Rakesh Saxena, once known as the “financial wizard,” now faces decades in prison over a Thai banking scandal that sparked the 1997 Asian crisis.
After a 26-year legal battle, the Supreme Court finally sentenced Saxena on September 12 to 335 years in prison for three counts related to the Bangkok Bank of Commerce (BBC) embezzlement scandal.
Although the sentence of over three centuries has been upheld, the 70-year-old will serve just 20 years behind bars, the maximum sentence under Thailand’s penal code.
Work your way up the ladder
From 1974 to 1985, Saxena worked as a foreign exchange dealer and money market broker in India, Singapore, Hong Kong and London. He later moved to Thailand to work as a financial columnist for newspapers and as a consultant for financial institutions.
In 1989, while living in Bangkok, he met and became friends with Krirkkiat Jalichandra, who had just been appointed Senior Vice-President of the BBC. In 1992 Saxena became personal adviser to Krirkkiat, who had since been promoted to BBC President.
The bank was then owned by Krirkkiat’s mother’s family. In his book BBC Truth, Krirkkiat wrote that his maternal grandfather, the late former Prime Minister MR Kukrit Pramoj, had told him: “You have to help Grandpa’s work at the bank.” Krirkkiat had previously worked at the Bank of Thailand for over a decade worked.
How the scandal unfolded
Between 1993 and 1994, the bank spent over 36 billion baht on corporate acquisitions and leveraged buyouts related to Saxena. The BBC also made loans with insufficient or overpriced collateral to Saxena-controlled companies, senior bank executives, including Krirkkiat, and their staff – many of whom were politicians.
The BBC scandal was linked to a clique of young politicians known as the ‘Group of 16’, many of whom went on to become political heavyweights.
Regulators valued the bank’s non-performing loans at over 50 billion baht, or about 40 percent of its assets.
Saxena claimed years later that BBC officials concealed the number of bad loans in 1995 by lending money to the bank’s shell companies so they could repay other borrowers’ debts.
After the scheme was uncovered, in February 1996 the central bank ordered Krirkkiat not to renew Saxena’s consultancy contract.
The collapse of a bank
Just a month later, the Bank of Thailand took control of the BBC.
During a no-confidence debate in early May 1996, opposition Democratic Party MPs accused unnamed government politicians of colluding with Saxena and Krirkkiat to “embezzle at least 50 billion baht from the bank’s deposits”.
The allegation, coupled with reports of the bank’s deteriorating condition, prompted a run on BBC deposits of more than 30 billion baht.
This led to a Treasury takeover that allowed the bank to fail in August 1998 after discovering an unmanageable default.
Krirkkiat, Saxena and several others faced 17 lawsuits for embezzlement and fraud that caused over 50 billion baht in damage. The disgraced BBC President has been sentenced to 20 years in prison and a fine of 3.1 billion baht. Krirkkiat died in October 2012 while still serving his sentence.
consequences for the economy
The BBC scandal led to the closure of a Thai bank that had been operating for over 50 years. Its collapse eroded confidence in Thailand’s financial system, leading to a domino effect that brought down 56 financial institutions and resulted in many Thai commercial banks being taken over by foreign investors.
In July 1997, the Thai government gave in to speculative pressure against the baht and devalued the currency. The move forced neighboring countries to follow suit with their currencies and triggered a financial crisis that swept across Asia.
In June 1996, Saxena was in Canada when Thai authorities charged him and others in connection with the BBC scandal. He was arrested a month later but resisted extradition from Canada, claiming he would be killed if sent back to Thailand.
The extradition fight began in June 1997. More than a decade later, in October 2009, the Supreme Court of Canada ruled against Saxena and he was handed over to Thai authorities.
In Thailand, Saxena waged a three-decade legal battle that ended this month with a final Supreme Court ruling that sealed his fate.
From Thai PBS World’s Business Desk