In what could be called the Mother of all Ponzi Schemes, poor investors lost billions of their hard-earned life’s savings through fraudulent companies like Saradha Chit Funds and Rose Valley schemes, while gullible investors were left high and dry, while the largest benefactors of the scam were Mamata and her acolytes. Now by blocking CBI investigation, Mamata is proving these allegations to be true.
One of the biggest conundrums of this Nation is “How does an investigation into a Ponzi scheme result in politicians screaming “Save the Constitution”?” The answer to this becomes clear only when it is unravelled that the politicians who are interested in ‘Save the Constitution’ are those who are the perpetrators of the Ponzi scheme. From those managing the fraud, to those managing the news channels, from those managing the money laundering to those defending the frauds, from those paying off the politicians & marketeers to those receiving the bribes, from those investigating the fraud to those hushing it up for them – all are interested in saving themselves. Not the Nation.
Bharat has had a history of frauds and scams committed in the name of awarding of contracts, lobbying, agency commission and many other ways. But the Saradha Scam is the rock bottom, because it robbed poor Bengalis of their hard earned life’s “savings” and those who did it did not even burp after gobbling up the money.
West Bengal Chief Minister Mamata Banerjee at Dharamtala in Kolkata where she started a sit-in demonstration on Feb 3, 2019
The How & Why of the Scam
To understand the success of the Saradha Ponzi scheme, it is very necessary to first understand why and how a scheme of such a huge magnitude even succeeded in the first place. For those of you who do not know, the Saradha Scam affected about 25 lakh gullible people robbing them of over Rs 20,000 crore. Most of the people who invested in this Ponzi scheme were poor or the middle class people. A Ponzi scheme is an investment fraud where clients are promised huge profit at little or no risk. Such companies attract new clients to invest in their company and this money is used to pay original investors their returns. Ponzi schemes rely on a constant flow of new funds because when this flow runs out, the scheme falls apart.
A file picture shows the women protesters are getting arrested during their agitation against the multi-crore Saradha scam in Kolkata
Traditionally, the rural areas of West Bengal had low access to banking facilities. Because of this, most people invest in Chit Funds or in Post Offices schemes. But the interest from Post Office deposit schemes is very less as compared to the returns from Chit Funds. Even though the people of West Bengal have been routinely cheated via Chit Funds, it still remains a favourite investment opportunity for those from the unorganized sector. West Bengal is one of the States where workers in the unorganised sector beats the national average. It comes as no surprise that by 2013, 80% of multi-level marketing (MLM) and finance schemes against which complaints have been received were based in West Bengal. An interesting result of investment in Chit funds and fraudulent companies is that over the years, an estimated sum of Rs 20,000 crore has been diverted from organised, Government-promoted Small Savings funds (like bank deposits or post office savings schemes).
Left party supporters take part in a rally in Kolkata to protest against West Bengal Government over Saradha chit fund scam (file photo)
This results in a reduced amount in bodies from which the State Government can borrow for funding various projects. Imagine the double-whammy on the common man. On the one hand, he is being taken for ride by fraudulent companies and losing his hard earned life’s savings. On the other hand, he is being shortchanged for lack of banking facilities which the State Government has to provide. Instead of educating the masses and encouraging them to save via safe banking, the Government of West Bengal favoured scrupulous Chit funds and other fraudulent companies. This was true when CPI(M) ruled the State. Today, TMC under Mamata Banerjee, used this route to fund her party ambition. For example, the net collection from small savings in West Bengal declined from a high of Rs 8,985 crore in 2009-10 to - Rs 987.22 crores in 2011-12 (this means that Rs 987.22 crores more was withdrawn than what was deposited)????. The Saradha Scam has erroneously been called a “Chit Fund” Scam, but it was not a Chit Fund, mainly because they started off by collecting money in the form of secured debentures and redeemable bonds. This was one of the best things to happen, because if it had not been so, the Saradha Group would have been investigated by the State Government under the Chit Fund Act, instead of the Securities and Exchange Board of India (SEBI), the Enforcement Directorate (ED) and the CBI. If this had happened, the results would have been no different to what happened during the Special Investigation Team (SIT) investigations or during the Justice Shyamal Sen Commission. In both these cases, justice was only partially served.
