By the book – Legal Fraud !

How do u cheat people legally and still be known as esteemed respectable citizens ? Baffled ? learn from the masters…

In America the honchos of Enron and a few other firms did it but atleast they were caught by the SEC and made to pay some price – even if they were let off relatively lightly in comparison to say China where such an offence with such a large magnitude would mean Death sentence..

But this is India – Anything goes. Nehru once said something about hanging every corrupt official by the nearest lamp pole. Well it was just wishful thinking …

Some business families here have made it a sort of Art to skim profits from cos and cheat investors… All u need is to pay off and be in the good books of some politicians to keep the state machinery at bay. Top executives of Financial Institutions could be paid or coerced to get ur loans sanctioned and later to set things right through favorable one time settlements.

The punishment for economic offenses that ruin thousands of peoples lives is negligible, that is if the offender doesn’t die before the case is settled in the Courts. In comparison even if u get dutiable goods inside this country then u can face the wrath of the Customs DRI etc which is much more severe as Mr Bachan must have faced.

In the early 1990s during the mania of the opening up of primary market , the group quickly raised large sums of public money in multiple companies.Not only them but there are so many companies that floated shares and simply disappeared leaving people clutching share certificates and cursing their fate.

This was repeated with the NBFC, Fixed deposit and Debenture scams in the late 90s wherein small cos took middle class depositors for a ride by giving large commissions to agents to push their deposits resulting in them loosing their deposits or getting repayments after a decade of … Lloyds finance, Alpic Finance, Rossel or Ross Murarka Finance, CRB are just a few of them.

There were also the Plantation Co scams like Anubhav bond wherein the deposits were supposedly to be used to plant trees – timber etc promising returns of 24+% and lest i forget there were the Holiday co scams too…

Now for the ones that do it legally.

We all know the Essar group (Ruias), the Ispat Group and the Sterlite group and how seriously they take Investor Interests into account.They are a classic case on how you should defraud ur gullable small investors… legally.

Lets take the case of the Ruias or the Essar groupThey built their companies like Essar Oil and Essar Steel using public funds and funds from Financial Institutions like Ifci and Uti etc. They managed through good political connections to stay above water and manage getting their debts with the FIs, annulled at very favorable terms incurring losses to small investors(including me) and these institutions.

The funds were often diverted to incubate new projects; some of these were started in the listed companies and then spun off, others were set up as unlisted entities.

Not only that they played every dirty card in the book – not declaring dividends, not sending investors Annual reports vital notices and disclaimers etc

Now when the economic cycle has turned, and everything looks rosy they find it hard to share the gains with those small investors that stuck by through thick and thin and they are delisting the stocks at peanuts. Those investors who held on during difficult times when the stocks quoted in single digits seem cheated and lost.

Thus the lesson to be learnt here is first Caveat Emptor and avoid greed and keep away from Rogue Managements. Second regulators dont wake up till the very last moment and seldom tell you the truth.The legal system is just not upto the mark and most fraudsters mange to escape. Lastly politicians are somehow mixed up in this – not convinced ? Try this link


4 thoughts on “By the book – Legal Fraud !

  1. I really don’t understand why these people should do something illegal, when they can and are making a lot of money legally. Just doesn’t make sense…
    And what is exactly the illegality or the game in the delisting of Essar Steel? It has been approved by the court, so obviously there is some strength in the company’s position.
    (nursing a sore rear having sold ESTL @ 22K loss)

    legal fraud is it not what this article all about ? it all comes down to greed
    they the ruias have cheated investors taking advantage of laws put in place without adequate consideration or thought – it is not strictly illegal but downright unethcal n immoral
    sorry ram- but when u play wt fire u can get burnt and this time u have
    learn ur lessons blame yourself for ur stupidity and move on

  2. the company goes for IPO because it wants to raise money to invest…
    now isn’t it the responsibility of the company to thank the investors who sticked with it during the tough time?

    thats why delisting is illegal…

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