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DALMIA SCANDAL


HISTORY OF THE SCANDAL
One of the top performers in the field of software and IT services was DSQ Software Ltd, in Chennai India which was established in the year 1992. Initially when the company was established it was known as Square D Software Ltd but later as it got graduated in its field the company changed its name in the year 1997 to DSQ Software. The company was one of the leading service providers in the area of Mainframe and Midrange computing, Telecommunications, CAD, and various other IT related sectors. They had a widespread extended clientele network which included western countries like US, Europe and Asia Pacific having more than 2000 people employed in its various field. Hewitt Associates, a leading US based Human Resources consultancy firm valued the human resources capital of DSQ at $1bn. However the year 2002 witnessed the collapse of DSQ for one of its company promoter and Managing Director Dinesh Dalmia got stuck in various other share market prolonged public disagreement.Dinesh Dalmia was found entangled in a number of uncertain asset and adherent allotments made by DSQ in the year 2000 & 2001. The market of DSQ started diminishing where most of its profit making operations and the agreements related to the client service commitments were all sold to a privately held company.


DSQ DISINTEGRATED IN THE YEAR 2003
As a result of this DSQ disintegrated in the year 2003 with just enough business activities happening because of Dinesh Dalmia, the promoter of the company who was absconding just not to face any enforcement of law on him by the power of tribunal. Later it was found that Dinesh Dalmia was leading a very luxurious life between the years 2003 to 2006 in the United States of America. He set up a BPO business in the US using various other proxy names and deals. It was reported by the FBI of US that he was frequently spotted in the New Brunswick area of New Jersey driving luxury cars and often eating at Udipi Cafe. Finally in the year 2006 he was charged by the FBI based on various grounds of fraud activities. However in the year 2011 he has been released on bail in all cases in India. There were rumors that he had also entered into a settlement in the United States.According to the Bombay Stock Exchange facts and statics the public holding in DSQ Software was over 70% and equity capital of over Rupees 300 million. On October 2013, SEBI the governing body of all security instruments obstructed Dinesh Dalmia and DSQ Software for a period of 7 years.

DEATILED REPORT
During the period of 2003 Dinesh Dalmia was one of the most wanted financier both by the US and the Indian government for he cheated nearly twenty five banks in America and other financial companies. The amount duped by Dinesh Dalmia was almost around $100 million. When the department of Central Bureau of Investigation in New Delhi arrested him the charge sheet report against him said that he played a major role in an Rs 595-crore Indian capital market scam. Dinesh Dalmia, who sparked an Interpol red corner notice, left a trail of massive frauds in four continents. Once investigation started based on Dalmia's cheating of investors of nearly Rs 595 crores he flew from India to USA. This scam involved a huge amount of about 130 lakh shares of the now disintegrated tech company, DSQ Software Ltd, by illegal transfers so as to fake firms through a preferential allotment. In the United States of America Dinesh Dalmia set up a new business venture by starting a BPO.

INVESTIGATION
Further investigations done both by the Indian CBI and the US FBI stated that Dinesh Dalmia was leading a very luxurious life New Jersey and other US cities for nearly three years where he was equally doing lot of criminal activities and was involved in lot of legal problems especially playing a dominant role in a North Brunswick-based data-processing BPO firm called All serve Systems Corp. But however this company was also in news because it got tangled in bankruptcy with very prominent and evident fraud and forgery and money laundering activities. Even after the identification it is reported that Dalmia worked from background at All serve and used pseudo-names to sign contracts and getting deals across. According to reports from US media it clearly stated that there were outright cash losses to a number of financial institutions and banks which even before the deep investigation showed up nearly to $100 million.

DALMIA'S FIRM FORGED DOCUMENTS
From the investigation it was also clear that Dalmia's firm forged documents, created false financial statements and faked invoices to get money released from finance companies like Key Bank and IBM Credit, which finance big computer purchases. This was not the case only in USA but also in the United Kingdom where Dinesh Dalmia controlled an equally fraud-drenched affiliate which by then totally collapsed and the investors were looking at a loss of more than $30 million. The New York Post came up stating that this unending blizzard of counterfeit paper involved nearly twenty five banks and number of financial institutions involving an amount of about $100 million in payment for only computer equipments. According to court-appointed bankruptcy receiver, Charles Stanziale, Dalmia pocketed nearly $100 million from the banks to buy new computers for his supposedly big BPO office, but he picked up $300,000 worth of second-hand computers to stuff in a warehouse. It took quite some time for the investors and the lenders to realize how cunningly and technically their money had been swindled by the Allserve Systems Corp. Bankruptcy court records show that the computer shipments that Dalmia fabricated to hoodwink the banks consisted mostly of obsolete gray market computers with their serial numbers scraped off.

JUSTIFYING ALL HIS ILLEGAL PROCEEDINGS
The detailed report of the Dalmia scam also states that Dinesh Dalmia had almost sold shares which was worth nearly 1.3 crores to three Mauritius based companies namely New Vision, Softec Trust and Technolgy Trust. But however when Dalmia gave his statements on this to SEBI he tried justifying all his illegal proceedings that this was done only to share swap deal where it was to purchase Fortuna Technologies, a company owned by TC Ashok. Also the investigation states that one Mr. Biyani who was a Kolkata based broker knew how the Dalmia scandal was in par with the Ketan Parekh scam too in the Joint Parliamentary Commitee. Further this led to the probing of the Ketan Parekh scam, who received a major portion of these shares from TC Ashok at the time of Kolkata stock exchange payment crisis.

INVESTIGATION AND THE REPORTS
DALMIA  SCAM
But the SEBI said that these shares were further transferred to DSQ in Chennai and various other companies which came under the control of Dalmia and were supposedly used in the shares of DSQ whose promoter being Dalmia. From the investigation and the reports it was very clear that the two companies namely IGTL and Allserve were occupying the same address of 204, North Center Drive, North Brunswick, New Jersey and the President of both the companies being Dinesh Dalmia. But however both these companies were earlier known as DSQ software. Records from the US bankruptcy court very clearly shows that money worth $2.7 million were transferred to IGTL account from Allserve just before the later was held or filed for bankruptcy. The bankruptcy court also states that an amount of $13 million was shipped to Vanguard Info-solutions. Vanguard Info-solutions is a BPO run by Dinesh Dalmia having branch offices in Gurgaon, India and New Jersey.

SECURITIES AND EXCHANGE BOARD OF INDIA
DALMIA SCANDAL
The Securities and Exchange board of India (SEBI) had calculated the unjust benefit that had accrued to Dalmia through the dubious issue of shares as Rs 630 crores; the value of shares issued then was Rs 945 crores. Dalmia was very bold enough to run a BPO in major cities in India including Gurgaon, Bangalore and Chennai even after he was filed a charge sheet against his illegal scam. Dinesh Dalmia was also in headlines in US where the investigating team and the money lenders were more keen on spotting Dalmia's global operations. The SEBI has levied a penalty of about Rs 630 crores on Dalmia and the DSQ group which also includes a ban from entering capital markets for 10 years on the key person Dalmia and other associates connected with DSQ Software and DSQ Holdings. The penalty is also put forth on various other investment companies which were in contact with Dalmia but of course at a lesser penalty rate.

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