Pyramid Saimira: Finger points to SEBI Manager in forged letter case

Moneylife learns that the infamous “forged letter” in the sensational Pyramid Saimira case may be the handiwork of a manager of SEBI called J D’Souza.

The case against Pyramid Saimira is taking another sensational turn. Moneylife learns from informed sources, that the “forged letter” may be the handiwork of a Manager of the Securities and Exchange Board of India (SEBI) called J D’Souza. He was attached to the investigation department. Ironically, it is SEBI’s thorough, police-style investigation that led to the SEBI insider in May. He has tendered his resignation soon after, but has yet to be released.
The story goes back to December 2008, when PS Saminathan, chairman of Pyramid Saimira received a letter, purportedly from SEBI, asking him to make an open offer for 20% of the floating stock at not less than Rs250 a share within 14 days (the ruling market price then was Rs70). This followed his decision to acquire the 25% stake held by two co-promoters, one of whom was Nirmal Kotecha, a stockbroker.

Naturally, the stock price soared and several vested interests made a killing. SEBI woke up a good 24 hours later and launched an investigation after declaring that it had not sent any such letter to Mr Saminathan. The subsequent investigation exposed an unholy nexus between promoters Saminathan and Kotecha and a series of dubious dealings by Nirmal Kotecha, who was found to have created a network of dummies, whose bank accounts, depository accounts and mobiles were systematically used to cover up the price manipulation and pump-and-dump operations. 

While SEBI sleuths tracked the murky underbelly of market manipulation by tracking mobile phone locations and questioning journalists and PR professionals, the original forgery on SEBI’s letterhead was apparently forgotten until May this year. However, there have been frequent rumours that the forged letter actually emanated from within SEBI and was couriered from its premises.

We now learn that SEBI discovered the involvement of its own official in the process of tracking all calls made by stockbroker Nirmal Kotecha and tracing them to specific geographical locations. It discovered one mobile phone to which there were many calls. The phone was traced to one Sameer Gawli of Bhandup (a Mumbai suburb). When he was tracked down, Mr Gawli is understood to have said that he works for an advocate named Prakash Shah, who is being investigated on several matters(

Advocate Shah was called in for questioning in March and it is he who revealed that he had given a SIM card, purchased in the name of Sameer Gawli, to the SEBI Manager J D’Souza.

SEBI has since discovered a series of calls made by its manager to Nirmal Kotecha. Sources inside SEBI say that it hopes to complete its investigation by July end and present it to the Securities Appellate Tribunal, where it has several other cases pending in the Pyramid Saimira case.

It has been more than 18 months and SEBI has been conducting a surprisingly slow investigation into the forged letter. So far, it has not even sent it for a forensic investigation to check the paper and stationery and to figure out whether other officials were involved in the action. Instead, on 5th April, Whole Time Member Dr KM Abraham issued an internal memo to its own officials saying that Advocate Shah was to be barred from appearing in cases before SEBI (this internal memo was suddenly withdrawn today, probably as a result of a series of questions that Moneylife mailed to top SEBI officials including the chairman). The action against Advocate Shah has acquired a life of its own and led to a couple of applications under the Right to Information Act, culminating with a hearing before SAT, but that is another story.

Only recently, SEBI scored a major victory when the Supreme Court, on 16th July, dismissed a petition by Pyramid Saimira challenging a seven-year trading ban imposed on it. The discovery that its own manager was part of the dubious nexus between Pyramid Saimira, its management and former promoter Nirmal Kotecha, is bound to damage SEBI’s frayed credibility.

What is worse, the series of RTI applications surrounding this case and others involving market manipulation seem to suggest that D’Souza is not the only manager who is hand-in-glove with market intermediaries and manipulators. After all, the fact that SEBI has failed to create a statutory reporting system to club cases against the same companies/intermediaries/ individuals involved in market manipulation and other violations, is part of a deliberate design and not a mere lack of common sense.  




6 years ago

The recent actions of SEBI such as, inaction on MCX's application for permission for it's exchange, the deals with several offenders for repeated mistakes/violations and now this forged letter, only serve to undermine SEBI's credibility. Mr. Bhave should either clean up the mess or resign if he is part of the problem.

Gaurang Shah

6 years ago

Excellent piece of reporting.

Explains in a lucid non verbose style and exposes the murky dealings that the mainstream media shies away from.

This raises the nagging question: who will regulate the regulators?

Who will rate the rating agencies?

We are creating a number of autonomous regulators in insurance, pension, telecom, securities market, who hardly have any accountability in such matters.

This piece is one more example why we rely upon MoneyLife to uncover and report what the others either do not know or neglect to report.

Pls. keep it up and do not deviate from your path.

padmanabhan s

6 years ago

SEBI is created to protect small investors
of all listed companies by GOI. Now what is the fate of the small investors who
had invested their hard earned monies
in the company? Is there any law suits
to get their monies? In India small investors has to pray the Almighty to get their monies !!!


6 years ago

Please check wether (unlike Sathyam) Top Brass is also involved in the scam. There may be many more skeletons in the cup Board !

India keen to buy BP's assets in Vietnam: Deora

Oil minister Murli Deora flew into the Vietnamese capital today with heads of blue chip Indian oil firms to lay a claim with Hanoi on BP's stake in two offshore gas fields — a pipeline and power project.

With BP Plc looking at selling interest in some fields to fund its the Gulf of Mexico oil spill liability, India is pitching for buying the British energy giant's stake in the $1.3 billion Nam Con Son gas project in Vietnam, reports PTI.

