Governance

Governance : All that glitters isn’t Modi

Harshad Mehta, CR Bhansali, Ketan Parekh and now Nirav Modi—they all had two things in common. One, their gluttonous appetite to make money and two, their ability, even willingness, to spot loopholes in overall financial system, and exploit them to the hilt. Ironically, they were undone by ‘minor’ things—Mehta by his flashy ‘Lexus’, Parekh by his K-10 and Modi by a curious low-level banker

by Alam Srinivas

KUCHCH din to gujaro Gujarat main! Only then can you visualise the entrepreneurial spirit of money-making adventures that grips the soul of a Gujarati. You will be able to listen to her dreams of wads of cash, not to show off, or spend in a wild spree of conspicuous consumption. The cash is not a means, but an end in itself. There is no cause and effect between the money earned, and the manner in which they live, think and behave. In fact, there is no effect at all. The two are related randomly.

Obviously, when entrepreneurship and money-making go hand-in-hand few unscrupulous elements emerge at regular intervals. They can take various shapes, and acquire varying contours. It can come in a personality like Big Bull Harshad Mehta, under-the-radar CR Bhansali, Tech Bull Ketan Parekh, and Glittering Scamster Nirav Modi. They had several things in common. The first was their gluttonous appetite to make money. Money for the sake of money; it didn’t matter whether it was thousands of crore, tens of thousands, or hundreds of thousands.


Once you acquire wealth and power, you think of yourself as undefeatable and never figure out new forces that act against you, waiting for a ‘small’ excuse to bring you down and drag you into Earth’s underbelly

The second was their ability, even willingness, to spot loopholes in overall financial system, and exploit them to the hilt. Without fear or favour! Without any element of guilt! In their minds, the loopholes existed to be exploited, the system was theirs to bend, amend, and manipulate. Thanks to their never-ending energy and enthusiasm, they picked up willing partners and abettors within the system, who willingly introduced them to more loopholes and how to exploit them more efficiently. There was enough grease to keep the fraud machines in running order.

Finally, they knew how to prey on other people’s greed—for money, material desires, lavishness, pomp and show, and entry into the social, eclectic circles of wealth and power. Mehta and Modi assiduously worked on the insatiable hunger of the bankers; Bhansali and Parekh on the voracious urges of the middle-class investors. Ironically, they were undone by ‘minor’ things—Mehta by his flashy ‘Lexus’, Modi by a curious low-level banker, and Parekh by his K-10. Not surprisingly, they never realised that there were larger forces at work against them.

This is the way it begins and ends. Larger-than-life factors act in your favour. Once you acquire wealth and power, you think of yourself as undefeatable and never figure out new forces that act against you, waiting for a ‘small’ excuse to bring you down and drag you into Earth’s unliveable, burning, and volcanic underbelly that destroys you as unrecognisable dust. As they say, ashes to ashes, dust to dust, if greed doesn’t get you, hubris must.

In April 1992, when Mehta’s fall began, his ‘Lexus’ was well-known. Very few people had it and a younger scion of a powerful business family was mightily impressed by it. When Mehta offered to gift it to him, it was taken as a slight. A mere stock exchange broker had the temerity to ‘gift’ something to the family which moved governments, as if the latter couldn’t afford it. When the same ‘Lexus’ was spotted outside the office of the State Bank of India, the rumour, which was in fact a fact, started that the Big Bull had a bullish problem.

Mehta, as the tip to a senior journalist went, had to return Rs. 500-600 crore to India’s largest bank, and was finding it a bit difficult. This was the beginning of a series of crashes in the Big Bull’s china shop of stocks that had soared over the past couple of years. The tsunami sucked him up, as it became clear how he had used the banking sector’s lackadaisical and antiquated system to regularly borrow money to fuel his stock market ambitions. Now, everyone knew the ‘illegal’ source of his money that was used to control the stock exchanges.


When entrepreneurship and money-making go hand-in-hand few unscrupulous elements emerge at regular intervals. They can take various shapes and acquire varying contours. They can come in a personality like Big Bull Harshad Mehta, under-the-radar CR Bhansali, Tech Bull Ketan Parekh, and Glittering Scamster Nirav Modi

CHAIN Roop Bhansali—the word’ Chain’ in his name is relevant, ironical and apt—played with the hearts of 300,000 depositors, including bigwigs like SBI. He raised over Rs. 1,200 crore and his intentions were backed by real and apocryphal stories about his largesse and money-making abilities. But he was decimated by a ‘small’ fraud; he encashed fraudulent dividends worth a mere Rs. 59 crore. It is truly coincidental that Bhansali emerged, in 1991-93, from Mehta’s ashes. He offered high returns, an annual interest of 24 per cent to depositors, and maintained it till the ‘paper’ house came crashing down, almost with a whimper, and with little noise.

Sadly, Parekh never learnt the key lessons from his predecessors. He kept a low-profile until he “threw” a millennium bash that was attended by politicians, business magnates and film stars. In addition, there was this all-round jealousy about K-10, his favourite stocks that zoomed to stratospheric levels—Visualsoft from Rs. 625 a share to Rs. 8,448 and Sonata Software from Rs. 90 to Rs. 2,150. Parekh successfully dumped these stocks, at regular intervals, on State-owned institutions, like the UTI. But when an angry bear cartel successfully hammered K-10 in early 2001, the party ended with a bang, rather the arrest of the Big Bull-in-works.

Aided by a mid-level banker, Modi drew limits through PNB guarantees from the foreign branches of other banks, without any or adequate collateral. Only when someone, out of sheer curiosity, decided to check the limits and state of collateral, did the cycle end. PNB was left with a bad taste of Rs. 11,000 crore. These diamonds were not forever. These diamonds turned out to be mere glittering glasses. The lights made them seem what they were not. But Modi, and his other family members escaped in the nick of time. Probably, they had an inkling of the future events.gfiles end logo



VOL. 11 | ISSUE 11-12 | MARCH 2018

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