Saradha net wider, tighter

On April 20, 2013, Bhola woke up to the screams of his mother who had set herself on fire in a small thatched toilet at their mudhouse in a village 40 km off Kolkata. A year and a half later, Bhola is still trying to get his money back. Urmila is listed among 82 investors who have committed suicide.

This week, the scandal claimed another victim in Shankar Baruah, a former director general of police in Assam, who shot himself dead. He was about to be interrogated by the CBI in connection with Saradha’s operations in Assam; he was being probed for allegedly having been paid to “protect” the group of companies.

Victim and subject of the probe, the widow and the policeman represented two ends of a scandal that has touched countless people one way or another in Bengal and neighbouring states. An ongoing CBI probe has unearthed the spread of the company to Assam and similar chit fund cases in Orissa, and also taken investigators to Bihar and Jharkhand.

Across borders

The Bengal government had set up a special investigation team of the police and it ended up unearthing apparent links between the company and ministers, MPs, bureaucrats, and celebrities close to the ruling Trinamool Congress. Several PILs were filed demanding a CBI inquiry, the government opposed it, and the matter went to the Supreme Court which handed the probe to the CBI on May 9. What has followed is the interrogation of a series of high-profile personalities, some of whom have been arrested. The CBI is probing the political connections while the Enforcement Directorate is following the money trail.

The CBI has arrested former DG of Bengal Armed Police Rajat Majumdar, East Bengal Club official Debabrata Sarkar, and businessman Sandhir Agarwal. In Assam, it has arrested Assamese filmmaker and singer Sadananda Gogoi, all of them for alleged dealings with Saradha CEO Sudipta Sen. Also in Assam, it has questioned Assam politicians Matang Sinh, Manoranjana Singh, Himanta Biswa Sarma and Anjan Dutta.

In Orissa, the Saradha probe has led the CBI to other chit fund rackets. It summoned advocate general Ashok Mohanty for questioning, leading to his resignation. It has made a number of arrests in connection to chit funds of the Artha Tatwa group (see box); besides questioning BJD MLA Prabhat Tripathi and BJP leader Sanjay Dasburma.

In Bengal, the CBI has called TMC MP Suvendu Adhikari and CPM leader Rabin Deb for questioning but they haven’t turned up. It has questioned TMC MPs Mithun Chakraborty, Srinjoy Bose, Arpita Ghosh, and Ahmed Hassan Imran. Another MP, Kunal Ghosh, who was later suspended by the party, was arrested last year by the SIT formed by the state government. And the Enforcement Directorate, while chasing the money trail, has questioned filmmaker Aparna Sen, senior officials of football clubs, and Textile Minister Shyamapada Mukheerjee for his involvement in a deal with Sudipta Sen.

The CBI has also raided the home of Bapi Karim, one of the closest associates of Transport Minister Madan Mitra. Sources close to his interrogation said Karim has spoken of links between Mitra and Sudipto Sen. Mitra said, “Didi wants the culprits to be punished. But we can see that the investigation has taken a wrong shape.”

The saradha network

Saradha, which has since declared itself bankrupt, was largely agent-based. It hired agents on a 40-per-cent commission and gave them incentives such as scooters, motorbikes and electronic gadgets. The targeted investors were small traders, farmers, housewives, fish vendors, women working as domestic helps, auto-rickshaw drivers and others with similar incomes. The agents would sell the schemes as “LIC policies” and allow them to collect the premiums in small daily amounts.

They gave their schemes a sense of credibility with pictures of Chief Minister Mamata Banerjee sharing the stage with Sudipta Sen to inaugurate a project, or Madan Mitra lauding Sen’s business efforts. “We used to tell them the government is with the company,” says Manas Chakraborty, an agent at Baruipur in South 24-Parganas.

Saradha started with an office on Shakespeare Sarani in Kolkata. In a year, Sen floated 160 companies with names such as Saradha Realty Pvt Ltd; Saradha Tours and Travels; Saradha Exports; Saradha Agro; Saradha Printing and Publication Pvt Ltd; Saradha Construction; Saradha Multipurpose Himghar Pvt Ltd; Saradha Livestock Breeding Pvt Ltd; Bhasank Foods Pvt Ltd; Saradha Ad Agency Pvt Ltd; Saradha Properties Pvt Ltd; Saradha Biogas Production Pvt Ltd; Global Automobiles. He set up at least 450 offices in five states and recruited more than two lakh agents.

The schemes he floated in 2008 were approaching maturity in 2013 when he sensed a crash and fled Kolkata after writing an 18-page letter to the CBI, naming several politicians, businessmen, journalists and his own employees as responsible for his downfall.

