Scam Inventors Handbook

From a certain perspective, stockmarkets are sponsored programmes run by bulls, bears and competitors using and electronic media to manufacture scams in order to transfer wealth from small and marginal shareholders to the perpetrators of these rumor mills. By way only of illustration, between 20 January and 10 February, Educomp lost some Rs 1,800 crore of market capitalisation based on reports published in one newspaper. The previous day, 19 January, the market saw a 67 per cent jump in short sales of Educomp shares in the forward market. What happened is a text book example of a self-fulfilling prophecy that can be usefully duplicated in a quest for wealth in these depressing Satyam Scam tainted times. Here is how it is done.

Act One: Make a laundry list of allegations based on half truths and if this means tearing facts out of context, or ripping random facts out of annual accounts, so be it. Start circulating anonymous e-mails to all and sundry, ensuring at all times to pander to the Indian love of conspiracy and scandal in high places. This will start a small rumour mill. If experience is any guide, I am afraid this is going to pay only marginal dividend, but this will bring together a disparate group of antagonist interest who will now start collaborating through mails, responses to mails, blogs and party gossip. After all, everyone wants the world to know that he has the inside track and what better way to do it than to pretend you know more than the next punter. Eventually, this process will culminate in a much refined list of slander that distills the wisdom of a large population of contrarian minds. The masala has been prepared.

Act Two: Take a massive short sale position on your target’s shares. This is a blood sport, but the bout can only go one way, or at least for enough rounds for you to square your position. Now you are ready to go.

Act Three: Find a paper that will publish these conspiracy theories. Corruptible journalists are probably hard to find in respectable print media but journalists are under considerable pressure to find a big story and gather in some readership. Compulsions sometimes overtake judgement, even with the best of motives. Split the information in easy digestible packages and launch the first attack by trying to draw a parallel between the half truth data you have and an attention grabbing scam…like Satyam. It’s idiot proof: everyone will read anything that looks like Satyam whether or not they believe it and you will get your headlines.

Trust me, your target’s response will be laughable. They will try to visit the newspaper and they will produce reams of paper to show that its conclusions are not supported by admitted facts. What can a journalist do under such circumstances? Promptly admit it may be completely wrong and lose its credibility? Or politely accept the PR visit, smile, cooperate, ask for more data and publish another follow-on exposé the next day? The only bandwagon you can get off is one that isn’t moving.

Act Four: This is the tricky part. Your initial exposé isn’t going anywhere unless other papers and the electronic media pick it up. With a little luck, it is possible to get the press to reproduce 50-word briefs of the first news report. News TV may be easier to get to: scams real and unreal fit well into their sound bite format, and besides they have 24 hours to fill. A potential national scam is just so much more interesting than the wisdom of some halfwit godman in some nondescript town in western UP. I can bet you the 24x7 TV channel will soon have the journalist who ‘broke’ the story in a programme titled ‘Fist Fight’ or ‘Full Contact’ or similar featuring well-known talking head. TV presence brings fame and fame in today’s world feeds on itself: it brings public access and access is credibility. Suddenly, the story-breaking journalist is not so small: he is going to be seen, he is going to be heard, and his exposure will create its own momentum. German politician and Reich Minister of Propaganda in Nazi Germany (1933-45) Joseph Goebbels once said “a lie repeated often enough is truth”.

Be aware that the target can do nothing about this situation. Sure, the target’s management will hyper ventilate and ask a lawyer if they can sue for defamation. Yes, they will be told, offering a 20-year time frame to win a case based on provocation that will have done its damage in 20 days. The target will ask if it’s possible to get interim protection. Not really, they will be told, the freedom of the press is not to be lightly tampered with. The media circus will play on.

Act Five: It’s time to step it up. If the journalists don’t do it, get a small shareholders forum to aggressively approach ministers and bureaucrats: ask them what they are doing about the next Satyam. You know that extinct is the politician who will be seen defending someone accused of a scam in a public place for a non-commercial reason. You will be sure that you will get your ministerial statement promising a thorough investigation of the alleged scamster.

At this point, you should be good for payback. If the target’s shares are not yet in free fall, you are not out of tricks in your bag. You can still get someone to ask a question in Parliament. You know how that is done, or where were you between the summer of 2008 and Aaj Tak?

Do I believe that with wide publicity in the print and electronic media, a statement by the government that they will investigate and a question in Parliament, shareholders are still utterly implacable, watching the whole monkey circus with a placid sense of superior self belief? I don’t think so. You are going to have blood on the stockmarket floor and you can square your position pronto. It doesn’t matter what happens thereafter. Maybe the investigation draws a blank but by then no one will remember what started it all.

It does not hurt that since man was genetically engineered, none has appeared yet that was so clean he had nothing to hide. Gandhiji slept with some strange company and many of his kids didn’t dote on him so much. If something does come out in the investigation, you can gloat and say ‘I told you so’. If nothing comes out of it, you would be so busy counting your short sale earnings you won’t notice.

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