Wrongdoings landing businessmen in jail
India is witnessing an unprecedented outing of corporate wrongdoing that is not—for a change—sparing the high and mighty
Aug 22, 2014, 06:42 IST2 min
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The last few years have been unusual in India’s business history. Never before have so many businessmen seen the insides of jail so often. The procession of suited gentlemen heading for the cooler began in January 2009, when Satyam Computers’ B Ramalinga Raju, much awarded for “corporate governance”, confessed to financial fraud and went in. Soon, there was another rush as scam after scam tumbled out of the UPA government’s closet. Among the early entrants to Delhi’s infamous Tihar Jail were Sanjay Chandra of Unitech Wireless, three executives of the Anil Ambani group, including group managing director Gautam Doshi, Shahid Balwa of DB Realty, Vinod Goenka of Swan Telecom, and Sharad Kumar, CEO of Kalaignar TV. Bringing up the rear this year were Subrata Roy, boss of the controversial Sahara Group (still in jail), who went in for sustained defiance of the Supreme Court’s orders, and Jignesh Shah, also still inside, for allegedly indulging in dubious practices with his commodity exchange. ![mg_77185_forbes_india_sm_280x210.jpg]( "mg_77185_forbes_india_sm_280x210.jpg")
Clearly, India is witnessing an unprecedented outing of corporate wrongdoing that is not—for a change—sparing the high and mighty. Crony socialism and crony capitalism are being shown for what they are (pure crime), and yesterday’s business icons are biting the dust with some degree of regularity. Hopefully, this will put the fear of god into those planning their next financial capers, aided often by corrupt politicians.
This issue of Forbes India brings you one such story—that of Jignesh Shah, the man who was in a tearing hurry to become India’s trading king. As author of a very successful stock exchange trading software, Shah thought he could make more money not by selling software, but by owning the exchange itself. This is what took him to commodities exchanges, including the National Spot Exchange Ltd, which went bust following a huge default last year. A successful exchange needs lots of participants and high volumes of trading to stay in business. This often presents new players with a dilemma: How do you bump up volumes so that it becomes a self-fulfilling prophecy? Shah solved this problem by creating contracts that appeared to be more like financing mechanisms than real trades backed by genuine collateral. Investors were lured in with promises of assured gains on their funds. They are now baying for Shah’s blood.
Sometimes you can get away with this kind of artificial pump priming. At other times, you can get caught in the downdraft. Shah thought he could get away with it as he operated in an under-regulated area of the market. He was wrong. India Inc is learning a new lesson: Trying to get rich quick by flouting the law and by indulging in sharp practices will not pay in an era of great suspicion about corporate buccaneers like Shah. This issue brings the story of Shah’s meteoric rise and ignominious fall.
Best,
R Jagannathan
Editor-in-Chief, Forbes India
Email: r.jagannathan@network18online.com
Twitter id: @TheJaggi
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