Ketan Parekh, the face of Scam 2000 was always a hero to Bollywood. He was the toast of their parties and helped many production houses pocket a few hundred crore rupees at hefty premia from the public or the Unit Trust of India (UTI).
Now Bollywood is returning the favour with a movie about Scam 1992 and 2000. But unlike Hollywood’s Wall Street, our desi filmmakers aren’t exploring the fallen hero. It is not about how they broke the law, ruined institutions and caused losses to investors, but the brokers’ side of the story told in a fictionalised account. Those in the know say, that it is a fictional expose about the role played by politicians, banks and institutions in the Scam—and how they get away scot-free in the end. So, our nice-guy hero is harmlessly ramping up stock prices, like he was flying kites that soar to the sky until politicians bring in greed and ambition with their promise of filthy lucre and the entire game spins out of hand. Some sources even say the movie will be like Harshad Mehta’s sensational allegation that he had bribed the then Prime Minister P.V. Narasimha Rao ‘but it will have the cover of fiction to avoid retaliation.’ The big question is, who would fund such a movie? The answer should be obvious. Investors lose money and institutions fold up, but discredited scamsters obviously have plenty to spare.
Custodian and Judge
Curiously, Bollywood is not alone in taking interest in the old scams. The custodian appointed under the Special Courts Act of 1992 to expedite the scam investigations has been moving at a spanking pace. Under D.K. Tyagi, the custodian’s office managed to sell off shares belonging to the scamsters after 10 long years. He is now moving rapidly to sell off the properties belonging to the late Harshad Mehta, including the apartments at Madhuli in Mumbai and the sprawling offices at Nariman Point. Another interesting development has been the appointment of Justice D.K. Deshmukh to the Special Court. The tough and no-nonsense judge is determined to wrap up the scam related cases as quickly as possible and to force them to pay up their liabilities. He is giving all scam-accused and their lawyers the jitters by refusing to permit delays through frequent adjournments and flimsy excuses.
Is insider trading continuing to happen with impunity? The latest example is Cadila Healthcare, which on July 30 announced plans to acquire a french pharmaceutical company. The Cadila stock was lying almost dormant from around November 2001 to around May 2003 and traded in the range of Rs 110 to Rs 150.
All of a sudden, trading volumes which used to be around 10 to 20,000 shares began to shoot up in June to a few lakh shares. The price quickly galloped to Rs 200 on July 1. It remained at that level during the month and jumped to Rs 234 on July 28 with 22.98 lakh shares being traded at that level on the National Stock Exchange. On July 29, a south-based business paper speculated that Cadila was buying a french pharma company, indicating that the news was already in the market.
Then on July 30, the company formally confirmed the news that it had acquired Alpharma Inc’s French subsidiary Alpharma SAS France for euro 5.5 million. Did some insiders make quick money on the stock?
In the midst of ongoing controversy, the Institute of Chartered Accountants of India (ICAI), the apex body for the accounting committee, passed, by a single vote a decision adopting rotation of company auditors. This is to be followed by a referendum covering over 1,10,000 chartered accountants across the country, but may lead to a similar result.
What is intriguing about the wafer-thin vote is that the DCA joint secretary on the Naresh Chandra Committee abstained from voting. Especially since the Chandra Committee had vetoed compulsory rotation of auditors after debating them at length and hearing presentations from the top accounting firms. It was convinced that rotation would not work and that it would be more damaging to rotate an audit firm every five years, when it has just begun to gain a deep understanding of the company’s activities in a complex business environment. Compulsory rotation would discourage audit firms from developing company specific expertise and only enhance the risk of audit failures. That is why; even the Sarbanes-Oxley Act of the US has only prescribed rotation of the lead audit partner. But ICAI’s decision is the outcome of an institute dominated by small audit firms, who stand to benefit from rotation. However, since many recent reforms have been triggered by a spate of corporate scandals in America and scams in India, the DCA ought to have used its vote to ensure the right outcome. -- Sucheta Dalal