A-G Goolam Vahanvati's son-in-law fined by UK regulator

By Paranjoy Guha Thakurta and Jyotirmoy Chaudhuri Goolamhussein Essaji Vahanvati, the 13th and current Attorney General of India, will probably go down in history as the most controversial chief legal officer of the Union government. After allegations of impropriety, misconduct and conflicts of interest were levelled against him in various cases, including the 2G spectrum and Coalgate scandals, the AG is back in the news for the wrong reasons. His son-in-law was recently fined by a regulatory authority in the United Kingdom and barred from offering financial services after he and his business associates were accused of attempting to manipulate the market prices of global depository receipts (GDRs) issued by Reliance Industries Ltd and Gazprom, the Russian hydrocarbons conglomerate which is the planet’s biggest gas extractor and one of the largest companies in the world. Whereas information on the episode relating to Vahanvati’s British son-in-law Tariq Carrimjee has been in the public domain for some weeks now, much of the mainstream media in India has chosen to ignore the story. [caption id=“attachment_1114893” align=“alignleft” width=“380”]  Goolamhussein Essaji Vahanvati. PTI[/caption] What has been more widely reported are the allegations against the AG that were made by Gurudas Dasgupta, member of Parliament belonging to the Communist Party of India, in a letter to the Prime Minister dated 9 August. On 24 August, a legal notice was sent to the MP by a firm of lawyers acting on behalf of Vahanvati claiming that the allegations made by him in his ‘confidential’ letter to the PM were false and baseless. Four days later, Dasgupta approached the Speaker of the Lok Sabha, Meira Kumar, with a notice requesting her to initiate breach of privilege and contempt of Parliament proceedings against the AG for allegedly seeking to prevent him from discharging his duties as an MP. Speaker Kumar has confirmed that she had received the notice. Dasgupta told Firstpost on 13 September that she had said the matter was still under her consideration. First, the episode relating to Carrimjee, a British citizen who is married to the AG’s daughter Sholeen, who is also a British citizen. The UK’s financial regulator, the Financial Conduct Authority (FCA), announced on 8 August through a press statement that Tariq Carrimjee of Somerset Asset Management would be fined £89,004. The statement added that he would also be banned from providing ‘financial services’, including brokerage services, for ‘recklessly assisting’ Rameshkumar Goenka, a Dubai-based private investor, in his plan to ‘manipulate Gazprom and Reliance securities’ in October 2010. (See the statement here). A ‘decision notice’ which lays down the facts of the case and the FCA’s reading of it, was thereafter issued. This notice was sent by the FCA’s predecessor – the Financial Services Authority (FSA) -‑ on 26 March 2013, five months prior to the release of the press statement on 8 August. Besides Carrimjee, two others who had advised Goenka in the “manipulation of securities traded on the London Stock Exchange” were also indicted, the FCA stated in a separate communication issued on 8 August. In this case, David Davis, senior partner and compliance officer of Paul E Schweder Miller and Co was fined £70,258 and Vandana Parikh, a broker in the same firm, was fined £45,673 (read here). Nearly two years earlier, in October 2011, Goenka had himself been penalised $ 9.1 million for market abuse by the UK market regulator, in what was termed by the Financial Times as one of ‘the largest fines imposed by the FSA on an individual’ (see here). This story goes back to April 2010 when Goenka reportedly put together a plan to manipulate and secure the closing prices of GDRs of two companies, the Russian oil and gas giant Gazprom and Reliance’s Industries. (Incidentally, a GDR or a global depository receipt is a financial instrument through which money can be raised globally by a company through issuance of bank certificates in one country and against shares in a foreign company.) In April 2010, Carrimjee introduced Goenka to Vandana Parikh or ‘broker B’ (as named in the FCA’s Decision Notice) and a series of conference calls took place. Carrimjee had apparently known Parikh for close to 10 years and his firm, Somerset, had an account with the brokerage firm, Schweder Miller. Targetting the GDRs of Gazprom first, Goenka wanted to know if the closing price of the company’s GDRs could be raised by placing strategic orders – he explored the steps necessary for increasing the closing price and the latest time at which an order could be placed. Parikh explained the closing auction process, specifically the likely price movements that could result from placing orders of various sizes. They also agreed on some trial runs. (See Decision Notice of the FCA in UK in the attachment.) The plan by Goenka, Parikh, Davis and Carrimjee to allegedly rig the prices of GDRs issued by Gazprom had to be dropped after Vladimir Putin (the then Prime Minister of Russia) announced a proposal to merge Gazprom and Ukranian gas major Naftogaz, which drove down the share prices of the Russian company. Goenka, it seems, used the information gained from this exposure later in the year in October and successfully manipulated the closing price of Reliance shares, saving some $3.1 million on a structured product he held. The ‘ final notice’ by the FCA to Goenka dated 17 October 2011 revealed that he had bought close to 770,000 GDRs of Reliance, whose prices had gone up artificially by around 1.7 percent above the ‘knock-in price’, a few moments before the closing bell was rung to announce the end of trading that day. According to the 8 August statement of the FCA, it was in the course of the manipulation of the GDRs that Parikh informed Davis that ‘she had concerns’ about the ensuing trading. Among the few Indian publications which reacted to the FCA’s censure and imposition of a penalty on Carrimjee, the Delhi-based weekend newspaper, the _ Sunday Guardian (_on 7 September) confirmed the imposition of the fine through the press office of the FCA and quoted the Decision Report in detail. There were no responses from Vahanvati and Carrimjee to queries raised by the newspaper. The Delhi-based daily Millenium Post on 11 September quoted Dasgupta’s three-page letter to the Prime Minister which alleged that Vahanvati had illegally maintained a foreign bank account in the Union Bank of Switzerland at its Singapore branch since 1997. The letter also provided details of the account number, secret code name and number and details of the beneficiary of the foreign bank account that was allegedly in the name of Vahanvati. The MP asked the Prime Minister to enquire and verify the information he had provided (read here). Thereafter, a legal notice was issued to Dasgupta on behalf of Vahanvati by Karanjawala and Company, a firm of advocates headed its managing partner,  prominent lawyer Raian N Karanjawala. The legal notice accused the CPI MP of acting at the instance of motivated persons hostile to the AG, and for having made no effort to ascertain the veracity of the information. The notice asked Dasgupta to furnish material proof to substantiate his allegations. Responding to this notice, the MP complained of breach of privilege to the Speaker of the Lok Sabha. Dasgupta’s letter to the Prime Minister urged him to direct the government’s law-enforcing agencies like the Central Bureau of Investigation, the Income Tax Department and the Enforcement Directorate to verify the authenticity of a slew of the allegations. Whereas the contents of what purports to be the MP’s letter to the PM have been circulated widely across the internet, these are not being reproduced here for want of verification. Incidentally, the name of Carrimjee, who is at the centre of this web of four alleged market manipulators, features in a list of holders of accounts in tax havens that was published earlier this year by the International Centre of Investigative Journalists. A search of the database of the Centre shows that Carrimjee operates an offshore company called Fast Tycoon Limited with a banking link in the British Virgin Islands. (Click here) The story does not rest here. Carrimjee will reportedly be contesting the enforcement notice of the FCA at the Upper Tribunal, a superior court of record in the UK.