Congress activists during an agitation demanding CBI enquiry into the chit fund scam in Kolkata in 2013
How was it Done
In the 1st decade of the 21st century, the real estate sector boomed all over Bharat. A lot of this boom was caused by the parking of black money and illicit funds. Saradha Group under Sudipto Sen, started their business in 2006 via land development projects in South Kolkata. Reportedly Sudipto Sen in his earlier avatar was Shankaraditya Sen, a Naxalite, who had gone to jail in the 70s. In jail Sudipto Sen made friends with other Naxalites, criminals and mid-rung politicians. When he came out of jail, he used his connections and soon became a land broker and loan shark. Initially Saradha Group employed agents from the rural areas and gave them commission ranging from 25 – 40%, helping them build an agent pyramid. By 2009, they had the SEBI on their trail and they evaded arrest by building a complex web of 200 companies with cross-shareholdings in all the companies. SEBI warned the State Government of West Bengal about Saradha Group's chit fund activities in 2011, but no action was taken. By this time, Saradha group had started taking money via other activities like tourism packages, timeshare vacation packages, infrastructure finance and more. The actual investments from funds collected were not clear to the investors. They also started dealing in shares. Soon, the Saradha Group started money laundering and hawala rackets, sending monies to Dubai, Singapore and South Africa. Also, a substantial amount was reportedly sent to Bangladesh to fund terror activities. With money moving out of Bharat, by April 2013, the company collapsed.
- In an interview to an online portal, Kunal Ghosh claimed that at a meeting with Mamata Banerjee, (Sudipta) Sen had assured her: “Didi, I am setting up my media houses in such a way that it can help you become the PM)”. he also said that If anyone has benefited the most from the Saradha media, it is Mamata Banerjee
- Didi’s war cry “Save the Country” should be renamed to read “Save the Country from Mamata and her Cronies”
The TMC Involvement
It started with many of the local agents being workers or supporters of the ruling Trinamool Congress (TMC) and it was alluded that the entire operation had the sanction and support of the State Government. Some of these agents were powerful local lords and they also enlisted the friendship and support of the local police. Saradha Group started putting its full financial might and material support behind the TMC before the 2011 assembly elections and they became the main financier for the TMC at all levels, giving money directly and indirectly to its leaders and workers, including the reported purchase of the paintings made by Mamata Banerjee for Rs.1.86 crore. Clench Foundation, a Saradha-owned NGO, operating out of local TMC offices – was reportedly a front to supply illicit funds to local TMC leaders. Saradha Group bought a loss-making cement company, Landmark Cement, which was owned by the TMC textiles minister Shyamapada Mukherjee. Reports of use of Saradha funds for private hospital bills of TMC leaders, for ambulances, a fleet of motorcycles for the police, all show how Saradha funds were used not for legitimate investments, but for staying in the good books of the ruling political party and in the limelight. Agents of Saradha were instructed by Sudipta Sen in the 2011 Assembly Elections to mobilise votes for the TMC. TMC leaders and members became officials and representatives of Saradha and Saradha employees held top positions in the TMC. At one time, out of 11 TMC members of the Rajya Sabha, at least 6 were directly linked to Saradha or the chit fund business. Others included MP Kunal Ghosh, Srinjoy Bose, shipping and media magnate, owner of the newspaper Sangbad Pratidin and also editor of the TMC’s mouthpiece Jago Bangla , Mithun Chakraborty (brand ambassador of Saradha), Ahmad Hassan Imran, editor of the Bengali daily Kalam, targeted to a Muslim readership and mouthpiece of the TMC (he was reportedly involved in routing money via hawala to Bangladeshi terrorists), TMC Lok Sabha MP and film actress Shatabdi Roy (brand ambassador of Saradha), TMC ex-VicePresident and ex-DG of police Rajat Majumdar (he was in charge of security operations of Saradha), the then transport minister Madan Mitra (President of the Saradha employee’s association), to name some of them. In fact, Mamata Banerjee ordered that only newspapers published by Saradha’s media houses would be kept by government libraries in West Bengal.
