Chronology of India's Biggest Scams - 1

2010 YEAR END SPECIAL
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Chronology of India's Biggest Scams;

Worth over Rs 80 lakh crore!

Last updated on: December 30, 2010 08:33 IST

http://www.rediff.com/news/yearend-2010.html

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With so many scams and scandals hitting the headlines during 2010, virtually pushing other national issues to the background, an effort has been made by some public spirited citizens to compile a list of past and present scams to put the present bunch of scams -- 2G, CWG, IPL, etc -- in perspective.

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According to the compilation, the total amount of money involved in various scams over the last 12 years alone, since 1992, is estimated to be over Rs 80 lakh crore (Rs 80 trillion) or $1.80 trillion!

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While this figure is not claimed to be a definitive calculation, it has been arrived at on the basis of material published in newspapers over the years.

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Here is a check-list of some of the major corruption scandals and corporate frauds that hit the headlines and the estimated amounts alleged to have been involved.

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1. 2G spectrum scam: Rs 176,000 crore

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At a mind-boggling Rs 176,000 crore (Rs 1.76 trillion), the 2G spectrum allocation scam is by far the biggest scam in India. The Supreme Court recently said the spectrum scam has put 'all other scams to shame'.

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The incident saw former telecom minister A Raja being forced to resign after the CAG indicted him in the 2G spectrum scam that resulted in a loss of about Rs 176,000 crore to the national exchequer.

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Even as investigations in to the scam -- which has now become a political hot potato with the Opposition gunning for the government, demanding a JPC and the ruling UPA adamant on not giving in -- are on, it has come to light that politicians, corporate lobbyists, business houses and even the media might have played a big role in it.

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The scandal revolves around the alleged irregularities in allotting wireless radio spectrum and licences by the telecom ministry to private operators -- some of whom were ineligible -- in 2007. Licences were given and spectrum allocation was done at an extremely low price leading to a gargantuan loss to the national coffers.

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2. Ramalinga Raju: Rs 8,000 crore

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The biggest corporate scam in India came from one of the best known businessmen.

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Satyam founder B Ramalinga Raju resigned as its chairman after admitting to cooking up the account books.

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His efforts to fill the "fictitious assets with real ones" through Maytas acquisition failed, after which he decided to confess the crime.

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With a fraud involving about Rs 8,000 crore (Rs 80 billion), Satyam remains one of India's biggest ever

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3. Harshad Mehta: Rs 5,000 crore

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He was known as the 'Big Bull'. However, his bull run did not last too long.

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He triggered a rise in the Bombay Stock Exchange in the year 1992 by trading in shares at a premium across many segments.

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Taking advantages of the loopholes in the banking system, Harshad and his associates triggered a securities scam diverting funds to the tune of about Rs 5,000 crore (Rs 50 billion) from the banks to stockbrokers between April 1991 to May 1992.

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Harshad Mehta worked with the New India Assurance Company before he moved ahead to try his luck in the stock markets. Mehta soon mastered the tricks of the trade and set out on dangerous game plan.

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Mehta has siphoned off huge sums of money from several banks and millions of investors were conned in the process. His scam was exposed, the markets crashed and he was arrested and banned for life from trading in the stock markets.

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He was later charged with 72 criminal offences.

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A Special Court also sentenced Sudhir Mehta, Harshad Mehta's brother, and six others, including four bank officials, to rigorous imprisonment (RI) ranging from 1 year to 10 years on the charge of duping State Bank of India to the tune of Rs 600 crore (Rs 6 billion) in connection with the securities scam that rocked the financial markets in 1992. He died in 2002 with many litigations still pending against him.

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4. Hassan Ali Khan: Rs 39,120 crore

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Pune-based real estate consultant Hassan Ali Khan was the main accused in a case involving alleged money laundering to the tune of $8 billion (Rs 39,120 crore), and suspected tax evasion.

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The Mumbai Income-Tax department had sent him a notice demanding Rs 40,000 crore for not disclosing funds in several foreign bank accounts, including $8 billion in an account in UBS AG, Zurich.

