Business

The high-flying fugitive

Is Rakesh Saxena a brilliant con man, or the fall guy for a corrupt banking system?

Vivian Smith May 24 1999
Business

The high-flying fugitive

Is Rakesh Saxena a brilliant con man, or the fall guy for a corrupt banking system?

Vivian Smith May 24 1999

The high-flying fugitive

Business

Is Rakesh Saxena a brilliant con man, or the fall guy for a corrupt banking system?

By Vivian Smith in Vancouver

Even on a drizzly May afternoon in Vancouver, the view of Granville Island and the yachts around it is delightful. But Rakesh Saxena is not interested. He has just finished a morning of stock trading, international business deals and his umpteenth Rothmans cigarette. The beige blinds are drawn, the big-screen television is tuned to a business channel, and files, boxes and regulatory texts surround him as he discusses his life as a wanted man. Saxena has spent most of the past three years fighting allegations that he committed a fraud so breathtaking that it helped topple the Thai government and trigger Asia’s economic tailspin, yet his tone is as easy and unemotional as if he were chatting about the rain.

Saxenas casual manner is not the only incongruous element in this picture of international intrigue and high finance. The stria visiting rules, the surveillance camera in the hall, the briefcase search at the door and the ever-present security guard seem out of place in what is otherwise a cluttered, three-bedroom suite in a luxury condominium complex. Known to Saxenas cronies as “the bunker,” the headquarters of his far-reaching business empire, the condo now also doubles as a jail cell for the 46-year-old financier. The Kingdom of Thailand has accused him and others of committing an $88-million bank fraud in that country, and Thai officials have demanded that he be sent

back to face charges. A hearing under Canada’s Extradition Act, which began in June, 1997, and is expected to wind up next month, will determine whether there is enough evidence to commit Saxena to trial in Bangkok.

Saxena (pronounced sak-SEE-na) does not wish to go, insisting he has committed no crime, will not get a fair trial, and may be in danger if he returns to a country where, he says, bribery and corruption are standard operating procedures. He has admitted in court that he delivered bribes to high-ranking Thai officials, but says the people ultimately responsible for the fraud were former colleagues, police and politicians. Much of the evidence presented against him in court, including testimony that he uttered death threats against former associates and their families, is simply “storytelling,” he says.

Despite a recent legal setback in which Judge Frank Maczko of the B.C. Supreme Court refused to allow Saxenas lawyers to admit certain documents into evidence, Saxena says he will oppose his extradition all the way to the Supreme Court of

Canada, if necessary. Given the legal avenues available to him should the judge find in Thailand’s favour—Saxena can also take his case to the B.C. Court of Appeal and the federal justice minister—he could well remain in Canada for years to continue the fight. Crown counsel Daniel Scanlan, who is acting for Ottawa on behalf of the Thai government, acknowledges there have been delays, but says “we are all very keen to move this as fast as we can.”

Saxena’s story is both fascinating in its scope and bewildering in its financial complexity. It also sheds light on how those with an appetite for risk can reap huge profits from social instability and lax regulations in the world s emerging markets. The kind of “fourth-world arbitrage” he does, Saxena submits, is “an art at the best of times, and that doesn’t mean it’s illegal.” He adds: “I don’t draw any moral line at all. My moral line is, as long as there is a deal and you honour the deal.”

And now here he is in Vancouver, keeping watch on investments in Sierra Leone, eastern Europe and Russia. During a typical day, he will rise at 2 a.m. to catch the opening of the major European markets and work until about 1 p.m., trading calls with business associates around the world. The rest of the day is devoted to seeing visitors, practising f ai chi, working out on his StairMaster or reading—his current fare

consists of works by Somerset Maugham—until he retires by 8 p.m. Visitors bring him food and cigarettes, and a twiceweekly visit by a housekeeper keeps the place tidy. A former denizen of expensive restaurants worldwide, he now just fixes himself “sandwiches and cold cuts.” When his mother, a retired senior official at the Commonwealth Secretariat in London, comes to visit, she doesn’t cook for him, either. “She’s an international lawyer,” says Saxena. “She can’t cook anything.”

