September 04, 2000

Net frauds and e-mail
A 23-year-old who made a mega profit by putting out a fake press release which caused the shares of Emulex, a US fibre optic company, to drop from $103 to $45 in just 15 minutes, was caught last week. How far are we from becoming victims of similar fraud? Not very far. e-mail is a dangerous territory. As long as the information is cross checked, unknown e-mailers are often an excellent source of information for journalists. One obviously tends to be careful about e-mail with nonsense words as identities, but fraudsters are more likely to use well-known names to appear more authentic. A few months ago I used to receive information about a steel company from someone registered as ’bimaljalan’. Last week, there was an e-mail to several newspapers in the name of ’samirarora’. Since the high profile fund manager lives in Singapore, it even had a Yahoo Singapore ID. Luckily for Arora and the newspapers, the garbled language and the insipid comments on an article in a business magazine made it obvious that it was a fake. But fraudsters are bound to get smarter and it is only a matter of time before some publication is duped. Unfortunately, fear of fraud may lead us to ignore some genuine tips and end up the losers twice over.

Absurd protection
Liberalisation may have thrown open several industries to competition, but some absurd relics in the form of protectionist acts and government orders remain in place. One such, is the Jute Packaging Materials (compulsory use in Packaging Commodities) Act, 1987 aimed at protecting the dying industry. Under a textile Ministry order of July 1999, food grains and sugar have to be compulsorily packaged in Jute material. Under other orders fertilisers (urea), cement etc. had to be packed in jute bags. A Gujarat based consumer body has pointed out that in the recent havoc caused by rains, water seeped into godowns and destroyed huge quantities of sugar and food stocks. For a State which was recently reeling under drought conditions such unnecessary damage is a criminal waste of food and money. In fact, the absurdity of using porous material which cannot protect the contents from rats, pests and spoilage due to moisture is obvious, but the usage of jute is compulsory. The same was the case with packing cement. It remains to be seen if the government reacts sensibly and repeals the Act.

Innovision flaws
Getting carried away with computerised graphic manipulation can sometimes be tricky. McCann Advertising, which created BPL’s advertisement proclaiming 400,000 mobile subscribers clearly does not expect readers to pour over it visuals, but they do. One reader with a penchant for such details called in to point out that the huge crowd of happy subscribers portrayed by the ad is not so vast after all. In fact, careful observation shows that the agency has simple created a collage out of a few frames of the same crowd so that each character appears around six times in the picture. But our reader has an interesting question. She says, “I hope BPL is not using the same method of compiling its subscriber number as it is in creating its advertising graphic”.

Selective haste?
SEBI seems to be slipping up. Three weeks in a row, the Securities Appellate Tribunal has set aside its orders. One case pertains to the June 1998 payment crisis which the BSE hushed up by scandalously opening the trading system in the dead of night to permit an officially sanctioned manipulation of the system by logging in select trades at above market prices. D.A.Gadgil, former MD of Sriram Mutual Fund had been barred from holding public office for three years for bailing out speculators in Videocon and causing a loss to its unit holders.

Following an appeal filed by Gadgil the SAT has remanded the matter back to SEBI for failing to follow procedure and has asked it to give him a fair and reasonable hearing. Interestingly, there were three companies whose shares were rigged up by Harshad Mehta and his cronies in 1998 – BPL, Videocon and Sterlite. Neither the companies, nor Harshad Mehta or his pal the then BSE vice president Rajendra Bhantia have yet been penalised, ostensibly because the investigation procedure is a painstakingly slow process. It is curious how SEBI acted in such haste against Gadgil that it even slipped up procedure.

Updated weekly.

The author's e-mail address is: suchetadalal@yahoo.com

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