What dictionaries say about scam:

1. A ploy by a shyster to raise money.

2., A fraudulent business scheme. To scam means to victimize: deprive of by deceit; "He swindled me out of my
inheritance"; "She defrauded the customers who trusted her"; "the cashier gypped me when he gave me too little
change"

3. A confidence trick, confidence game, or con for short (also known as a scam) is an attempt to
intentionally mislead a person or persons (known as the mark) usually with the goal of financial or other
gain. The confidence trickster, con man, scam artist or con artist often works with an accomplice called
the shill, who tries to encourage the mark by pretending to believe the trickster.

Financial scams have a habit of cropping up with an alarming regularity in the Indian financial system. We have
reconciled to financial irregularities to such an extent that we simply do not pay heed to smaller scams that take
place around us on a daily basis. I am, or rather was, a part of the financial machinery for a few years, and trust
me, even the private sector is not entirely free of the machinations of unscrupulous and enterprising scamsters.
The scope of the money involved multiplies manifold in the public sector, with a corresponding drop in
accountability.

Despite a plethora of scams that surround us on a daily basis, frequently scams of large proportions come to light,
and manage to stun even our jaded sensibilities. Then, there is the usual round of allegations, counter-allegations,
enquiries and legislation. Some of our most notable regulations and financial institutions are the results of such
scams.

Insurance Scam – This scam had originated and prospered in the period immediately following Independence in
1947. At that time, the insurance sector was not nationalized, and a handful of private companies ruled the roost. 
These companies were more concerned with providing benefits to selected industrialists, and ignored the interests
of the common man. The government responded by nationalizing the insurance sector, and the LIC was founded
under an special Act passed by the Parliament. This scam laid the foundation of the nationalization culture in India.

Securities Scam – Harshad Mehta – This is perhaps the most well known of all financial scams – probably because it
happened in a highly visible period – economic reforms had just been started in 1991. Harshad Mehta was quick to
understand the weaknesses of the banking system, and exploited these weaknesses to the hilt. He managed to
procure huge amounts of money using the so called “Ready Forward” deals, and used this money to purchase large
amounts of shares at hugely inflated prices. He earned the sobriquet of “Big Bull” due to this penchant. Later, the
banks got a clue of his shady deals, and demanded their money back. The house of cards collapsed, and the rest, as
they say, is history!

CRB Scam – This scam took place in the years 1992-1996, the period immediately following the Harshad Mehta
fallout. This makes the scam even all the more daring and surprising. CR Bhansali, the perpetrator of this scam,
floated more than 100 companies, such as CRB Mutual Funds and CRB Capital Markets. The primary purpose of
these companies was to attract huge funds from the public by promising high rates of interest. This interest was
later paid form further borrowings, and so on.  In 1995, the stock market collapsed, and this proved to be the
undoing of CR Bhansali. He was investigated, and later arrested. After a brief 3-month stint in jail, he has
disappeared without a trace, and nobody is asking!

UTI Scam – The UTI scam involved the flagship US-64 scheme of UTI, which was meant to channel the funds of
small investors into instruments bearing high returns. Gradually, US-64 developed a investor base of around 2
crore investors. The economic liberalization in India, coupled with the absolute opacity in the operations of UTI, led
to a situation wherein the Government was forced to announce a huge bailout of about Rs 3,500-4,000 crores in an
order to prevent default in payments to the investors. The consequences of such a situation are unimaginable. But
the story does not end here. Later, it turned out that the UTI Chairman appointed at this time, Mr P S
Subramanyam, along with a couple of executive directors, acted wrongly to selectively benefit a powerful coterie
of brokers and industrialists, while at the same time, jeopardizing the interest of lakhs of small investors.

Home Trade – Around the year 2000, a finance portal emerged on the financial landscape, and gained quick
recognition on the back of endorsements by personalities like Hrithik Roshan, Sachin Tendulkar and Shahrukh
Khan. The portal, owned by Sanjay Agarwal, claimed to deal in gilts. Soon, RBI got suspicious of activities of some
cooperative banks in the gilt market, and a scam was uncovered. The same old saga – brokers and bankers
combining to rob people of their hard earnings – was repeated. Funds from Seaman’s Provident Fund and PPF
were affected. The total scam size was reported to be around Rs 300 crores, and more than Rs 200 crores were
spent on publicity costs alone.

Securities Scam – Ketan Parekh – That our system never learns its lessons was proved by this scam. Ketan Parkekh,
a qualified CA, and a stock broker, identified a number of stocks (popularly called the K-10), and took up huge
positions in these. For this purpose, he used a large number of Benami accounts and smaller stock exchanges, such
as the Kolkata and Ahmedabad stock exchanges. He also borrowed heavily from banks such as Global Trust Bank
and Madhavpura Mercantile Cooperative Bank. Unfortunately, he was stuck in a bear cartel, and was soon
pounded to pulp on the stock exchange. The extent of the scam was estimated to be around Rs 1,500 crores.

Fake Stamp Papers – This scam promised to be the mother of all scams in India, with the initial reports quoting a
figure of Rs 30,000 crores as the scam size. Later, RBI clarified that this figure was “rather exaggerated”, and the
“correct” figure was around Rs 200 crores. Again, this scam exposes how the India system works – Mr Abdul Karim
Telgi, the scam kingpin, paid bribes to get access to the security press in Nasik, where stamp papers and currency
notes are printed. He later used this knowledge to print fake stamp papers. At the height of the scam, Telgi’s
network spanned 14 states, 125 banks and more than 1,000 employees.

DSQ Software – Though this scam was modest in terms of money involved (only Rs 600 crores!), and did not affect
the general public to a great extent, yet it is notable for how it came into being. The main player in the scam was
Mr Dinesh Dalmia, who was the MD of DSQ Software Ltd. This company issued around 1.3 million shares in 2001,
and these shares were allotted to four companies on a preferential basis. NSDL, a stock depository, dematerialized
and helped in delivering the shares. Nothing wrong in that, except that the shares were not even listed on any
stock exchange! Oops!

IPO Scam – A number of key operators, including corporate stock brokers such as Karvy and Indiabulls, were
involved in the IPO scam that spanned the years 2004 – 2005. The modus operandi was simple – the operators
would open thousands of fake accounts to purchase shares in IPOs, in the hope of selling later at huge profits. A
spate of IPOs issued during this period were heavily oversubscribed due to this scam, sometimes by as much as 40
times!