Rather than await his fate in jail—he has spent only four months in a detention centre since his arrest in 1996—Saxena negotiated a bail agreement under which he posted $2 million in sureties to live and work at his own home. In addition, he agreed to hire a private security agency to keep him under 24-hour surveillance—at a cost, he says, of $30,000 a month. The guards allow him to leave the condo only for court appearances and meetings with lawyers. Their assignment is not to protect Saxena from his enemies but to ensure that he doesn’t flee. In February, 1998, he was found to have violated an earlier set of bail conditions by arranging the forgery of a passport, a charge he continues to deny.

Although Saxena professes not to be overly perturbed by his circumstances, he is attempting to have the bail terms relaxed so he can socialize, work on his 22-handicap golf game

Saxena’s neighbours are outraged by his bail arrangements

and use his box seats for sporting events at General Motors Place. A prodigious drinker who routinely downed litres of beer and half-bottles of scotch daily, Saxena says heavy drinking is simply a Thai protesters at the height of the country’s financial crisis: a domino effect

trader’s way to unwind after the markets

close. His bail conditions stipulate, however, that no alcohol

or drugs are permitted in his home.

The man referred to in the extradition documents simply as “the fugitive” is involved in at least eight legal battles in British Columbia alone, including a recently launched civil action in which he accuses Thai officials of conspiring to falsely accuse him of embezzling the $88 million. The action would compel the officials to testify under oath in Canada— after which, Saxena hopes, the courts will agree to unfreeze his bank accounts in Switzerland, Ireland and the Isle of Man.

If it were up to Saxenas neighbours, however, he would be hauled off to Thailand immediately. One woman who lives in the condominium development says that she and some other residents are afraid of “such a powerful man.” Neither she nor any of Saxenas former associates would agree to be quoted by name, but there is widespread outrage at the fact that wealth has enabled Saxena to secure such a comfortable bail arrangement. His neighbours also worry about the impact his pres-

ence will have on property values. Even in a depressed Vancouver housing market, Saxena’s condo is worth at least $700,000.

But it is Judge Maczko, not the neighbours, who will pronounce on Saxena’s fate, in a decision expected in early September. Although Thai officials have accused Saxena and several associates of embezzling as much as $2.2 billion in a series of transactions over several years, the extradition case hinges on one charge in particular: an alleged fraud involving an $88million loan from a mid-sized Thai commercial bank, the Bangkok Bank of Commerce. Thai prosecutors say the loss ultimately triggered a run on the bank’s deposits and led to the institutions collapse.

Almost nothing about Saxenas case is simple, however—not even the circumstances of his arrest one July afternoon in 1996 while lunching with Thai police in the ski resort of Whistler, B.C., a suitcase full of money by his side. There are two vastly different accounts of what happened that day. Saxena claims to

The bursting of a bubble

Key events in the case against Rakesh Saxena, the Indian-born currency trader whom Thailand accuses of triggering the Asian financial crisis:

1989: While living in Bangkok, Saxena meets and befriends Krirkkiat Jalichandra, president of Thailand’s Bangkok Bank of Commerce. In time, Saxena becomes a consultant to the bank.

1993-1994: In a scheme allegedly masterminded by Saxena and his associates, the bank provides loans to prominent politicians and others to be used to acquire stakes in publicly traded

Thai companies. Some of the loans, prosecutors say, went to companies controlled by Saxena and bank officers.

Early 1994: Thai regulators estimate the bank’s bad loans at $2.1 billion, roughly 40 per cent of its assets. Subsequent audits reveal several dubious transactions.

1995: Bank officials,

Saxena says, try to conceal the number of bad loans by

lending money to bankowned shell companies so they can repay debts owed by other borrowers.

February, 1996:

Thailand’s central bank governor orders Krirkkiat not to renew Saxena’s consulting contract.

May, 1996: Alarmed by news reports of the bank’s deteriorating condition, depositors withdraw hundreds of millions of dollars from their accounts. The collapse fuels allegations of widespread corruption and mismanagement in Thailand’s economy.