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5. Money stashed away in Swiss banks: Rs 21 lakh crore

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Post-Independence, India lost a staggering $462 billion, or about Rs 21 lakh crore, in illicit financial flows due to tax evasion, crime and corruption, a research and advocacy group has said in a report.

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The report released by Washington-based Global Financial Integrity (GFI) found that the faster rates of economic growth since economic reform started in 1991 led to a deterioration of income distribution which led to more illicit flows from India.

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According to the primary findings of the report titled 'The Drivers and Dynamics of Illicit Financial Flows from India: 1948-2008', India lost a total of $213 billion in illicit financial flows (or illegal capital flight).

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These illicit financial flows were generally the product of: tax evasion, corruption, bribery and kickbacks, and criminal activities.

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"The present value of India's total illicit financial flows (IFFs) is at least $462 billion. This is based on the short-term US Treasury bill rate as a proxy for the rate of return on assets.

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India's aggregate illicit flows are more than twice the current external debt of $230 billion," the report said.

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Based on the last five years of the study, 2004-2008, India lost assets at a rate of US $19 billion per year.

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6. Teak plantation swindle Rs 8,000 crore

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The plantation scam took thousands of investors for a ride and is said to be of the order of Rs 8,000 crore.

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7. Dinesh Singhania: Rs 120 crore

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Another major scam involved Dinesh Kumar Singhania, the former president of Calcutta Stock Exchange.

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Singhania was accused in the Rs 120 crore (Rs 1.2 billion) CSE scam.

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Singhania was president of the exchange for two terms and also a director when the scam was unearthed in March, 2001, Mitra said.

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8. Ketan Parekh: Rs 1,000 crore

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Ketan Parekh followed Harshad Mehta's footsteps to swindle crores of rupees from banks. A chartered accountant he used to run a family business, NH Securities.

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Ketan however had bigger plans in mind. He targetted smaller exchanges like the Allahabad Stock Exchange and the Calcutta Stock Exchange, and bought shares in fictitious names.

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His dealings revolved around shares of ten companies like Himachal Futuristic, Global Tele-Systems, SSI Ltd, DSQ Software, Zee Telefilms, Silverline, Pentamedia Graphics and Satyam Computer (K-10 scrips).

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Ketan borrowed Rs 250 crore from Global Trust Bank to fuel his ambitions. Ketan alongwith his associates also managed to get Rs 1,000 crore from the Madhavpura Mercantile Co-operative Bank.

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According to RBI regulations, a broker is allowed a loan of only Rs 15 crore (Rs 150 million). There was evidence of price rigging in the scrips of Global Trust Bank, Zee Telefilms, HFCL, Lupin Laboratories, Aftek Infosys and Padmini Polymer.

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9. Fertiliser import scam Rs 1,300 crore

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The fertiliser import scam cost the national exchequer over Rs 1,300 crore.

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Similar scams which cost the nation hugely include:

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10. Sugar import scam of 1994: Rs 650 crore

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11. Meghalaya Forest scam of 1995: Rs 300 crore

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12. Urea scam of 1996: Rs 133 crore

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13. Bihar fodder scam of 1996: Rs 950 crore

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14. Scorpene submarine scam Rs 18,978 crore

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In what is billed as one of the biggest defence scandals in India, huge kickbacks were alleged in the planned purchase of 6 French Scorpene submarines.

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Other scam that hit the national exchequer include:

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15. Army ration pilferage scam of 2008 Rs 5,000 crore

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16. Bihar land scandal in 1997: Rs 400 crore

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17. Bihar flood relief scam of 2005: Rs 17 crore

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18. Sukh Ram telecom scam in 1997: Rs 1,500 crore

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19. SNC Lavalin power project scam in 1997: Rs 374

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20. C R Bhansali: Rs 1,200 crore

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The Bhansali scam resulted in a loss of over Rs 1,200 crore (Rs 12 billion).

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He first launched the finance company CRB Capital Markets, followed by CRB Mutual Fund and CRB Share Custodial Services. He ruled like a financial wizard 1992 to 1996 collecting money from the public through fixed deposits, bonds and debentures. The money was transferred to companies that never existed.