Oil minister Murli Deora flew into the Vietnamese capital this morning with heads of blue chip Indian oil firms to lay a claim with Hanoi on BP's stake in two offshore gas fields, a pipeline and power project — together referred as Nam Con Son, Vietnam's largest gas project.

"This is a great opportunity for us. The gas fields were originally allocated to us but due to foreign exchange crisis of 1990s, we had to farm-out (give away) some stake to BP. We will like to get back that stake," Mr Deora said ahead of his meetings with Vietnamese prime minister Nguyen Tan Dung and government-run PetroVietnam.

BP is considering selling fields in Colombia, Venezuela and Vietnam in order to meet the $20 billion clean-up bill of the worst US spill. It had in June announced a $10 billion asset sale programme to pay the costs of compensating victims of the Gulf of Mexico oil spill caused by the blowout of the Macondo well in April.

China's CNOOC and Sinopec, as well as Thailand's PTTEP may also be interested in BP's stake in the Vietnam project.

ONGC Videsh, the overseas arm of state-run Oil and Natural Gas Corporation (ONGC), already has 45% stake in the offshore gas fields where BP has 35% and the balance is with PetroVietnam.

A 370-km pipeline ships the gas produced from the fields to onshore power plants. BP has 32.33% stake in the $565 million pipeline where its other partners are ConocoPhillips (16.7%) and PetroVietnam (51%).
The gas produced from the fields is supplied to a 720 MW, $412 million power plant where BP, NI of Japan and Semb Corp of Singapore have 33.3% stake each.

Oil secretary S Sundareshan said India is interested in taking over BP's stake in all the segments of the Nam Con Son project — the gas fields, pipeline and the power plant.

While OVL along with state-owned Oil India Ltd (OIL) may takeover BP stake in the gas fields, gas utility GAIL India was interested in the British energy giant's stake in the pipeline. GAIL and refiner Indian Oil Corporation (IOC) can together manage the power plants.
Nam Con Son project's upstream part is the Block 06.1, located 370 km south-east of Vung Tau on the southern Vietnamese coast. The 955 sq km block has Lan Tay and Lan Do gas fields. Lan Tay currently produces around 14 million standard cubic meters per day of gas (mmscmd) while Lan To is being developed currently.

OVL recouped all its investment in the project in 2006 and currently earns $35-$40 million of net revenues, officials said.

OVL has so far invested $217 million in the gas fields and has government approval to invest up to $377.46 million.

ONGC chairman and managing director R S Sharma, OVL managing director R S Butola, GAIL chairman and managing director B C Tripathi, OIL chairman and managing director N M Borah and IOC director (refineries) B N Bankapur are part of the high-level delegation Mr Deora is leading.

"There are reasonable expectations that BP may exit its project in Vietnam. We will like to put on record our claim (on this)," Mr Sundareshan said.

If Nam Con Son was put on the auction block, Asian interest would be strong, especially from Thailand and India, who have regional ambitions but often play second-fiddle to China's outbound merger and acquisition (M&A) deal-making prowess.

Chinese oil majors could come up against political opposition in Vietnam, where suspicion of China runs high due to the territorial disputes between the countries in the South China Sea.

Besides Nam Con Son, BP also owns 75.9% operating interest in Block 5-2 with PetroVietnam holding 24.1%. It partners ConocoPhillips and PetroVietnam in Block 5-3.

OVL also has two other exploration blocks — 127 and 128 in Vietnam.

The gas fields in Block 06.1 were discovered in 1998 and were put on production in January 2003. The field produced an average of 12 mmscmd in 2009 and with additional compressors being put, the output will rise to 15 mmscmd.


Madras HC pulls up RIL for starting project without green nod

The court also asked the Puducherry government to ask for and obtain an environment impact report from experts, since the project area spread over mangrove forests

The Madras High Court (HC) has taken exception to Reliance Industries (RIL) going ahead with a gas pipeline related project in the union territory of Puducherry without obtaining environmental clearance in advance, reports PTI.

Passing an order on a PIL filed by S Sai Kumar, hailing from Yanam in Puducherry, a division bench comprising Justices Prabha Sridevan and G M Akbar Ali said on Tuesday that the fact that Reliance had obtained approval after commencing the project was not enough.

The court also asked the Puducherry government to ask for and obtain an environment impact report from experts, since the project area spread over mangrove forests.

The bench said it was disturbed by the company's attitude and expected it to have greater social responsibility. "If an environment disaster strikes, it will strike the mighty and the weak equally. We do not understand why the company should have commenced production and then obtained approval", the bench said.

In his petition, Mr Kumar asked the court to restrain the respondents from establishing a 'block valve station' for the pipeline project in Dariyalatippa village without due process of law as laid down in the Madras River Conservancy Act. He said he apprehended there would be environmental damage if the project was established.

The Puducherry government and the company had entered into a memorandum of understanding (MoU) for implementing a national gas development project. 25% of the local population were fishermen dependent on the river. If the project was not halted, then, by virtue of destruction of coconut plantation and mangrove forests, the possibility of flooding would increase, the petitioner said.

The mangrove forests should be protected, Mr Kumar said in his petition.

Disposing of the petition, the bench said the applicant should come forward with an environmental management plan, which must be cleared by experts. To prevent possible future damage, the government should also be satisfied that the damage was not irreversible.

The applicant should be prepared and must sufficiently secure the cost of reversing any damage, the bench said.

The government should also have in place necessary infrastructure to maintain periodical survey and enforce stipulations subject to which the permission may be granted.

Before granting approval, the government should call upon the company to publish its proposal so that the public, particularly those who were likely to be affected, were made aware of the proposed action.

This would ensure transparency in the process and at least safeguard against a possible misjudgement if a mishap occurs, the bench said.


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