This story is from October 21, 2006

CBI questions Karvy chief

Prafulla Marpakwar / TNN / Oct 21, 2006, 01:22 IST

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CBI is now confident that it will be able to crack the scam that rocked the commercial sector, the official said.

Mumbai: Nearly nine months after it registered a first information report for cheating, forgery, conspiracy and corruption against 26 firms for their alleged involvement in the multicrore IPO scam, a week ago, the Central Bureau of Investigation grilled Karvy group of companies CEO C Parthasarthy.
Immediately after Sebi lodged a complaint against the firms, including the Karvy group, CBI had on February 21, 2006 registered criminal cases under the Indian Penal Code and prevention of corruption act against erring companies.
"Since Karvy's name had prominently figured in the complaint, CBI summoned its CEO for seeking more information on the episode," an official told Times of India on Friday.
On the basis of information that came out during Parthasarthy's marathon grilling, CBI is now confident that it will be able to crack the scam that rocked the commercial sector, the official said.

Along with knocking on the doors of CBI, Sebi had passed a 252-page comprehensive prohibitory order against erring firms, to ensure there was no cheating in new IPOs being issued by financial institutions.
Elaborating on the scam, the official said Sebi found IPOs floated by Yes Bank and IDFC, were fraudulently obtained by a few individuals with the help of 26 firms, including Karvy, to corner large number of shares. Karvy denied the charge, saying, it made submissions before Sebi on objections raised by it.

Sebi has found Karvy group to have opened the demat accounts, introduced the bank accounts, arrange for finances from Bharat Overseas Bank, attached the pay orders to application forms and perfected the whole scheme of operations.
Out of the 58,938 demat accounts opened for securing IPOs by retail individual investors, 49,708 or 84% of total accounts were held by Karvy.
Out of these 20,000 had the same postal address. Significantly, most demat account holders have their bank accounts with Ahmedabad-based Bharat Overseas Bank.
In fact, Sebi in its FIR alleged that Karvy was the main conduit in the scam. "During the preliminary probe, it was found that Karvy did not adhere to know your client norms," the official said.

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