Moving on to an Indian battle for DPC

The business community across the world watched in shock and amazement the spectacular flameout of Enron Corporation, one of Wall Street's darling companies. Its shares hurtled from a peak of $90-plus to a low of 27 cents as hidden losses became public and within days it was forced to file for bankruptcy. But many of us in India were not surprised.

Those opposed to Enron have been alleging exactly what the rest of the world discovered in the aftermath of the biggest corporate burnout - lack of transparency, shadowy deals with related companies controlled by senior employees, hustling policy changes through powerful political connections, fudging of accounts and to top it all pugnacious arrogance.

In India, Enron had educated policy makers, academics and journalists into believing that expensive power projects backed by sovereign guarantees were better and simpler than the tougher job of reforming electricity distribution systems, reducing theft, dismantling state monopolies and increasing the operational efficiency of existing power utilities.

Enron's legacy is a modern and much-needed power utility capable of producing over 2,184 MW of power which is unfortunately so expensive that it is lying closed for several months. Its bankruptcy had fuelled the hope that Enron or its creditors would be in a tearing hurry to sell of its Indian operations for a fraction of the $1 billion it had originally demanded (to cover its equity investment) in order to get out of the country.

However, events have turned out to be a lot more complicated. First, the DPC was kept out of Enron's bankruptcy filing in the US and seems hell bent on pursuing its plans to issue its final termination notice on the MSEB.

At the same time, the misinformation campaign which has always marked Enron's entire negotiation since 1994 seems to have begun in right earnest.

Confusing and contradictory news reports emanating from all the parties involved have ensured that nobody really knows what is going on.

On the one hand, DPC is sacking most of its Indian employees and one section of the media has reported that it has barely $8 million in the kitty to fight its legal battles. On the other hand, one newspaper reports that it is optimistic about its chances of extracting as much as Rs 280 billion in damages from India.

The second report coincides with yet another notice from DPC to MSEB challenging the grounds for rescinding its contract.

Meanwhile, the negotiations for taking over Enron's stake in DPC seem headed for bumbledom with many basic issues remaining unclear and confused.

On the one hand we have the Indian financial institutions who are trapped with a massive Rs 62-billion exposure to DPC, entirely due to their own gullibility and poor appraisal skills. This exposure includes hefty guarantees extended to DPC's foreign lenders which, if classified as a bad loan, would badly damage the credit rating and borrowing capability of the FIs.

Although negotiating from an extremely weak position, the FIs will have some say in the negotiation, because most of the borrowing is backed by DPC's assets as well as a large chunk of equity.

Then there are the Indian bidders for DPC (the Tatas, the Reliance-backed BSES, and the Videocon group) who not only expect to acquire the equity at a huge discount but are also demanding distribution rights for specified geographical areas from the MSEB.

That is not all. According to one news report, the central government, which had so far stayed aloof from the DPC imbroglio, also wants a say.

According to a pink daily, the government plans to invite 'open bids' for Enron's stake and would also encourage the National Thermal Power Corporation to bid. This can only happen if the government makes DPC a central project and buys out MSEB's 15 per cent investment and arranges to rework the power purchase agreement. Otherwise, it has no business calling for any bids.

Ironically, neither DPC's lenders nor the potential bidders have thought it fit to talk to MSEB, which is a signatory to the DPC deal and its only buyer of power. Top level sources at MSEB point out that in the entire babble over taking over DPC, nobody has focussed on the all-important task of first making it viable.

Clearly, a new PPA will have to be negotiated; but the potential buyers seem to assume that they will simply purchase Enron's equity and takeover the operations on the same terms. It would be recalled that MSEB scrapped the DPC agreement because it was unable to ramp up its power generation from zero to peak capacity within the contracted three-hour period.

The failure to fulfil this requirement had a hefty penalty clause which was invoked by the MSEB to cancel the contract.

Even if the buyers hope that MSEB can be arm-twisted into dropping all litigation, viability remains a key issue. MSEB is bound by the Maharashtra State Electricity Regulatory Commission's ruling which forces it to prioritise purchase from the lowest cost power producers and so long as DPC remains the most expensive producer it will be last in the queue.

