IndiaPost.com - Mastermind Indian CFO to cough $1.2b for Ponzi scam

NEW YORK: In what CFO.Com calls an "astonishing sentence for an astonishing scam", a US court has sentenced Indian mastermind Chief Financial Officer of New Jersey-based Allied Deals Inc. Anil Anand to pay $1.3 for participating in the international Ponzi scheme.

Anand, however, got off with a light 7-month prison sentence of "time served" as against a possible 30 year imprisonment, for his cooperation with investigators that led to the arrest of 15 US defendants in the $680 million scam involving 20 banks worldwide. United States District Judge Richard M. Berman, who imposed the sentence in Manhattan federal court, ordered Anand to pay forfeiture of $600,000,000 and restitution of $683,632,800, totaling $1.28 billion.

According to a release from the US Attorney's office, the Allied Deals companies were controlled by brothers Narendra Rastogi, in the United States, and Virendra Rastogi, in the United Kingdom. Allied Deals, Hampton Lane Inc., and SAI Commodity in the US, and RBG Resources in the UK -- companies that prosecutors collectively called the Allied Deals companies - purported to be in the business of brokering trades in nonferrous metals.

The companies purportedly would arrange for sales between buyers and sellers of metal in legitimate, "arms-length" transactions (transactions negotiated by unrelated parties, each acting in his/her own best interest). To finance those metal sales, the defendants then arranged for loans with banks, usually to be repaid after 180 days.

As collateral for the loans, the banks relied on Allied Deals' accounts receivables (the money that Allied Deals was due from the customers for the metal transactions), expecting that the loans would get repaid when the customers repaid Allied Deals for the metal that had been purchased. In fact, hundreds, if not thousands, of metal transactions upon which the loans were based simply did not exist.

Anand, the Rastogi brothers, and their co-conspirators had set up and controlled an elaborate network of hundreds of sham, nominee companies around the world (which they called "group companies") to serve as fake purchasers of metal from Allied Deals so that the defendants could get loans from the victim banks.

The Rastogis and their co-conspirators used loan proceeds from one victim bank to make the loan payments required by another victim bank, while concealing that the newly-issued loans were not being used to fund actual, arms-length metal transactions and that the money used to pay off the loans had not been provided by the buyers of metal in bank-financed sales.

"The co-conspirators went to extraordinary lengths to mislead and convince banks into believing that the sham, 'controlled' customers were in fact real, independent companies with actual employees and offices and with no ownership or control relationships with the defendants," according to the US Attorney. Among other things, a number of co-conspirators posed as Allied Deals customers, established offices and phone lines for the sham companies in the United States and abroad, arranged for fake letterhead and bank accounts, and were prepared to field calls from bankers or auditors, according to Federal officials.

Anand allegedly was involved in helping the brothers establish a number of the sham "controlled" customers that were central to the scheme, by recruiting a number of his friends to set up fake metal companies in New Jersey, New York and California. He and others then allegedly used these fake customers to generate millions of dollars in sham accounts receivables, which they used as collateral to obtain millions of dollars in loans from the victim banks.

According to Reuters, Anand had pleaded guilty in 2002 and agreed to cooperate with the government's investigation into the fraud. The defrauded banks were located in the United States, Europe and Asia and included JPMorgan Chase & Co; Fleet National Bank; PNC Bank N.A.; Dresdner Bank Lateinamerika AG; China Trust Bank; and Hypo Vereins Bank, N.A. According to CFO.com Anand pleaded guilty to one count of conspiracy, one count of bank fraud, one count of conspiracy to commit money laundering, one count of tax evasion, and one count of making false statements to federal agents.

As part of his cooperation, he testified in 2004 in New York against six of his co-defendants five of whom were convicted after trial. He also testified in London in the fall of 2007 at the UK trial of Virendra Rastogi and three others. That trial recently ended in the conviction of three of the defendants, including Virendra Rastogi, who was sentenced to 9 1/2 years in prison.