Satyam – On a cold January morning in 2009, Ramalinga Raju, chairman of Satyam Computer Services, admitted to
falsification in the company accounts and various other irregularities, and sent a chill down the collective spine of
the Indian financial system. Coming on the back of the global recession, this incident promised to bust the Indian
outsourcing industry and the stock market, but for some deft bailout work by the government. The matter is still
under investigation and litigation, and the true extent of the scam will be known in the future, perhaps. Mr Raju
himself had admitted to irregularities worth around Rs 12,000 crores.

An analysis of the scams reveals a common script  – greed, corruption, unscrupulous brokers, colluding bankers,
irresponsible authorities and hapless investors, who refuse to learn their lessons. But then, these are the essential
ingredients of a worthy financial scam!
2. Harshad Mehta

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

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

Taking advantages of the loopholes in the banking system, Harshad and his associates triggered a securities
scam diverting funds to the tune of Rs 4000 crore (Rs 40 billion) from the banks to stockbrokers between April
1991 to May 1992.

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.

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.

He was later charged with 72 criminal offences.

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.

3. Ketan Parekh

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.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.
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).

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.
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.

4. C R Bhansali

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

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.

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.

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.

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

5. Cobbler scam

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.

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.

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.

6.IPO Scam
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.

It also banned 85 financiers from capital market activities.

Suzlon Energy Ltd's Rs 1,496.34 crore (Rs 14.963 billion) public issue (September 23-29, 2005). The retail portion
was oversubscribed 6.04 times and the non-institutional portion was oversubscribed 40.27 times. Key operators
used 21,692 fictitious accounts to corner 323,023 shares representing 3.74 per cent of the total number of
shares allotted to retail individual investors.

Jet Airways's Rs 1,899.3 crore (Rs 18.993 billion) public offer (Feb 18-24, 2005). The retail portion was subscribed
2.99 times and the non-institutional portion by 12.5 times. Key operators used 1186 fake accounts for cornering
20,901 shares repersenting 0.52 per cent of the total number of shares allotted to retail investors.

National Thermal Power Corporation Ltd's Rs 5,368.14 crore (Rs 53.681 billion) IPO (Oct 7-14, 2004). The retail
portion was oversubscribed 3.73 times and the non-institutional portion by 11.93 times. Key operators used a
total of 12,853 afferent accounts for cornering 2,750,730 shares representing 1.3 per cent of the total number of
shares allotted to retail investors.

Tata Consultancy Services's Rs 4,713.47 crore (Rs 47.134 billion) public offer (Aug 19-23, 2004). The retail portion
was oversubscribed 2.86 times and the non-institutional portion by 19.15 times. Key operators used 14,619
'benami' accounts to corner 261,294 shares representing 2.09 per cent of the total shares allotted to retail
individual investors.

Patni Computer System Ltd's Rs 430.65 crore (Rs 4.306 billion) public issue (Jan 27-Feb 5 2004). The retail portion
was oversubscribed 9.36 times and the non-institutional portion by 39.22 times. A lone key operator used 2541
afferent account for cornering 127,050 shares representing 2.71 per cent of the total number of shares allotted
to retail investors.

7. Dinesh Dalmia

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

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.

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

8. Abdul Karim Telgi

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

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

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 171.33 crore (Rs 1.71 billion), it was initially pegged to be Rs
30,000 crore (Rs 300 bilion), which was later clarified by the CBI as an exaggerated figure.

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

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

Telgi's networked spread across 13 states involving 176 offices, 1,000 employees and 123 bank accounts in 18
cities.

9.Virendra Rastogi

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

He was also involved in the duty-drawback scam to the tune of Rs 43 crore (Rs 430 milion) in India.
The CBI said that five companies, whose directors were the four Rastogi brothers -- Subash, Virender, Ravinde
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.

10. The UTI Scam

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'.

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.

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.

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.

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

11. Uday Goyal

Uday Goyal, managing director of Arrow Global Agrotech Ltd, was yet another fraudster who cheated investors
promising high returns through plantations. Goyal conned investors to the tune of over Rs 210 crore (Rs 2.10
billion). He was finally arrested.

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

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

12. Sanjay Agarwal

Home Trade had created waves with celebrity endorsements.

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.

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

Co-operative banks and brokers acted in collusion in abid 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.

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.

Harshad Shantilal Mehta the rise in the Bombay Stock Exchange in the year 1992. Exploiting several loopholes in
the banking system, Mehta and his associates siphoned off funds from inter-bank transactions and bought shares
heavily at a premium across many segments, triggering a rise in the BSE Sensex. When the scheme was exposed,
the banks started demanding the money back, causing the collapse. He was later charged with 72 criminal offenses
and more than 600 civil action suits were filed against him. He died in 2002 at the age of 47 with many litigations
still pending against him.

Early life

Harshad Shantilal Mehta was born on 29 July in a Gujarati Jain family of modest means. His early childhood was
spent in Mumbai(Kandivali) where his father was a small-time businessman. Later, the family moved to Raipur in
Chattisgarh after doctors advised his father to move to a drier place on account of his indifferent health. He studied
in Holy Cross Higher Secondary School, Byron Bazar,Raipur, but Raipur could not hold back Mehta for long and he
was back in the city after completing his schooling. –––

Stock Market Scandal

Mehta gradually rose to become a stock broker on the Bombay Stock Exchange and lived almost like a movie star
in a 15,000 square feet apartment, which had a swimming pool as well as a golf patch. He also had a taste for
flashy cars, which ultimately led to his downfall. The year was 1990. Years had gone by and the driving ambitions of
a young man in the faceless crowd had been realised. Harshad Mehta was making waves in the stock market. He
had been buying shares heavily since the beginning of 1990. The shares which attracted attention were those of
Associated Cement Company (ACC). The price of ACC was bid up to Rs 10,000. For those who asked, Mehta had the
replacement cost theory as an explanation. The theory basically argues that old companies should be valued on
the basis of the amount of money which would be required to create another such company.

Through the second half of 1991, Mehta was the darling of the business media and earned the sobriquet of the ‘Big
Bull’, who was said to have started the bull run. But, where was Mehta getting his endless supply of money from?
Nobody had a clue.

On April 23, 1992, journalist Sucheta Dalal in a column in The Times of India, exposed the dubious ways of Harshad
Metha. The broker was dipping illegally into the banking system to finance his buying.

