It has been over a year and a half since Harshad Mehta's brazen bid to re-emerge as the Big Bull of the Indian capital market ended in a disastrous payment crisis, but SEBI's inability to crack down on the broker-management nexus in manipulating stock prices continues to damage its credibility.In fact, SEBI's inertia has given rise to speculation that powerful industrialists who connived to manipulate their shares are being protected. Details of SEBI's investigations published by The Indian Express confirm that it has positive evidence of collusion between Harshad and the companies. It has followed up all the leads and established the nexus between Harshad's Damayanti Group and three specific companies. It has also established that the nerve centre of the market manipulations by the Damayanti Group's was 1208, Maker Chambers V, Nariman Point, Mumbai and that Harshad operated from there.This paper has already detailed how BPL funded Harshad's activities. Now let's look at the course of Harshad'sprogression from Growmore of 1992 to Damayanti in 1998. The story begins in 1998. Harshad apparently decided it was time to put the Securities Scam behind him.He hit on the idea, brilliant in its simplicity, of launching a website harshad.com which would openly dispense tips in the garb of research based analysis. Faithful speculators would come flocking back and the same old formula of rigging up select scrips to stratospheric highs would work all over again. Promoters, ever willing to be party to the market manipulation were easy to find, as is clear from the nexus between him and BPL in rigging up prices and the subsequent bail-out of brokers after the June '98 crash. He further enhanced his credibility by wrangling deals with several newspapers to carry his tips.After the basic spadework, the manipulation began in earnest towards March 1998. Within days the capital market was buzzing with reports that the Big Bull was back. But as usual, Harshad was too ambitious. The liquidity crunch ensured thatrigging of a few select scrips was neither moving the Sensex nor pivotal scrips. SEBI's investigations show that the Sensex in fact declined 11 per cent while BPL, Videocon and Sterlite were being brazenly manipulated by as much as 230 per cent. Harshad being a notified person in the securities scam had severe restrictions imposed on him by the Special Court; hence the Damayanti Group was set up as a front.Harshad's buddies and employees of 1992 were again at the helm of affairs and handling the price manipulation through dozens of brokers. Harshad's brothers-in-law Anil Doshi and his brother Dinesh Doshi were directors of Damayanti companies in various permutations and combinations. Pankaj V.Shah a relative and Atul Parikh a former employee, both co-accused of the securities scam also dealt for Damayanti. A third was Sunil Samtani, also a former employee of Harshad controlled Mazda Industries.The Damayanti Group entities had no financial standing or professinal expertise, yet dozens of brokers starteddealing with them without so much as collecting margins or deposits, all because Harshad was issuing instructions. They extensively transferred cheques/kaplis between themselves and moved positions from one stock exchange to another. When they faced payment problems, they `sold' certain illiquid scrips on `spot' basis which gave them access to funds from their financiers. The BSE clearly knew about Harshad's activities, and later helped get him off the hook by opening trading systems at midnight to put in manipulated trades.The group built up huge concentrated positions in BPL, Videocon and Sterlite shares and prices soared. After the crash in June when some newspapers began to probe the brazen cover-up by the BSE, SEBI too started investigations to establish with proof what was openly known to the market. It probed the activities of the Damayanti group and began the tedious job of finding evidence to link Harshad with Damayanti which indulged in the manipulation.It obtained documents and travel billsof Damayanti companies which were traced back to Harshad, his associates, lawyers, and family. These were corroborated with airlines and the Special Court, whose permission Harshad and his co-accused had to seek every time they traveled outside Mumbai. It also found that lawyers defending Harshad were also paid Rs 14 lakhs byDamayanti. Further corroboration was provided by S.S. Gulati of LKP Shares and Digital Leasing which did some deals with Damayanti companies. The more devastating links were discovered directly from BPL, Videocon and Sterlite and their group entities.The softer targets have been attacked. Systemic problems such as margins have been tightened or plugged. The BSE officer bearers (except Vice President Rajendra Bhantia) who aided the cover-up of what would have been a huge default have been sacked and 34 brokers suspended. Even Sriram Mutual Fund has been harshly dealt with, but Harshad remains untouched. Is he being protected or are the companies which connived with him powerful enoughto stymie investigation?Author's email: suchetadalal@yahoo.com
