It’s not Billiards!

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(L-R) Once feted for his achievements, Michael Ferreira has been arrested for fraud. A TV grab shows him being taken into custody
(L-R) Once feted for his achievements, Michael Ferreira has been arrested for fraud. A TV grab shows him being taken into custody
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Sporting legend Michael Ferreira’s recent arrest links him to a ponzi scheme that swindled the public. While he says he was an unsuspecting partner in the crime, investigators believe he was in the know of things

By Ajith Pillai

Those who know Michael Ferreira in Mumbai vouch for the fact that he is a thorough gentleman—affable, accessible and always willing to help. His sporting credentials are the stuff of legends—as world amateur billiards champion thrice over and a Padma Bhushan awardee, he has done much to popularize the game in the country and has lent his voice against corruption in sports bodies and federations. So it came as a surprise when news broke that a man of his standing and three others were arrested by the Hyderabad police on October 19 in a case of serious fraud. Ferreira and his associates allegedly duped people to the tune of Rs 425 crore. According to police estimates, this amount may even be around Rs 1,000 crore.

So was the Bombay Tiger, as Ferreira is known among friends and fans, directly involved in the racket or was he someone who had merely invested in Vihaan Direct Selling India (VDSI) Pvt Ltd, an arm of the Hong Kong-based company, Q-Net, which runs a multi-level marketing (MLM) business?

MLM is a marketing model in which those who join the scheme initially invest money and are given products which they can sell for a cut. But there is an additional commission to be earned when they enlist others into the scheme. Simply put, it works like this. You invest a minimum amount in a company (say Rs 10,000) and you are given over-priced products to sell and an identity card showing you as an independent representative (IR) of the company. A commission is paid for sales you generate. But the big bucks roll in when you enlist new IRs into the scheme and bag a commission from their investment. And when they in turn enlist others and the others enlist still others, the commission keeps accruing to you. The sky is the limit on what can be earned if you believe in the QNet hype. The chain reaction triggered off by the initial investment, the gullible are told, can earn a person several lakhs a week.

The motto of the company, ‘sell more, earn more’, appears very attractive and innocuous. However, this motto is fully camouflaged. The company stands on a basic statement that people can be fooled. Thus, the true motto is ‘sell more, earn more’ by fooling people.—Bombay High Court

Police investigations have revealed that in VDSI’s case, initially, the money was paid to the IRs with convincing regularity. But it soon dried up when the money began to roll in and the con game got under way. QNet and VDSI’s product range included wellness products like Biodisks, Chi Pendants as well as holidays packages in resorts.

TIGHT SPOT

That Michael Ferreira is in a tight spot would be an understatement. He is the majority shareholder (80 percent) in VDSI and should have known what was going on. His statement in defense was what he told the media a few days ago after he was issued summons by the Economic Offences Wing of the Mumbai police in December 2013. Ferreira had then said: “A good friend of mine from Hong Kong told me about the online company (which) he wanted to open—a franchise complying with local laws in India for the purpose of goods and services. They asked me to be a shareholder and I said yes. I saw it as a great business opportunity. I have no operational responsibility for setting up the company and I am just a shareholder.”

This is an explanation that his friends and well-wishers like to reiterate. That he did not know. But this does not quite square up with the observations about QNet and VDSI made by Justice Mridula Bhatkar of the Bombay High Court in a May 21, 2016, order. It had rejected the anticipatory bail application of Ferreira and his associates, including Magaral Veervalli Balaji, director of VDSI and Malcolm Nozer Desai, who is a 20 percent stakeholder in Vihaan and Srinivasa Rao Vanka, a director in the company.

To quote the High Court order: “The motto of the company, ‘sell more, earn more’, appears very attractive and innocuous. However, this motto is fully camouflaged. The company stands on a basic statement that people can be fooled. Thus, the true motto is ‘sell more, earn more’ by fooling people. In fact it is a chain where a person is fooled and then he is trained to fool others to earn money. For that purpose, workshops are conducted where study and business material is provided with a jugglery of words, promises and dreams. Thus, the deceit and fraud is camouflaged under the name of e-marketing and business”. The appeal against the High Court ruling in the apex court was turned down and the former billiard champion and others had to surrender to the police.

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According to police sources, though he owns 80 percent share in VDSI, Ferreira’s actual financial exposure may not be much despite the company’s turnover of thousands of crores. This is because typically in pyramid structure ponzi schemes such as this one, much of the money is bankrolled by the IRs themselves. Apparently, product orders are only placed once the money comes in and in QNet’s case, it was all imported. And many of the holiday packages on offer did not materialize.

Ferreira’s major investment was his name and standing. People like him are often roped in to give credibility to such organized swindles. But the big question is whether the former billiard champion was tricked into joining the venture or he knew all along what was happening. And how well was he compensated for his association?

LONG ASSOCIATION

The fact is Ferreira cannot get away by saying his involvement was peripheral. The investigators have submitted to the court that he was linked to the promoters of VDSI from 2006 when a company called Quest Net was formed. It was involved in the sale of wellness products, gold coins and holiday packages through multi-level marketing schemes but was wound up in 2012 after complaints surfaced from the public. It was then re-launched as QNet with three companies under its umbrella—one of them was VDSI. This group continued with the business of the earlier company that had been wound up.

The Mumbai police’s Economic Offences Wing registered a case against QNet on August 16, 2013, when many IRs who invested in the company complained that they were being short-changed. Investigations revealed that 90,000 members had lost Rs 425 crore. “However, till today during the investigation, it was found that number of members who are deceived are around 5 lakh and misappropriation and money laundering was about more than Rs 1000 crore,” the High Court order notes quoting police reports.

The challenge before Ferreira is to prove in court that he was ignorant of the activities of a company in which he was a majority shareholder. This might be a difficult task given the strictures that have come from the Bombay High Court even while dismissing the anticipatory bail petition.

To quote Justice Bhatkar’s order: “On considering parameters of Section 438 of the Code of Criminal Procedure, I am not inclined to protect the accused… It is necessary for the prosecution to take injunctive steps against this business activity, which is prima facie, illegal. Though by stopping this business, a large group of people may get financially affected, however, it will save larger groups of people from becoming prey of this activity.”

It’s time for Ferreira to consider his next move. He may find it hard to feign ignorance given the numerous police complaints against the company since 2013 reported in the media. And if the former billiard champion knew, why didn’t he cry foul and bail out from the company all this time? Ferreira certainly has a lot to account for.

Lead Pictures: (L-R) Once feted for his achievements, Michael Ferreira has been arrested for fraud. A TV grab shows him being taken into custody

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