Virendra Rastogi, Anand Jain and Gautam Majumdar have been sentenced today to a total of twenty five years and six months' imprisonment for conspiracy to defraud in relation to their running of RBG Resources plc ("RBG").
Sentences
In relation to the same one count of conspiracy to defraud received sentences as follow:
Virendra Rastogi [Chairman - d.o.b. 08.02.1968]Nine years and six months' imprisonment. Disqualified from acting as a company director for fifteen years
Anand Jain [Director - d.o.b. 08.05.65]Eight years and six months' imprisonment. Disqualified as company director for ten years
Gautam Majumdar [Chief Executive Officer and Director - d.o.b. 17.10.51]
Seven years and six months' imprisonment. Disqualified as company director for ten years
This was a fraud that involved literally billions of dollars, and of the defendants HHJ Wadsworth in passing sentence said today "they created a very impressive front that fooled banks, the metal exchanges in both countries, (UK and USA), and well respected accountancy firms." The judge also said, "they were involved in years of calculated dishonesty," and that during the trial "they had shown no shadow of regret or remorse or repentance."
Background Information
The Allied Deals/RBG Resources fraud was a truly global fraud that cost banks $700 million dollars worldwide but that was ultimately brought down by the pressing of a wrong button on a fax machine.
Between 1996 and 2002, Virendra Rastogi, Anand Jain and Gautam Majumdar, (together with Virendra's brothers, Narendra who was based in the USA, Ravindra who was based in the UAE and Subhash who was based in Singapore) ran a web of in excess of 300 fake "customers" who were supposedly based in the USA, Hong Kong, Singapore, Dubai, India, France and Italy. The defendants used the supposedly independent customers to create "trades" that were then used as the collateral for cash advances from banks. Whilst the banks thought they were financing a very successful metal trading firm (one so lucrative that Virendra Rastogi appeared in the Sunday Times Rich List and had Jack Cunningham MP, Lord Holme, Lord Woolmer and Lord Gray as advisers) they were actually advancing money to a company that was propped up by dishonesty. The "customers" were actually Rastogi's paid henchman based in addresses around the world who would falsify documentation and purport to banks and auditors to be independent traders. The truth was however far more audacious. The address of one of the customers was actually a cow shed in India. One SFO witness at trial indicated that another customer in the USA was actually just a laundrette in New Jersey and an investigator who went to locate one of the "customers" found a residential New Jersey housing estate with the house in question owned by an elderly lady who sold scrapbooks. A number of supposedly independent customers actually had the same address and when investigators phoned some of the companies the phones were actually answered by children.
Ultimately it was the complicated nature of the fraud, together with the controlling tendencies of Virendra Rastogi that led to the uncovering of the fraud. Mr Rastogi would require copies of the false customer documentation to be sent to the UK for checking by himself. One of his henchmen in Hong Kong, intending to fax a number of false letters from various "customers" to Rastogi for review, inadvertently pressed the wrong button on the fax machine and sent all the material to PricewaterhouseCoopers, who were RBG's auditors in the UK. Although Rastogi tried to recover the documentation alleging that they were documents that had been sent in error, PwC refused to return them and resigned as RBG's auditors. This resignation prompted concern amongst the banks. Realising that the banks investigation would reveal the extent of their dishonesty, the defendants and their accomplices went into a panicked attempt to cover up the fraud. Offices were rented, letter headed paper and business cards produced and individuals recruited to sit at desks and pretend to be employees. Investigators found hundreds of customer stamps amongst the fraudster's papers at their Hong Kong business location, from which a ready inference could be drawn. Why would they own so many of their customer's stamps unless they controlled them?
RBG Resources also employed a number of genuine metal traders, who were based at RBG's London offices at 105 Piccadilly. These traders entered into real metal transactions. These traders were not aware that the business conducted by Virendra Rastogi, Anand Jain and Gautam Majumdar was founded on fraud. They were the honest veneer of a business that in many regards was (as described by SFO counsel Richard Latham QC) "rotten to the core".
Paige Rumble, the lead SFO investigator on the case, said "This was a truly audacious and ruthlessly efficient fraud that ranged from the poorest areas of India to the corporate tower blocks of Manhattan. The RBG Resources empire was a family business founded and driven by fraud. The successful prosecution of this case required a huge and technical analysis by the SFO team that unravelled the truth behind the facade and demonstrated to the jury the full extent of the defendants' dishonesty".
Chronology
2001
November - Faxes were received by RBG's auditors PriceWaterhouseCoopers (PWC) purportedly by different RBG customers around the world, but faxes came from one number in Hong Kong. Suspicions led to further investigations by PWC.
2002
January - PWC resigned as RBG's auditors. Immediately after resignation, PWC issued a statement to Companies House citing a breakdown of trust, a statement was issued to the London Metal Exchange.
1st May - The City of London Police referred the case to the Serious Fraud Office.
2nd May - An SFO investigation was launched into allegations of conspiracy to defraud in connection with trade finance facilities. City of London Police worked closely with the SFO during the next two years of the investigation.
2nd May - Upon application to the High Court by WestDeutsche Landesbank Girozentrale (WestLB), Grant Thornton was appointed as liquidator to manage the affairs of RBG Resources plc.
3rd May - Search warrants were executed by officers from the City of London Police at the business premises of RBG Resources plc, 105 Piccadilly, London W1 and also at a number of residential premises in London and the Home Counties.
FBI launched an investigation and conducted raids on premises of Allied Deals Inc, New York, (RBG Resources `sister' company in the US).
2003
14th February - Virendra Rastogi charged with attempting to pervert the course of justice at first court hearing at City of London Magistrates Court having been found shredding documents during the search of his home (on 3 May 2002).
2004
SFO continue to conduct extensive investigations worldwide in excess of 200 people were interviewed and millions of documents were reviewed.
2005
24th October - Virendra Rastogi, Anand Jain charged with conspiracy to defraud. It was the Prosecution's case that the defendants conspired to persuade lending institutions to advance vast amounts of money in respect of trades with metal trading companies which were in fact controlled by Virendra Rastogi. The fraud was devised, directed and operated by Virendra Rastogi during the period of the indictment from the London headquarters of RBG.
2006
3rd May - Gautam Majumdar charged with conspiracy to defraud after voluntarily returning to the UK from India to stand trial.
2007
3rd September - Trial commenced at Southwark Crown Court. Fifty-four witnesses appeared for the Prosecution in court and seven gave evidence for the Defence in a trial that lasted eight months, (111 days in court).
Amongst those giving evidence for the Prosecution were Narendra Rastogi, (Virendra Rastogi's brother) Soniya Basra and Anil Anand, key defendants in the US trial. Each of them entered into a plea bargain with the US authorities, under which they were required to give evidence to the UK.
During the course of the trial, it was shown that over $1 billion was advanced to RBG by financial institutions which had been defrauded. When RBG collapsed, WestLB and GMAC Commercial Credit Ltd were owed in total a little over $250 million dollars. Losses to all banks in the UK which lent to RBG totalled just over $420 million.
2008
22nd April - Virendra Rastogi, Anand Jain and Gautam Majumdar found guilty by jury of conspiracy to defraud.
Confiscation proceedings are set to take place on a date to be fixed.
A fourth defendant Jayesh Patel was acquitted on the direction of the judge at the close of the case of the prosecution during the trial. Today the judge ordered for his costs to be paid from Central Funds in view of this acquittal.
