that it was a real operation," said Assistant U.S. Attorney Mark Ferzan, chief of the commercial crimes unit, which brought the case. "Somebody who is capable of this type of hustle has to be pretty good at what he or she does."

 

The FBI affidavit filed in federal court in Newark alleges Dalmia soaked at least 20 major investors, but it spells out the crime against just one backer, DB Zwirn & Co., a New York hedge fund.

 

Using the name Nick Mittal, the complaint says, Dalmia approached the company last summer as the chief operating officer of Allserve Systems. Mittal allegedly said he had already arranged to buy call center equipment from a supplier named IGTL and to transport the hardware to India.

 

Under Mittal's plan, his backers would pay IGTL for the equipment and then lease it back to Allserve, recouping their investment plus interest.

 

According to the complaint, a Zwirn representative met with Mittal at Allserve's North Brunswick offices in June to inspect nine high-end servers. Weeks later, Zwirn wired $9.9 million to IGTL's account in Commerce Bank. In September, the company made a second payment for $3.9 million to the same account.

 

IGTL's president was Dinesh Dalmia.

 

A spokesman for Zwirn did not respond to a request for comment.

 

Investigators believe the servers he touted were basically junk. FBI agents later traced some of the hardware to used parts dealers in Colorado and South Carolina.

 

One dealer, identified in court papers only as "cooperating witness 1" told agents that Dalmia told him he didn't care if the equipment worked, only that it was "large, clean and impressive." A second salesman said Dalmia only wanted to buy hardware with "red flashing lights."

 

Dalmia hired about 30 people to give the perception of activity at the office by operating a low-volume call center. Some desks still showed signs of life yesterday, such as bowls of candy, blinking voice mail indicators, family photos and Christmas cards.

 

But the debts were mounting. On the desk of one corner office rested a printout from February 2005 listing more than $12 million in unpaid bills. On another was an April 2005 letter to from a creditor warning that Allserve's account was "seriously in default."

 

In November, as creditors closed in, Allserve filed for bankruptcy. By the end of the year, Dalmia was gone.

 

He resurfaced last month in India and was jailed in connection with the 2001 stock scam. According to newspaper reports in India, Dalmia had refused to cooperate with the national police, so officers sought court approval to use "polygraph, narco-analysis and brain mapping tests" on him.

 

Meanwhile, British authorities are also probing the losses of another $30 million there.

 

Neither Stanziale, the bankruptcy trustee, or the U.S. prosecutors, Assistant U.S. Attorneys Kevin Walsh and Robert Giallombardo, have filed motions to seize Dalmia's house, but they won't rule that out.

 

As Stanziale and a technician pored over the remnants of the company yesterday, a visitor pointed to one large computer cabinet and asked how to describe it.

 

"Garbage," came the reply.

 

John P. Martin covers federal courts and law enforcement. He may be reached at [email protected] or (973) 622-3405.

 

http://www.nj.com/news/ledger/index.ssf?/base/news-5/114197345649770.xml&coll=1

 

 

 


-- Sucheta Dalal



 



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