Also, nobody is discussing the Madhav Godbole committee recommendations, which have called for hefty sacrifices on the part of all parties to the deal - DPC, MSEB, the lenders and the government. Only then will DPC be able to produce power at an affordable Rs 3, or thereabouts, per unit.

If the new buyer expects to inherit Enron's gold-placed project, complete with sovereign guarantee, extortionate operation & maintenance contracts, and excess costs built in for other infrastructure such as the jetty or the existing fuel supply terms which were tailor made for Enron, it are wrong.

Unless they work out the basics of a new PPA with MSEB or convert it into a central project, their bids for Enron's equity seem rather premature.

Otherwise, MSEB's objection to DPC's expensive power will remain and the real battle will begin after Enron is out of the picture. The objections of anti-Enron NGOs to the high cost of power will also remain intact -- their agitation will merely target the new owners of DPC instead of Enron.

My suspicion is that the confusion and obfuscation over the sale of DPC and the confusing signals from all parties are probably deliberate. Our policy makers and bureaucrats thrive in confusion because it is ideal for covert deal making.

http://www.suchetadalal.com/articles/display/1/296.article

Enron v/s Iridium: similarities and contrasts (10 February 2002)

Remember Iridium LLC, the global satellite phone company that went up in smoke? Until the Enron flameout, Iridium was probably the most high-profile bankruptcy in the United States in recent times.

Iridium was Motorola’s dream experiment, which envisaged 66 artificial satellites girdling the globe and connecting up with terrestrial systems to zap calls to user telephones anywhere on earth. I remember Iridium’s slick talking communications official making the rounds of Indian newspapers and displaying natty little cellphone-like instruments which he said would be Iridium’s answer to the suitcase-sized Inmarsat phones that were the only satellite-linked alternative then.

In India, a consortium led by IDBI but steered by Deepak Parekh and Ravi Parthasarathy (then chairman and vice-chairman respectively of Infrastructure Leasing and Financial Services) was put together to invest $70 million in Iridium LLC and a further Rs 126.09 crore for the gateway at Pune. It now turns out that the Indian institutions were victims of a well-orchestrated fraud—at least that is what they allege in a criminal complaint filed before the Pune magistrate a few months ago. Or is it that they are so overawed by the high-octane sales pitch of US companies that they turn credulous and commit themselves to totally one-sided contracts? We will know soon enough.

The Indian consortium had a five per cent stake and a seat on the board of directors of Iridium LLC and would set up the gateway. In fact, there was much huffing and puffing about the bureaucratic delay in granting permission for the gateway, which, Iridium had otherwise threatened to reallocate to China. As it happens, the Iridium phone, when it was finally launched, was nowhere near the dream that was sold to the world. Instead of a snazzy handset there was an embarrassing shoebox-sized phone, which had no chance of becoming the business executive’s favourite gizmo; instead it was sold as a communication tool for oil exploration rigs, archeological expeditions and military outfits stationed at remote locations.

Even that market was difficult to tap, because the phones and the calls made with it were far too expensive. Hence, it was no surprise that Iridium filed for bankruptcy in 1999, or, that India’s largest overseas investment had gone bust.

Now that Indian institutions have filed for criminal fraud, several interesting facts have spilled out, and they provide an interesting comparison between India’s experience with Motorola’s Iridium and Enron’s Dabhol Power Company. For starters, Dabhol was touted as the ‘largest foreign direct investment in India’ while Iridium was India’s largest investment overseas. Both Iridium LLC and Enron filed for bankruptcy, but for entirely different reasons.

Like Enron, Iridium’s parent Motorola is among America’s most respected companies. Both Iridium and Dabhol had large and disastrous investments by Indian financial institutions and in both cases, the US companies wrote themselves gold plated deals and one-sided contracts. Enron’s sweetheart deal involved a change in India’s electricity policy, and eliminated all its business risk through multiple payment guarantees. It also got itself several lucrative contracts such as the fuel supply deal and the operations & maintenance (O&M) contract giving it a separate income stream.

