5 Top White Collar Crime Cases In India You Never Know

White- collar crime or a corporate crime refers to financially motivated, nonviolent crime committed by government and businesses professionals. Below are some of the top 5 white collar crime cases in India.

1. Harshad Mehta Securities Fraud (1988–1995)

Protagonist — Harshad Mehta

Harshad Mehta was a stockbroker, and he established his security firm in 1990, “ Grow More Research & Asset Management Limited”. He was a reputed name in the stock market, and is considered the ‘Sultan of Dalal Street’, investors blindly followed Mehta’s footsteps.[1] He took a loan of huge amount from the bank and purchased the scrips at high prices, thereby creating a false market. He misused his status and manipulated the stock prices of certain scrips for his gain.[2] This resulted in unnatural pumping of money in the stock markets causing an abnormal rise in the price of these shares. This act of Harshad Mehta though being immoral was not illegal. The problem arose when Mehta obtained capital to invest in the stock market by misappropriating bank’s money. This misappropriation of money falls in the purview of money laundering. He earned approximately ₹ 5000 crores.[3] The then renowned journalist Sucheta Dalal exposed this scam. This unabated selling caused the market to loose ₹ 0.1 million in a day. This was the biggest ever crash which the Indian stock market had ever experienced. To curtail such transaction various changes were brought in SEBI rules and regulations.

Protagonist — B. Ramalingam Raju

2. Satyam Scandal: biggest ever corporate accounting fraud

This scam came into light on 7 thJanuary, 20009 by way of confession letter written by B. Ramalingam Raju (Founder and chairman of Satyam Computers Services Limited) published in Times of India. The letter confessed about manipulating his books of account by overstating the assets and understating liabilities.[4]

The books of accounts are the reflection of the company’s financial standing. They act as an important tool on which investors can rely on before investing their money. Accounts books were manipulated to cheat investors and shareholders.

The whole scam cost approximately ₹14,000 crore and is considered to be an important factor which contributed to the recession of 2009.[5]

In this scandal, SEBI hit back strongly, holding Ramalinga Raju and nine major associates and guilty of insider trading, indulging in fraudulent and unfair trade practices. SEBI directed accused to pay approximately ₹3000 crore within 45 days and also debarred them from accessing the security markets in any way for 14 years.[6] SEBI managed to lash back strongly to ensure such a scam never happened again.

Protagonist — Ketan Parekh

3. Ketan Parekh Security Scam

Parekh was involved in circular trading and stock manipulation through 1999–2001. He borrowed from banks like Global trust Bank and Madhavpura Mercantile Co-operative bank and manipulated a host of stocks known as K-10 stocks.[7] The scandal amount was approximately ₹ 1,250 Crore. He has spent only one year in jail, but he has been debarred from trading in the Indian Stock market till 2017.

Although his name continues to haunt the street as he has been accused of playing from backstage. An Intelligence Bureau Report alleged Parekh and his associates to be engaged in circular and insider trading through front entities.

Protagonist- Sudipta Sen

4. Saradha chit fund case

Saradha Group financial Scandal was a major financial scam and alleged political scandal caused by the collapse of Ponzi scheme run by Saradha Group, a consortium of 200 private companies that were believed to be running collective investment schemes popularly and wrongly referred to as Chit Fund.[8] This group collected around ₹200 to ₹300 billion from over 1.7 million depositors, promising a multiplied hefty sum in return in the form of cash or real estate and other assets.[9]

At least 10 Saradha group entities were alleged for committing fraud through public money-pooling activities. Amidst continuing public protest against the group’s alleged fraudulent activities, SEBI barred Saradha Realty India and its managing director Sudipta Sen from the securities market till it winds up all the Collective Investment Schemes (CIS) and makes the refund, as the same amounts to CIS Violation.[10]

The central government through income tax department and Enforcement Directorate launched a multi-agency probe to investigate the Saradha Scam and similar Ponzi scheme. Later, in May 2014 Supreme Court of India, alleging possible international money laundering, severe regulatory failures an alleged political nexus, referred this case to CBI, India’s federal investigation agency.[11] Many prominent personalities were arrested for their involvement in the scam including two Members of Parliament- Kunal Ghosh, Srinjoy Bose, former West Bengal director general of police- Rajat Majumdar, a top football club official Debabrata Sarkar, Sports and Transport minister in the Trinamool Congress government Madan Mitra.

