Ketan Parekh scam may touch Rs 40,000 cr
The Serious Frauds Investigation Office (SFIO) has finally produced a detailed report on former big bull Ketan Parekh’s rip off on the stock market, and recommended penal action against him. The gigantic scam, unearthed in March 2001, engulfed top institutions including the Unit Trust of India (UTI), the Bank of India (BoI) and the Madhavpura Mercantile Cooperative Bank (MMB).
In an exhaustive 16 volume report, each one running into thousands of pages with the annextures, the SFIO has estimated that the extent of the fraud could touch Rs 30-40,000 crores. SFIO investigators told Hindustan Times that charges against Parekh — to be framed after the centre's formal nod — include, among others, manipulation of shares with the intent of benefitting himself and others, cheating of banks, falsifying of accounts, paying huge remunerations to some company directors without the centre's permission, giving loans without following norms and mishandling public money.
Parekh's unprecedented stock market heist began around mid 1998 and continued for nearly three years till the market crashed by 176 points on a single day, one day after the 2001 Union Budget was presented. The Securities and Exchange Board of India (SEBI)and the Reserve Bank of India (RBI) began investigations. The panic run on the bourses continued, forcing Bombay Stocke Exchange (BSE) President Anand Rathi to resign. Hundreds of investors were driven to the brink of bankruptcy.
The CBI arrested Parekh on March 30 that year, charging him with defrauding BoI of Rs 137 crore. After the collapse of the MMCB in December, Parekh and 11 others were also charged with defrauding MMBC of a whopping Rs 1030 crores.
The SFIO report reveals that Parekh managed large-scale manipulation of shares through six companies registered with various Stock Exchanges. Two others — Classic Credit Limited (CCL) and Panther Fincap & Management Services Ltd (PFMSL) — were the main players in the market as clients of the brokering entities.Another 8 companies were also used mainly to arrange finances from banks, FIIs and corporate entities.
Alleging that Parekh manipulated the market through his stock brokering and investment entities, the SFIO investigations point out that he managed the scam by circular trading,synchronised trading, effecting cross deals, generating high volumes and price by acting in concert with other brokering firms across the stock exchanges.
“The modus operandi was very systematic, well drilled and precisely executed albeit within a close group of persons who were acting for the furtherance of each other's interests,” the report asserts.
The investigations have revealed that part of the "illegitimate money " was taken out of the country using the overseas corporate bodies (OCBs). "Various corporate entities issued shares to OCBs and sub-accounts of the FIIs that were later purchased by these entities from Parekh controlled companies to legitimately transfer money out of the country", the report indicates.
The report further states that the trading pattern and volume handled by sixteen Parekh controlled companies is marked by a triple-fold hike in 2000-2001 as compared to 1999-2000. "In fact, the total volume of these entities was arguably many times more than what was reflected in their annual accounts," the SFIO report adds.
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