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Saturday, Dec 14, 2019

Rastogi's multi-million dollar scam was right out of Bollywood

Indian-born businessman Virendra Rastogi's gigantic scam to defraud the world of finance of 700 million dollars much of it still untraced was so audacious it could have come out of Bollywood.

india Updated: Jun 06, 2008 17:42 IST
Dipankar De Sarkar
Dipankar De Sarkar

Indian-born businessman Virendra Rastogi's gigantic scam to defraud the world of finance of 700 million dollars - much of it still untraced was so audacious it could have come out of Bollywood.

Forget the real work of scam and high finance, the closest that anything comes to Rastogi's web of deceit is the 1970s Hollywood hit "The Sting", in which two ordinary cheats pull a giant con by creating a fictitious gambling set.

The con Rastogi dreamed up was far bigger - billions of dollars bigger.

Along with co-conspirators Anand Jain and Gaurav Majumdar, he created an international business charade that turned into desperate theatre - with workers handed out scripts - as the dragnet of investigators closed in on them.

“They created a very impressive front that fooled banks, the metal exchanges in both the UK and US and well-respected accountancy firms,” Judge James Wadsworth told Southwark Crown Court Thursday.

“They were involved in years of calculated dishonesty and have shown no shadow of regret or remorse or repentance.”

Rastogi even duped former senior Labour cabinet minister Jack Cunningham and three other political peers - ex-Tory energy minister Lord Gray, Liberal Democrat Lord Holme and Labour's Lord Woolmer - into becoming advisers of his metal trading firm, RBG Resources.

Wadsworth called it an “empire of imaginary metal” and referred to Rastogi's “brains” that had conjured it all up.

But as any policeman will tell you, even the cleverest of criminal brains cannot insure against the accidental error.

After fooling the world of finance with a sophisticated fraud spanning three continents and six years from 1996 to 2002, Rastogi's RBG Resources fell under the suspicion of Britain's Serious Fraud Office (SFO) because of a simple unintended human error.

In 2002 a PricewaterhouseCoopers auditor in Romania became suspicious when six documents - purporting to be sent from six different companies all over the world - were all sent from the same fax machine in Hong Kong.

PwC resigned as RBG auditors two months later, prompting a formal announcement to the London Metal Exchange and triggering a lengthy and costly investigation by the City of London Police and the SFO.

One of Rastogi's brothers, Manhattan-based Narendra, turned approver after plea-bargaining his way out of prison in the US. In April, the three men were convicted of international conspiracy to defraud after a massive investigation and trial that cost at least 10 million pounds.

It brought an end to six years of fictitious metal deals that earned Rastogi a place on the coveted Sunday Times Rich List, a flat in Mayfair - one of London's poshest neighbourhoods - and private education for his two children.

He was chauffeur driven everywhere.

Rastogi ran his racket through a network of 324 non-existent shell companies - but they included a cowshed in India, a laundrette in New Jersey, US, the home of an elderly woman who sold scrapbooks, and flats and shops with only a table and chair.

Each 'shell trader' had a headed notepaper and company stamp, through which Rastogi created a paper trail of bogus orders, deliveries and accounts, apparently ordering vast quantities of metal through RBG from the US, the United Arab Emirates, Hong Kong and Singapore.

With employees in the US, Hong Kong, Singapore, Dubai, India, France and Italy, the company secured huge loans from creditors in such companies as the German-based West LB and General Motors, but averted suspicion by paying them back with even bigger borrowings.

Investigators found that although US and British banks had been conned into lending several billion dollars, the “circular movement of monies” meant that 343.5 million pounds had actually disappeared.

Much of it was laundered through Dubai and Switzerland, with at least 40 million pounds thought to have been sent to India.

None of the money has been recovered.

But as the dragnet closed in on him a desperate Rastogi ordered workers into his office in Piccadilly, central London, for "file tidying" weekends, investigators said.

Workers were issued with “pure theatre” scripts to learn in case new auditors called.

When SFO investigators finally burst into his office in 2002, Rastogi was found frantically shredding documents.

Wadsworth told Rastogi Thursday: "Your brains made it as large as it became. Over the years the banks were induced by your falsehoods to advance literally billions of dollars of trades that did not exist in any real sense."