The Congress Connection
Sudipto Sen claimed that he paid Rs 25 crore to former Congress MP from Assam and Central Government Cabinet Minister Matang Sinh and his family members. The CBI has also alleged that Nalini Chidambaram (wife of Congress leader P. Chidambaram) had entered into criminal conspiracy with Sudipto Sen, after they met through Manoranjana Sinh. Apparently, she was paid Rs 1.4 crore as legal fees, which the CBI alleges that it was a payment (bribe) for her role in managing probes by various organisations, such as the SEBI and the registrar of companies.
The paintings of Mamata Banerjee were sold in around Rs 9 crore. Recently, the CBI sent a notice to the TMC, raising questions on the sale of the paintings and the party’s financial details between 2010 and 2014. It is said that one of her masterpieces was sold for Rs 1.8 crore, and the plucky buyer was none other than Sudipto Sen, chairman of the Saradha Group, who has been in police custody since April 2013 for his central role in the Saradha scam.
Investors Left High and Dry More than 17 lakh poor people from the States of West Bengal, Assam, Odisha, Jharkhand & Tripura were affected by the Saradha Scam. Many were driven to suicide, including former Assam DGP Shankar Barua, who was a suspect in the case. A SIT was formed by the West Bengal Government to investigate & punish the guilty. Chief Minister Mamata Banerjee was reported to have said, "ja gechhey ta gechhey" (whatever has gone has gone) and in April 2013, she announced a controversial Rs. 500 crore relief fund for the low income depositors of the Saradha Group. Justice Shyamal Sen Commission was formed and 17.4 lakh depositors filed claims with the Commission, of which 83% invested Rs 10,000 or less. The Commission recommended that West Bengal State Government sell the assets of Saradha Group and proportionally distribute the returns to defrauded investors. In November 2013, Kunal Ghosh was arrested by SIT after he posted a list of 12 names (including CM Mamata Banerjee) on his Facebook page. By April 2014, the Commission had refunded only 4,00,000 depositors who had invested less than Rs 10,000. By then the SIT had also filed 288 chargesheets. But the other investors were left in the lurch and are still awaiting justice.
Why Mamata Banerjee is Angry
On April 6, 2013, Sudipto Sen wrote an 18-page confessional letter to the CBI, in which he admitted that he had paid large sums of money to several politicians. He also stated that TMC leader Kunal Ghosh had forced him to enter into loss-making media ventures and blackmailed him into selling one of his television channels at below market price.
Kunal Ghosh claimed that “If anyone has benefited the most from the Saradha media, it is Mamata Banerjee”. He also wanted her to be questioned by the CBI. In an interview to an online portal, Kunal Ghosh claimed that at a meeting with Mamata Banerjee, (Sudipta) Sen had assured her: “Didi, apni CM theke PM hoben, ami media house ke seibhabei sajachchhi (Didi, I am setting up my media houses in such a way that it can help you become the PM).”
Madan Mitra, one of Mamata’s closest aides, was summoned by the CBI several times but avoided it under the garb of ‘bouts of illnesses’. Finally, he ran out of excuses and was arrested by the CBI in 2015. He too has reportedly given out the names of several TMC top brass. At that time too, Mamata Banerjee had carried out a protest against the CBI.
Rajeev Kumar who was heading the SIT and is currently the Police Commissioner of Kolkata, is reported to have actually shielded the Saradha Group & Rose Valley Scam accused. He is accused by the CBI of subverting the investigation process. The affidavit filed by the CBI also alleged that crucial evidence like laptops, mobile phones were "handed over" to the main accused in the Saradha case by the investigating officer, ANI reported. The officer was reportedly under the supervision of Kumar. Shockingly, the CBI also said that several "incriminating materials" and correspondence materials which were evidence against "senior police officials" and "senior politicians", may have been destroyed or doctored.
The CBI landed up in Kolkata to investigate the Police Commissioner. Immediately, an angry Mamata Banerjee felt the urgent need to “Save the Constitution” and “Save the Country”.