“In 1992, when I broke the story about the Rs 600 crore that he had swiped from the State Bank of India, it was his
visits to the bank’s headquarters in a flashy Toyota Lexus that was the tip-off. Those days, the Lexus had just been
launched in the international market and importing it cost a neat package,” Dalal wrote in one of her columns
later.

The authors explain: “The crucial mechanism through which the scam was effected was the ready forward (RF)
deal. The RF is in essence a secured short-term (typically 15-day) loan from one bank to another. Crudely put, the
bank lends against government securities just as a pawnbroker lends against jeweller. The borrowing bank actually
sells the securities to the lending bank and buys them back at the end of the period of the loan, typically at a
slightly higher price.”

It was this ready forward deal that Harshad Mehta and his cronies used with great success to channel money from
the banking system.

A typical ready forward deal involved two banks brought together by a broker in lieu of a commission. The broker
handles neither the cash nor the securities, though that wasn’t the case in the lead-up to the scam.

“In this settlement process, deliveries of securities and payments were made through the broker. That is, the seller
handed over the securities to the broker, who passed them to the buyer, while the buyer gave the cheque to the
broker, who then made the payment to the seller.

In this settlement process, the buyer and the seller might not even know whom they had traded with, either being
known only to the broker.”

This the brokers could manage primarily because by now they had become market makers and had started trading
on their account. To keep up a semblance of legality, they pretended to be undertaking the transactions on behalf
of a bank.

Another instrument used in a big way was the bank receipt (BR). In a ready forward deal, securities were not
moved back and forth in actuality. Instead, the borrower, i.e. the seller of securities, gave the buyer of the
securities a BR.

As the authors write, a BR “confirms the sale of securities. It acts as a receipt for the money received by the selling
bank. Hence the name - bank receipt. It promises to deliver the securities to the buyer. It also states that in the
mean time, the seller holds the securities in trust of the buyer.”

Having figured this out, Mehta needed banks, which issue fake BRs, or BRs not backed by any government
securities. “Two small and little known banks - the Bank of Karad (BOK) and the Metropolitan Co-operative Bank
(MCB) - came in handy for this purpose. These banks were willing to issue BRs as and when required, for a fee,” the
authors point out.
Once these fake BRs were issued, they were passed on to other banks and the banks in turn gave money to Mehta,
obviously assuming that they were lending against government securities when this was not really the case. This
money was used to drive up the prices of stocks in the stock market. When time came to return the money, the
shares were sold for a profit and the BR was retired. The money due to the bank was returned.

The game went on as long as the stock prices kept going up, and no one had a clue about Mehta’s modus operandi.
Once the scam was exposed though, a lot of banks were left holding BRs which did not have any value - the
banking system had been swindled of a whopping Rs 4,000 crore. When the scam was finally revealed, the
Chairman of the Vijaya Bank committed suicide by jumping from the office roof because he knew that if people
come to know about his involvement in issuing cheques to Harshad Mehta, people would accuse him.

Mehta made a brief comeback as a stock market guru, giving tips on his own website as well as a weekly
newspaper column. This time around, he was in cahoots with owners of a few companies and recommended only
those shares. This game, too, did not last long.[1]

Interestingly, by the time he died, Mehta had been convicted in only one of the many cases filed against him.

Till now, the real story behind the entire scam is unknown. The recent Hindi movie 'Gafla' showed this scam in a
different perspective.[2]

Ketan Parekh is a Mumbai based share and stock broker. He is from a well to do share-brokerage based family. He was
involved in the shares scam of the year 2000/01.
Modus Operandi
Companies when raising money from the stock market rope in brokers to back them in raising the share price. Ketan
formed a network of brokers from smaller exchanges like the Allahabad Stock Exchange and the Calcutta Stock Exchange.
Ketan also used benami or share purchase in the name of poor people living in the shanty towns of Mumbai. Ketan's rise
to fame occurred at the same time as the worldwide dot-com boom (1999-2000) and he relied primarily on the shares of
ten companies for his dealings (now known infamously as the K-10 scrips).
Ketan had large borrowings from Global Trust Bank, whose shares he was ramping up (so that he could get a good deal
at the time of its merger with UTI Bank) – he got Rs 250 crore loan from Global Trust Bank, though Global Trust’s
chairman Ramesh Gelli (who was later asked to quit) repeatedly said that lending to Ketan was less than Rs 100 crore in
keeping with Reserve Bank of India norms. Ketan and his associates got another Rs 1,000 crore from the Madhavpura
Mercantile Co-operative Bank despite the fact that RBI regulations ruled that the maximum a broker could have got as a
loan was Rs 15 crore.
Thus, Ketan’s modus operandi was clearly to ramp up shares of select firms in collusion with the promoters – ironically,
during the Ketan clean up, SEBI concluded a 3-year old case where Harshad Mehta colluded with the managements of
BPL, Sterlite and Videocon to ramp up their shares with money provided by these managements – and to get funding
from them to do this. In the current Ketan case, SEBI has found prima facie evidence of price rigging in the scrips of
Global Trust Bank, Zee Telefilms, HFCL, Lupin Laboratories, Aftek Infosys and Padmini Polymer.
Ketan's endgame
Now with the prices of select shares constantly going up,thanks largely to this rigging,innocent investors who bought
such shares thinking the market as genuine,were at loss. Soon after discovery of this scam,the prices of these stocks
came down to the fraction of the values at which they were bought.
The scam burst and the rigged shares came down so heavily that quite a few people in India lost their savings. Some
banks including Bank of India lost money heavily.
At this time a group of traders (known as the bear cartel-Shankar Sharma, Anand Rathi, Nirmal Bang) relied on the global
meltdown of stocks to make their profits. Bears sell stocks at high prices and buyback at low prices. At the time of the
year 2000 Financial Budget this cartel placed sell orders on the K-10 stocks and crushed their inflated prices. All the
borrowing of Ketan’s could not rescue his scrips. The Global Trust Bank and the Madhavpura Cooperative went bust
because the money they had lent to Ketan had sunk with his K-10 stocks..
The information which was furnished by the Reserve Bank of India to the Joint Parliamentary Committee (JPC),during the
investigation of the scam revealed that Financial institutions Industrial Development Bank of India (IDBI Bank) and
Industrial Finance Corporation of India (IFCI) had extended loans of Rs 1,400-odd crore to companies known to be close
to broker Ketan Parekh.
Ketan Parekh was later arrested on December-2,2002 in kolkata.