Its two US partners—GE Capital and Bechtel—got themselves equipment supply deals and Maharashtra was left tied to an unviable project, largely funded by Indian institutions who have even guaranteed the loans by US banks and institutions.

Look at the similarity between this and the allegations made by Indian institutions against Iridium. They say that Motorola promoted Iridium LLC, only to use the project for ‘developing new technology at other people’s cost’. Also, while a global consortium of countries invested in the equity and gateway projects, Motorola allegedly raked in the moolah. It pocketed a hefty $6.5 billion as payments from Iridium LLC.

As against its equity investment of a mere $315 million, it earned $3.68 billion in equipment supply contracts etc at ‘artificially high prices’. Like in the Dabhol case, it cornered the O&M contract, the terrestrial network development contract and the space system contract at Iridium LLC.

This ensured that Motorola began to recover its money right at the beginning irrespective of whether or not the Iridium experiment worked. Further, its contracts with Iridium were not only ‘exorbitant’, but were structured in such a way that although ‘Iridium paid all the development costs, the most valuable assets of the system would still be owned by Motorola’.

Moreover, Motorola had protected itself by quietly using various debt and equity raising exercises to discharge third party guarantees that it had provided to Iridium LLC, in order to attract global investment. If this sounds astounding today, it is a pity that the Indian investors never realised what was going on during their umpteen trips abroad to tie up the deal. The institutions say that they later discovered that ‘the Iridium system was a complete failure and all the material representations made… were totally false, dishonest, fraudulent and deceitful’ and to the knowledge of Motorola officials.

In fact, the Motorola board had rejected a proposal to fund the development of Iridium on its own in the early 1990s. Far from processing fax and data, the constellation of satellites could not even generate signals that could be picked up inside buildings or in automobiles. Further, the gateway costing Rs 126 crore was a completely unnecessary and a waste (since the system itself did not work). Motorola allegedly knew that ‘the Iridium system could be operated through a single gateway and that other gateways were not absolutely necessary’. It only created the ‘subterfuge’ of the need for gateways in order to obtain licenses to operate Iridium in countries such as India.

Indian investors allege, that Motorola had become aware that Iridium was a disaster well before the commercial launch, but it suppressed this fact and ‘concealed the shortcomings’ to ‘induce’ investors to keep pumping money into the system even faster. The question is what next? When Indian investors demanded $250 million to make good the losses, Motorola slapped a counter demand on them of $6.9 million.

Undoubtedly Motorola will fight aggressively to protect itself. However, this led to the filing of a criminal complaint at Pune where again Motorola ignored the summons served on itself and its top brass. It now remains to be seen what role the Indian government will play in helping Indian institutions (the list includes IDBI, ICICI, HDFC, UTI, SBI, LIC, GIC, Exim Bank of India and IL&FS) recover their money.

If vice-president Dick Cheney and various US Ambassadors could aggressively push the Enron deal, can India do the same? Will the Indian government and its politicians stand up for its institutions without any strings attached? The next few months will demonstrate how good we are at protecting our national interest.

http://www.suchetadalal.com/articles/display/80/161.article

N.J. FIRM'S BAD PAPER

Fugitive financier from India, Dinesh Dalmia, involved in a major fraud at New Jersey computer company, All-serve systems Corp.

Swindlers used scissors and glue to forge documents that made them millions while wiping out jobs on three continents in the collapse of New Jersey computer company All- serve Systems Corp., The Post has learned.

The North Brunswick firm went belly up in mid-November, owing $83 million to equipment-leasing companies from San Francisco to Boston, but leaving just $36 million in collateral to be divvied up among creditors.

Documents obtained by The Post show that poorly forged invoices and a fake financial statement could account for much of the missing money.

The documents surfaced separately from a hearing in federal court in Newark last week where lawyers and a federal bankruptcy trustee have been struggling in vain to track down more than $47 million in cash and computer gear.

Last week's hearing was the first to attract the attention of federal law enforcement. Two FBI special agents sat silently in the audience taking notes.

In London, where another part of the Allserve network has also collapsed, the U.K.'s Serious Frauds Office has opened a probe as well. A source in the case says the office manager has departed abruptly for India, leaving the office records in disarray.

