Ponzi Storm Strikes Bengal

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As if the Saradha scam was not enough, the state is now saddled with the Rose Valley scam. At stake is a whopping `60,000 crore and one crore hapless investors

By Shantanu Guha Ray


Around the time when counting was about to start for the crucial 2011 assembly elections in West Bengal—where the Left Front had ruled for 34 long years— Arkoporbo Saha, an anchor of Bengali news channel, Newstime, got into a peculiar logjam while interviewing Gautam Deb, a top Marxist minister. The Left Front, it needs to be mentioned, was still in power.

As Deb hated a pre-poll analysis shown by Saha and disliked some of the tough questions posed, there was palpable tension in the studio. The poll had made it very clear that the Trinamool Congress (TMC), powered by Mamata Banerjee—then considered by the Left Front as a troublesome leader who had to be listened to but ignored—could sweep the polls, dislodging the three-decade-long rule of the Red Brigade.

Still Deb, a seasoned politician, kept his cool for the initial part of the interview. Eventually, he got annoyed, almost threatening to take off the mike attached to his shirt and walk out of the show.

SHAMELESS PLEADING

Saha, realizing the Left was still in power and a poll may go horribly wrong—evident during the NDA’s India Shining campaign—now tried to make amends. He first apologized on air, and then virtually went down on his knees, pleading—hands folded—to Deb that his government should not do anything destructive to the channel. “Sir, there are many who earn and live off this channel and its parent company (Rose Valley Group). Please think about them, do not leave the set, we will immediately pull off the opinion poll,” he said. Probably Saha knew that Deb was aware of what the parent company of the news channel did behind the façade of news, real estate, entertainment and financial services business.

Kolkata: Rose Valley staff members stage a demonstration to press for release of Rose Valley Group chairman Gautam Kundu - who was arrested by the ED (Enforcement Directorate) in connection with a chit fund scam -  in Kolkata, on March 30, 2015. (Photo: Kuntal Chakrabarty/IANS)

Rose Valley staff members demonstrating for Kundu’s release

After all, Tripura’s Leftist chief minister Manik Sarkar had been—in a total break from all parliamentary norms—endorsing Rose Valley since 2008, right under the nose of Securities and Exchange Board of India (SEBI). The Left’s bond with Rose Valley was more solid and enduring than the iron bars of the Howrah Bridge.

In the studio, the minister, now happy at the anchor’s total submission, regained his composure and waxed eloquent about why he thought such polls were “total bunkum”.

The results proved otherwise and the TMC swept into power. Mamata, once sworn in, pushed her men to replace the top brass of the channel and took control with her “favorite journalists”. Overnight, the Rose Valley Group shifted its allegiance from the Red Brigade to the Blue and White one (TMC’s favorite color).

LARGE NETWORK

But in one shot, the studio show proved how Left Front leaders and those who enjoyed their patronage, reaped the benefits of the ponzi company, whose operations were almost six times that of the Saradha Group that is now financially bankrupt.

Having cast its wide net across Bengal, Tripura, Assam, Odisha, Jharkhand and Maharashtra, among others, the company raised close to `60,000 crore.

“The Rose Valley case proves that ponzi schemes were in operation in Bengal, rather eastern India, for more than three decades. The Left Front actively encouraged the growth of such companies,” West Bengal BJP president Rahul Sinha said in a telephonic interview from Kolkata.

Rose Valley’s operations were almost six times that of the Saradha Group. Having cast its net across Bengal, Tripura, Assam, Odisha, Jharkhand and Maharashtra, among others, the company raised close to `60,000 crore.

The BJP, too, came under attack after Facebook and Twitter carried photographs of Asansol MP and current minister of state Babul Supriyo sharing stage with Rose Valley chairman Gautam Kundu, currently languishing in jail.

“Supriyo was a guest at a function organized by Kundu, nothing more. Even the Enforcement Directorate (ED) has not found a single paper on Supriyo taking any financial help from the tainted group,” added Sinha.

Agents of Rose Valley promised gullible villagers the moon, offering a return of 300 percent within two to three years on all amounts invested in the company.

SMART OPERATOR

But Kundu, who was among six people named in the chargesheet filed by the ED in the Rose Valley ponzi scam in April 2015, proved to be smarter than Saradha head Sudipta Sen, also in jail with his partner-colleagues.

Ever since he was arrested, Kundu encouraged his office to push thousands of workers of Rose Valley to jam streets in Kolkata and other parts of the state, virtually paralyzing business. Holding placards and banners, the workers screamed slogans and demanded Kundu’s release, calling his arrest “a political vendetta” by the BJP-led ruling NDA at the center. “We are suffering, the company is suffering, work has come to a standstill,” a protester was quoted by The Times of India. The ED has already attached 2,631 Rose Valley bank accounts with `295 crore under the Prevention of Money Laundering Act (PMLA).

