IPO Scam

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MUMBAI: Mafia funds are suspected to have been pumped into the IPO scam which involved using thousands of benami demat accounts to corner shares allotted in the retail segment of such offers.

A senior IPS officer from Mumbai said the police did not rule out the mafia’s involvement in the scam.

Agencies including the income tax department and the enforcement directorate, which is tracking money being routed through hawala deals, are conducting parallel inquiries in this connection.

According to sources, the scam involved persons active in the illegal kerb market in Ahmedabad, Surat and Vadodara, who lent names and dematerialised accounts for a fee to those willing to apply for shares and get out soon after listing.

In the kerb market, punters begin trading in shares even before allotments are made by the company.

The transactions are regularised by transferring shares into the buyer’s dematerialised accounts as soon as allotments are made. Sources in Mumbai police said a Dawood frontman in Gujarat is suspected to be behind this racket.

"It is a simple modus operandi to channelise black money and convert it into white," an IPS officer says, adding that several persons were involved in the racket.

For example, during investigations, Sebi, the stock market regulator, had found that in the IDFC IPO, Roopalben Nareshbhai Panchal used the largest number of such benami and fake accounts to rake in lakhs of rupees.

The person is suspected to have been only a front for financiers, whose identities are yet to be established. Says an officer from Mumbai’s economic offences wing, "There is a deep nexus between bankers, brokers, market intermediaries and the underworld. The purpose — launder black money."

Sources said that the fictitious benami demat accounts were created in 2003, right at the beginning of the revival of the primary market which means the scheme was well thought out and elaborately planned.

A Reserve Bank of India probe had found that in several cases, refund money was credited directly into broker’s accounts.

This meant that the banks as well as the registrar to the issue knew that the account holder was merely a front. As in the case of earlier scams orchestrated by Harshad Mehta and Ketan Parekh, this time too, players seemed to have tapped into the banking system to fund their operations, sources added.

Satya