Metals trading scam ends in convictions [1]
Friday, April 25, 2008 - 03:11. Updated on Monday, July 27, 2015 - 16:37.
By Megan Murphy
Virendra Rastogi, the former chief executive of RBG Resources, was facing a lengthy jail sentence on Tuesday after being convicted of masterminding a worldwide metals trading scam that defrauded financial institutions out of hundreds of millions of dollars.
The verdict is a vital boost for the Serious Fraud Office after an arduous eight-month trial that hinged largely on testimony from Mr Rastogi's brother, Narendra, and other admitted members of the conspiracy.
The embattled agency ... sharply criticised earlier this month over its decision to scrap a corruption probe into BAE Systems ... has secured convictions in a string of high-profile prosecutions involving companies such as Independent Insurance and Izodia.
The RBG case was one of the most complex investigations tackled by the SFO, moving from the roots of the Rastogi family empire in India to a plush office suite just off London's Piccadilly Circus.
The fraud, however, was one of its most basic. Mr Rastogi and his associates defrauded banks such as WestLB and GMAC into lending them hundreds of millions by creating an elaborate web of sham companies around the globe.
Trading under names such as Sincere Dragon and Bonfire International, these companies posed as legitimate customers of RBG, the counterparties to thousands of profitable metals contracts.
In reality, they were corporate shells controlled by RBG and its sister company in the US, Allied Deals, supporting fictitious transactions.
Backed by a vast paper trail that included reams of fake invoices and other false documentation, the fraud operated undetected for more than four years.
RBG's demise, like so many before it, was in fact brought about by a single, "silly" mistake, prosecutors said during the trial at Southwark Crown Court.
One of RBG's employees in Hong Kong mistakenly faxed documents to PwC offices in Romania, ostensibly as evidence of contracts with six different client companies in different countries.
The accountancy group raised the alarm when it realised that all six documents originated from the same fax number at exactly the same time.
When police raided Mr Rastogi's house, they found him and his wife surrounded by a pile of shredded documents.
RBG Resources went into administration in May 2002 owing creditors $420m (...263m, ...£210m). Allied Deals... collapse at the same time cost US banks about $280m.
Narendra Rastogi has already been sentenced in the US to seven years in prison for his role in the conspiracy.
Virendra Rastogi and two other former RBG executives, Anand Jain and Guatam Majumdar, will be sentenced in June after being found guilty of one count of conspiracy to defraud.
Another defendant, Jay Patel, was acquitted of involvement in the conspiracy.
None of the men showed any reaction to Tuesday...s verdicts.
All three had argued that they believed they were involved in a legitimate enterprise, and any fraudulent activity had been carried out by Narendra.
Judge Wadsworth QC remanded all three in custody and warned that a "substantial" prison sentence was a "very real" likelihood. Financial Time, 23/04/0.