rbg resources
customer rubber stamps for the false clients of rbg resources (virendra rastogi). photograph: serious fraud office / pa
2 rbg was known by the name of impactworld plc on incorporation. it changed its name to allied deals plc on 17 july 1996 and then to rbg resources plc on 17 september 2001 .
attention will inevitably spread to the rest of virendra rastogi' s empire. in addition to rbg resources and rbg capital, the filings at companies house show he is a director of several other firms, including rbg technologies, rbg films and two internet companies, webrizon and company hub .
( b) the sale proceeds of rbg’s metals are to be released to rbg or its solicitors, as rbg’s solicitors may direct .
the court heard the 324 fake firms were apparently ordering vast quantities of metal from the usa, united arab emirates, hong kong and singapore through rastogi' s company rbg resources plc .
viren rastogi, the indian - born multimillionaire frequently profiled in britain' s' asian rich list', has been arrested in connection with the collapse of his metals company, rbg resources .
creditors at financial institutions, such as german - based west lb and general motors, were told rbg resources gave their customers unusually long 180 - day' credit windows' before having to pay up .
the banks – including west lb, jp morgan chase and dresdner bank – lost more than £400m after they were duped into backing a series of bogus metal shipment trades by rastogi' s firm rbg resources and related companies .
viren rastogi, 40, once reckoned to be among britain' s 10 wealthiest asians from running an apparently global metals empire based in mayfair trading as rbg resources and allied deals, was today convicted of fraud at southwark crown court .
by sgs, rbg remains the legal and beneficial owner of the metals in the fujitrans warehouses which had been held for the account of rbg prior to any dealing of the metals between rbg and cl .
1 the plaintiff, rbg resources plc (“rbg”), is a public limited company incorporated in england. it was placed in compulsory liquidation in england on 12 june 2002. the present action involves a claim by the second defendant, credit lyonnais (“cl”), a bank incorporated in england, to various metals stored in warehouses in singapore. cl’s claim is resisted by the liquidators of rbg who, in turn, have made a claim against cl for conversion of metals owned by rbg .
the four companies at the centre of the allegations, allied deals, hampton lane and sai commodity - all based in piscataway, new jersey - and rbg resources in london, are alleged to have stolen millions of dollars in loans from numerous banks around the world by faking business transactions .
rbg resources' parent company is registered in the british virgin islands and employs only a few people in britain, against 1, 400 in romania and 1, 200 in bolivia. in 1998, it received a uk government grant of £25, 000 to help buy a romanian copper plant .
rbg resources, primarily a metals and minerals producer, recorded sales of $ 1. 1 billion in 2000. concerns about the company, until recently known as allied deals, first surfaced after it was dropped in march by its auditor, pricewaterhousecoopers, over concerns that its accounts might include non - existent transactions .
15 if and when rbg exercised the call option, the hedging transaction placed by clrd would be unwound or closed out. in the meantime, clrd was supposed to deliver, by way of documentation, the metal to rbg and rbg would make payment .
17 in each rollover, rbg’s obligation to pay for its purchase was set off against clrd’s obligation to pay for its subsequent purchase. the difference was reflected in rbg’s account .
( d) on 9 may 2002, bcv commenced an action in singapore against rbg and fujitrans. bcv also obtained, on the same day, an interim injunction restraining rbg and fujitrans from dealing with or disposing of all metals which were the property of rbg .
129 in the circumstances, i find that rbg has established its claim against cl for conversion .
rbg resources, which operates in bolivia as well as romania and, according to its latest filing at companies house, had a turnover of more than £1 billion for the year ending 21 may 2001, has now filed for bankruptcy. a potentially lucrative joint venture with the state - owned nigerian mining corporation to mine tin has bitten the dust as a result .
10 prior to the first metal transaction between rbg and clrd, rbg and clrd had engaged in an exchange of e - mail in which rbg had sought financing from clrd and clrd agreed to provide financing. however, the eventual structure of each group of transactions is as set out below .
22 there was a long discourse by cl in its closing submissions that because rbg was claiming to be the owner of the metals in fujitrans warehouses, it was incumbent on rbg to prove that assertion. i do not agree that rbg has to do so for the reasons set out below .
82 in any event, the issue before me is not so much whether rbg is estopped but whether the liquidators of rbg are estopped vis - à - vis cl’s ascertainment claim and bulk claim .
at the centre of the allegations are claims that allied, its london - based sister firm rbg resources, founded by virendra rastogi, brother of narendra and one of britain' s wealthiest asians, plus two other new jersey metal brokers, hampton lane and sai commodity inc, engaged in a series of deals involving phantom shell companies posing as metal suppliers and customers .