At its zenith two years ago, the Allserve network boasted of operations in New Jersey, Texas and four other states, with overseas facilities in Singapore, India and the U.K., and a global workforce of more than 3,000. In 2004 the company claimed revenues of $97 million and claimed plans to double its worldwide payroll to 6,000 by the start of this year.

Little remains of those plans now except a skeleton crew of barely a dozen Allserve workers in New Jersey, and a lot of furious creditors who say they were duped.

Many of them are pointing the finger straight at a fugitive financier from India named Dinesh Dalmia, who has been living in Fort Lee, N.J., where he has been fighting unsuccessfully to make Interpol remove his name and photo from its Web site.

The Indian Police's Central Bureau of Investigation has posted an Interpol red notice for Dalmia on its Web site. He is wanted by police in Calcutta for forgery, fraud and money laundering in connection with his involvement in a Calcutta Stock Exchange swindle five years ago.

Long linked to the All- serve network in the Indian press, Dalmia nonetheless insists he has nothing to do with the group. And All- serve's own officials have said the same. Last summer, Dalmia's Washington-based lawyer, E. Lawrence Barcella, demanded a retraction from The Post for reporting otherwise.

Yet the forged U.S. documents now underscore Dalmia's seeming influence over the network more starkly than ever. They show how a forged financial statement helped trick commercial finance money men into lending millions to the network, with more than $2 million of the money apparently flowing into a 2-year-old company headed by Dalmia himself.

One set of documents purports to be invoices to Allserve creditors from a company called IGTL Solutions (USA). The invoices, totaling $2.5 million, list computer gear for supposed delivery to Allserve's North Brunswick offices.

But New Jersey state records list IGTL as operating from the same Allserve address, and the records name Dalmia as IGTL's president. Investigators for the creditors say the lenders apparently paid the invoices anyway, even though they appear to have been dummied up with tape and household glue.

Altogether, checks totaling more than $11 million were issued by Allserve to IGTL in the three months prior to the bankruptcy, court records show.

A separate document, purports to be an audited financial statement for an obscure Allserve affiliate called B2B Solutions Inc.

The company's audited financials, on file with the U.S. Securities and Exchange Commission, show B2B Solutions Inc. to have had declining revenues of barely $17 million in 2003, along with less than $2.5 million in assets and virtually no book value.

But the bogus financials instead show B2B Solutions Inc. to have been brimming in 2003 with twice as much in revenues, six times more in assets, 10 times more in profits, and 20 times as much in book value.

The fraud-drenched financials were festooned with signs that should have raised red flags for any lender. One example: The report offered no address — or even a phone number — for B2B Solutions Inc.

Yet investigators say lenders including IBM Credit Corp. and CIT Equipment Leasing went ahead and extended more than $20 million in lease financing to the Allserve affiliate anyway. Some of those loans have now turned up in the Allserve bankruptcy.

B2B Solutions Inc., which now goes by the name Vanguard Info-Solutions Corp., is not part of the Allserve bankruptcy proceeding. But the two entities are so closely intertwined that even investigators for All- serve's creditors say they've had trouble telling them apart.

Over the last two years, all three companies have shared each other's New Jersey office space and phone numbers. And top officials for each have routinely signed documents as officers for other firms in the group.

http://www.suchetadalal.com/articles/display/46/1825.article

DALMIA NABBED

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.

http://www.suchetadalal.com/articles/display/46/1954.article

US law has fugitive Indian financier running

An Interpol ‘red corner’ notice against Dinesh Dalmia, who once headed the stock exchange-listed DSQ Software and DSQ Biotech, is clearly no barrier to the rogue industrialist making news overseas. Over the past two years, an American investigative journalist got on his trail and tracked Dalmia down to a palatial house in New Jersey and to a clutch of equally controversial new businesses. While Indian intelligence agencies struggle to find anything new, Dalmia has been a busy man indeed. But a week ago, Dalmia was on the run again, after bankruptcy proceedings filed against him in the US courts led to some decisive action. His hectic activities in several countries finally seem headed for a consolidated investigation and conclusion. Here is a quick recap of the past four years.