The money the schemes made did touch a large number of people over those years. Sen donated to clubs for Durga Puja, hosted dinners in five-star hotels during film festivals, and hired journalists at twice the salaries other media houses were paying. The ED is questioning executives of East Bengal, Mohun Bagan and Kalighat Club over alleged payments by Sen. He is said to have sponsored Lionel Messi in the 2011 friendly between Argentina and Venezuela at Salt Lake stadium, and hosted “Banga Sammelan”, a cultural programme for NRIs in Las Vegas.

Anindya Sen, an economist and senior professor at IIM-Calcutta, said it is a perfect example of “crony capitalism” and “trading without capital”. “If there is no industry or no manufacturing unit, people tend to earn money through muscle-flexing and other easy ways. Offshoots of crony capitalism are real estate, syndicates, extortion and ponzi schemes,” he said.

Saradha and hundreds of such companies flourished in Bengal in the six years since 2008. According to the sources in the industry department, those six years saw the closure of 12 jute mills and four industrial units while six industries including four of steel and one of power failed to take off.

The victims

The Bengal government last year set up a commission of inquiry under Justice Shyamal Sen, which invited complaints from investors. Nearly 17 lakh people queued up to register.

In April 2013, Mamata announced a Rs-500-crore relief fund and released part of it; the commission is waiting for more funds. The last lot of 1.3 lakh cheques was issued two month ago, on June 13. In the one year since it was set up, the commission has received 12.5 lakh applications and has issued cheques for Rs 251.22 crore to 4.98 lakh investors. According to sources in the commission, the government has so far released Rs 286.5 crore, nearly all of which has been exhausted, while the commission also has Rs 2.48 crore obtained from Sudipta Sen’s debtors.

A group of investors has started a “Chit Fund Sufferers Unity Forum” headed by Ashim Chatterjee, a former Naxalite leader. “We have listed 82 people who have committed suicide,” he said.

Politics

The recent crackdown has left the TMC indignant. Mamata has termed the investigation politically motivated, and alleged it is trying to shield the “actual culprits”. Minister Subrata Mukherjee agreed, “This politically motivated investigation by the CBI is aimed at stalling the popular government’s development initiatives.” And TMC general secretary Mukul Roy said, “The CBI is a political organisation. The current PM was once grilled for 19 hours by the CBI; even the current BJP president was in police custody.”

A TMC minister said, “The company started when the CPM was in power. Why is former finance minister Asim Dasgupta not being interrogated?” Dasgupta refused to comment, saying his party has not authorised him to. He had formed an economic offences wing under IPS official Narayan Ghosh, who submitted a report against Saradha and such companies to the SEBI in 2010. The government took no action, saying it had not received any complaint from investors.

Amid the charges of bias, a CBI officer described the wide political spectrum covered. “We have interrogated the Congress’s Matang Sinh and his former wife Manoranjana who has joined the BJP now. We have interrogated a BJP MLA in Orissa and the president of the Youth Congress too. Former CPM MLA Deben Biswas has been summoned in Bengal. We have conducted raids on the residences of BJD MPs and MLA s in Orissa.”

And an ED official said, “We have interrogated five MPs and a cabinet minister along with several leaders of the ruling party. Nobody was called without documentary evidence, there was no political colour.”

In the last three months, the CBI has conducted raids on 64 locations in Bengal, 15 in Assam and 89 in Orissa.

The regulators

In 2011-12, SEBI alerted the state government about five companies in which, for deposits about Rs 7,000 crore, the investors’ interests were not protected. The RBI,meanwhile, estimates the size of deposits collected by several hundred chit fund companies at around Rs 17,000 crore. And the Income Tax Department said almost Rs 70,000 crore has been raised without authorisation by over 800 companies. However, none of these agencies cracked down on those companies. SEBI said it can only take action if the company is running a “collective investment scheme” and RBI said it is responsible only for a vigil on “non-banking finance companies”.

IIM economics professor Anup Sinha said, “Saradha is a result of regulatory failure. There has to be a minimum coordination. Regulatory bodies like SEBI and RBI cannot fight on jurisdiction issues like local police stations.”

As per the court’s orders, senior officials of market regulators too are being probed. ED officials said they found “serious irregularities” in their functioning and have interrogated four: a retired RBI manager of RBI, one of the topmost officials in RoC (Kolkata) and two SEBI officials. Investigators said the officials took bribes; in 2009, 140 companies of the Saradha group were registered with RoC (Kolkata) in four days. And more than 50 of these 140 companies were registered on a Saturday, a holiday.