_____________________________________________________________________________________________

HM

Mr Mehta and his brothers were arrested by the CBI on November 9 for allegedly ``misappropriating (in 1992)
more than 27 lakh shares of about 90 companies, including Sensex heavyweights such as ACC and Hindalco,
through forged share transfer forms.'' The total value of the shares was placed at Rs 250 crore. The two brothers
have been granted temporary bail for five days following the death of Mr Harshad Mehta.

Mr Harshad Mehta started his career as an employee of New India Assurance Company but later quit the job to
play the stock market. By 1991, Mr Mehta had become the most recognisable and revered icon of the stock
market. Considered a financial genius by many, he was nicknamed the Big Bull who single-handedly decided the
course the markets would ply.

At the peak of his glory, Mr Mehta lived in a 15,000 sq.ft. house with its private swimming pool and golf patch. His
lavish lifestyle and flashy cars were the stuff known only of movie stars.

His ``bull'' run, however, ended in April 1992 when the stock market scam broke out bringing down in its wake
several financial entities and causing despair to millions of investors. The man who was singularly credited with the
rise of the market was also squarely blamed for the crash.

Mr Mehta's fall from grace was as fast as his meteoric rise. Investigations revealed that his ``unending resources''
were actually siphoned off from the banking system. According to investigators, he had devised an ingenious way
of using bank receipts to feed the stock market frenzy.

He was arrested and banished from the stock market with investigators holding him responsible for causing a loss
of more than Rs 4,000 crore to various entities.

Mr Mehta again raised a furore in 1995 when he made a public announcement that he had paid Rs 1 crore to the
then Congress President and Prime Minister, Mr P.V. Narasimha Rao, as donation to the party for getting him ``off
the hook.''

The decade-long tug of war with the law that started in 1992 was continuing when Mr Mehta died. He had
altogether 28 cases registered against him. The trial of all except one, are still continuing in various courts in the
country. Market watchdog, Securities and Exchange Board of India, had recently banned him for life from stock
market-related activities.

Mr Mehta perhaps had as many admirers as critics. If he was loathed by some, he was revered by many. But
almost all of them admit that he caused a ``change'' in the Indian stock market, permanently.
Family: Gujarati Jain family

Father : Mr Shantilal Mehta  , a small businessman

 Harshad Mehta‘s childhood was spent in Mumbai … Later, the family moved to Raipur , Madhya Pradesh.
Somehow Harshad Mehta did not find his future in Raipur and could not stay away from Mumbai’s shiny life style.

 After coming to Mumbai Harshad Mehta  joined his 1st job as dispatch clerk in the New India Assurance Company.
But his 1st love is always Stock market.

 Harshad Mehta’s first love was stock exchange. During his work at new india insurance he  has started investing in
stock market with his brother Ashwin Mehta. And after sometimes he has managed to get BSE broker’s card. Who
knows at that time that it was starting of great Indian scam!!

Growth period of Big Bull:

After investing in stock exchange Harshad Mehta found some wrong patter on trades in stock exchange. He found
that companies are not rising and falling as oer their fundamentals, and he started manipulating one stock named
ACC. It was rising , rising and rising only. But Harshad Mehta had reason for all the questions for its rising. Its
“Replacement Price Theory”. He was successful in explaining this theory to Indian public.

But the fact had another side too. Mr Mehta started buying this ACC at mid 1990 and then he made it public.  It
was Harshad Mehta’s  trademarked style. He used to study fundamentals, he used to buy in big quantity and then
he used to make is public. And demand of that stock used to rise like anything after recommendation of this Big
Bull !!