After being caught at fraudulently trying to place shares equal to 50% of DSQ Software’s capital with three Mauritius-based companies, Dinesh Dalmia ditched the Indian operations, sold his most lucrative international contracts to Ramesh Vangal’s Scandent Solutions and vanished from India. Scandent later listed on Indian SEs through a reverse-merger with a little known company. After abandoning the DSQ companies, Dalmia surfaced in the US as owner of a series of BPO outfits with offices in New Jersey, London and India (Gurgaon, Bangalore and Chennai) under the name Allserve Systems Corporation. These activities were exposed when Dalmia first attempted an audacious takeover of a US company called Aegis Communication and again last year, when he tried to reverse-merge another affiliate into TACT (The A Consulting Team, Inc), a Nasdaq-listed company. Both deals fell through following exposure by the NY Post. Interestingly, Ramesh Vangal, one of the largest shareholders and founder-promoter of Scandent Solutions, suddenly stepped down last week to spend more time with his flagship Katra group, which has interests in healthcare, beverages and marine bulk infrastructure.

Meanwhile, the Securities and Exch-ange Board of India (Sebi), the Securities Appellate Tribunal, the Enforcement Dire-ctorate and the Company Law Board issu-ed serious penalty orders against Dalmia in the two DSQ probes as recently as a mo-nth ago, and the Serious Fraud Investi-gation Office also continues to probe him.

Dalmia still thrived in the US, having raised a massive $82 million for his BPO operations. But, his penchant for diverting funds raised for a specific business to numbered accounts in Tortola seem to have destroyed the BPO business, too, and he filed for bankruptcy a month ago. During the recovery proceedings, his creditors discovered that his assets were barely worth $22 million. Bunce Atkinson, Federal trustee to the bankruptcy proceedings, then ordered all Allserve operations in the US be terminated after the court obtained “reliable information” that “very large fraudulent transfers” of debtor property have been made to India and that the company had been conducting fraudulent business activities subsequent to its bankruptcy petition. In an e-mail (available with me) to creditors’ representatives, Mr Atkinson said: “Over the last few days, the Trustee has received reliable information that has led him to determine that this Debtor has not materially complied with its obligations to make full disclosure to the Trustee of its assets, liabilities or operations...The Trustee has also received additional information that indicates that at least a prima facie case exists to seek the avoidance of very large fraudulent transfers and preferences and to further investigate allegations of actual fraud.”

• While our agencies struggle for leads, US law takes Dalmia by the collar

• Federal trustee to bankruptcy proceedings there issues a damaging order

• Money from Dalmia’s defunct firm may have gone into a hedge fund here

He then ordered the dismissal of Allserve employees worldwide, stop-ped payroll and cash transfers to them and changed locks on Allserve offices. A written demand is also understood to have been filed for accounting of debtor equipment in India.

Meanwhile, Christopher Byron of the New York Post reports that some money from Dalmia’s defunct Allserve Systems may have gone into an offshore hedge fund called the India Deep Value Fund, which recently applied for registration with Sebi and is bound to come in for close scrutiny in light of US media reports. Acti-ng on a tip that Dalmia had returned home, Indian intelligence agencies had launched a hunt for him in Delhi last week, but they seem to have drawn a blank again.

Strangely, neither the enforcement directorate nor the CBI has initiated any serious probe into Dalmia’s overseas she-nanigans and businesses, although he owes money to scores of Indian creditors.

http://www.suchetadalal.com/articles/display/479/1915.article

JERSEY FRAUD

Major U.S. companies are in federal bankruptcy court demanding they get back $83 million they loaned to a New Jersey outfit they claim is linked to an international fugitive financier.

Dinesh Dalmia, who is being sought by Interpol, has been implicated by Sovereign Bank and CIT Financial, among others, seeking repayment of loans to a North Brunswick, N.J. outsourcing company called Allserve Systems Corp.

In a Newark courtroom Wednesday, the creditors told Judge Rosemary Gambardella that they weren't buying Allserve's explanation of two disasters hitting call centers in India within months of each other.

