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Virendra Rastogi, Anand Jain and Gautam Majumdar were sentenced to a total of twenty five years and six months' imprisonment for conspiracy to defraud in relation to their running of RBG Resources plc.

The fraud reportedly amounted to billions of dollars. Judge Wadsworth in passing sentence said “they created a very impressive front that fooled banks, the metal exchanges in both countries (UK and USA), and well respected accountancy firms.

The judge also said “they were involved in years of calculated dishonesty,” and that during the trial “they had shown no shadow of regret or remorse or repentance.”

Fake customers 

The Allied Deals/RBG Resources fraud was a truly global fraud that cost banks $700 million dollars (£350 million) worldwide but that was ultimately brought down by the pressing of a wrong button on a fax machine.

Between 1996 and 2002, Virendra Rastogi, Anand Jain and Gautam Majumdar, - together with Virendra's brothers, Narendra who was based in the USA, Ravindra who was based in the UAE and Subhash who was based in Singapore - ran a web of in excess of 300 fake “customers” who were supposedly based in the USA, Hong Kong, Singapore, Dubai, India, France and Italy.

The defendants used the supposedly independent customers to create “trades” that were then used as the collateral for cash advances from banks.

The banks thought they were financing a very successful metal trading firm, one so lucrative that Rastogi appeared in the Sunday Times Rich List and had Labour peer and former cabinet minister Jack Cunningham, Lord Holme, Lord Woolmer and Lord Gray as advisers.

They were instead advancing money to a company that was propped up by dishonesty.

The “customers” were Rastogi's paid henchman based at addresses around the world who faked documentation and pretended to banks and auditors to be independent traders.

Wong button on the fax machine 

The truth was, however, far more audacious. Investigators from Ernst & Young discovered that the address of one of the customers was in fact a cow shed in India.

One SFO witness at trial indicated that another customer's address in the USA was a laundrette in New Jersey and an investigator who went to locate one of the “customers” found a residential New Jersey housing estate with the house in question owned by an elderly lady who sold scrapbooks.

A number of supposedly independent customers had the same address and when investigators phoned some of the companies the phones were answered by children.

Ultimately it was the complicated nature of the fraud, together with the controlling tendencies of Virendra Rastogi that led to the uncovering of the crimes.

Rastogi usually required copies of the false customer documentation to be sent to the UK for himself to check. 

One of his henchmen in Hong Kong, intending to fax a number of false letters from various “customers” to Rastogi for review, inadvertently pressed the wrong button on the fax machine and sent all the material to PricewaterhouseCoopers' Bucharest office, RBG's auditors in the UK.

They were picked up by an visiting accountant who was conducting a routine audit. He noticed that the letters, supposedly from clients around the world, had all been sent from a single fax number in Hong Kong.

Although Rastogi phoned in to try and recover the documentation, alleging that they were documents that had been sent in error, PwC refused to return them and resigned as RBG's auditors.

Rotten to the core

This resignation prompted concern amongst the banks. Realising that the banks investigation would reveal the extent of their dishonesty, the defendants and their accomplices went into a panicked attempt to cover up the fraud.

Offices were rented, letter headed paper and business cards produced and individuals recruited to sit at desks and pretend to be employees.

Investigators found hundreds of customer stamps amongst the fraudster's papers at their Hong Kong business location, from which a ready inference could be drawn. Why would they own so many of their customer's stamps unless they controlled them?

RBG Resources also employed a number of genuine metal traders, who were based at RBG's London offices at 105 Piccadilly.

These traders entered into real metal transactions. These traders were not aware that the business conducted by Virendra Rastogi, Anand Jain and Gautam Majumdar was founded on fraud.

They were the honest veneer of a business that in many regards was – in the words of Serious Fraud Office (SFO) counsel Richard Latham QC - “rotten to the core”.

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