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3 NRIs convicted for 300 million pounds global fraud

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April 24, 2008 10:07 IST

Three Indian-origin businessmen  who swindled banks in Britain and the United States of more  than 300 million pounds by pretending to run a worldwide metal trading empire have been found guilty and face a long term in jail.

Virendra Rastogi (39), Anand Jain (43) and Gautam  Majumdar (57), ex-directors of metal trading business RBG  Resources, were convicted at London's Southwark Crown Court of conspiracy to defraud and remanded to custody this week.

Judge James Wadsworth told the three they could expect  'long prison terms' when he sentences them on June 5. The conviction came at the end of a long drawn out  international investigation. When investigators from the Serious Fraud Office swooped on Rastogi in his Mayfair apartment here in 2002, he was found shredding wads of documents.

For six years, Rastogi reportedly conned banks into funding non-existent metal trading deals using 324 fake companies that turned out to be based in small flats and shops, with few assets beyond a table and chair.

The address of one company turned out to be a cowshed in India and another was a launderette in America. Hundreds of millions of dollars and pounds circulated around the globe on the instruction of the conspirators.

"This was a sophisticated and complex enterprise; it  continued for over four years, in increasing amounts and fooled not only the banks (who undertook their own due diligence) but also the auditors," the SFO said after they were convicted.

It was an audacious fraud, underpinned by a very small amount of genuine business, which could be used to give  credence to the wider claims of the businesses, the SFO added.

RBG went in to liquidation in 2002, but in the years before its collapse, it was presented to its bankers, auditors and regulatory exchanges as an aggressively developing and successful business.

"The truth was in stark contrast to this impression. Banks in the UK and elsewhere were persuaded to provide extensive financial facilities to RBG effectively secured against debts due to RBG from sales to customers," the SFO said.

In the event these debts proved valueless as the transactions were not, as the banks believed, with independent third party customers but with companies, controlled by the Rastogi family around the world, it said.

The fraud was discovered during investigations by the liquidators and the SFO, which also involved the Southern District of New York US Attorney's Office and FBI in the USA as well as Department of Justice and Police in Hong Kong.

RBG's sister company Allied Deals which was run by Virendra Rastogi's brother Narendra, comprised the other half of a worldwide fraud, perpetrated for the benefit of the Rastogi family.

RBG obtained funding from banks in UK and Europe, while ADI obtained funds from US banks which was all put into a common 'pot' for the use of the conspirators to support their own lifestyles.

The SFO termed the case as a 'huge enquiry' that required worldwide investigations and the co-operation of the governments of a number of jurisdictions.

Vast quantities of documents and electronic material were inspected, reviewed and analysed, including a warehouse of material from Hong Kong and at least 2000 boxes of material from the USA.

Prasun Sonwalkar in London
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