like with all Ponzi schemes, the Saradha Group promised astronomical returns in fanciful but seemingly credible investments. People fell into the trap, almost readily, because they wanted to make easy money
When people become greedy, they fall prey to all kinds of fake schemes even when the returns clearly appear to be not only impractical but also out of the realm of possibility. Investments in so-called high-interest returns schemes are driven by the desires of many people who want to have all the good things in life the easy way. Such scams have, therefore, surfaced in every State; West Bengal’s Saradha scam is just the latest in the series that came to prominence. Harshad Mehta and Ketan Parekh are other examples. Reportedly, Harshad Mehta had paid one crore rupees to a former Prime Minister as donation to his party.
As for the Saradha issue, it is a financial scam that was caused by the collapse of a Ponzi scheme run by the Saradha Group — a consortium of over 200 private companies that was believed to be running a wide variety of collective investment schemes. like all Ponzi schemes, Saradha Group promised astronomical returns in fanciful but credible looking investments. Its funds were sold on commission by agents who were recruited from local rural communities. As much as 25 per cent to 40 per cent of the deposit was returned to these agents as commissions and lucrative gifts to quickly build up a wide agent-pyramid.
The group collapsed in April 2013, causing an estimated loss of Rs 20,000 crore to over 1.7 million depositors. However, the exact figures are not in the public domain. As is often the case in our country, the Government woke up to bolt the stables only after the horses had fled.
After the scandal, the West Bengal State Government instituted an inquiry commission to investigate the collapse, and also set up a fund Rs 500 crore to compensate low-income investors. The Union Government, through the Income Tax Department and Enforcement Directorate, also launched a multi-agency probe to investigate the scam as well as other similar Ponzi schemes.
On May 9, the Supreme Court, citing inter-State ramifications, the possibility of international money laundering, serious regulatory failures and alleged political nexus, transferred all investigations in the Saradha scam and other ponzi schemes to the Central Bureau of Investigation. It said that the CBI will investigate all cases against 44 chit fund companies in Odisha as well. The Supreme Court also said that the State police have not yet been able to find the money trails that clearly had inter-State as well as possible international links.
The apex court also asked the Enforcement Directorate to join the CBI in unearthing the money trail. The ED is already conducting a probe into the scam. The apex court said it wanted the chit fund scam in these States to be probed by an independent agency like the CBI because of the involvement of politicians and influential persons in the cases. The court also said that the CBI is the right agency to probe the cases as the roles of market regulators such as the Securities and Exchange Board of India and the Reserve Bank of India are under the scanner. Earlier, the Calcutta High Court had refused to grant the prayer for a CBI investigation into the multi-crore Saradha chit fund scam.
While he was underground, Saradha Group chairman Sudipta Sen sent an 18-page letter to the CBI, in April 2013, listing 22 politicians, including two influential MPs of the ruling Trinamool Congress, who were also involved. The name of the wife of a senior UPA Minister also figures in the list.
Mr Sen had been earlier arrested under Section 420, 421, 467 and 406 among others of the CrPC. He has taken the lid off political corruption. In the same letter, he added that Trinamool Congress’s former Rajya Sabha members, Kunal Ghosh and Srinjay Bose, had assured him that his business interests will be protected, “as they have a very close connection” with West Bengal Chief Minister Mamata Banerjee.
Mr Sen claimed that in the past two years he had paid Rs 20 crore mostly by cheque or bank transfer. He noted that “various times they have taken cash under various causes” and that the amount was not less than two crore rupees per month. The letter alleged that Mr Ghosh was given a new car with allowances for fuel and a driver’s salary. The letter, signed on each page by Mr Sen, said that he had purchased a television channel, Channel 10, for Rs 24 crore and spent another Rs 50 crore to re-brand it. But Mr Ghosh allegedly made him sign away the same “for a meagre amount of Rs 55 lakh”.
Urging the CBI to expeditiously conduct a probe to unravel the truth, Mr Sen alleged that he was “forced” to take over a loss-making motorbike manufacturing unit in Polba near Singur by a business lobby close to the Trinamool Congress Government. He alleged that a Minister in the Assam Government, whom he referred to as Himanta Biswa Sarma, had “dramatically cheated” him. He alleged that Mr Sarma took about three crore rupees over a period of six months, along with expenses for international flights for his son.
One thing which is certain in the Saradha scam is that the name of the West Bengal Chief Minister has been dragged in, without her being involved in any wrongdoing. To the extent I know her, she has led an impeccably honest life and she will deal with a firm hand all those from her party who have let her down, at the appropriate time and place. Having said this, it is also important to reiterate that our laws are so soft and so pro-accused that even after misappropriating money or defrauding the poor, the corrupt and the cheats get away.
The first step to remedy this situation should be to seize the ill-gotten wealth and put the onus on the accused to prove that whatever he or she has acquired has been done legally. The higher the station of life of the accused, the higher the priority that should be given to the trial of such persons. Also, the laws should be changed to give them model punishment.