May 23, 1996: Saxena enters Canada on a visitor’s visa.

June, 1996: Thailand accuses Saxena and several associates of embezzling as much as $2.2 billion from the bank. Weeks later, RCMP officers arrest him in Whistler, B.C.

July 2, 1997: The Thai government gives in to speculative pressure on its currency by devaluing the baht. The move forces neighbouring countries to follow suit, triggering a financial crisis that spreads across Asia and to other emerging markets.

Digging out

Twenty-three months after Thailand stunned investors by devaluing its currency, the country is only now emerging from the regional economic crisis. A Thai finance ministry official said last week that the kingdom might not have to withdraw the remaining $5.9 billion available under its $24-billion rescue program from the International Monetary Fund. The government’s most recent withdrawal was $740 million in April.

have been in constant contact with Thai police regarding their investigation, even to the point of arranging transportation for them from the Vancouver airport to Whistler. He came to Canada not to elude Thai authorities, he says, but merely to oversee various business deals. RCMP officials, however, say they made the arrest at the request of the Thai police, who had embarked on a global manhunt for Saxena.

Whatever the case, Thai prosecutors depict Saxena as the man who knocked over the first domino in what became a global economic crisis. Saxena, a short paunchy man, maintains that he is simply a consultant and trader who plays the game the same way everybody else plays it in the worlds emerging economies, where “if you do not bribe, you do not survive.” The idea that one person can be held responsible for an economic crash is ludicrous, he says.

Saxena has always been a numbers wizard, former associates say. He was born near Delhi, India, in 1952, and moved with his mother to Britain while he was a young boy. She and Saxenas father, a retired government bureaucrat, are divorced, and he has two siblings. Saxenas ex-wife still lives in Bangkok with their three children, an eight-year-old girl and twin sixyear-old boys, who he has not seen since 1995. “You live with it, life goes on,” he says of the separation from his children.

At 16, Saxena returned to India to study mathematics and physics, but he switched to a lighter course load, majoring in English literature, so he would have more time to organize left-wing, anti-Vietnam War student protests. Philosophically, he says, he was—and still is—a Marxist.

But he was a Marxist with a knack for figures and a love of

high finance. After learning to trade currencies, he worked in Hong Kong and then went to Thailand in 1985, establishing himself as a foreign exchange trader and trade consultant just as Thailand’s economy was taking off. Four years later, he hooked up with a group of top officials at the Bangkok Bank of Commerce. During the early 1990s, Thai police allege, a number of bank insiders, including Saxena and the bank’s then-president, Krirkkiat Jalichandra, began floating dubious loans to Thai politicians and other influential people. According to the Thai government, loans were also made to companies controlled by Saxena and bank officers. Saxena said in court that the bank’s lending practices were questionable by North American standards, but he insisted he was being used as a scapegoat for others. There is no doubt he has many powerful friends: in 1994, for instance, Saxena introduced Saudi arms dealer Adnan Khashoggi to the bank. Soon after, the bank allegedly loaned Khashoggi and his group $132 million. Saxena now plays down the strength of the friendship, despite the fact that at a critical point in his bail hearing last year, Khashoggi—or someone purporting to be him—rushed to help his old associate by swearing out a character affidavit and faxing it to the court from Paris.

Today, with Thailand and its neighbours still struggling to repair their battered economies, Saxenas trading activities are centred elsewhere. One targeted area is Africa, where he controls a company with four diamond concessions in strife-torn Sierra Leone. According to evidence collected in a British parliamentary investigation, Saxena helped fund a mercenary-led attempt to restore the government in defiance of a UN arms embargo. Saxena disputes that, saying the mercenaries were simply helping to extricate a trio of his employees from an untimely coup.

Who to believe? Saxenas case is full of enough charges and counter-charges to keep the Canadian justice system busy for years. As one veteran watcher of the case puts it: “There are so many versions of the truth here, even if only a quarter of it all is true, it is still incredible.” To others, perhaps; for Saxena, it’s all just business. ES3

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