113 accordingly, while it may be said that e - mail from rbg prior to the transactions had suggested that rbg was seeking a loan with the metals being provided as security, and cl’s e - mail in response did not disagree with what rbg was seeking, the end result was the contractual structure of a purchase and an option granted to rbg which gave rbg the entitlement but not the obligation to buy the metals back. as was observed by lord cullen in gavin, rbg would have stood in the same position as a borrower who had repaid the loan to it if rbg exercised its option. however, in the interval, cl would have been the owner, if the appropriation had been properly and validly carried out. further, if rbg chose not to exercise its option, then cl would remain the owner of the metals .
( i) on 10 july 2002, rbg obtained an order in the bcv action giving rbg discovery of all documents obtained by fujitrans under fujitrans’ anton piller orders and all affidavits filed by lim and documents produced by lim in the bcv action. the order also allowed rbg to use any of the documents discovered, as a result of the order, for the protection or determination of rbg’s rights whether in singapore or otherwise .
88 accordingly, i am of the view that estoppel cannot be used as against the liquidators of rbg .
8 although rbg initially started trading with clr back in 1998, there is no claim arising from transactions between rbg and clr, which is a separate legal entity from cl. as can be seen, the claims involve the transactions with clrd only. as clrd is a division of cl, cl is the litigant against rbg .
26 as i have stated, under the terms of each purchase confirmation, title to and the right to possess the goods would pass from rbg to cl upon receipt of delivery documentation by cl and payment of the purchase price to rbg .
53 however, in rbg’s closing submissions at para 4. 8. 12, rbg was not prepared to concede this one drum to cl arguing that the sticker was clearly insufficient to identify lot 519 - w127 as part of cl’s claim .
the fraudsters ware granted massive loans to cover them in the interim period and rbg borrowed half its annual' turnover.'
63 relying on this statement, the liquidators argued that since rbg was in the business of buying and selling metals, the metals in the fujitrans warehouses were part of rbg’s general trading stock and hence, should be excluded from the definition of bulk .
19 in early march 2002, cl received information that rbg’s auditors had resigned on the ground that certain transactions undertaken by rbg could not be substantiated. cl then decided to have a visual inspection of the metals it believed it had purchased from rbg. the inspection of metals in fujitrans warehouses was done on 12 march 2002 by clrd’s william john harris (“harris”), also known as bill harris, the person who had been dealing with rbg’s representatives on the metal transactions. after this inspection various events occurred :
5 cl treated the 45 purchases mentioned above as 13 groups of transactions. each group of transactions comprised an initial purchase of metal by clrd, the grant of a call option to rbg to buy the metal and a subsequent exercise of the call option by rbg, followed by what has been called “rolls” or “rollovers”, ie clrd would then purchase the metal which rbg had exercised its option for, and grant to rbg another call option and so on. i will elaborate on the structure of the transactions later .
23 cl, and the other defendants, are the substantive plaintiffs as cl, and the other defendants, derive their alleged title or interests from rbg. for example, cl is claiming as purchaser from rbg. its claim must be premised on rbg’s ownership of the metal goods just prior to the purchase. indeed, para 4 (1) of cl’s reply and rejoinder states that rbg’s ownership of the metal claimed by cl and its ability to give absolute title is admitted by rbg and / or is not in issue and proof of the same is not necessary. if it is for rbg to prove its ownership prior to cl’s purchase, then where would cl stand if rbg failed to do so? after the purchase, cl’s claim to title as purchaser depends on whether cl is able to establish its claim. if cl fails to do so, then by default, title to the metal remains with rbg vis - à - vis cl. whether other claimants should subsequently surface is another matter which does not concern cl’s claim .
police and the sfo are investigating allegations of false accounting at rbg after the company was forced into liquidation by creditors earlier this month .
a number of banks fear they may have lost up to $ 500 million lent to rbg. some are understood to be gulf - based banks but rbg' s biggest creditor was westlb, the german financial services company that is seeking to finance the development of wembley stadium. westlb is thought to have an exposure to rbg of up to $ 200 million. the bank declined to comment yesterday .
for rbg, a subsidiary of rbg enterprises, a shadowy conglomerate based in the british virgin islands, pwc' s resignation was a disaster. the uk company, which changed its name from allied deals only last september, had hitherto enjoyed significant support across the political spectrum .
