Parekh had major role in GTB's closure

Ketan Parekh played a major role in the closure of the Global Trust Bank (GTB) three years later, according to official investigators.

The broker is also accused of manipulating the stock markets in what became a multibillion-rupee scandal in 2001.

According to top sources in the Central Bureau of Investigation (CBI), records have been found of five bank accounts that were used to transfer a sum of over Rs 4 billion from the Hyderabad-headquartered GTB from 1999 to 2001 to Parekh. These funds were never returned.

"We have found bank records indicating that money from these accounts was sent to Parekh," a top official of the agency said.

Worse, the CBI has sufficient evidence to show that the funds were used by Mumbai-based Parekh in the scandal that rocked the stock markets in 2001.

"We were surprised to find money dealing in his name while investigating the closure of the bank," said the official. He added that preliminary investigations have revealed these figures but the probe could reveal a bigger amount of fraud.

The CBI is now trying to widen the scope of the investigations.

"We believe that some top bank officials were involved with Parekh because a fraud of such a huge amount could not be carried out without the help of bank officials."

Official sources said the CBI could only investigate cases that involved fraud of at least Rs 5 billion.

The CBI official said after the closure of GTB, the government had ordered an inquiry into the dealings that led to its becoming non-functional.

Parekh used to buy stocks at rock bottom prices and then push them up through market manipulation with funds borrowed from banks. He was arrested by the CBI on August 10, 2001, but is out on bail.

The stock market scam carried out by Parekh involved the siphoning off of Rs 13 billion from the Madhavpura Mercantile Cooperative Bank (MMCB) and the State Bank of India (SBI).

Officials said Parekh had played a major role in the closure of the Gujarat-based MMCB by defrauding it of Rs 10.5 billion. In that case, CBI officials said some of the bank officials were involved in the scam.

Similarly, Parekh had allegedly siphoned off Rs 2.5 billion from SBI for the sale and purchase of shares by his K-10 companies.

However, a CBI official said, "If we don't find the money, we will not let him enjoy it either."

CBI sources also said they might never be able to recover at least Rs 2.78 billion, which were transferred to Britain through investments made by companies operating in Mauritius.

"These funds were first transferred to Mauritius and from there they were transferred to bank accounts in England. We know who the people involved are but we do not have much proof to strengthen our case," said a source.

"We know about the remaining sum but we might never be able to recover this amount from Parekh," said the source.

Investigators following the money trail also suspect that a few non-resident Indian businessmen in Britain were involved in carrying out Parekh's operations in that country.

The officials also said some key conspirators of the scam were hiding in Britain but since the government of India did not have an extradition treaty with that country, it could not bring them to India.