Harshad Mehta
Harshad Mehta was an Indian stockbroker caught in a scandal beginning in 1992. He died of a massive heart attack in
2001, while the legal issues were still being litigated. Early life
Harshad Shantilal Mehta was born in a Gujarati jain family of modest means. His father was a small businessman. His
mother's name was Rasilaben Mehta. His early childhood was spent in the industrial city of Bombay. Due to indifferent
health of Harshad?s father in the humid environs of Bombay, the family shifted their residence in the mid-1960s to
Raipur, then in Madhya Pradesh and currently the capital of Chattisgarh state.
An Amul advertisement of 1999 during the conterversy over MUL saying it as "The Big Bhool" (Bhool in Hindi means
Blunder)
He studied at the Holy Cross High School, located at Byron Bazaar. After completing his secondary education Harshad left
for Bombay. While doing odd jobs he joined Lala Lajpat Rai College for a Bachelor?s degree in Commerce.
After completing his graduation, Harshad Mehta started his working life as an employee of the New India Assurance
Company. During this period his family relocated to Bombay and his brother Ashwin Mehta started to pursue graduation
course in law at Lala Lajpat Rai College. His youngest brother Hitesh is a practising surgeon at the B.Y.L.Nair Hospital in
Bombay. After his graduation Ashwin joined (ICICI) Industrial Credit and Investment Corporation of India. They had
rented a small flat in Ghatkopar for living.
In the late seventies every evening Harshad and Ashwin started to analyze tips generated from respective offices and
from cyclostyled investment letters, which had made their appearance during that time.
In the early eighties he quit his job and sought a job with stock broker P. Ambalal affiliated to Bombay Stock Exchange
(BSE) before becoming a jobber on BSE for stock broker P.D. Shukla.
In 1981 he became a sub-broker for stock brokers J.L. Shah and Nandalal Sheth. After a while he was unable to sustain
his overbought positions and decided to pay his dues by selling his house with consent of his mother Rasilaben and
brother Ashwin. The next day Harshad went to his brokers and offered the papers of the house as guarantee. The
brokers Shah and Sheth were moved by his gesture and gave him sufficient time to overcome his position.
After he came out of this big struggle for survival he became stronger and his brother quit his job to team with Harshad
to start their venture GrowMore Research and Asset Management Company Limited. While a brokers card at BSE was
being auctioned, the company made a bid for the same with financial assistance from Shah and Sheth, who were
Harshad's previous broker mentors.
He rose and survived the bear runs, this earned him the nickname of the Big Bull of the trading floor, and his actions,
actual or perceived, decided the course of the movement of the Sensex as well as scrip-specific activities. By the end of
eighties the media started projecting him as "Stock Market Success", "Story of Rags to Riches" and he too started to fuel
his own publicity. He felt proud of this accomplishments and showed off his success to journalists through his mansion
"Madhuli", which included a billiards room, mini theatre and nine hole golf course. His brand new Toyota Lexus and a
fleet of cars gave credibility to his show off. This in no time made him the nondescript broker to super star of financial
world.
During his heyday, in the early 1990s, Harshad Mehta commanded a large resource of funds and finances as well as
personal wealth.
The fall
In April 1992, the Indian stock market crashed, and Harshad Mehta, the person who was all along considered as the
architect of the bull run was blamed for the crash. It transpired that he had manipulated the Indian banking systems to
siphon off the funds from the banking system, and used the liquidity to build large positions in a select group of stocks.
When the scam broke out, he was called upon by the banks and the financial institutions to return the funds, which in
turn set into motion a chain reaction, necessitating liquidating and exiting from the positions which he had built in
various stocks. The panic reaction ensued, and the stock market reacted and crashed within days.He was arrested on
June 5, 1992 for his role in the scam.
His favorite stocks included
? ACC
? Apollo Tyres
? Reliance
? Tata Iron and Steel Co. (TISCO)
? BPL
? Sterlite
? Videocon.
The extent
The Harshad Mehta induced security scam, as the media sometimes termed it, adversely affected at least 10 major
commercial banks of India, a number of foreign banks operating in India, and the National Housing Bank, a subsidiary of
the Reserve Bank of India, which is the central bank of India.
As an aftermath of the shockwaves which engulfed the Indian financial sector, a number of people holding key positions
in the India's financial sector were adversely affected, which included arrest and sacking of K. M. Margabandhu, then
CMD of the UCO Bank; removal from office of V. Mahadevan, one of the Managing Directors of India?s largest bank, the
State Bank of India.
The Central Bureau of Investigation which is India?s premier investigative agency, was entrusted with the task of
deciphering the modus operandi and the ramifications of the scam. Harshad Mehta was arrested and investigations
continued for a decade. During his judicial custody, while he was in Thane Prison, Mumbai, he complained of chest pain,
and was moved to a hospital, where he died on 31st December 2001.
His death remains a mystery. Some believe that he was murdered ruthlessly by an underworld nexus (spanning several
South Asian countries including Pakistan). Rumour has it that they suspected that part of the huge wealth that Harshad
Mehta commanded at the height of the 1992 scam was still in safe hiding and thought that the only way to extract their
share of the 'loot' was to pressurise Harshad's family by threatening his very existence. In this context, it might be
noteworthy that a certain criminal allegedly connected with this nexus had inexplicably surrendered just days after
Harshad was moved to Thane Jail and landed up in imprisonment in the same jail, in the cell next to Harshad Mehta's.
Mumbai: Just as the year 2001 was coming to an end, Harshad Shantilal Mehta, boss of Growmore Research and Asset
Management, died of a massive heart attack in a jail in Thane. And thus came to an end the life of a man who is probably
the most famous character ever to have emerged from the Indian stock market. In the book, The Great Indian Scam:
Story of the missing Rs 4,000 crore, Samir K Barua and Jayanth R Varma explain how Harshad Mehta pulled off one of the
most audacious scams in the history of the Indian stock market.
Harshad Shantilal Mehta was born in a Gujarati Jain family of modest means. His early childhood was spent in Mumbai
where his father was a small-time businessman. Later, the family moved to Raipur in Madhya Pradesh after doctors
advised his father to move to a drier place on account of his indifferent health. But Raipur could not hold back Mehta for
long and he was back in the city after completing his schooling, much against his father?s wishes.
Mehta first started working as a dispatch clerk in the New India Assurance Company. Over the years, he got interested in
the stock markets and along with brother Ashwin, who by then had left his job with the Industrial Credit and Investment
Corporation of India, started investing heavily in the stock market.
As they learnt the ropes of the trade, they went from boom to bust a couple of times and survived.
Mehta gradually rose to become a stock broker on the Bombay Stock Exchange, who did very well for himself. At his
peak, he lived almost like a movie star in a 15,000 square feet house, which had a swimming pool as well as a golf patch.
He also had a taste for flashy cars, which ultimately led to his downfall.
? Newsmakers of the week: View Slideshow
?The year was 1990. Years had gone by and the driving ambitions of a young man in the faceless

crowd had been realised. Harshad Mehta was making waves in the stock market. He had been buying shares heavily
since the beginning of 1990. The shares which attracted attention were those of Associated Cement Company (ACC),?
write the authors. The price of ACC was bid up to Rs 10,000. For those who asked, Mehta had the replacement cost
theory as an explanation. The theory basically argues that old companies should be valued on the basis of the amount of
money which would be required to create another such company.
Through the second half of 1991, Mehta was the darling of the business media and earned the sobriquet of the ?Big
Bull?, who was said to have started the bull run. But, where was Mehta getting his endless supply of money from?
Nobody had a clue.
On April 23, 1992, journalist Sucheta Dalal in a column in The Times of India, exposed the dubious ways of Harshad
Metha. The broker was dipping illegally into the banking system to finance his buying.
?In 1992, when I broke the story about the Rs 600 crore that he had swiped from the State Bank of India, it was his visits
to the bank?s headquarters in a flashy Toyota Lexus that was the tip-off. Those days, the Lexus had just been launched in
the international market and importing it cost a neat package,? Dalal wrote in one of her columns later.
The authors explain: ?The crucial mechanism through which the scam was effected was the ready forward (RF) deal. The
RF is in essence a secured short-term (typically 15-day) loan from one bank to another. Crudely put, the bank lends
against government securities just as a pawnbroker lends against jewellery?.The borrowing bank actually sells the
securities to the lending bank and buys them back at the end of the period of the loan, typically at a slightly higher
price.?
It was this ready forward deal that Harshad Mehta and his cronies used with great success to channel money from the
banking system.
A typical ready forward deal involved two banks brought together by a broker in lieu of a commission. The broker
handles neither the cash nor the securities, though that wasn?t the case in the lead-up to the scam.
?In this settlement process, deliveries of securities and payments were made through the broker. That is, the seller
handed over the securities to the broker, who passed them to the buyer, while the buyer gave the cheque to the broker,
who then made the payment to the seller.
In this settlement process, the buyer and the seller might not even know whom they had traded with, either being know
only to the broker.?
This the brokers could manage primarily because by now they had become market makers and had started trading on
their account. To keep up a semblance of legality, they pretended to be undertaking the transactions on behalf of a bank.
Another instrument used in a big way was the bank receipt (BR). In a ready forward deal, securities were not moved back
and forth in actuality. Instead, the borrower, i.e. the seller of securities, gave the buyer of the securities a BR.