( a) on 2 may 2002, the english court ordered rbg to be placed in provisional liquidation with effect from 3 may 2002 .
24 as for rbg filing the present action as plaintiff, this was pursuant to a direction from me when fujitrans was seeking interpleader relief. i have alluded to this above. as there were various claimants at the time, i was of the view that it would be neater for rbg to be the plaintiff and the various claimants to be the defendants. there would then be one action and several defendants instead of several actions, one by each claimant, and with only rbg as defendant. also, with rbg as plaintiff in the same and one action, it would be in a better position to lead and co - ordinate the various interlocutory steps leading to the trial. however, cl and the other claimants remain the substantive plaintiffs except, of course, in relation to rbg’s claim for conversion where rbg is the substantive plaintiff .
91 perhaps, in most instances, the illustration above would resolve itself either by rbg making physical delivery or payment of damages or going into liquidation .
jack cunningham, the former labour cabinet minister, and liberal democrat peer lord holme, acted as advisers to rbg but severed links to the company last month .
7 rbg’s claim against cl relates to 300mt of nickel briquettes which were removed from a fujitrans warehouse, on the instructions of cl, on 9 may 2002 .
16 however, in the groups of transactions before me, the matter did not end there. after the exercise of a call option, clrd would enter into a similar set of transactions all over again, ie clrd would purchase the metal from rbg, hedge it and issue a call option to rbg to purchase the metal during a future period. this was referred to as a “roll” or “rollover”. the number of rollovers would vary depending on whether rbg exercised the call option or not and whether another set of transactions was then entered into. however, in the rollovers, no fresh delivery of delivery documentation was required of rbg .
when rbg collapsed in may 2002, investigators struggled to trace the metal - trading customers and those that were found consisted of' low rent local trade operations.'
35 in so far as cl also relied on what was referred to as the tinfos transaction, this did not carry cl’s case further. the tinfos transaction was a matter in which cl had purchased 401. 791mt of zinc from rbg on or about 10 january 2002. as was in the other instances of purchase, cl received a fujitrans warehouse receipt. on or about 24 april 2002, cl sold the zinc to rbg. cl was then informed by rbg that it had sold the zinc to tinfos nizi sa .
the complex fraud was only discovered in late 2001 when an associate of rastogi' s in hong kong unintentionally faxed a number of fake letters to rbg' s auditors pricewaterhousecoopers .
6 cl’s claim relates to five groups of metal transactions between rbg and clrd. the metals forming the subject matter of those transactions were stored in the fujitrans warehouses. these were :
14 on the same date as the purchase confirmation, clrd would grant rbg a call option giving rbg the right, but not the obligation, to purchase a similar quantity of the same generic metal. the call option was exercisable within a stipulated period. the expiry date of the option would be a date earlier than the forward date in the hedging transaction .
a. sorry, i misunderstood the question. there was no agreement with rbg that it would be held as a bulk. it was specified goods. sorry, mr gill .
upon the occurrence of an event of default rbg shall not be entitled to exercise its rights under this call option and all such rights shall lapse and clrd may sell nickel it is holding against this option to third parties and rbg shall indemnify and keep indemnified clrd against all losses, costs and expenses incurred by clrd as a result of such third party sales .
( c) cl is to pay damages to rbg for conversion of the nickel briquettes. such damages are the net purchase price or prices which cl has obtained for the same .
117 in the call option confirmation, one of the events of default was if rbg became insolvent or was generally not paying its debts as they became due. bearing in mind that rbg was not contractually obliged to exercise the call option in the first place, the inclusion of cl 5 was surprising. it gave rise again to the spectre of a security arrangement .
( m) on 4 october 2002, rbg commenced the present action and served its writ of summons on various defendants. thereafter this action proceeded to trial. however, before the trial commenced, rbg reached a settlement with the first, third, fifth, sixth and seventh defendants. there was no settlement with the fourth defendant which did not even enter a defence to rbg’s action. a judgment in default of defence was entered against the fourth defendant. cl, the second defendant, was the only remaining claimant to metals in the fujitrans warehouses .
42 as i have mentioned, prior to 12 march 2002, cl had received information that rbg’s auditors had resigned on the ground that certain transactions of rbg could not be substantiated. harris then decided to come to singapore to do an inspection to establish that what was believed to be held by fujitrans to the order of cl was, in fact, in the warehouses .