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CRB Capital Markets raised a whopping Rs 176 crore in three years. In 1994 CRB Mutual Funds raised Rs 230 crore and Rs 180 crore came via fixed deposits. Bhansali also succeeded to to raise about Rs 900 crore from the markets.

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However, his good days did not last long, after 1995 he received several jolts. Bhansali tried borrowing more money from the market. This led to a financial crisis.

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It became difficult for Bhansali to sustain himself. The Reserve Bank of India (RBI) refused banking status to CRB and he was in the dock. SBI was one of the banks to be hit by his huge defaults.

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21. IPO scam: Rs 1,000 crore estimated

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The Securities and Exchange Board of India barred 24 key operators, including Indiabulls and Karvy Stock Broking, from operating in the stock market and banned 12 depository participants from opening fresh accounts for their involvement in the Initial Public Offer scam.

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It also banned 85 financiers from capital market activities.

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22. Abdul Karim Telgi: Rs 500 crore

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He paid for his own education at Sarvodaya Vidyalaya by selling fruits and vegetables on trains.

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He is today famous (or infamous) for being the man behind one of India's biggest scams.

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The Telgi case is another big scam that rocked India. The fake stamp racket involving Abdul Karim Telgi was exposed in 2000. The loss is estimated to be Rs 500 crore (Rs 5 billion), it was initially pegged to be Rs 30,000 crore (Rs 300 billion), which was later clarified by the CBI as an exaggerated figure.

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In 1994, Abdul Karim Telgi acquired a stamp paper license from the Indian government and began printing fake stamp papers.

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Telgi bribed to get into the government security press in Nashik and bought special machines to print fake stamp papers.

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Telgi's networked spread across 13 states involving 176 offices, 1,000 employees and 123 bank accounts

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23. The Jharkhand medical equipment scam Rs 130 crore

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Major irregularities were alleged in the UPA government's free healthcare services programme in Jharkhand.

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Other notable scams include:

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24. Punjab's City Centre project scam in 2006: Rs 1,500 crore

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25. Taj Corridor scam of 2006: Rs 175 crore

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26. State Bank of Saurashtra scam in 2008: Rs 95 crore

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27. Rice export scam of 2009: Rs 2,500 crore

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28. Orissa mine scam in 2009: Rs 7,000 crore

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29. Madhu Koda mining scam of 2009: Rs 4,000 crore

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30. Preferential allotment scam of 1995: Rs 5,000 crore

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31. Yugoslav Dinar scam of 1995: Rs 400 crore

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32. Cobbler scam: Rs 1,000 crore

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Sohin Daya, son of a former Sheriff of Mumbai, was the main accused in the multi-crore shoes scam. Daya of Dawood Shoes, Rafique Tejani of Metro Shoes, and Kishore Signapurkar of Milano Shoes were arrested for creating several leather co-operative societies which did not exist.

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They availed loans of crores of rupees on behalf of these fictitious societies. The scam was exposed in 1995. The accused created a fictitious cooperative society of cobblers to take advantage of government loans through various schemes.

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Officials of the Maharashtra State Finance Corporation, Citibank, Bank of Oman, Dena Bank, Development Credit Bank, Saraswat Co-operative Bank, and Bank of Bahrain and Kuwait were also charge sheeted.

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33. Dinesh Dalmia: Rs 595 crore

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Dinesh Dalmia was the managing director of DSQ Software Limited when the Central Bureau of Investigation arrested him for his involvement in a stocks scam of Rs 595 crore (Rs 5.95 billion).

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Dalmia's group included DSQ Holdings Ltd, Hulda Properties and Trades Ltd, and Powerflow Holding and Trading Pvt Ltd.

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Dalmia resorted to illegal ways to make money through the partly paid shares of DSQ Software Ltd, in the name of New Vision Investment Ltd, UK, and unallotted shares in the name of Dinesh Dalmia Technology Trust.

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Investigation showed that 1.30 crore (13 million) shares of DSQ Software Ltd had not been listed on any stock exchange.

