Convictions in $700 million metal markets fraud
5 June 2008
Virendra Rastogi, Anand Jain and Gautam Majumdar have today been sentenced to a total of over 25 years, having earlier been convicted of conspiracy to defraud in relation to their running of RBG Resources plc (“RBG”). All three have also been disqualified from acting as company directors.
Richard Latham QC, instructed by the Serious Fraud Office, led for the prosecution.
Summary
Virendra Rastogi was Chief Executive of RBG, which he controlled with other directors including Messrs Jain and Majumdar. The company was a metal trading business based in London. In May 2002 it went into provisional liquidation owing to creditors over US$420 million.
In the years leading up to the company’s collapse it was presented to its bankers and auditors, the regulatory authorities and investors as a thriving and growing concern. In 2000, the company's financial statements showed turnover in excess of US$ 1billion and profits before tax of US$ 11million. Jack Cunningham MP, Lord Holme, Lord Woolmer and Lord Gray were duped into becoming advisers to the company. Rastogi led a luxurious lifestyle and was listed as one of Britain’s wealthiest Asian businessmen in the Sunday Times Rich List.
The defendants persuaded banks in the UK and elsewhere to provide extensive financial facilities to RBG effectively secured against debts due to the company from sales to customers. In the event, these debts proved valueless as the transactions were not, as the banks believed, with independent 3rd party customers but with sham companies controlled by the Rastogi family. RBG formed the British half of a worldwide fraud, the other half being centred in the US, the base for a company called Allied Deals inc., (“ADI”), run by Virendra Rastogi's brother Narendra. Just as RBG obtained funding from banks in UK and Europe so ADI obtained funds from US banks. When ADI collapsed in May 2001 the total loss to the US banks was just under US$280 million.
False documents created by ADI staff, together with the use of accomplices in Hong Kong, Dubai and India to circulate money around the globe bolstered the impression of a successful business. In fact, the fraudulently obtained funds went into a common “pot” for the use of the conspirators, to support their own lavish lifestyles and to maintain the fraud. The audacious and complex fraud continued for over four years until the end of 2001, when suspicions were raised. RBG’s demise was swift. Banks began to pull funding and its auditors resigned. The worldwide flow of money necessary to perpetuate the fraud began to dry up. With the banks experiencing problems in recovering money already lent to RBG, Provisional Liquidators were appointed in May 2002.
That appointment coincided with the beginning of an investigation by the SFO. Almost simultaneously, US authorities began an investigation into the activities of ADI. The SFO’s investigation was huge and involved liaison with a number of jurisdictions, in particular the US and Hong Kong.
The trial began on 3rd September 2007 and ran for 8 months. The indictment contained two counts of Conspiracy to Defraud, the first alleging a worldwide conspiracy involving the defendants, others at RBG and at ADI and elsewhere around the world; the second alleged a conspiracy based at RBG in London alone. The jury returned a guilty verdict on the wider worldwide conspiracy, which encompassed the London conspiracy. Accordingly, the jury were not required to return verdicts on Count 2. Much of the profits of the fraud were laundered through Dubai and Switzerland, with many millions of dollars being sent to India. None of the money has yet been recovered and efforts to trace it continue.