3 rbg (then known as allied deals plc) became a customer of credit lyonnais rouse ltd (“clr”) in 1998. clr was at all material times a wholly - owned subsidiary of cl and a ring - dealing member of the london metal exchange (“lme”). subsequently, from october 2001, rbg entered into metal trading with a division of cl called credit lyonnais rouse derivatives (“clrd”). this division trades in various commodities, including metal. the transactions between rbg and clrd were between october 2001 to april 2002. during this period, there were 158 transactions between clrd and rbg regarding the purchase of metals in various locations around the world. these 158 transactions included 45 purchase transactions relating to metals in warehouses supposedly operated by fujitrans (singapore) pte ltd (“fujitrans”) .
judge james wadsworth qc said the' collusion' of rastogi' s company rbg, and his brother' s company in america resulted in billions of dollars being borrowed from banks all over the world .
( g) on 18 june 2002, fujitrans applied in the bcv action for interpleader relief, citing the claims against fujitrans made by bcv and cl, and the demands from various other bank creditors of rbg .
( a) that cl had purchased generic metal from rbg in each purchase transaction which metal was subsequently ascertained by appropriation to each contract of purchase. hence title therein passed to cl (“the ascertainment claim”) .
the observer can reveal that rastogi was the unnamed rbg' employee' apprehended last week in dawn raids by the serious fraud office and the city of london police. he was later released without charge on police bail .
108 accordingly, in so far as the liquidators were seeking to go behind the legal relationship between rbg and cl, it seems to me that the lord president’s judgment in the case of gavin did not assist the liquidators .
77 cl also submitted that by delivering or procuring the delivery of the warehouse receipts to cl, rbg had represented to cl that it was appropriating metals to the purchases or alternatively, that it was identifying the bulks of nickel, copper and tin in the fujitrans warehouses as bulks from which cl’s metals were to come. in reliance on such representations, cl had acted to its detriment by paying the purchase price and rbg is therefore estopped from contending otherwise .
95 as cl was relying on s 20a of the act, rbg sought to deny cl any relief under s 20a by, in turn, relying on s 62 (4) of the act. section 62 (4) states :
90 as to whether estoppel could be available against rbg itself in a bulk claim, i also have some doubt if the bulk has not been identified. further, can there be a bulk claim by estoppel over and above the s 20a claim ?
by the time both allied and rbg' s auditors had resigned, allied' s shankar had quit, too, confiding in a colleague that he was' unwilling to continue lying to the banks', according to the criminal charge levelled last week .
in para 148 of cl’s reply submissions, cl submitted that cl 5 would have applied where rbg, having exercised the call option, committed a breach of the terms of the call option. in my view, cl 5 was not worded as such .
11 clrd would purchase a certain quantity of a particular metal (eg nickel) from rbg on an over - the - counter or private contract basis. the metal was supposed to be of lme grade. the purchase was constituted or evidenced by clrd’s purchase confirmation, the terms of which required delivery documentation to be delivered to clrd. the purchase confirmation also provided for title and risk to the metal to pass from rbg to clrd when the delivery documentation was received by clrd and the purchase price was paid by clrd .
116 what is more interesting is cl 5 of the standard call option confirmation which the liquidators also relied on. it will be recalled that after each purchase by cl, cl would grant rbg a call option to buy back the metals. clause 5 stated :
101 on the facts before me, there was no relationship of borrower and lender and no obligation on the part of rbg to pay cl after each sale, although the original intention might well have been for cl to lend money to rbg on the security of the metals it purchased. it seems to me that the legal transaction was a sale and purchase and not one of a loan with a security. the fact that cl was holding the same metals it had bought against each call option does not change the position .
12 the purchase price was the price calculated by clrd and agreed to by rbg. the calculation started off with a basis price from which various items were discounted or deducted. this lower price became the purchase price. the various items deducted were in respect of :
9 i will deal with cl’s claims first and then with rbg’s claim. i have included, at the end of my judgment, a schedule listing the dramatis personae for easy reference. the list is of those i have referred to in my judgment more than once .
( k) on 7 august 2002, rbg filed a petition in singapore in companies winding up no 60 of 2002. on 8 and 13 august 2002, various orders were made appointing singapore provisional liquidators over rbg and allowing them to survey and sell metals in various warehouses, including fujitrans warehouses, without prejudice to the claimants’ rights and to hold the proceeds of sale of the metal goods pending further order. the survey was done by sgs testing & control services singapore pte ltd (“sgs”). on 7 october 2002, rbg was ordered to be wound up by the singapore court and the persons previously appointed as provisional liquidators in singapore were appointed its liquidators in singapore. after the survey, the metals were sold and the sale proceeds of the disputed metals are being held pending the court’s determination of the disputes .
