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Virendra Rastogi, Gautam Majumdar and Anand Jain jailed for scam




Three UK NRIs jailed for $700-million fraud for involving 324 bogus companies
Tricking banks in Britain and the US into funding non-existent deals


London, June 06, 2008
Sudesh Sharma

NRI Virendra Rastogi, 40, chairman of RBG Resources, metal trading firm ,was sentenced to 9.5 years in prison. A director, Anand Jain, 40, and chief executive, Gautam Majumdar, 56, face eight and nine years in jail.

Serious Fraud Office in London said:

  • Between 1996 and 2002, the all three directors of RBG ran a web of more than 300 fake customers, that were in fact paid henchmen.
  • It was "a truly audacious and ruthlessly efficient fraud that ranged from the poorest areas of India to the corporate tower blocks of Manhattan".
  • A number of genuine metal traders were employed by RBG at its London offices in central London who entered into real transactions and were not aware that the business was being used as a front for a massive fraud operation.
  • The scandal was uncovered when false documents were unintentionally sent to the company's auditors by fax.
  • The fraud was "truly global", with company staff in the United States, United Arab Emirates and Singapore, and "was ultimately brought down by the pressing of a wrong button on a fax machine

The fax was quickly followed by an anxious telephone call from the head office of RBG Resources to say the documents had been sent in error and should be shredded. The call was taken by an accountant who was in Romania to conduct a routine audit.

He looked through the papers and was surprised to note that six different companies, one in Belgium, one in Switzerland and four in Hong Kong, had sent eight letters – all addressed to RBG in London – from the same fax machine in Hong Kong.

An accountant alerted and his announcement sent alarm through the banking industry because the company owed at least £400m to European banks alone. It also had a sister company in the US, run by Rastogi's brother, Narendra, which was heavily in debt to US lenders.

The banks thought they were financing a successful metal trading firm, quoted in the Sunday Times rich list, they were advancing money to a company propped up by dishonesty.

Judge H H J Wadsworth said:

  • They created a very impressive front that fooled banks, the metal exchanges in both the UK and USA, and well respected accountancy firms
  • They "were involved in years of calculated dishonesty” and that during the trial "they had shown no shadow of regret or remorse or repentance".

They had office at Piccadilly. About 30% of RBG's income was generated at the ground floor where 8-10 traders were working. Rest of the 70% was generated upstairs, where Rastogi, Jain and Majumdar were running the business. No body knows what was happening on second floor. To show that they are big metals traders, they had advisers including the former cabinet minister Jack Cunningham, now a Labour peer, and the Liberal Democrat peer Lord Holme.

Interestingly, Bank investigators found:

  • The "head office" of another firm turned out to be a house in New Jersey from which an elderly woman sold scrapbooks.
  • Second firm was just a building which had been empty for about two years.
  • In India's office was just cow shed

One time, NRI Virendra Rastogi was lauded as one of Britain's most successful young entrepreneurs. At the age 34, he was in 209th place in the Sunday Times Rich List.

3 UK NRIs found guilty of conspiracy to defraud of US $420,507,190

London, April 22, 2008
Sudesh Sharma

RBG Resources plc: Former Directors convicted
Virendra Rastogi, Anand Jain and Gautam Majumdar have been found guilty of conspiracy to defraud in relation to their running of RBG Resources plc (“RBG”). They are remanded in custody pending sentencing on 5th June.

RBG Resources plc (in liquidation) was a metal trading business based in London. In May 2002 it went into Provisional Liquidation with amounts owing to creditors of US$420,507,190.

RBG was controlled by its Chief Executive, Virendra Rastogi and other directors, including Messrs. Jain and Majumdar. The company's financial statements for the year ended 31.7.00 showed turnover in excess of US$1billion and profits before tax of US$ 11million. In the years leading up to company's collapse it was presented to its bankers, auditors, regulatory exchanges and the City as an aggressively developing and successful business.

