ROGUE INDIAN FINANCIER IS ARRESTED IN NEW DELHI
HE ran, but he couldn't hide.
After two-and-a-half years of flouting the law on four continents, India's rogue financier extraordinaire, Dinesh Dalmia, was arrested over the weekend at the home of relatives in New Delhi.
It was coverage in the Indian press that drew back the curtain on Dalmia's hidden world of white-collar crime and sent him fleeing to America three years ago.
And it was coverage by the New York Post that made it impossible for Dalmia to hide once he got here, and that finally sent him fleeing back to India three weeks ago.
This time, the cops were ready. Tipped that he was staying with relatives in New Delhi, Indian government agents surprised Dalmia in a midnight raid and took him into custody.
This brings to a halt, if not to an end, one of the costliest and most reckless careers in the annals of international white-collar chicanery.
In India, Dalmia is wanted for questioning about his role in a six-year-old stock-rigging scheme that shook the Calcutta Stock Exchange and triggered the Enron-like collapse of the company he headed, a tech-world highflier called DSQ Software Ltd.
IN the U.S., where Dal mia has been living for the last three years, he faces separate but equally serious legal problems. These involve his hidden role in the management of a North Brunswick, N.J., data-processing company called Allserve Systems Corp. The company collapsed in bankruptcy last November, and evidence of fraud, forgery and money laundering have been pouring from its files ever since.
In the U.S., outright cash losses to banks and commercial finance companies are already approaching $100 million. And in London, where Dalmia controlled an equally fraud-drenched affiliate that also called itself Allserve Systems and that has also now collapsed, lenders are looking at $30 million more in losses. And it doesn't end there.
Prior to fleeing India in 2003, Dalmia took the opportunity created by the meltdown of his company, DSQ Software, to transfer nearly all its worldwide assets into offshore shell companies he himself controlled.
These transferred assets included the entire business operations of DSQ Software in the U.S., which were being carried at the time on DSQ's books at a value of a bit more than $21 million. Yet the evidence seems clear enough that Dalmia didn't pay DSQ Software a dime for the U.S. business — he simply took it and moved it to Tortola.
Next, Dalmia sold some of the assets to a Singapore-based data-processing company called Scandent Ltd. that had been launched some months earlier with financial backing from the Bronfman family. What was left he renamed Allserve Systems Corp.
Dalmia worked hard to stay in the background at Allserve, but he was done in ultimately by his own showboating lifestyle, and by his seeming impatience with details.
He bought a mansion in Fort Lee, N.J., overlooking the Hudson, but kept his name off the paperwork by putting the transaction in his wife's name. Then he inexplicably shot himself in the foot by having Allserve's North Brunswick office install and pay for a telephone in his Fort Lee home, and list its number publicly in the phone book under the name Allserve Systems.
And he called further attention to himself, as well as created jealousy among Allserve's employees, by driving around New Jersey in a Ferrari sports car, while sticking Allserve with the $112,124 down payment and $1,799 in monthly payments under a four-year lease in Allserve's name.
Lying to outsiders about Allserve's secret Mister Big became a way of life at the company, and it infected everything, from routine record keeping to the names under which Allserve signed business contracts. During a single one-month period in mid-2003, the names of three different individuals appear on supplier contracts as Allserve's chief operating officer. Employees say two of the three are pseudonyms used by Dalmia on numerous contracts.
IN this climate of lying and deception, the com pany's files were soon overflowing with forged documents, false financial statements, and fake invoices — much of it geared toward acquiring shipment after shipment of leased computers worth millions of dollars from finance companies like Key Bank and IBM Credit.
Eventually, this unending blizzard of counterfeit paper wound up duping nearly two dozen banks and finance companies out of close to $100 million in payments for computer equipment. Only after the party ended and Allserve filed for bankruptcy did the lenders begin to realize how spectacularly they'd been swindled.
In the equipment-leasing business, a finance company like CIT Group will purchase computer equipment from a manufacturer or licensed reseller and then lease it to a data-processing company like Allserve.
That at least is what Allserve's creditors thought was happening when, in contract after contract, they purchased computers by the truckload and had them shipped directly to Allserve's offices in North Brunswick, where the company was supposedly setting up a huge data-processing operation that was going to employ thousands.
In reality, these supposedly savvy businessmen had been hoodwinked into placing their equipment orders through Dalmia-controlled sham companies that had been set up to look like legitimate vendors and resellers.
Worse still, no one from the finance companies ever bothered to follow up and see what sort of equipment was actually being delivered. Too bad, for as bankruptcy court records now show, the shipments mostly consisted of obsolete and worthless "gray market" goods with their serial numbers scraped off. And instead of using it to set up that vast new data-processing center Allserve had been promising, the company had simply been piling the junk on pallets in a Trenton warehouse.
Last week, appraisers for the court-appointed bankruptcy receiver in the case, Charles Stanziale, declared that the total value of all known computer equipment in Allserve's possession — for which the finance companies were owed more than $83 million — now amounts to less than $300,000. And court papers filed by Stanziale last week show that the U.S. attorney plans to impound the equipment as evidence in a parallel criminal case that has now been launched. In other words, a nearly 100 percent wipeout for every creditor in the case.
Meanwhile, last week brought reports that a second Dalmia-linked computer company, called Vanguard Info Solutions Corp., and a third company, in Maryland, may have received computer equipment under bogus Allserve-generated contracts as well.
How much further Dalmia's ripples will spread before this is over is anyone's guess. But for now at least, it looks as if Dalmia himself will be just another sidelines observer of his handiwork.
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