What Happened on February 3
A CBI team reached Kolkata police commissioner Rajeev Kumar’s house to question (not arrest) him over the Saradha scam. In retaliation, Kolkata Police also sent its teams to the CBI offices in the the city and the residence of CBI’s West Bengal unit chief Pankaj Srivastava. They detained 5 CBI officers. When the interim CBI Chief M Nageshwar Rao revealed that the CBI team was present because "There is evidence against him (Rajeev Kumar), he has been instrumental in causing destruction of this evidence and obstructing justice. We are investigating these chit fund cases as per the directions of the SC. An SIT has been constituted by the WB govt prior to SC's direction under the chairmanship of Rajeev Kumar, who is currently the Kolkata police commissioner. They have taken charge of all the evidence, seized all the documents. They have not been cooperating with us in handing over all the documents and a lot of evidence has been destroyed or caused to disappear", immediately Mamata Banerjee along with Rajeev Kumar sat on a Dharna to protest against “BJP wanting to destroy the Federal Structure” of State Governments. Many other Opposition leaders lent their support to Mamata Banerjee – this included Rahul Gandhi (INC), Raj Thackeray (MNS), Chandrababu Naidu, Kanimozhi, Stalin (AIADMK), Aravind Kejriwal (AAP), Tejaswi Yadav (RJD), Akhilesh Yadav (SP) among others. Notable was the fact that most of these leaders/parties themselves were embroiled in some scam or the other during the last UPA rule. Also notable was the fact that Telangana CM KCR did not offer any support, maybe because he has also tried to cobble together a united opposition projecting himself as Prime Ministerial candidate in the past.
Though Rahul Gandhi did offer support on Twitter, he refrained from attending the dharna when he was advised by his local party members about their opposition to TMC and their role in the Saradha Scam. It is quite possible that the Congress also felt threatened by the ease with which Mamata Banerjee was able to stitch together support from the rest of the Opposition parties using the time-tested planks of the Congress – “Save the Constitution” & “Save the Country”. This probably also made them acutely aware of the fact that it may not be easy to project Rahul Gandhi as the PM candidate of the entire Opposition, in case the need for it arose.
The Supreme Court passed an order that Kolkata Police Commissioner Rajeev Kumar cannot be arrested but he has to appear before the CBI in Shillong and make available all evidence and cooperate with investigations into chit fund scams in Bengal. Mamata Banerjee put up a brave front calling it a “moral victory”.
Some Positive developments after the Saradha & the Rose Valley Chit Fund Scams Financial inclusion via Government or Semi-Government institutions was one of the main reasons why the unorganized sector depended on Chit funds to invest their funds or to borrow from. The opening of Jan Dhan accounts by the Modi Government helped many to come into the fold of organized banking. Added to this, was the linking of the Aadhar to the bank accounts to avail of subsidy by the Government. This has resulted in the rural folks of Eastern Bharat too being covered by the banking institutions.
West Bengal Government provided space to banks in order to set up new branches in Gram Panchayat offices in villages, with the view to promoting financial inclusion. State Finance & Industries Minister, Amit Mitra said that many banks had come forward to accepting the proposal and an estimated 700 branches were likely to come up in such offices.
The North Eastern States of Assam, Manipur and Tripura too were affected badly by the scam. Rashtriya Gramin Vikas Nidhi (North East) Microfinance Limited got Reserve Bank of India’s Small Finance Bank license on March 31, 2017 mandating it to carry out banking services in remote and “unbanked” areas of India's eight Northeastern states, as well as in West Bengal and registered a Public Limited Company by the name ‘North East Small Finance Bank Ltd’.
Rupali Kalita, MD & CEO NESFB said, “We have robust expansion plan. We are starting with 28 branches and will soon add another 80 branches.” North East Small Finance Bank Ltd which has a net worth of Rs 300 crore is supported by infusion of funds from domestic and overseas investors.
While the CBI will carry on its investigations, one fact cannot be ignored and that it is that political parties that do not mind using illicit funds to gain power. Secondly, there is no central mechanism yet to ensure that the common man who has been defrauded, gets back at least a share of his investments. Big banks manage to get back at least some portion of their bad debts via sale of assets, but small investors have no hope of getting back their savings if they opt to park their savings in NBFCs (which fail in the future). Both of the above are detrimental to any Nation and more so, to democracy. Didi’s war cry “Save the Country” should renamed to read “Save the Country from Mamata and her Cronies”.