Cheques amp; Balances

The average person knows nothing about the nitty-gritty of the scam. Most people seem to think that there was one case filed against the broker for all his shenanigans with banks, public sector undertakings, mutual funds and others. Had the broker not been convicted after seven long years, it would have seemed a complete miscarriage of justice and a further loss of faith in the system.

For Harshad, an acquittal in the first scam case would have been the green signal for his re-entry into public life. Mehta8217;s aggressive and articulate lawyers would have lost no opportunity to convey the implication that an acquittal in a minor case was an indicator that the 26 others which are being heard are frivolous and would lead to an acquittal. Nobody would be the wiser for at least half a decade and the general public, whose memory is notoriously short, would lose all interest in the investigation anyway. This would have given the broker all the time he needed to work on his image and to projecthimself as the wronged party. In fact, this is why there is such a crying need to prioritise the scam cases and hear the major ones on a continuous basis.

As things stand, exactly the reverse has happened. A conviction in a relatively minor case makes things that much more difficult for Harshad in the bigger ones. It was probably a big gamble by him and his lawyers which did not pay off. The Maruti case will now go to the Supreme Court but by the time the apex court hands down its verdict, there will hopefully be a few more verdicts from the Special Court in Mumbai in connection with the other cases and more convictions too.

Is it far fetched to believe that an acquittal would have meant the return on Harshad Mehta? Just go back a couple of years.

In 1997, Harshad was already on the comeback trail, too impatient to wait for the courts8217; verdict. Armed with a website and half a dozen newspaper columns he had set himself up as an investment guru and columnist, while at the same time going back to exactlythe same modus operandi of rigging up shares. The Harshad way is to put out a tip in the market, create endless hype about a stock and work at the rigging along with the management of those companies. His media brokers who helped place his columns insisted that so long as Harshad was merely an accused in the scam, it was almost his right to be a columnist. That line of argument is now closed, probably forever.

For seven years now the Bombay Stock Exchange BSE has also hung on to this argument to avoid expelling the broker. Harshad has more than one card on the BSE, which are merely suspended. The BSE will now have to take a decision on the issue, if necessary, with some prompting by the Securities and Exchange Board of India SEBI.

As for SEBI itself, it has been conducting an excruciatingly slow and hesitant investigation into the June 1998 payment problem, when brokers operating for Harshad failed to pay up. SEBI has clear evidence of a set of investment companies who were common clients of 20-oddbrokers involved in the rigging of four particular scrips. They have also been able to trace these back to the Big Bull. Yet, the regulator has been dithering. The verdict would probably embolden SEBI to complete its endless investigation into the June problem.

Having said that, the securities scam trail continues to be an example of how not to deal with financial scandals. One decision out of 26 cases is a pathetic record by any standards. Huge amounts of money remain blocked up, the Custodian has not been able to liquidate shares seized by the office despite several bull runs since 1992 8212; so much so that some of those shares have now turned completely worthless. The money that is being spent on the scam investigation is getting disproportionately large. Moreover, there are hundreds of junior level officials, implicated by the CBI in various cases, who are completely destroyed. In their case, most often, their crime has been their inability to stand up to their bosses and insist on correct proceduresbeing followed. For them the long-drawn trial is in itself a punishment far bigger than their crime.

In contrast, Nick Leeson, the main accused in the collapse of the blue chip Barings has served his sentence and is already out. May be, a stable government at the Centre would have the courage to order some sort of re-evaluation or prioritisation of the cases pending in the Special Court.

Authors email:suchetadalalyahoo.com