As the authors write, a BR ?confirms the sale of securities. It acts as a receipt for the money received by the selling bank.
Hence the name - bank receipt. It promises to deliver the securities to the buyer. It also states that in the mean time, the
seller holds the securities in trust of the buyer.?
Having figured this out, Metha needed banks, which could issue fake BRs, or BRs not backed by any government
securities. ?Two small and little known banks - the Bank of Karad (BOK) and the Metorpolitan Co-operative Bank (MCB) -
came in handy for this purpose. These banks were willing to issue BRs as and when required, for a fee,? the authors point
out.
Once these fake BRs were issued, they were passed on to other banks and the banks in turn gave money to Mehta,
obviously assuming that they were lending against government securities when this was not really the case. This money
was used to drive up the prices of stocks in the stock market. When time came to return the money, the shares were
sold for a profit and the BR was retired. The money due to the bank was returned.
The game went on as long as the stock prices kept going up, and no one had a clue about Mehta?s modus operandi.
Once the scam was exposed, though, a lot of banks were left holding BRs which did not have any value - the banking
system had been swindled of a whopping Rs 4,000 crore.
Mehta made a brief comeback as a stock market guru, giving tips on his own website as well as a weekly newspaper
column. This time around, he was in cahoots with owners of a few companies and recommended only those shares. This
game, too, did not last long.
Interestingly, however, by the time he died, Mehta had been convicted in only one of the many cases filed against him.

KPThe Crash that Shook the Nation

The 176-point1 Sensex2 crash on March 1, 2001 came as a major

shock for the Government of India, the stock markets and the
investors alike. More so, as the Union budget tabled a day earlier
had been acclaimed for its growth initiatives and had prompted a
177-point increase in the Sensex. This sudden crash in the stock
markets prompted the Securities Exchange Board of India (SEBI) to
launch immediate investigations into the volatility of stock markets.
SEBI also decided to inspect the books of several brokers who were
suspected of triggering the crash.

Meanwhile, the Reserve Bank of India (RBI) ordered some banks to

furnish data related to their capital market exposure. This was after
media reports appeared regarding a private sector bank3 having
exceeded its prudential norms of capital exposure, thereby
contributing to the stock market volatility. The panic run on the
bourses continued and the Bombay Stock Exchange (BSE) President
Anand Rathi's (Rathi) resignation added to the downfall. Rathi had
to resign following allegations that he had used some privileged
information, which contributed to the crash. The scam shook the
investor's confidence in the overall functioning of the stock
markets. By the end of March 2001, at least eight people were
reported to have committed suicide and hundreds of investors
were driven to the brink of bankruptcy.
The scam opened up the debate over banks funding capital market operations and lending funds against collateral
security. It also raised questions about the validity of dual control of co-operative banks 4. (Analysts pointed out
that RBI was inspecting the accounts once in two years, which created ample scope for violation of rules.)
The first arrest in the scam was of the noted bull, 5 Ketan Parekh (KP), on March 30, 2001, by the Central Bureau of
Investigation (CBI). Soon, reports abounded as to how KP had single handedly caused one of the biggest scams in
the history of Indian financial markets. He was charged with defrauding Bank of India (BoI) of about $30 million
among other charges. KP's arrest was followed by yet another panic run on the bourses and the Sensex fell by 147
points. By this time, the scam had become the 'talk of the nation,' with intensive media coverage and
unprecedented public outcry.

KOLKATA: Stock broker Ketan Parekh was arrested on Monday by a team of the Kolkata police from his office near
Dalal Street for his alleged involvement in last year's Rs 120-crore scam at the Calcutta Stock Exchange.
Parekh was arrested at around 4 p.m. and taken to the MRA police station near Crawford market for interrogation.

He will be produced in the Esplanade court around 11 a.m. on Tuesday before being taken to Kolkata, where an FIR
was registered against him by the Calcutta exchange in September.
According to the police, Parekh's arrest came close on the heels of the dentention of his associates in Kolkata,
Dinesh Singhania, Harish Biyani and Ashok Podar.
Parekh has been accused of making brisk share purchases on the exchange prior to March, 2001, through his
associates.
But he failed to provide funds amounting to over Rs 150 crores for the same, leading to a huge payment crisis that
had affected share prices across the country.
Following the default, the exchange officials had to use the settlement guarantee fund (SGF) to the tune of over Rs
50 crores to announce pay-out and since then the exchange has been fighting for survival.
Parekh had earlier admitted before the joint parliamentary committee investigating the March 2001 stock scam
that he had paid Rs 3,191 crores to Kolkata-based stock brokers towards purchase of shares, payment of margins
etc. He acknowledged that he had availed of the faulty margin system in the exchange.
The committee had urged criminal action against Parekh. The Securities and Exchange Board of India had found
out that most of the trades done by Parekh were aimed at rigging stock prices in close nexus with company
promoters.

The market crashed but ended up pushing much-needed modernisation.

Ketan Parekh can best be described as the Pied Piper of Dalal Street. For two years, marketmen followed his every
action because all he touched turned to gold. Better known as the Pentafour Bull, he kept a low profile, except
when he threw a millennium bash that was attended by politicians, business magnates and film stars. A chartered
accountant by training, Parekh came from a family of brokers, which helped him create a trading ring of his own.
Between 1999 and 2000, as the technology bubble was engulfing the rest of the world, the stock market in India
sprang to life too.

Be it investment firms, mostly controlled by promoters of listed companies, overseas corporate bodies or
cooperative banks, all were ready to hand the money to Parekh, which he used to rig up stock prices by making his
interest apparent. In no time, scrips like Visualsoft rose from Rs 625 to Rs 8,448 per share and Sonata Software
from Rs 90 to Rs 2,150. But the vicious cycle of fraud did not end with price rigging. The inflated stocks had to be
dumped onto someone in the end, for which Parekh used financial institutions like the UTI. But the party ended
rather abruptly a day after the Union Budget was presented in February 2001. A bear cartel started disrupting
Parekh's party by hammering prices of the K-10 stocks, precipitating a payment crisis in Kolkata.