The truth was in stark contrast to this impression. Banks in the UK and elsewhere were persuaded to provide extensive financial facilities to RBG effectively secured against debts due to RBG 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 companies, controlled by the Rastogi family around the world. Despite intensive investigations by the Liquidators, there has been no substantial recovery of amounts due to RBG's creditors.

The full extent of the fraud became apparent during the course of the Liquidators' and SFO's respective investigations as well as that of the authorities in the USA. RBG's `sister company', Allied Deals inc., (“ADI”), which was run by Virendra Rastogi's brother Narendra, comprised the other half of a worldwide fraud, perpetrated for the benefit of the Rastogi family. Just as RBG obtained funding from banks in UK and Europe, ADI obtained funds from US banks. All the money was put into a common `pot' for the use of the conspirators, to support their own lifestyles and to maintain this elaborate fraud.. Total losses accruing to US banks at the time of the collapse of ADI in May 2002 were just under US$280 million.

The operation of the fraud and overview chronology

The defendants persuaded banks and funding institutions to provide facilities to RBG amounting to many hundreds of millions of US$ by convincing the banks that they traded extensively with genuine businesses around the world. By arrangement with the banks the debts arising on the sales to these customers were `discounted.' In other words RBG would receive up to 90% of the face value of a sales invoice by drawing it down from the facility provided by the banks. In return the banks acquired the right to receive the full amount of the debt from the customer when the debt fell due at the end of the credit period extended by RBG. This was important to RBG, as it claimed to have extended lengthy credit terms to its customers of up to six months, and the facilities therefore provided RBG with cashflow ahead of the debts being paid by the customers.

In reality false documentation was created and sent to the banks as evidence of what purported to be genuine trade. The creation of this documentation involved the co-operation of not only ADI staff, but various `hub controllers' in key jurisdictions around the world, notably Hong Kong, Dubai and India. These `hub controllers' were in charge of ensuring that money was paid into the fraudulent system, for onward transfer to the banks, at the time when the so called debts became due. They would also act on the instruction of the Rastogi brothers to make purchases or enter into various business enterprises for the benefit of the Rastogi family, using the fraudulently obtained funds.

In this way, hundreds of millions of US$ circulated around the globe on the instruction of the conspirators, giving the impression that RBG's and ADI's customers paid their debts regularly and promptly. All this gave credence to the professed success of these companies, as propounded by their respective directors. This was a sophisticated and complex enterprise; it continued for over four years, in increasing amounts and fooled not only the banks (who undertook their own due diligence) but also the auditors. It was an audacious fraud, underpinned by a very small amount of genuine business, which could be used to give credence to the wider claims of the businesses.

Towards the end of 2001, however, circumstances led to the banks becoming suspicious of RBG and triggered in-depth investigations. Movements on the tin market, and positions adopted by RBG on the London Metal Exchange began to ring alarm bells; press coverage of the arrest of a Rastogi brother in India also caused concern; and short-cuts in RBG's cleverly planned processes started to occur due to the ever increasing complexity of the web of controlled counterparties required to perpetrate the fraud.

The findings of the banks' in-depth investigations did not make for happy reading. Banks considered their positions and began to pull funding to RBG. As the sources of funding dried up, the flow of money around the world did likewise, and the banks increasingly had problems in recovering money due.

It was at this time, during the final six months of the company, that the Directors sought desperately to appease the banks, and to cover up the true nature of RBG's business. The banks were told that they didn't understand how RBG interacted with its customers, and that matters would resolve themselves, just so long as the funding remained in place. They were also told that, for example the recent events of 9/11 had interrupted the international banking of many of its customers causing cash flow difficulties.

By this time, RBG's auditors, PriceWaterhouseCoopers had identified concerns, which culminated in their resigning in January 2002, citing a break down in the relationship of trust between the auditors and RBG's directors. This resignation was a serious blow to RBG, who relied on having high profile professional names to lend credibility to their business. RBG's directors managed to find replacement auditors, and applied pressure on them to sign off the accounts for the 14 months to 30th September 2001. Those accounts were never in fact signed off, as the Provisional Liquidation overtook events.

