A former CFO who was an accused mastermind of a scam that investigators said had “astonishing scope” was sentenced to time served, which amounts to seven months in prison. The key to the soft sentence in the more than $680-million scheme, according to federal prosecutors: his cooperation in a case that so far has led to the arrest of 15 U.S. defendants.
Anil Anand, the former finance chief of three metals companies, including Allied Deals Inc., had faced as much as 30 years of prison time, according to an earlier report. He was charged with participating in a sprawling, international Ponzi scheme that had resulted in over $680 million in losses for about 20 banks worldwide, including JPMorgan Chase, Fleet National Bank, PNC Bank N.A., KBC Bank N.V., Hypo Vereins Bank N.A., Dresdner Bank Lateinamerika AG, China Trust Bank, and General Bank.
Anand pleaded guilty in December 2002, under the cooperation agreement with the government, to participating in a scheme that induced banks to issue hundreds of millions of dollars in loans, among other allegations.
In addition to the sentence of seven months time served, Anand also was ordered to forfeit $600 million and pay restitution of nearly $684 million.
According to Michael J. Garcia, U.S. attorney for the Southern District of New York, Allied Deals, Hampton Lane Inc., and SAI Commodity in the U.S., and RBG Resources in the UK — companies that prosecutors collectively called the Allied Deals companies — purported to be in the business of brokering trades in nonferrous metals.
The Allied Deals companies were controlled by brothers Narendra Rastogi in the U.S. and Virendra Rastogi in the UK. As part of their business, the companies supposedly would arrange for sales between buyers and sellers of metal in transactions negotiated by unrelated parties, each acting in his or her own best interest. To finance those metal sales, the defendants then arranged for loans with banks, usually to be repaid after 180 days. As collateral for the loans, the banks relied on Allied Deals’ accounts receivables, expecting that the loans would get repaid when the customers repaid Allied Deals for the metal that had been purchased.
As it turned out, “hundreds, if not thousands,” of metal transactions upon which the loans were based simply did not exist, according to prosecutors.
The brothers and other co-conspirators allegedly set up and controlled an elaborate network of hundreds of sham nominee companies around the world to serve as fake purchasers of metal from Allied Deals so that the defendants could get loans from the victim banks. They allegedly used loan proceeds from one victim bank to make the loan payments required by another victim bank, while concealing that the newly-issued loans were not being used to fund actual, arms-length metal transactions and that the money used to pay off the loans had not been provided by the buyers of metal in bank-financed sales.
“The co-conspirators went to extraordinary lengths to mislead and convince banks into believing that the sham, ‘controlled’ customers were in fact real, independent companies with actual employees and offices and with no ownership or control relationships with the defendants,” according to Garcia. Among other things, a number of co-conspirators posed as Allied Deals customers, established offices and phone lines for the sham companies in the United States and abroad, arranged for fake letterhead and bank accounts, and were prepared to field calls from bankers or auditors, according to Federal officials.
Anand allegedly was involved in helping the brothers establish a number of the sham “controlled” customers that were central to the scheme, by recruiting a number of his friends to set up fake metal companies in New Jersey, New York and California. He and others then allegedly used these fake customers to generate millions of dollars in sham accounts receivables, which they used as collateral to obtain millions of dollars in loans from the victim banks.
Anand pleaded guilty to one count of conspiracy, one count of bank fraud, one count of conspiracy to commit money laundering, one count of tax evasion, and one count of making false statements to federal agents. As part of his cooperation, he testified in 2004 in New York against six of his co-defendants five of whom were convicted after trial. He also testified in London in the fall of 2007 at the UK trial of Virendra Rastogi and three others. That trial recently ended in the conviction of three of the defendants, including Virendra Rastogi, who was sentenced to 9 1/2 years in prison.