89 furthermore, i doubt if estoppel would have been available as against rbg itself, assuming it was not in liquidation, to overcome an absence of ascertainment. for example, if rbg sold 100mt of nickel to each of three purchasers and there were only 120mt of nickel in the fujitrans warehouses, how would any of the purchasers be able to claim its 100mt in the face of competing claims by the others? of course, if rbg decided to physically deliver to one purchaser its 100mt first, that would probably constitute the appropriation, leaving aside any question of undue preference in a liquidation. however, in the absence of such a delivery, each of the purchasers would still have no title to the metals in the warehouses. estoppel would not help as the question would remain as to which metals the purchaser has title to .
( c) alternatively, that each of cl’s contracts for the purchase of metal was of a specific quantity of unascertained metal that formed part of a bulk which bulk was identified not in the purchase confirmation but by subsequent agreement between rbg and cl. accordingly, cl was owner in common with rbg of the metal to the extent of the quantity purchased by cl pursuant to s 20a of the sale of goods act (cap 393, 1999 rev ed) (“the bulk claim”). i will refer to the sale of goods act as “the act” .
40 the fact that lim could deliver another quantity of metal, ie 300mt of nickel briquettes, to cl when asked to do so also did not advance cl’s position further. i will say more later about the release of the 300mt of nickel when i deal with rbg’s conversion claim .
94 as i have already mentioned, rbg is not the substantive plaintiff in so far as cl’s claims are concerned. cl is making its claim to metals in fujitrans warehouses and i see nothing contrary to public policy to require cl to establish its title to the metals. it is not a question of allowing rbg to benefit from its illegal conduct in the sense mentioned in beresford. furthermore, there is no question of double enrichment. cl has paid for the metals. if it cannot establish its title to the metals, it will have to claim as an unsecured creditor .
( b) on 6 may 2002, darryl john kennard (“kennard”), an english solicitor representing another bank, banque cantonale vaudoise (“bcv”), spoke to and also met with lim about the metals in the fujitrans warehouses. lim told kennard that all such metals belonged to rbg .
119 in any event, i note that cl 5 would not apply if rbg had simply allowed the call option to lapse without an event of default. accordingly, i am of the view that cl 5 did not turn a purchase and a call option into a loan with a security .
the company employed former labour cabinet minister jack cunningham and the liberal democrat peer, lord holme, as consultants. former tory energy minister lord gray sat on the board of its sister company, rbg capital. all have now resigned, though there is no suggestion of any wrongdoing on their part .
rbg was apparently trading in the great financial centres of the world - london, new york, dubai, hong kong and singapore - but after a bizarre slip the business was found to be a sham, with a network of false addresses masterminded by rastogi and his three brothers operating around the globe .
70 as regards the third requirement, cl had to establish that the bulk was identified either in each contract or by subsequent agreement between the parties. it was common ground that at the time each contract was entered into, the bulk was not identified as the location of the metal sold was not mentioned in the contract document, ie the purchase confirmation. indeed it was cl’s position that, legally, rbg was not obliged to tender or forward delivery documentation from fujitrans subsequent to the entry of each contract so long as the delivery documentation pertained to metal of the type and quality sold, even though cl and rbg may have been contemplating metal in a fujitrans warehouse .
115 the names below those minutes were those of andy howell, relationship manager, and roy pemberton, head of commodities. neither were called by cl to give evidence to explain this paragraph of the minutes which seemed to suggest that cl was looking at a security arrangement. however, harris said that andy howell was working in a separate department and reported to roy pemberton while harris himself reported to andy grooch. harris also said that andy howell had never spoken to him about clrd’s relationship with rbg. moreover, i note that the minutes were dated about three years before rbg began to enter into transactions with clrd. accordingly, i did not place much weight on the minutes .
97 the parties had initially proceeded on the basis that it was necessary for the liquidators to establish that, in reality, each sale contract was a contract by rbg to provide metal as security to cl for a loan to rbg. in dealing with this point, much was said on behalf of the liquidators about financing transactions as though a financing transaction was necessarily a transaction for a loan. in my view, a financing transaction does not necessarily encompass a loan. thus in thai chee ken v banque paribas [ 1993 ] 2 slr 609, the court of appeal cited the following passages with approval. in in re george inglefield, limited [ 1993 ] ch 1, romer lj said at 27 :
( l) in the meantime, on 6 september 2002, after considering the claims of various claimants pursuant to the orders given for interpleader relief in the bcv action, i directed rbg to commence a fresh action as plaintiff and to name the claimants as defendants. i also gave directions on various matters including the exchange of pleadings and discovery of documents .