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34. Virendra Rastogi: Rs 43 crore

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Virendra Rastogi, chief executive of RBG Resources, was charged with for deceiving banks worldwide of an estimated $1 billion.

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He was also involved in the duty-drawback scam to the tune of Rs 43 crore (Rs 430 million) in India.

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The CBI said that five companies, whose directors were the four Rastogi brothers -- Subhash, Virender, Ravinder and Narinder -- exported bicycle parts during 1995-96 to Russia and Hong Kong by heavily over invoicing the value of goods for claiming excess duty draw back from customs.

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35. The UTI scam: Rs 32 crore

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Former UTI chairman P S Subramanyam and two executive directors -- M M Kapur and S K Basu -- and a stockbroker Rakesh G Mehta, were arrested in connection with the 'UTI scam'.

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UTI had purchased 40,000 shares of Cyberspace between September 25, 2000, and September 25, 2000 for about Rs 3.33 crore (Rs 33.3 million) from Rakesh Mehta when there were no buyers for the scrip. The market price was around Rs 830.

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The CBI said it was the conspiracy of these four people which resulted in the loss of Rs 32 crore (Rs 320 million). Subramanyam, Kapur and Basu had changed their stance on an investment advice of the equities research cell of UTI.

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The promoter of Cyberspace Infosys, Arvind Johari was arrested in connection with the case. The officals were paid Rs 50 lakh (Rs 5 million) by Cyberspace to promote its shares.

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He also received Rs 1.18 crore (Rs 11.8 million) from the company through a circuitous route for possible rigging the Cyberspace counter.

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36. Uday Goyal: Rs 210 crore

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Uday Goyal, managing director of Arrow Global Agrotech Ltd, was yet another fraudster who cheated investors promising high returns through plantations.

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Goyal conned investors to the tune of over Rs 210 crore (Rs 2.10 billion). He was finally arrested.

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The plantation scam was exposed when two investors filed a complaint when they failed to get the promised returns.

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Over 43,300 persons had fallen into Goyal's trap. Several criminal complaints were filed with the Economic Offences Wing.

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The company's directors and their relatives had misused the investors' money to buy properties. The High Court asked the company to sell its properties and repay its investors.

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37. Sanjay Agarwal: Rs 600 crore

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Home Trade had created waves with celebrity endorsements.

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But Sanjay Agarwal's finance portal was just a veil to cover up his shady deals. He swindled a whopping Rs 600 crore (Rs 6 billion) from more than 25 cooperative banks.

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The government securities (gilt) scam of 2001 was exposed when the Reserve Bank of India checked the accounts of some cooperative banks following unusual activities in the gilt market.

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Co-operative banks and brokers acted in collusion in a bid to make easy money at the cost of the hard earned savings of millions of Indians. In this case, even the Public Provident Fund (PPF) was affected.

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A sum of about Rs 92 crore (Rs 920 million) was missing from the Seamen's Provident Fund. Sanjay Agarwal, Ketan Sheth (a broker), Nandkishore Trivedi and Baluchan Rai (a Hong Kong-based Non-Resident Indian) were behind the Home Trade scam.

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38. LIC Housing Finance scam

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The chief executive officer of LIC Housing Finance Ramachandran R Nair and seven others, including three top officials of public sector banks, were recently arrested in connection with a multi-crore housing finance racket recently.

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Apart from Nair, those arrested are Naresh K Chopra, secretary (investment), LIC; R N Tayal, general manager of Bank of India (Delhi); Maninder Singh Johar, director (chartered accountant) of Central Bank of India; and Venkoba Gujjal, deputy general manager, Punjab National Bank (Delhi).

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Rajesh Sharma, chairman and managing director of Mumbai-based firm Money Matters Ltd and two of its employees -- Suresh Gattani and Sanjay Sharma-- were also among those arrested, CBI said. Money Matters was allegedly acting as a middleman for loans.

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The officials allegedly colluded with the firm to sanction large scale corporate loans, overriding mandatory conditions for such approvals along with other irregularities.

Also See

http://www.youtube.com/watch?v=7RhnHPU5-JY

http://www.youtube.com/watch?v=0VS4wbHWdI4&feature=channel