As SEBI investigated, it was evident that bank and promoter funds were used to rig the markets. Parekh was
arrested in March that year and was in custody for 53 days. In the aftermath of the scam, many gaping loopholes in
the market were plugged. The trading cycle was now reduced from one week to one day. Badla was banned and
operators could not carry forward trade in its primitive form. Forward trading was formally introduced in the form
of exchange-traded derivatives to ensure a well-regulated futures market. Broker control over stock exchanges
was demolished. It's perhaps thanks to the Pentafour Bull that India's stock markets are today considered safe.
And to his credit, Parekh forced lethargic policy-makers to institute reforms in the financial system. He is, however,
now suspected to be operating in the markets through conduits. Parekh will remain a work-in-progress for
regulators.

BOMBAY -- It was the proverbial fall of the Icarus. The Bank Securities and Fraud Cell of India's Central Bureau of
Investigations (CBI) on March 30 arrested Ketan Parekh, the man synonymous with the biggest boom in the history
of Bombay Stock Exchange (BSE). The charge against him was allegedly defrauding the Bank of India (BoI) to the
tune of Rs 130 crore. Parekh's arrest triggered crash of stock markets for the seventh consecutive Black Friday. By
all means, this was a repeat performance. Around the same time in 1992, another Big Bull, Harshad Mehta had
brought the market to its knees and then paid the price. Sadly, the so-called watchdogs were found napping on
both occasions.
 
In the following few days, CBI also raided companies linked to Parekh including Panther Investment Traders,
Panthers Fincop and Management Services, M/S Classic Private Ltd, Chitrakoot Computers Pvt. Ltd and Nakshatra
Software Pvt Ltd. Residential premises of three bank officials and the Mandvi branch of BoI and the Madhavpura
Bank were also raided. The event unfolded after BoI filed a complaint with the CBI following which a case of
alleged cheating and forgery was registered against Parekh. The complaint said the pay orders issued by the
Madhavpura Cooperative Bank in the name of Ketan Parekh and discounted by them (BoI) to the tune of Rs 137
crore, had been dishonored. Pay orders had been credited to the three finance companies owned by Parekh and
the amount routed through these companies was Rs 660 crore. The question that arose with these transactions
was something had been going wrong which was not tracked by the
regulatory authorities.
 
Even before the Parekh scandal broke out, the stock markets had been witnessing turbulent times across the
country. The Calcutta Stock Exchange (CSE) was the first to make news after Abhishek Banka committed suicide on
March 19 after reportedly losing money in the market. His wife, Sona followed suit, days later. Subsequently, the
BSE witnessed a series of Black Fridays. On February 16 (Friday), the Sensex fell 106.67 to close at 4330.32 and
then on February 23, it further plummeted by 140.39 points to close at 4122.16. All Fridays in the month of March
saw a decline in the market. March 2, 9, 16, 23 and 30 all witnessed decline in points of 176.49, 174.98, 74.12,
78.69, and 147.18 respectively. Clearly something was wrong with the way things were being run.
 
T Surinder, Manish Khanduri and Vikas Dhoot, in their cover story, The Unmaking of Mr Ketan Parekh said, "the
story of the stock market's recent boom and bust has many elements. Brokers, analysts, fund managers, regulators
(and even retail investors) stand accused. Of greed. Of fear. Of incompetence. The gyrations in the global market
add spice to the story. But above all, this is the story of one man. His genius and his greed. This story is about the
rise and fall of a man called Ketan Parekh." There is a curious similarity between Parekh and his predecessor Big
Bull Harshad Mehta. Both belong to Gujarat and both were virtual non-entities before catching up with infamy.
 
Sucheta Dalal, the Indian Express reporter, who virtually unearthed the Securities scam in 1992, said, "The plot is
similar, only the star cast is different. Harshad Mehta may have schmoozed with a larger figure - Rs 660 crore - but
there is a ring of familiar about Ketan Parekh's default on Bank of India's Rs 130 crore." Interestingly, Harshad's
brother Ashwin Mehta is Ketan's close advisor and both the bulls operated through a close group of family and
friends. Ketan's business operations were aided by his brother Kartik, who has been arrested with him.
 
Ketan Parekh has long been a low-key but influential figure on Dalal Street and has been billed as a maker and
breaker of fortunes. He had a penchant for technology shares and was described as the pied piper leading his flock
in the direction of his favorite stocks, which became famous as the K-10 index. His grandfather and father Vinubhai
have all been involved in the securities business. Like Harshad Mehta, Ketan too had found gaps in the system and
closed in on them. Income tax officials had raided his office and residence last year. News of that search had sent
shivers down the market. The Sensex, at one time, had slumped nearly 300 points, leading to an erosion of almost
Rs 40,000 crore in aggregate market cap on the BSE.
 
The biggest losers from the entire scam were the smaller cooperative banks. Madhavpura Mercantile Co-operative
Bank (MMCB) had provided guarantees worth Rs 200 crore to Ketan Parekh. According to a probe conducted by
the Reserve Bank of India (RBI)'s Ahmedabad office, Madhavpura chairman Ramesh Parekh had accommodated
Ketan Parekh, with whom he had business dealings. Apparently, Ketan had no account with the bank's branches
either in Mumbai or in Gujarat. Following these findings, the RBI superseded the Madhavpura board and placed it
under an administrator. Ketan Parekh finally surrendered before the bank fraud and security cell of the CBI on April
5. More intrigue appeared as the investigations went on. Securities and Exchange Board of India (SEBI) probe
revealed that Ketan Parekh had another 4.7% holding of Global Trust Bank (GTB). Interestingly, the holding is
traced not to Parekh's own companies, but three finance companies owned by detergent magnate Karsanbhai
Patel.
 
The bourse by definition is a gamble. No one has a clue on how it will perform. This is because the market moves
less on fundamentals (quality of product, management, demand, market share, etc). and more on perception.
Ketan Parekh perceived media companies would do well. So he bought them lock, stock and barrel. Share prices
zoomed. Newspapers and magazines wrote about how the 25-year-old directors became millionaires. And soon
enough everybody was clamoring for media stocks. All that was based on perception. The other side of the
speculation is the effect of international markets.
 