As The Post has reported, Dalmia's activities have ranged from a failed effort to sell a germ warfare facility to the Iraqi government following the attacks of Sept. 11, to his alleged use of identity-hiding offshore shell company accounts in the British Virgin Islands to sequester millions looted from a publicly traded company, DSQ Software Ltd.

Interpol has issued a so-called Red Notice for Dalmia who is also wanted for securities fraud in his native India.

Allserve, which filed for bankruptcy on Nov. 18, said its business was, in effect, swallowed by a sink-hole that opened under its offices in the city of Chennai, India, last March.

After that, the company said, its Chennai operation was relocated to other offices in the city. But, the company claimed, the new location was gutted in a fire six weeks ago, which permanently knocked it out of business.

The creditors contended that Allserve's efforts to get bankruptcy protection appeared to be part of a pattern of fraud that may involve Dalmia as well.

The company, according to the creditors, has refused to identify its top officials, or explain where most of its computers are now located.

They also said it won't explain what happened to more than $35 million of cash that appears to have vanished from Allserve's accounts between July and October.

Federal law requires companies to provide a breakdown of their revenues for the full year prior to filing for bankruptcy.

But it is impossible to tell from the documents that Allserve submitted whether its accounting for revenues covers "Year to Date," or "Current Month," or the seven-month period between the sink-hole event and the fire, since the accounting is described as covering all three time frames simultaneously, the documents show.

A separate exhibit in the case file, for Allserve's general ledger, shows that between August and October of this year, when Allserve's financial noose was supposedly tightening, the company nonetheless wired all of its gross revenue for the period — more than $11 million — to two affiliated companies in India.

Both affiliates share common addresses in Chennai, where they had supposedly set up operations after the sink-hole had swallowed Allserve's offices.

But documents from a variety of Indian Web sites show the two operations had actually been located at the latter address for years.

Other creditors include the Bostonia Investment Group, Qwest Communications, GATX Technologies Services and Republic Bank.

http://www.suchetadalal.com/articles/display/27/1865.article

FUGITIVE FINANCIER'S STOCK FRAUD SCAM GETS PERSONAL

FOR the past two months this column has been chronicling the Krakatoa-like eruptions of fraud, forgery and identity theft that have been darkening the sky over New Jersey in the bankruptcy proceedings of a North Brunswick computer company called Allserve Systems Corp.

Allserve, which claimed (for a time) to be world leader in the booming computer-based business of corporate outsourcing, is the plaything of Dinesh Dalmia, a rogue financier from Calcutta. Last week the company brought evidence of one of Dalmia's most remarkable, and scary talents — a Zelig-like ability to dress himself in the camouflaging identity of virtually any person or company that comes near him.

Latest example: An unlisted cell phone number that was issued by then-Nextel Communications in April 2002 to a Bronx security guard, Gilberto Alvarez.

Last week, Alvarez's cell phone number was discovered in the bankruptcy files of one of Allserve's creditors, where it adorned an invoice seeking $1.3 million from the subsidiary of a Cincinnati-based software company called Cincom Systems — with the money to flow to a company secretly controlled by Dalmia.

This was all astonishing news to Alvarez, who insists that he knows nothing of Dalmia or the Allserve affair, and said he has no idea how his cell phone number turned up on the invoice.

Dalmia certainly knows the answer to that question if no one does. But like the rest of Allserve's largely Indian-born top brass, he's reported to have left the country and returned to India — leaving behind the mystery of Alvarez's cell phone number along with a lava flow of bank fraud, forgery and money laundering that now stretches from New Jersey to Singapore.

The invoice itself — ostensibly issued by Allserve supplier IGTL Solutions (USA) Inc. — is actually a tissue of lies, and the bankruptcy case file contains at least a dozen more like it, from its hoaked-up and bogus logo to its make-believe street address. The invoice even includes what purports to be IGTL's main corporate switchboard number. In reality, the number belongs to Alvarez's cell phone.

The invoice, issued in June 2004, seeks payment for $1.3 million worth of enumerated computer equipment, and directs that payment be made to a bank account at the Franklin Park, N.J., branch of PNC Bank.

