Indian tycoon Roy's get-out-of-jail deal is mired in mystery

Indian tycoon Roy's get-out-of-jail deal is mired in mystery
Sahara Group Chairman Subrata Roy gestures as he speaks during a news conference in Mumbai in this February 4, 2012 file photo.

NEW YORK/MUMBAI - Subrata Roy, the boss of Indian conglomerate Sahara, is in a New Delhi prison on contempt-of-court charges and needs to post US$1.6 billion (S$2.1 billion) in bail to get out. To help raise the money, Sahara is in talks to refinance its overseas hotels, including New York's Plaza.

The only problem: It's unclear if the man who's orchestrating the deal, a 34-year-old former broker named Saransh Sharma, has the money to pull it off.

Sahara's head of corporate finance, Sandeep Wadhwa, said Sahara's lawyers had verified with Bank of America that Sharma has deposited just over US$1 billion in an account at the bank that is "earmarked for the said transaction."

That account, however, doesn't appear to exist.

A manager at the bank told Reuters that he didn't write a crucial document attributed to him: an email, sent in his name to Sahara, which purported to verify the account's existence. After Reuters asked the bank to look into the account, spokeswoman Jumana Bauwens issued a statement saying: "Bank of America isn't involved in the transaction." What's more, Sharma, who lives in San Jose, California, has admitted to stealing a database from a former employer. There are also two pending lawsuits against him alleging he forged a letter and produced fake documents to obtain a loan.

Bank of America's assertion that it has nothing to do with the deal, as well as details about Sharma's past, could throw a wrench into Sahara's efforts to free Roy in a case that has made headlines in India for almost a year.

Roy is being held at Tihar jail, the largest in India, on contempt charges for failing to comply with a court order to repay investors in a bond scheme later ruled to be illegal. The bail amount, the largest ever in India, reflects the cost of the illegal scheme, estimated by Indian regulators to be as much as US$7 billion.

A lawyer working for Sahara, speaking on the condition of anonymity, said the company's lawyers had not separately checked with Bank of America to see whether Sharma had a billion-dollar account with the bank. Instead, the lawyer said, Sahara relied on a letter from the bank saying the funds were there. Sahara declined to comment on the lawyer's assertion.

Sharma told Reuters he is backed by a group of US and UK investors for the refinancing and that the funds in the account have come from them. Both he and Sahara declined to identify the investors.

Sharma, who spoke with Reuters on Jan. 23 and sent a subsequent email on Jan. 28, said in an emailed statement on Wednesday that Mirach had faced "a number of challenges in closing this transaction" and that he wouldn't disclose"sensitive details" about the deal until it closes.

Under the proposed deal, which Sharma said he reached with Sahara in December, Sharma's investor group would help pay off about $880 million of a Bank of China loan for the hotels. Besides the Plaza, which Sahara bought for about US$570 million in 2012, the properties also include the Dream Hotel in downtown New York and the Grosvenor House in London.

Sharma and the investor group also agreed to lend US$650 million to Sahara and make a US$450 million investment in the conglomerate's properties in India. Sahara and Sharma have said they expect to finalize the deal by Feb. 20.

It is unclear how paying off the Bank of China loan, or obtaining the loan and investment, would help Sahara pay Roy's bail and refund money to the bond investors.

Sahara's businesses range from financial services to media, retail and real estate. The company used to sponsor the Indian cricket team, which helped to make it a household name in the country. During his heyday, Roy, 66, socialized with presidents and film stars. Seen as a maverick among India's conservative business elite, his self-appointed title is "Managing Worker,"and he's known in the company as "Saharasri," or "Mr. Sahara." Sahara's troubles started in 2011 when it was found by the Securities and Exchange Board of India (SEBI), the market regulator, to have illegally sold billions of dollars of bonds to investors. After a legal battle that reached the Indian Supreme Court, Sahara was ordered to refund investors the money.

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