32 as regards the lot numbers in the warehouse receipts, i am of the view that they were neither here nor there. they could have been genuine references from a warehouse accounting system or numbers which lim or rbg had plucked out of the air to give the appearance of physical lot numbers or of lot numbers as part of a warehouse accounting system .
128 on another point, rbg argued that what was released to steinweg did not conform to what was purchased by cl. this argument was raised because cl’s initial contract of purchase of nickel briquettes and subsequent rollovers were for the purchase of nickel briquettes of lme grade. the nickel briquettes released were not all of lme grade. however, on this point, harris said that after the initial purchase, cl was aware that not all the nickel briquettes were of lme grade and therefore a further discount was given by rbg to cl for the deliverability allowance as the non - lme metal would attract a bigger discount should it be on - sold by cl to others. there was documentary evidence of this further discount. thus, although the contract documents were not amended, it seems to me that rbg and cl had agreed that what was being sold to cl were nickel briquettes of mixed grades. however, this view does not get cl off the hook in the light of my conclusion that the nickel briquettes had not been appropriated to cl before the release to steinweg .
50 harris was referring to a conversation and a meeting which lim had had with kennard on 6 may 2002. i have alluded to this above. according to kennard, lim had told him that all the metals in the fujitrans warehouses belonged to rbg. there was also apparently an inspection by joseph quiazon, a representative from another bank, but he did not give evidence .
( c) on 7 may 2002, harris had a telephone discussion with lim. as a result of the discussion, another warehouseman, c steinweg warehousing (fe) pte ltd (“steinweg”), was allowed to take delivery of 300mt of nickel briquettes out of a fujitrans warehouse, on behalf of cl on 9 may 2002. this is the subject of rbg’s conversion claim .
( b) alternatively, that after the metal had been ascertained, it was wrongfully commingled by fujitrans with other metal in the fujitrans warehouses and no longer became capable of ascertainment. accordingly, the metal in each category of metals corresponding to the metal purchased by cl and remaining in the fujitrans warehouses was held for rbg and cl as tenants in common (“the commingling claim”) .
27 cl’s position was that for each of its purchases, delivery documentation was received by it and payment made to rbg accordingly. the delivery documentation was sent by fax and was in the form of a warehouse receipt on a fujitrans letterhead certifying that fujitrans was holding a specific quantity of goods for the account of and to the order of cl. the original was later received by cl .
the squad' s investigations were triggered after ernst & young, auditors to allied, and rbg' s auditor, pricewaterhousecooper (pwc), resigned in january. ernst & young said it went over allied' s' inability to audit certain overseas transactions'. pwc said it was unable to satisfy itself that six apparent deals with parties in hong kong, belgium and switzerland had really taken place .
liquidators from grant thornton have been chasing the assets for a decade since rbg rapidly collapsed in the wake of a 2002 raid by the serious fraud office. a sham international paper trail led them not to warehouses full of metals, but to a long list of addresses that amounted to little more than brass plates, including a cowshed near delhi. creditors were quickly told they would not receive a penny .
13 it was anticipated that clrd would enter into a concurrent lme hedging transaction with clr for the forward sale by clrd to clr of a similar quantity of the same generic lme metal. the price for this forward sale formed the basis price for the initial purchase by clrd from rbg. the period of time between the initial purchase and the forward date was the period of time over which the discounts were calculated .
52 there is one minor qualification. in one of the sgs survey reports, ie sgs survey report certificate no 6005 / 170028, for severonickel dated 14 april 2001, there is a reference, at p 74, to words on a document on one drum of nickel identified in the sgs report as 519 - w127. these words on the document are “credit lyonnais rbg a / c”. the document is a piece of paper stuck near the bottom right of the drum with the words barely visible. in cross - examination, mr malcolm brian shierson (“shierson”), one of the english liquidators of rbg, was prepared to give some weight to that sticker and agreed, initially, that it was possible to associate other drums in the same area as being nickel held for cl. however, he then said he was prepared to accept that the sticker gave cl “some credibility to claim that drum” alone .
118 harris, not being a lawyer, could only say that he had inquired of cl’s legal department and it was explained to him that as cl was holding stock against each option, there might be a loss to cl if cl had to liquidate the stock. cl would then want to claim consequential damages against rbg. clause 5 was incorporated to take into consideration the case of hadley v baxendale (1854) 9 exch 341; 156 er 145 .
