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Ketan Somaia $23m fraud trial opens in London

Ketan Somaia denies 11 counts of obtaining money by deception.

Ketan Somaia denies 11 counts of obtaining money by deception.

LONDON, Apr 5 – Businessman Ketan Somaia, whose interests once included banks and luxury hotels, was described as a “confidence trickster on a grand scale” in a $23m fraud trial.

Opening the trial on Friday, the prosecution claimed Somaia had seduced three victims into making huge unsecured loans by persuading them that he was a successful financier with a personal fortune of $100m and control of assets worth $500m.

He claimed to be close to the billionaire Hinduja brothers, and flaunted his wealth with private jets, offices in Mayfair, all expenses paid trips to Dubai, Kenya and South Africa, and a palatial home in the exclusive north London suburb of Hadley Wood.

Somaia, who denies all charges, is accused of 11 counts of obtaining money by deception in a criminal prosecution at the Old Bailey.

“Mr Ketan Somaia was what is sometimes called a confidence trickster,but on a grand scale,” said William Boyce QC, opening the prosecution. His lavish lifestyle was being paid for by people whose money was “taken and not given back”, in a “systematic series of frauds”.

In less than a year, Somaia allegedly took $23m – about £14m at historic exchange rates – from a single victim, another businessman called Murli Mirchandani, whom he promised to make his investment partner.

With ventures manufacturing and exporting to Africa, Mirchandani had built up a considerable personal fortune of his own and was not a gullible target, but described an experienced entrepreneur who came to trust Somaia.

The two men had met in November 1998, and Boyce said Somaia “wooed” Mirchandani over the coming months, meeting him at a wedding in Dubai, inviting him to a series of dinners at Annabel’s nightclub in London and eventually on a trip to visit his offices in the Middle East and Africa.

The two men had nicknames for each other, with Mirchandani referring to Somaia as “Ketanbhai”, using a suffix which indicates trust and brotherhood.

Somaia was said to have used his ownership of five subsidiaries of Delphis bank, which he had bought from the remnants of the collapsed Bank of Credit and Commerce International, to give the impression of financial credibility.

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Shortly after his transactions with Mirchandani, in May 2001, Somaia was replaced as chairman of one of the subsidiaries, Delphis Bank Mauritius, and the company’s banking licence was revoked in 2002.

In a series of loans, as part of a relationship said to have been based on verbal promises rather than written contracts, Mirchandani claims to have handed over millions of dollars to take stakes in the bank and other operations of Somaia’s.

He handed over $7.5m in June 1999, on the promise of a 10% stake in Delphis Bank Mauritius.

The following month, seduced by the prospect of sky high returns, Mirchandani claims to have transferred a further $2.5m for a stake in another subsidiary of Somaia’s Dolphin Group, called Driscoll. In August, he invested $2.8m on the promise of a 50% stake in the Diamond Mining Corporation of Liberia, whose value he thought would treble in

nine months. In September, he handed over $3m to purchase a bank in Tanzania.

Somaia claimed not to need to the money, but said he preferred personal loans because bank lending rates in Africa were very high. In the transactions, he offered interest rates of as much as 18%.

Mirchandani was “completely hooked” by Somaia, the prosecution claimed, and wrote to him offering to be his junior partner, asking permission to refer to him as “the general or the commander in chief”.

“Meanwhile his partner was stabbing him in the back,” said Boyce.

The transactions continued until May 2000, when Mirchandani agreed to a final payment of $1m. Aside from several payments for interest,

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Boyce claimed “not a penny of the 23m capital advanced to Mr Somaia

has ever been repaid”.

The second victim was London-based Dilip Shah, who had been enticed into lending £200,000 after attending a group presentation of Somaia’s businesses at his Hadley Wood mansion. Shah’s transfer was made in August 2000, by which time Mirchandani had realised he was not going to get his money back.

Shah says he was not repaid but his wife, it was claimed, did succeed in reclaiming several thousand pounds from Somaia after confronting him publicly at a party, at which point a chauffeur was dispatched to withdraw cash for her.

The prosecution also outlined claims made by Dubai businessman Surajit Sen that he was owed several million by Somaia following transactions dating back to 1997. The prosecution claimed in total a sum of $25m had been obtained from the three men.

“He is a very clever conman” claimed Boyce. “In the community and background from which they come one sets great store by something that is evaporating elsewhere: my word is my bond. For these men a concept which meant a great deal to them. He knew that and he played upon it.”

Somaia denies all charges. The trial continues.

This story was first published by The Guardian.

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