The rise and fall of technology shares have been far too often for comfort. On April 13, technology stocks reeled
under heavy selling pressure for the second consecutive day after the profit warning by tech giant Infosys
Technologies. Most of the tech stocks took a further beating with Infosys hitting the lower circuit barrier of 16% for
the second day. Another tech giant Hughes Software, however, said it was not affected by the US meltdown,
adding that the cost-cutting measures there had, in fact, helped the company to bag more business from US firms.
Despite such claims, the truth is that technology stocks are no longer the market's favorite. There have been panic
selling and claims and counter claims of its resurgence. Amidst all this, a recurring question surfaces -- Who is
calling the shots in Indian markets?
Gujarat Congress leader Arjun Modhvadia alleged that former minister of state for home Amit Shah had allegedly
received a bribe of Rs 2.5 crore from stock market scamster Ketan Parekh to help him in a bank fraud case.

He released a letter of the then additional DG (CID crime) Kuldeep Sharma written to the then Chief Secretary of
Gujarat Sudhir Mankad in August 2005 regarding Ketan Parekh, the main accused in the Rs 1600 crore fraud in
Madhavpura Mercantile Cooperative Bank (MMCB) which had gone bust in 2001.

BJP was not immediately available for comments.

Sharma, in his letter, had referred to an application of one Hasmukh Shah who had allegedly given details of how a
broker Girish Dani had organised a meeting between the main accused Parekh and Shah, who was also a director
in the MMCB, Modhvadia alleged.

Parekh was arrested for diverting money to play stock markets, leading many small investors to bankruptcy. "Dani
met Ketan Parekh and he organised a meeting at his house in the first week of October 2004 between Shah and
Parekh. It was decided in this meeting that Shah would organise withdrawal of SLP filed in the Supreme Court
because he has influence as director of the bank," Sharma stated in his letter to the then chief secretary.

T he government has received reports that tainted stock broker Ketan Parekh, barred from the capital

markets till 2017 over a securities scam, is still active and has taken positions in oil PSUs like ONGC and HPCL.

Ketan Parekh, who was banned for his role in a securities scam between 1999 and 2001, and his associates are
acquiring very large positions in petroleum companies such as ONGC and HPCL, private news channel Headlines
Today reported, quoting sources in the Intelligence Bureau.

"They (Parekh and associates) have claimed to close associates that they possess insider information on the
government's proposal to decontrol the sale of gas which is expected to raise profit margins of these companies by
about 20 per cent," the channel quoted the IB official as saying.

While the channel said that the intelligence reports have been sent to the Prime Minister, the Finance Minister and
other senior government functionaries, Parekh could not be contacted over phone, nor his comments could be
obtained on e-mailed queries.

It may be recalled that market regulator Securities & Exchanges Board Of India (Sebi) had approached the
Enforcement Directorate last year, saying Parekh appears to be trading in stocks through certain front entities.

"...it appears that he (Parekh) has conveniently used the connected clients at will as front entities for executing
trades desired by him in the market," Seb had said.

Ketan Parekh and his companies were banned by Sebi from participating in securities market for masterminding
the multi-crore stock scam during 1999-2001.
In 2007, SEBI had barred Parekh and his 10 associates, including brother Kartik Parekh, for 14 years with effect
from December 12, 2003.

The news channel further said that one of Parekh's associates is active through front entities in an infrastructure
stock so as to take the price up to Rs 2,000 a share. The share today closed down 3.55 per cent at Rs 1,181.20 on
BSE.

Besides, his associates claim to possess insider information about a deal initiated by Piramal Health Care Ltd with
Abbott Laboratories, the channel said, quoting a report from the Directorate of Intelligence Bureau.

They have been working on the scrip from March-April 2010 and are planning to buy one million shares at Rs 557 a
scrip through a front operator, it said.

Parekh is also reported to have made huge profits earlier in the Dish TV scrip and now is again active in it, and
companies like Parsvanath Developers Ltd and Tatia Global Ventures Ltd scrips.

The other companies where Parekh is reported to be active are Suzlon, I B Real IndiaBulls Real Estate Ltd, Siemens
Ltd, Tata Motors, RNRL, Tarapur Transformers Ltd.

SEBI had banned him after its probe into trading in the shares of Himachal Futuristic Communications Ltd, Zee
Telefilms, Adani Exports, Global Tele Systems, Ranbaxy, Shri Adhikari Brothers TV Network, Shonkh Technologies,
Padmini Technologies and Aftek between October 1999 to March 2001

How to spot a stock market scam

Source: ChilliBreeze  
 
Scams in the stock market are common today. Wondering how you can avoid being affected by them? You must
understand the phenomenon and learn to recognize the telltale signs. Read on to know how!
 
With activity in the stock market ever on the rise, scamsters are aware that every investor wants to subscribe to
stocks from particular industries, such as software as part of their portfolio because these stocks yield higher
returns.
 
Here’s the architecture of a typical scam:
 
Currently, more than 4500 companies are listed in the B2 category on the BSE. The B2 category is a subset of listed
shares that have higher market capitalization and liquidity than the rest. Stocks of these companies are hardly
traded as these companies are no longer in operation. Scamsters take over and change the entity of such a
company to that of a software company. They hire people, install required equipment and claim to process
software export orders. In reality, they do not have the requisite infrastructure or personnel to process export
orders.
 
Next, they set up a subsidiary abroad by hiring a representative to run operations or by renting a small place. They
conduct export transactions using free ports, such as Hong Kong, Singapore, and Dubai. They pay cash in India and
obtain dollars from the subsidiary. In the company books, these dollars are reflected as income from exports.
                               
The promoters then hire market operators to publish stories indicating huge orders or collaborations and predict
excellent profits for the company. This is substantiated by the net profit figure boosted by the forged export
income in the company’s books. The Earnings Per Share (EPS) for the company appears healthy and is priced low
when compared to other companies, and the stock is deemed to be an excellent buy.
 
A few market operators then start transactions on the stock and increase liquidity for the counter. Consequently,
the trade volumes for the share rise. The share price increases 3 to 5 times in a short period of time. The
promoters then start taking advantage of this buoyant situation and sell their stocks to investors. The price of the
share goes down suddenly and the investors end up with dead stock. The promoters are able to obtain a good
price for stocks of their company. Further, they get a tax rebate by converting hoarded cash into export income!
 
So before investing in any stock, do check the company’s background carefully and performance of the stock at
least for the past two quarters. It’s best to avoid investing in stocks that show too much fluctuation in prices.