38 in the absence of any further evidence to suggest otherwise, i am of the view that that was what lim did and the lot numbers were not a means of appropriation by way of a warehouse accounting system. that tinfos had also referred to the same lot numbers in its communication with fujitrans was also neither here nor there because tinfos had, in my view, simply used the same lot numbers as must have been given to it by rbg or cl or lim .
123 the liquidators’ position was that according to rbg’s records, which were admittedly incomplete, there should have been 750mt of nickel briquettes in the fujitrans warehouses as at the date of provisional liquidation in england in may 2002. there was no reference in any packing list of nickel briquettes leaving the fujitrans warehouses. the liquidators submitted that cl was not able to demonstrate that the 300mt of nickel briquettes removed on its behalf belonged to it and that its 300mt would have been part of the 450mt missing from the warehouses .
51 in my view, lim knew that rbg did not have enough metals for its transactions with various banks, whether the banks were purchasers or lenders. i will refer to this as the overlapping of metals. on 12 march 2002, he knew where different metals were stored, he knew the purpose of harris’ visit and he took harris around and pointed to various locations where sufficient metals of the type in question were stored so as to give the impression that he could identify cl’s metals to the exclusion of those of others .
once they had obtained financing from the banks they used the money as a security assurance for future loans, essentially operating a massive ponzi scheme. the network of transactions was able to fool banks into thinking the money they received was coming from genuine trades. in fact the money was simply being moved around between different providers of capital, with a portion being siphoned off into offshore trusts in the british virgin islands. in this way rbg was able to defraud some of the world’s biggest banks out of around of £300m and make the money' disappear' (edwards, 2008) .
125 i also note that cl is not relying on s 18 rr 5 (1) and 5 (2) of the act to claim that the release of the nickel briquettes amounted to appropriation if there was no earlier appropriation of the same. if cl had sought to rely on the release, it would have had to contend with two questions bearing in mind that the date of release, ie 9 may 2002, was after the effective date of the appointment of provisional liquidators and commencement of winding up in england. the questions then would have been whether lim still had authority to release the metal and whether the release was void for being a disposal of rbg’s assets after the commencement of winding up .
rastogi, 34, who lives in london and has an estimated personal fortune of £150m, began his career as a scrap metal merchant. separately, he is thought to be under investigation for alleged customs and excise fraud in india .
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bogus invoices led to' clients' in indian shacks, say us court papers. jamie doward reports on a crime the fbi calls' larceny as sure as hauling bags of cash from a bank'
the voice at the end of the phone sounded sceptical. very sceptical. why, the us banker asked, had the invoice been faxed from allied deals' headquarters in a sleepy town in new jersey? after all, it was supposed to have gone to the bank direct from an allied customer based in asia .
allied' s 27 - year - old treasurer, udhay shankar, replied that the invoice had been faxed to the firm' by mistake' .
the banker remained sceptical. the fax had no facsimile line to show that it had come from abroad .
shankar changed tack, claiming that allied had asked the customer to send the invoice - proof of a significant transaction - by overnight delivery .
but allied had sent the bank the fax before 9. 30am. as non - stop flights between asia and new york take at least 14 hours it was practically impossible that shankar' s story was correct .
it was september 2001, and even before the terrorist attacks on the eleventh of that month there were whispers that allied, the large metal broker headed by narendra rastogi, was in trouble. payments from customers were drying up. what was happening didn' t make sense. none of allied' s clients appeared to be connected, yet they were all stopping payments .
to the banks, which included jp morgan chase, and dresdner, such a co - ordinated action was unprecedented. add in the concerns over false invoices and it was clear the situation needed urgent investigation. just what was going on ?
according to criminal charges filed last week in the united states, what was going on was a fraud of massive proportions which' raised deceit and misrepresentation to an art form' .
in what threatens to be one of the most complex and serious banking scandals in recent years, it is alleged that, for at least two years, allied, as part of a ring of interlinked metal broking firms, used fake invoices, purchase orders and bills as proof of genuine deals against which they were able to borrow more than $ 600 million from a consortium of banks. even when the banks became suspicious, the firms went on trying to lie their way out of trouble, according to the us authorities .
james b. comey, the united states attorney for the southern district court of new york said the alleged fraud had' consequences reverberating worldwide' and included a cover up of' astonishing scope and magnitude' .
instead of their money being used to pay the suppliers, as the banks had believed, the authorities allege much of it was secreted away in accounts owned or controlled by shankar, narendra and virendra rastogi, and two other men, anil anand and manoj nijhawan. in one deal alone, it is claimed, almost $ 65m of an $ 85m transaction went into accounts held by the five and their associates .
