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An MP from UP has alleged that the Anil Dhirubhai Ambani Group had diverted funds raised through External Commercial Borrowings and Foreign Currency Convertible Bonds into stock market operations through Swiss bank UBS, which were allegedly used for large-scale unauthorised trades

Remember Raashid Alvi? He is the Member of Parliament (MP) who used to dash off letters against the Reliance Group of companies, when he was not a member of the Congress Party. The Uttar Pradesh-based MP is still at it; this time his attention is focused on the alleged shenanigans of the Anil Dhirubhai Ambani Group (ADAG)—especially the incredible allegations about unauthorised trading in the accounts of a couple of diamond traders out of the London branch of Union Bank of Switzerland (UBS).

Part of this is already in the public domain in the form of the ban on Barclays Bank and Societe Generale by the Securities and Exchange Board of India (SEBI) in January this year. SEBI has barred these entities from issuing Participatory Notes (PNs) and Offshore Derivative Instruments (ODIs) after they were found fudging the beneficial owner in a case involving the shares of Reliance Communications. Now Mr Alvi has taken the story further.

On 1 February 2010, he wrote to the Enforcement Directorate (ED) demanding action in the ‘money laundering scam’ that was brought to the attention of the Directorate of Revenue Intelligence (DRI) way back in 2008. This time he draws attention to two other company shares —Reliance Natural Resources Ltd (RNRL) and Reliance Energy Ltd (REL).

The crux of the allegation is that the ADAG diverted funds raised through External Commercial Borrowings (ECB) and Foreign Currency Convertible Bonds (FCCB) into stock market operations through UBS. The funds were moved by UBS into the dormant accounts of some diamond merchants and then used to conduct large-scale unauthorised trades running into several billions of dollars. This was done by routing the money into the Indian capital market in the form of PNs and ODIs through a Mauritius-based entity called Pluri Emerging Company PCC.

Mr Alvi has asked the ED why it is not willing to pursue the matter, even though the Financial Services Authority (FSA) of the UK has written to it (on 17 March 2009) indicating that it has information about the case and is willing to share it.

The MP has further written to all the regulatory agencies, including the Reserve Bank of India (RBI) and the SEBI and the Chairman of the Central Board of Direct Taxes (CBDT) asking why they are uninterested in pursuing the investigation.

As with everything else, we hear that the pressure to investigate the ADAG comes from the rival Ambani camp and regulators, who have no qualms about persecuting legitimate business and are dragging their feet on this issue. Some also argue that if the ED and tax agencies had really gone after the biggest cases of transferring funds overseas, then there wouldn't be so much Indian money stashed in Swiss bank accounts.