Sucheta Dalal :Ketan's profits
Sucheta Dalal

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Ketan's profits  

Dec 4, 2005

In a mockery of the justice system, scamster Ketan Parekh has been diligently earning and paying back a hefty Rs 15 crore per month to the Gujarat Based Madhavpura Mercantile Cooperative Bank (MCCB) under Supreme Court ordered bail conditions. He has already paid back over Rs 169 crore so far, which leads to the reasonable assumption that his income must be significantly higher. Market sources say that he has even paid back all his off-market liabilities. This income is far more than what an average businessman earns in a lifetime of hard work and paying taxes; even for a big market operator in a strong bull market, the income is extraordinary. In this case, there is a bigger hitch. The Securities and Exchange Board of India (Sebi) has barred Ketan Parekh ‘‘from buying, selling or dealing in securities in any manner directly or indirectly’’ and also debarred him ‘‘from associating with the securities market, for a period of fourteen years’’. How then did Parekh earn this enormous profit? Income Tax officials and the Central Bureau of Investigation (CBI) are trying to find answers. Parekh’s lawyers reportedly argued before the court that the source of his money in immaterial so long as he fulfills his bail conditions. Investigation officials say that Parekh’s funds have emanated from scores of companies including investment companies but cannot say how the money was earned. Meanwhile, it is common market knowledge that the broker operates out of a Nariman Point office that is a stone’s throw away from Sebi’s headquarters. This time he is a big player is the derivatives segment especially the individual stock futures. This only shows that Sebi’s stringent sounding orders have neither bark nor bite because there is little action based on market intelligence. Unless Sebi intervenes in the Supreme Court proceedings and investigates Parekh’s income source he will keep earning while he remains officially banned from the market for at least another decade.


Fighting for the spoils


While Ketan Parekh has paid MMCB over Rs 169 crore in order to remain out of jail, it is Bank of India (BOI), to which he owes over Rs 120 crore that actually has a recovery order against him from the Debt Recovery Tribunal (DRT). The story began in the year 2001 when thousands of depositors of Gujarat-based co-operative banks lost their life’s savings after MMCB collapsed under the burden of Ketan Parekh siphoning off a whopping Rs 880 crore in connivance with the MMCB management. His cronies, Mukesh Babu and Shirish Maniar and owe another Rs 225.63 crore and Rs 19 crore respectively to MMCB, which the authorities are in no hurry to recover. BOI suffered a loss when it discounted a Rs 137 crore payorder of MMCB that was dishonoured for lack of funds. Bank officials tell me that in various court submissions, both MMCB and Ketan Parekh have admitted their liability to BOI (he still owes the bank over Rs 124 crore). Since BOI has a recovery order from the DRT, its logic is simple: ‘‘one conspirator is paying another conspirator, while BOI is the admitted victim and so it should have first right to the money’’. The next hearing of the MMCB case is in January, when MMCB apparently plans to contest BOI’s claim on the humanitarian plea that small depositors’ interests should be given a priority.


Doshi of Jermyn Capital


On November 20, 2005 this column first exposed how Dharmesh Doshi, a close associate and employee of Ketan Parekh, who has an Interpol alert against him, is merrily running a company called Jermyn Capital that is based in London. This company has helped many Indian companies raise Foreign Currency Convertible Bonds (FCCB) and is even registered as a Foreign Institutional Investor (FII) in India. The Interpol alert on Dharmesh Doshi is extremely sketchy and the CBI doesn’t even respond to emails offering information on his whereabouts. However, officials tell us that in a recent development Dharmesh Doshi’s passport has been cancelled. The agency is now understood to be making attempts to revoke his visa and force him to return to India for trial. Doshi fled the country in 2002 when a case against him had come up for hearing. As mentioned earlier, Jermyn Capital is also registered with the Financial Services Authority (FSA) of London, whose website lists him as the compliance officer of Jermyn, without any attempt to check his antecedents. The question is: what is SEBI doing in the matter?


Know Your Scamster?


A top surveillance source tells us that there is no way that stock exchanges or SEBI can plead ignorance about the operations of a notorious market operator. Transactions that generate profits in excess of Rs 15 crore a month cannot be done by placing individual orders through brokers; it is only possible when brokers lend their trading terminals to the broker to conduct his own trades. Since the address from where he operates is fairly well known, it is simple enough for stock exchanges to find out which brokerage firms have VSAT terminals at that location. The problem is that neither bourses, nor the regulator, or even investigation agencies have made a serious attempt to get at the truth.







-- Sucheta Dalal