This scam is often compared to the Sanchayita investment scam, a multi-crore rupees scam that occurred in West Bengal in the 1970s, complaints related to the same have to lead to the formation of Prize Chits and Money Circulation Schemes (Banning) Act, 1968.[12]

Protagonist- Nirav Modi

5. Punjab National Bank Fraud

Nirav Modi is a diamantaire, elite jewelry designer and India’s 85 thrichest person.

Bank said that Modi and the companies linked to him colluded with its officials to get guarantees or Letter of Undertaking to help fund buyer’s credit from other overseas banks.[13]

PNB’s preliminary investigation showed that two officials of the bank had fraudulently issued Lou’s to the said firms without following the due procedure. These Los were then transmitted across the SWIFT messaging system, based on which the credit was offered to the said firms.[14]

PNB alleged that the funds ostensibly so raised for the purchase and sale of diamonds were not used for the purpose.

Read Also: Taxpayers Don’t Fall For These Types of Tax Scams in India

PNB issued to the stock exchange, about the detection of the fraudulent and unauthorized transaction. PNB has incurred $1.8 billion fraud, one of the largest to be detected in Indian Banking Sector.[15]

[1] “THE GROWTH OF SEBI — FROM HARSHAD MEHTA TO SUBRATA ROY” ( PDF) <https://lawsdocbox.com/Legal_Issues/73899378-The-growth-of-sebi-from-harshad-mehta-to-subrata-roy.html> accessed May 13, 2019.

[4] Datta D and Datta D, “Ramalinga Raju And The Incredible Story Of India’s Greatest White Collar Crime” ( HuffPost India July 15, 2016) <https://www.huffingtonpost.in/devangshu-datta/ramalinga-raju-and-the-in_b_7032688.html> accessed May 13, 2019.

[7] Nimmi ( KETAN PAREKH SCAM) <https://www.indianmirror.com/indian-industries/indian-scams/ketanparekhscam.html> accessed May 13, 2019.

[8] “Here’s Why Saradha Was Not a Chit Fund but a Ponzi Scheme” (first post-December 20, 2014) <https://www.firstpost.com/business/heres-why-saradha-was-not-a-chit-fund-but-a-ponzi-scheme-739597.html> accessed May 13, 2019.

[10] “Saradha Chit Fund Scam: Mercedes of Sudipta Sen’s Son Seized” ( The Economic Times May 7, 2013) <https://economictimes.indiatimes.com/news/politics-and-nation/saradha-chit-fund-scam-mercedes-of-sudipta-sens-son-seized/articleshow/19937529.cms?from=mdr> accessed May 13, 2019.

[11] Reporters BS, “SC Jolt for Mamata: CBI to Probe Saradha Scam” ( Business Standard May 9, 2014) <https://www.business-standard.com/article/current-affairs/sc-jolt-for-mamata-cbi-to-probe-saradha-scam-114050900345_1.html> accessed May 13, 2019.

[12] Mukherji UP, Bandyopadhyay K, and TNN, “Sanchayita Haunts Saradha Victims | Kolkata News-Times of India” ( The Times of India May 13, 2019) <https://timesofindia.indiatimes.com/city/kolkata/Sanchayita-haunts-Saradha-victims/articleshow/19656723.cms> accessed May 13, 2019.

[13] “Nirav Modi Case: How PNB Has Defrauded of Rs 11,400 Crore” ( Business Today March 15, 2018) <https://www.businesstoday.in/sectors/banks/nirav-modi-case-pnb-fraud-11400-crore-scam-ed-cbi-raid/story/270708.html> accessed May 11, 2019.

[14] Desk BQ, “The Nirav Modi-PNB Fraud Case: Everything We Know So Far” ( BloombergQuint February 17, 2018) <https://www.bloombergquint.com/law-and-policy/the-nirav-modi-pnb-fraud-case-everything-we-know-so-far> accessed May 11, 2019.

[15] Nair V, “The Nirav Modi Case: How The $1.8 Billion Fraud Detected At PNB Unfolded” ( BloombergQuint February 19, 2018) <https://www.bloombergquint.com/pnb-fraud/the-nirav-modi-case-how-the-18-billion-fraud-detected-at-pnb-unfolded> accessed May 11, 2019.

Originally published at https://legodesk.com on May 19, 2019.

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