BEHIND this hoax lay more than a year of history, beginning with the incorporation of IGTL as a New Jersey shell company housed in Allserve's North Brunswick office and having Dalmia as its president. The company's name was chosen to match, word for word, the name of a separate, and fully functioning, computer vendor based in Arlington, Va.

The idea behind the brazen ploy — which amounted not simply to the theft of a single individual's identity but to that of an entire corporation — was to give the invoice enough legitimacy so that Cincom would pay the $1.3 million bill without thinking. And the scam worked, because a subsequent notation on the invoice indicates the charge was approved for payment.

The use of Alvarez's cell phone number on a forged invoice is now just one more thing for the FBI to investigate as its agents struggle to scope out the ever-widening dimensions of the Allserve bankruptcy and the chicanery of its buccaneering Mister Big, Dinesh Dalmia.

From the start, Dalmia's calling card has been the purloined identity — a disturbing fact when one considers that much of the growth in the outsourcing business is coming from U.S. banks, credit-card companies and other such financial services outfits, which are blithely outsourcing their customer billing and records-keeping work to offshore data-processing sweat shops run by men like Dalmia.

Now, the collapse of Allserve has brought to light a whole new demi-world of stolen corporate identities featuring Dalmia-linked fake and "mirror image" companies, each set up to facilitate swindles that have so far bilked close to $100 million from a long list of presumably savvy U.S. lenders.

In California and Delaware, investigators have uncovered Dalmia-controlled mirror image and fake companies designed to look — on paper at least — like clones of Allserve's own business partners. In Delaware, there's even a mirror image of Allserve itself — set up as part of a failed scheme to take over a Texas-based outsourcing company called Aegis Communications.

No company has been more shaken by this skullduggery than privately held Cincom, one of the nation's largest, oldest and most-respected software companies. Some of the others that got snookered are International Business Machines, CIT Group and Wells Fargo Bank.

Almost immediately after setting up Allserve in early 2003 as an outsourcing operation in the U.S., Dalmia set up a fake version of Cincom as a Delaware shell. But Cincom officials discovered it and threatened to sue, causing Dalmia to stop — at least temporarily.

But a year later, Dalmia began worming his way into Cincom all over again. This time it happened through a mid-level Cincom sales manager who has now been put on leave by the company and is thought by officials to be facing indictment for a variety of offenses involving payments to Dalmia-linked companies. Others at Cincom are believed to be targets as well.

In London, yet more forged invoices tied to Cincom have now surfaced. One seeks a $911,690 payment, in the name of a Santa Clara, Calif., company called Cincom Systems Inc., to an account at the same Franklin Park, N.J., branch of PNC Bank listed on the invoice containing Alvarez's cell phone number.

A search of California business records reveals no such company, but does disclose a resident named Anoop Kapoor, who has held positions as a top official at both the London and New Jersey Allserves.

For two-and-a-half years, The Post has been pretty much a voice alone in warning of Dalmia The Despicable's arrival in town and what it might lead to. Yet no one listened as he prepared to pick the pockets of U.S. corporations a hundred times his size, then skedaddle back to India.

Now readers of this column have been up close and personal with a man who epitomizes all that is worst in the scruple-free business climate of the developing world. So, isn't it time for us to say, "Enough's enough!" — and put an end to this nutty outsourcing racket once and for all?

JUST forget about the liberal whining over the millions of entry- level computer jobs that have been wiped out in the U.S. already by this foolhardy approach to cost-cutting. Instead, think only about Gilberto Alvarez, the Bronx security guard, and how lucky he was that Dalmia didn't get his hands on more than just his cell phone number.

Then ask yourself this: If we can't even catch a thug like Dalmia while he's parading around New York robbing us all blind, then how on earth will we ever catch him — or others like him — if we're dumb enough to hand him all the computerized records of value that we have, so that they never have to leave the safety of their own squalid, corrupt home countries to steal it in the first place?

Isn't that what this all comes down to . . . really . . . in the end? Not being hopelessly stupid about the same thing . . . twice? Say goodnight, Gracie, it's been fun.

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