THE CON: Using shell companies in London and the U.S., Narendra and Virendra Rastogi ran a worldwide con based on phony metal-trading deals. When investigators tracked down the addresses of the brothers' “clients,” they found everything from a cowshed in India to a laundromat in New Jersey.
THE DAMAGE: $680 million
THE OUTCOME: Narendra Rastogi was arrested in the U.S. and named his brother as a co-conspirator. Virendra was arrested – while shredding documents – in London. Both brothers are in prison.
The Rastogi brothers and their cadre of impostors fooled banks worldwide, wheedling $680 million in loans for metal-trading deals that didn't exist. Using shell companies in the U.S. and London, and piles of phony documents, the brothers secured fresh loans to drive their Ponzi scheme. When investigators looked deeper into their operation in 2002, th
ey discovered who the Rastogis' “customers” really were – the addresses led them not to the offices of multimillion dollar companies but everywhere from a laundromat in New Jersey to a cowshed in India. Indeed, the tentacles of the Rastogi con stretched far; they had people playing the part of metal traders in the U.S., Hong Kong, India, France and Italy.
Before they were exposed, the Rastogis ran a complex and efficient con. Narendra Rastogi, the eldest brother, managed Allied Deals and a handful of other metal trading companies in the U.S., while Virendra oversaw RBG Resources, a metal and mineral producer in London. Their premise was reasonable: banks loaned them the fees for the metal deals they brokered – fees they weren't paid until the metal arrived by ship, which could take months.
Except there were no metal deals. In the U.S., at least fifteen people worked for the Rastogis. They set up phony bank accounts, created letterhead and stood ready to field phone calls from auditors. To add extra authenticity, the Rastogis even invented an agency that issued fake credit reports on the fake companies.
With their customers in place, the Rastogis set about securing loans from banks with phony purchase orders and invoices. They created bill of ladings – documents issued by ships to testify that goods have been taken on board - to give banks as collateral. Often they used the same bill of lading to collect on several loans, which gave them cash to pay off earlier lenders. Worldwide, about twenty banks made loans to the Rastogis; in the U.S., their dupes included JP Morgan Chase and Fleet Financial.
They might have kept their sprawling con going for more than a few years if it wasn't for a slip of the finger. In 2002, an employee in Hong K ong pressed the wrong button on the fax machine and sent a stack of letters from RBG “customers” intended for Virendra Rastogi to PricewaterhouseCoopers, his auditor in Britain.
When London police showed up to arrest Virendra, they found him busy shredding documents. Meanwhile, across the pond, his brother Narendra and three other men were arrested in New Jersey. British investigators released Virendra while continuing to investigate RBG Resources. In the States, Narendra admitted his guilt and, as part of his plea bargain, named his brother as a co-conspirator. In 2007, Narendra was sentenced to seven year in prison and ordered to pay $683.6 million. That same year, his brother started a 9 ½ year sentence in prison.