Second verdict on 1996 share scam set for Sept 13

The special tribunal for capital market lawsuits is likely to deliver a verdict on September 13 in another case on the much-hyped 1996 share market scam.

It will be the second judgment in one of the 15 cases filed over the scam nearly 20 years ago, when millions of investors went broke.

This case involves Premium Securities and its then chairman A Rouf Chowdhury, managing director Moshiur Rahman, and directors Syed H Chowdhury and Onu Zaigirdar, who are all on the run.

Judge Humayun Kabir set the verdict date after completing the hearing on the case yesterday, said Masud Rana Khan, a lawyer for Bangladesh Securities and Exchange Commission.

The BSEC filed the case against Premium Securities and its directors in 1997 on charges of selling different companies' shares by violating securities rules in 1996.

The regulator also filed another 14 cases against 34 individuals, eight listed companies and five brokerage firms on charges of manipulating share prices through fraudulent means in the same year.

Of the cases, 12 were stayed by the higher courts, and proceedings of only three cases had been continuing in the special tribunal, which gave the first verdict in one of the cases on Monday last.

In the maiden judgment, the tribunal sentenced two directors of Chic Tex to four years in prison for their involvement in price manipulation, and also fined them Tk 30 lakh each. In case of failure to pay, they will have to serve another six months in jail.

In the case of Premium Securities, the accused traded shares of Beximco Pharmaceuticals, Bata Shoes, Prime Textile and Mita Textile through fraudulent means between July and December in 1996, according to the charge sheet, based on a government probe report on the scam.

The accused sold around 13.25 lakh shares of Beximco Pharmaceuticals through their brokerage house, but of them, 9.98 lakh shares were settled through the delivery versus payment (DVP) system, and the rest were unsettled.

It means the DVP was used as a tool to just increase the price of a certain company's shares, and in 1996, many companies' shares were traded in bulk through the DVP system, but those were never settled.

The accused traded 5.53 lakh shares of Bata Shoes, 2.74 lakh of Prime Textile and 1.11 lakh of Mita Textile. But of the traded shares, 30,000 of Bata Shoes, 5,000 of Prime Textile and 11,000 of Mita Textile remained unsettled.

Through such activities, they cheated general investors who ultimately had to incur losses after the crash, according to the probe report.

The share price index of the Dhaka Stock Exchange had risen as high as 3,648.75 points on November 5, 1996. The following day, it started falling and eventually came down to 462 points in May 1999.

The share prices of listed companies soared abnormally, even by several hundred times, before the crash.

After the price debacle, the government formed a probe committee in December 1996, headed by Aminul Islam who was vice-chancellor of Jahangirnagar University at the time. The committee submitted its report to the government on March 27, 1997, identifying a number of companies and some of the country's biggest brokers and influential individuals involved in market rigging.

On the recommendations from another probe panel on a fresh stockmarket crash in 2011, the Securities and Exchange Ordinance 1969 was amended in November 2012, empowering the government to set up special tribunals to try capital market-related cases.

The tribunal that gave verdicts on three separate cases so far began functioning in July this year.