The modus operandi of Rose Valley, among 53 ponzi companies being probed by the ED and other organizations on instructions from SEBI, was the same as that of Saradha, except that the scale was bigger.

PROMISING THE MOON

Agents of Rose Valley promised gullible villagers—mostly farmers, small traders, fishermen, and poultry owners—the moon, offering a return of 300 percent within two to three years on all amounts invested in the company. The first investors were paid on time, a ploy to rope in more. Agents of Rose Valley went where the banks didn’t, receiving instant commissions of 16 to 33 percent to get rural depositors to invest in fixed-deposit funds. In some places, Rose Valley hired wives of local police officers as representatives to prevent investors from raising an alarm against such dubious investment programs.

The villagers eventually learnt to their horror that they were duped of their life savings and that the schemes were nothing but a massive ponzi scam.

In cash-starved West Bengal, no one from the TMC is offering any words of hope to the investors. There are enough reasons for that. TMC MP Tapas Pal has already confessed that he was on the payrolls of Rose Valley as group director, brand communications, and was paid `1,00,000 monthly. Pal, whose apartment was among the many premises raided by the CBI in Bengal, left Rose Valley in six months time.

As many as 22 people have committed suicide over the scam, including agents of the operators of the ponzi scheme. The West Bengal Association of Small Savings Development Officers has even warned of riots in the days to come.

“Investors were lured by advertising campaigns shot with Bollywood stars. The villagers were fooled but it would be wrong to blame the TMC for everything. It is a malaise that existed for long,” remarked Nirbed Ray, a seasoned politician in Bengal and a member of TMC.

KING OF FRAUDS

SEBI, in a note in early January 2015, said repeated scams had resulted in $11.5 billion losses and affected seven million people in West Bengal alone, one of the biggest financial fraud cases in India. There were chances, the SEBI said, of similar scams in Odisha and Jharkhand too.

The Serious Fraud Investigation Office (SFIO) said the ponzi schemes flourished in West Bengal, Odisha and Jharkhand because rural residents here don’t have easy access to banks. “What is interesting is that almost all companies work in Bengal on similar lines. They raise cash, float media companies, bribe politicians, make films, open resorts and fund soccer clubs and entertainment soirees. And behind the veil, use the hawala route to transfer cash to tax havens abroad,” says Deepak Ghosh, a former principal secretary of West Bengal whose intervention forced the closure of two ponzi companies 14 years ago.

SEBI has confessional statements of several operators of the schemes saying they acquired diamond mines in Africa, villas in Jordan and Dubai and partnered oil traders across the UAE.

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Saradha scam kingpin Sudipta Sen

“Rose Valley was the most arrogant because it was patronized by the Left Front. It continued to raise cash even after being banned by the SEBI. Now, who will ensure that the ban stays, the state government, right? But when you have the state government eating out of Kundu’s hands, do you believe Rose Valley will be asked to shut shop?” asked Ghosh. He definitely has a point.

MOVIE LINKS

He said like the Saradha scam, officials of Rose Valley also promoted films, film stars and directors. For example, veteran filmmaker Gautam Ghosh, whose movie Paar had once won a National Award, took cash from Rose Valley to make Moner Manush, based on the life of Lalan Fakir, a popular country singer in Bengal. Another big movie, Jatiswar, featuring Prasenjit Chatterji, Bengal’s reigning star, was funded by Rose Valley. “Poor villagers get sucked in by such news. They feel the group is big, else how will they invest in such big buck movies. So, they readily open up their coffers,” added Ghosh.

The modus operandi of Rose Valley, among 53 ponzi companies being probed by the ED and other organizations, was the same as that of Saradha, but the scale was much bigger.

Consider the case of Bollywood filmstar Shah Rukh Khan, who used to endorse Rose Valley for its investment in Kolkata Knight Riders (KKR), a team in the Indian Premier League. He has already indicated to the ED that he’s keen to return a portion of the `10 crore paid to his company, Red Chillies, by Rose Valley.

But will other monies return? The chances are less.

India’s financial regulator admits there is no way out because SEBI itself lacks the manpower to monitor such illegal collections across rural India. “SEBI is dependent on state governments and needs ground-level support,” SEBI chairman UK Sinha informed a business conference in Delhi late last year.

Till an answer is found, the cash will remain missing, so will be the hopes of recovery of one crore investors.

That is not good news.

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