Indian authorities arrest shadow banking financier in $3.9 B refund probe

Subrata Roy, who owns the financial services group Sahara India Pariwar, surrendered to law enforcement in India after the country's high court issued a warrant of arrest in relation to a $3.9 billion refund probe. Bloomberg said Roy is being investigated by police over reports that he had failed to refund his depositors.

The news agency said Roy worked his way up to India's $670 billion shadow banking industry when he went door to door collecting fees from just about anyone willing to invest with him: rickshaw pullers, laundry washers and tire repairmen. His 35 years in the business had made Roy $11 billion richer by the end of 2012, Bloomberg said. Roy's company, Sahara, currently owns high-profile properties like the Plaza Hotel in New York, Grosvenor House in London, and at least 120 companies in healthcare, television broadcasting, food, retail and sports clubs.

Bloomberg said Roy has been looking to convince India's Supreme Court that he had refunded INR240 billion or $3.9 billion to some 30 million depositors. In June 2011, the nation's market regulator had faulted two of Roy's companies for selling convertible debt without regulatory approval.

According to former executive director Jitendra Nath Gupta at Securities and Exchange Board of India, or SEBI, "This is going to be a landmark case. It will serve as a deterrent for the next generation of legal cases on shadow financing."

Police had been having a hard time finding Roy. In several national newspapers, Roy claimed that he was simply on errands for his mother's healthcare. In his media statement today, Roy was quoted as saying, "I am not that human being who will abscond. I've started hating myself. Now, I can't handle this level of agony and humiliation. They are bullying and indulging in character assassination."

Roy also argued that the 31,675 cartons' worth of evidence in 128 truckloads was more than enough for SEBI to convince that he had paid his depositors. Bloomberg said lawyers for the country's market watchdog had told the court that the documents Roy offered as evidence often led them to nowhere and that computation was muddled.

Tags

Subrata Roy, Sahara India Pariwar, Indian shadow banking industry

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