Lies, Bribes and Me -Part 12: The Smartest Banking Con
Banking frauds can be somewhat crude. Take Nirav Modi, for instance. He bribed a bank official to keep giving him facilities far in excess of his approved limits. This was a ‘breach of trust’ by an employee, exacerbated by the failure of the bank’s control systems.
But a ‘con’ is altogether more classy.
A con requires that the victim is made to trust the perpetrator, to the extent that he actually pleads that his money be taken. It requires a superb build-up, the creation of an aura of honesty, and generating greed within the victim.
And there are classes of cons, too. Pulling off a six-month con on a rich individual is one thing, but a con on over a dozen banks, constructed over 20 years, is something else altogether.
Madhav Patel did this in Dubai, using his company—Solo Industries. I saw this happen, and you may say I was a victim of it, too.
This is the story.
Solo was a limited liability company (LLC) based in Sharjah, UAE, owned 49% by Mr Patel and 51% by his UAE national sponsor, who had a side agreement with Madhav Patel that he had nothing to do with the affairs of the company except get a fixed annual fee. This was the standard arrangement in UAE at the time—nothing untoward about it.
Solo was involved in metal trading, internationally. It was registered in the London Metal Exchange (LME) and had ISO 9002 accreditation. It was also the producer of exotic metal alloys, which it supplied to none other than Toyota. Its reputation had been built up over 20 years, and was considered to be impeccable.
Madhav Patel was a low-key person—no swanky office, no gori secretary, no ‘sho-sha’ at all. He worked from a portacabin set in one corner of the dusty compound of Solo Industries in Sharjah. He was soft-spoken. very polite, and not to be found in the 5-star hotels and social clubs.
Over all these years, he had been building up his ‘business’, and his ‘turnover’ showed a steady growth. His financials were audited by a respectable international firm. All financial parameters were good. His reputation in the market was A-1.
As his ‘turnover’ grew, so did his banking lines—loans and letters of credit (LCs). His track record was exemplary—every commitment was met on time and, a day or two before an LC became due for payment, the money was paid into his account. 
(If you are wondering why ‘business’ and ‘turnover’ are within quotation marks, you will get to know soon—relax.)
No wonder banks fell over themselves to get his business. But Mr Patel had one condition—if you wanted to lend to him, the minimum was 50mn (million) dirhams (about US$13.6mn). He was not interested in ‘chillar’ banking facilities—he already had enough, thank you.
Our bank was a major player in UAE, and naturally we had given a large limit to Solo, starting about 15 years earlier and growing steadily.
Until ‘T’ stepped in.
If you have read my earlier stories, you will know who ‘T’ was – our general manager (GM) and my direct boss.
T called me to his office one morning and said, very excitedly, “Look what I found. Madhav Patel is a fraud.”
I was astonished and could only say, “What? How?”
Mightily pleased with himself, T explained that he had contacted an expert in metal alloys based in Glasgow (T never trusted anyone born south of Hadrian’s Wall) and asked him about a special alloy that he had seen mentioned in one of Solo’s LCs. The expert had said that no such alloy existed.
I tried to say that just the word of one expert was not evidence enough, but T was adamant. He ordered me to meet Mr Patel immediately and withdraw all our facilities.
Rather reluctantly, I went and met Mr Patel.
The only way I could think of to tell him was to say, “We cannot tell you how to run your business, but we can, and do, tell you that we don’t like the way it is run. So, please return our money.”
Mr Patel was cool as a cucumber. He nodded, said, “Of course.”  He said that he would pay off the loans and overdraft within a week, but since a number of LCs were outstanding and could not be cancelled, he would like to settle them on due dates.
T grumbled at my ‘failure’ to get everything cancelled immediately, nodded when the loans and overdrafts were settled, and kept an eagle’s eye on each outstanding LC. Every single one was settled on its due date, and when the final one was paid up, he bent as far as to say, “Well done, my boy.”
Six months later, T resigned and a new GM arrived. Solo kept expanding steadily.
A year later, our managing director (MD) called me and said that the GM wanted to reinstate the facilities of Solo, and that he agreed. I reminded him of what T had discovered, but the MD waved it away. All I could do was put a comment on the proposal saying that I could not support it in view of the previous GM’s decision, but it was approved anyway – 50mn dirhams.
Cut to the economic downturn of the late-1990s. Rumbles began to appear in the market, at first about Mr Patel’s father’s company in India, and then about a large European customer of Solo. I heard of all this much later because, by then, I had left the bank.
One local bank decided to pull the plug on Solo. It demanded full repayment, and Mr Patel agreed provided that the matter was handled quietly. The manager of a European bank, who had been marketing fruitlessly for Solo’s account for years, suddenly got a call from Mr Patel accepting a 50mn dirham loan. The manager was overjoyed!
You can guess where the money went.
The manager’s happiness was short-lived. Two weeks later, Mr Patel left for London and never returned. He did make a couple of appearances assuring people that he would shortly resolve all issues, but that was it—he was never seen or heard of later. Rumour had it that he had undergone plastic surgery to change his appearance and was living in Argentina with a new identity, but this was never proven.
Now about the quotation marks…
Mr Patel did have a genuine business, but it constituted only about 20% of his stated turnover. The rest was fake. He had created a number of shell companies all over the world, and exchanged LCs with them. The cash lines from banks ensured that every LC was settled on the due date, and the LC settlement money just rolled from one company to another. 
In short, there was no real business of turnover—hence, the quotation marks.
It is estimated that Madhav Patel robbed the banks of US$300mn. Moreover, he did it in style—no bribes, and the victims really wanted to give him the money.
Con – not fraud.  
(Deserting engineering after a year in a factory, Amitabha Banerjee did an MBA in the US and returned to India. Choosing work-to-live over live-to-work, he joined banking and worked for various banks in India and the Middle East. Post-retirement, he returned to his hometown Kolkata and is now spending his golden years travelling the world, playing bridge, befriending Netflix & Prime Video and writing in his wife’s travel blog.)
1 year ago
"Rumbles began to appear in the market, at first about Mr Patel’s father’s company in India......". Was this company Hamco Mining & Smelting Ltd. (originally Hind Alloys Mfg. Co. Ltd.)?
Amitabha Banerjee
Replied to pgodbole comment 1 year ago
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