Sucheta Dalal :SEBI officially admits to its manager’s involvement in the Pyramid Saimira case
Sucheta Dalal

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SEBI officially admits to its manager’s involvement in the Pyramid Saimira case  

September 4, 2012


It required a parliament question by MP Rajeev Chandrashekar for SEBI to admit the involvement of its manager Jerome K Alexander in the infamous “forged letter” sent to Pyramid Saimira by SEBI. While Pyramid Saimira is being wound up, why is the regulator dragging its feet over the Alexander case and his links with Nirmal Kotecha?

Sucheta Dalal

In November 2011, when RK Padmanabhan took over as chief vigilance officer (CVO) at the Securities & Exchange Board of India (SEBI), he stirred things up with an internal warning memo about how he was "receiving complaints" about officers helping to "get certain cases settled" through "consultants and advocates". How come then is he dragging his feet over the involvement of Jerome K Alexander, the manager responsible for sending a 'forged' letter to Pyramid Saimira? Why did it require a parliament question to extract information about Jerome Alexander-which Moneylife alone has been reporting? And how come the involvement of a consultant as collection officer led to the arrest of deputy manager Avarjeet under this watch?

Moneylife is the only media to have repeatedly pointed out that the forged letter, which was leaked to several newspapers by stock market manipulator Nirmal Kotecha (including DNA and Business Standard) was the handiwork of a SEBI official. SEBI, which had conducted a searching investigation into the 'leak' of the forged letter, had however kept a tight lid on the involvement of its official. The reply to parliament, also clarified the exact name and designation of the official. Based on information from sources, we had wrongly reported the name as J D'Souza. At that time, we had tried to have the name verified by the executive director in charge but she would not confirm the name. Please see: Pyramid Saimira: Finger points to SEBI Manager in forged letter case or Forgery by SEBI Insider or Consent Orders: Compromised or SEBI is Repeatedly Refused Access to Phone Data … and SEBI: Time for Introspection 

The media finally woke up when Rajya Sabha MP Rajeev Chandrasekhar asked the finance ministry for an answer. SEBI was then forced to reveal that an assistant general manager, Jerome K Alexander is under investigation "relating to his alleged involvement in the issuance of a 'forged letter' to Pyramid Saimira" and has been placed under suspension from 15th April 2011. 

Strangely enough, in response to a question in parliament, minister of state for finance, Namonarain Meena said that the investigation has still not been concluded by the chief vigilance officer of SEBI. This is strange, because SEBI tracked to Mr Alexander through a mobile phone given to him by Mr Kotecha. Moneylife had checked with Mr Kotecha about his link to Mr Alexander and he did not deny it either. What is more interesting is that SEBI has been lobbying furiously for the power to tap phone and demand information from phone companies. If the regulator cannot act against its own, when caught in a flagrant act of corrupt collusion with a market operator, can we trust it to act impartially when it has the power to tap phones at will? Let's not forget, that SEBI has been recently pulled up by the Securities Appellate Tribunal (SAT) for dragging an investigation for 12 long years. This too is a case that cries for a detailed investigation by SEBI CVO. 

But let's go back to Jerome Alexander and the Pyramid Saimira for a moment. This a curious investigation which started with a bang, with excellent work by Dr Pradnya Sarvade, an IPS officer who had taken over as head of SEBI's investigation. It dates back to December 2008, when PS Saminathan, chairman of Pyramid Saimira received a letter from SEBI asking him to make an open offer for 20% of the floating stock at not less than Rs250 a share within 14 days while the ruling market price was only Rs 70 then. This followed Mr Saminthan's decision to acquire 25% stake held by two co-promoters, one of whom being Nirmal Kotecha, a stockbroker. But the investigation quickly fizzled off and turned lop sided to the point where Pyramid Saimira, a profitable, listed company is being liquidated (rather than forcing a change in management) thereby causing losses to tens of thousand shareholders and employees. On the other hand, Nirmal Kotecha, a notorious speculator and a self-confessed admirer the late scamster Harshad Mehta, is still scot free, while the involvement of its own officials has been kept suppressed until today. 

The other two cases that the minister mentions in his reply to the parliament question is that of Rajesh Pratap Singh, another assistant general manager at Kolkata, who was caught by the Central Bureau of Investigation (CBI) accepting a bribe. According to the minister, two cases have been registered against him-for possession of disproportionate assets and for accepting a bribe. 

Mr Chandrashekhar's question to the ministry of finance, based on Moneylife reports was simple: "Whether any investigations have been conducted into the allegations of irregularity, bribery and corruption by the staff" at SEBI. Minister of state for finance Namo Narian Meena responded by giving three examples (Read the PDF document here).
The more recent case is the one involving Avarjeet Singh, a deputy general manager, who was also caught by the CBI for accepting a bribe and is now on bail (Bribery: SEBI must show good governance). Here too, we had learnt that the CBI may broaden investigation to nearly a score of entities that were part of the same investigation and order, where Mr Singh had demanded a bribe. 



-- Sucheta Dalal