The appointment of Provisional Liquidators in May 2002 coincided with the opening of an investigation by the SFO, which commenced with immediate searches of RBG's offices and the homes of the defendants. Search warrants were executed by officers of City of London Police, via whom the case was referred to the SFO. City Police continued to work with the SFO in the early stages of this investigation.

Only a matter of days later, the US authorities undertook large scale searches and seizures in relation to ADI's offices and various addresses related to the US suspects.

The SFO's investigation

The SFO's investigation commenced in May 2002, and culminated in the charging of defendants Messrs Rastogi and Jain in October 2005 and Mr. Majumdar in 2006 (who was resident in India at the time and returned to the UK to be charged).

By the very nature of the case, this was a huge enquiry, requiring worldwide investigations and the co-operation of the Governments of a number of jurisdictions. Vast quantities of documents and electronic material were inspected, reviewed and analysed, including a warehouse of material from Hong Kong and at least 2000 boxes of material from the USA.

The SFO would like to take this opportunity to extend our particular thanks to the Southern District of New York US Attorney's Office, and FBI, for their unstinting support and assistance in bringing this case to trial. That assistance included providing access to US defendants who had pleaded guilty to their part in the worldwide conspiracy and who had then decided to co-operate with the authorities in the United States. Four of those defendants provided voluminous statements to the SFO, and three attended court to give evidence. The SFO considers that their evidence in particular was powerful and cogent, and helped in the clear presentation of the Crown's case to the jury.

We would also like to acknowledge the considerable assistance of the Department of Justice and Police in Hong Kong.

The trial
Four defendants were indicted and their trial commenced on 3rd September 2007. Those defendants were:

Virendra Kumar Rastogi (Chief Executive and Managing Director, born 08.02.68)

Anand Kumar Jain (Director, born 08.05.65

Gautam Majumdar (Deputy Chief Executive and Director, born 17.10.51

Jayeshkumar Patel (Senior Vice President, born 02.10.68)

The judge ordered the acquittal of Patel on both counts at the close of the Prosecution case, following a Submission by his legal team.

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 particulars of the indictment were as follows:

Count 1: VIRENDRA RASTOGI, ANAND JAIN, GAUTAM MAJUMDAR and JAY PATEL between 1 January 1996 and 1 June 2002 conspired together and with others to defraud such institutions as might provide funds to Allied Deals Incorporated and RBG Resources plc (formerly known as Allied Deals plc) by dishonestly causing or permitting the said institutions to provide funds based on various metal transactions which were false, in that:

Some of these transactions did not represent the genuine sale or purchase of metal for value and/or
Some of these transactions were not conducted with genuine customers and/or
Some of these transactions were in fact conducted with companies secretly controlled or influenced by the Rastogi brothers.

Count 2: VIRENDRA RASTOGI, ANAND JAIN, GAUTAM MAJUMDAR and JAY PATEL between 1 January 1996 and 1 June 2002 conspired together and with others to defraud such institutions as might provide funds to RBG Resources plc (formerly known as Allied Deals plc) by dishonestly causing or permitting the said institutions to provide funds based on various metal transactions which were false, in that:

Some of these transactions did not represent the genuine sale or purchase of metal for value and/or
Some of these transactions were not conducted with genuine customers and/or
Some of these transactions were in fact conducted with companies secretly controlled or influenced by the Rastogi brothers.
The jury convicted all remaining Defendants on the wider worldwide conspiracy, which encompassed the London conspiracy. Accordingly, the jury were not required to return verdicts on Count 2.

The trial lasted 8 months, including periods of time when court did not sit, to allow for Christmas and Spring breaks.

The SFO will be pursuing confiscation against all remaining Defendants.
Source- Serious Fraud Office, London






NRIs jailed


Virendra Rastogi,40, was sentenced to nine years and six months in prison

Gautam Majumdar, 56

Director, Anand Jain, 40, and chief executive,