UK regulator names Anil Ambani owner of 'illegal' Mauritius fund

Is Anil Ambani the real owner of the Mauritius-based investment vehicle Pleuri, which invests in Indian stocks?

According to a report in Financial Times, two UBS bankers created Pleuri in Mauritius to allow Anil Ambani to illegally invest in Indian stocks - and this evidence was presented by the Financial Service Authority (FSA), the UK market and financial services regulator, before a London tribunal. Under Indian law, Indian nationals cannot invest in stocks through overseas subsidiaries.

The evidence emerged in a case involving Sachin Karpe, who headed a UBS wealth management desk that handled portfolios of India’s mega rich. Karpe apparently misled the UBS management about the true nature of Pleuri’s ownership, which Karpe, and another unnamed UBS banker, allegedly claimed belonged to a French couple. UBS ultimately declined to okay the Pleuri structure.

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[caption id=“attachment_156211” align=“alignleft” width=“380” caption=“According to a report in Financial Times, two UBS bankers created Pleuri in Mauritius to allow Anil Ambani to illegally invest in Indian stocks. Reuters”]  [/caption]

While both Karpe and the other banker have left UBS, the FSA has fined Karpe 1.25 million for his lapse. At the tribunal hearing, the FSA’s lawyer Jonathan Crow QC made it clear that “The source of funds (for Pleuri) was plainly the Ambani family.”

According to the Financial Times, “Mr Ambani…has not been accused by the FSA of any wrongdoing….The FSA alleges that in addition to trying to establish the offshore structure for Mr Ambani, Mr Karpe made unauthorised trades on other clients’ accounts. To hide losses, Mr Karpe allegedly arranged loans from other clients, falsely promising them that the loans would be guaranteed by UBS at an above-market rate.”

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Pleuri, meanwhile, seems to be opening up another link in the 2G scam. According to a report in The Times of India, the Enforcement Directorate has twice grilled Unitech Managing Director Sanjay Chandra in the last 10 days. Chandra is a prime accused in the 2G scam who recently got bail, and the ED is investigating a Rs 240 crore transaction routed through a tax haven.

According to the newspaper, “Chandra’s subsidiary company Unitech Overseas Ltd in the Isle of Man had invested $51,000,000 (about Rs 240 crore) in a derivative product through the Netherlands’ Rabobank. The derivative purchased was linked to the performance of a Mauritian firm, Pluri Emerging Companies PCC Cell.” The ED obviously thinks the money is some kind of payoff in the 2G scam.

It is not known if this Pluri is the same as the Pleuri mentioned in London tribunal, since the spellings differ.

But either way, a whole new can of worms is being opened up in the 2G scam. Both Sanjay Chandra and Anil Ambani - three of whose executives spent six months in jail as an accused in the 2G scam - will have to answer a lots of questions in the coming days.

Reliance ADAG Group’s stand

In response to the UK regulator’s statement in London, a Reliance ADAG spokesperson had this to say: “The matter is nearly five years old, and has already been closed with Indian regulators under the consent order framework in January 2011. The matter relates to regulatory action in the UK against former employees of a foreign bank, for unauthorised trades made by them and misuse of a large number of client accounts.

“The bank has already accepted the weaknesses in its internal systems and processes, and settled the matter with the UK regulators by payment of a fine. There are no charges levelled against us by the UK regulators in these proceedings. As such, we are not party to these proceedings, and not represented therein.”

(Note: The Reliance viewpoint has been added in this updated version of the post)