last week shankar, narendra rastogi, anand and nijhawan were arrested and charged with conspiracy to commit bank, mail and wire fraud. if found guilty, the four face up to five years imprisonment, plus fines .
given the scale of the investigation more arrests are likely. an fbi spokesman declined to comment on whether investigators will seek the extradition of virendra rastogi whose home was raided by the city of london fraud squad earlier this month .
as the squad combed his home in london' s plush portman square it became clear rastogi had been shredding a number of documents, according to the us authorities .
it had received backing from the british embassy in romania, where it had bought a smelting plant, and the european bank for reconstruction and development .
virendra rastogi, 34, who describes himself as a' serial entrepreneur' and is said to be worth £150m, has been investigated before. the rastogi family businesses have been under investigation by the indian authorities for alleged customs and excise fraud .
it was claimed companies controlled by the rastogis exported bicycle parts to russia and hong kong at inflated prices. investigations by the indian authorities, found that the firms that' bought' the parts were not at the addresses given .
one brother, subash rastogi, also once an allied deals director, was arrested last year as a result of the investigations .
amid the fallout, only one thing seems certain. if the original alleged fraud was massive, the cover - up was even bigger. as the banks investigated, the metal traders are alleged to have obfuscated further. initially they claimed their customers were defaulting on payments because of a family feud in india. then they blamed the fact that subash had been arrested. they also cited the 11 september attacks .
unimpressed, the banks decided it was time to confront the traders' customers themselves. executives were dispatched to india, hong kong, singapore, the united arab emirates and other countries .
but while the banks screamed for their money, the traders, it is said, were attempting a complex juggling act. the us authorities allege they' used loan proceeds from one victim bank to pay down debt owed to another victim bank and attempt to draw in new victim banks and seek even more credit, while concealing and perpetuating their fraud'. despite their best efforts, the banks' men were unable to find the customers. office addresses in india, for example, were found to be nothing more than shacks hidden down side streets which could be reached only by rickshaw .
inside, the banks' investigators found' with few exceptions, no fax machines, computers, or equipment necessary to produce documents those customers had purportedly sent to the companies' offices in new jersey' .
similarly, when representatives of one of the banks, general bank, went in search of customers in new jersey they found only a run - down home that had been empty for two years .
it is also alleged that the traders arranged for' fake' customers to meet with the banks' representatives and that conference calls were permitted only after narendra rastogi had talked to his' clients' first. those few clients rastogi produced seemed to have little idea who he was, according to the charges .
if the allegations are proven, those involved face a life of ignominy which, to proud men who have rubbed shoulders with politicians, will be far worse than jail sentences .
worse, if found guilty they are in danger of being labelled as nothing more than common bank robbers. kevin donovan, assistant director in charge of the new york field office of the fbi, said:' these defendants... tried to pass off straw men as customers when the lending banks got suspicious. this is larceny as surely as breaking into the bank vault and hauling off bags of cash.'
the us attorney' s office describes the alleged fraud as' massive', and it is not hard to see why .
the victim banks are: jp morgan chase & co, fleet national bank, pnc bank, kbc bank, hypo vereins bank, dresdner bank lateinamerika, china trust bank, general bank .
the four firms claimed to be brokers, buying and selling metal, arranging for overseas shipments of metal, and providing interim financing to suppliers and customers. to provide such financing, the four firms entered into a series of complicated loan agreements with the banks.
rbg resources was a british public-limited firm based in london that was allegedly involved in a serious fraud worth close to £ 300 million ( us$ 600 million ) . rbg resources made $ 1.1 billion in sales in 2000 . it was an affiliate of the united states based allied deals inc. , which was also involved in the fraud , and resulted in 14 people convicted or pleading guilty to related crimes . 
rbg resources was a british public-limited firm based in london that was allegedly involved in a serious fraud worth close to £ 300 million (us$ 600 million). rbg resources made $ 1.1 billion in sales in 2000. it was an affiliate of the united states based allied deals inc., which was also involved in the fraud, and resulted in 14 people convicted or pleading guilty to related crimes.
rbg resources was a british public-limited firm based in london that was allegedly involved in a serious fraud worth close to £ 300 million (us$ 600 million). rbg resources made $ 1.1 billion in sales in 2000. it was an affiliate of the united states based allied deals inc., which was also involved in the fraud, and resulted in 14 people convicted or pleading guilty to related crimes.