Saradha Scam

This scam really came into open, in April 2013. This was the scam where local Trinamul Congress (TMC)  politicians/ministers and central minister’s involvement came into picture. This scam was really a very complicated scam and to understand the same media and experts took longer time  and the  promoter confessed to CBI in a letter about the involvement of various politicians of different parties, who were financially benefited and then absconded, later he was arrested. Below are the details of this scam, which are little longer, but to understand this scam, this is the minimum details, you should know.

Saradha Scam

It was a major financial scam, which affected the eastern part of the country. It happened due to collapse of Ponzi( Chit Fund) scheme run by Saradha Group. A Consortium of over 200 privately held companies, who were operating collective investment schemes similar to Chit Funds schemes in Eastern India. The group had collected about Rs 30,000 Crores from 1.7 million small investors before it collapsed in Apr 2013.

Sudipto Sen was Chairman and Managing Director and Ms Debjani Mukherjee was Executive director, these two were key operating persons of the Saradha group. Like all Chit Fund schemes, Saradha group also promised fanciful returns to their investors. The schemes were sold in rural market by agents of the companies, who in return used to get commission varying from 25 to 40% of the deposite amount. The group used nexus of various companies to launder money and evade market regulators. Initially they were issuing secured debentures and redeemable preferential bonds, soon SEBI found out as they have not taken permission from SEBI to issue Bonds & Debentures, because as per Companies act if a company is taking funds from more than 50 persons than SEBI’s permission is required.

SEBI confronted Saradha group in 2009, they changed the modus operandi by opening up to 200 new companies to create  more cross holdings. They also started their operations apart from West Bengal, in other Eastern States like Orrisa, Jharkhand , Bihar , Assam etc. Investors were rarely informed about the schemes under which they are investing.

SEBI warned the State Govt of West Bengal in 2011 about Saradha group’s Chit fund activities. Which again prompted the group to change its strategy. This time they acquired and sold large number of shares of various listed companies and then embezzled the same amount by manipulating the account books. In the same  time they also started  laundering large portion of their funds to UAE, South Africa & Singapore. By 2012, SEBI was able to classify the group’s activities as collective investment schemes rather than chit funds—and demanded that it immediately stop operating its investment schemes until it received permission to operate from SEBI, Saradha Group did not comply with this ruling and continued to operate until its collapse in April 2013.

Saradha group had systematically  built their brand, by associating various celebrities and politicians with their group . They also invested in high visibility sectors such as Bengali Film industry, they recruited famous actress Satabadi Roy, a MP of Trinamool Congress (TMC), and also recruited famoua actor Mithun Chakravorty as their brand ambassadors. They also appointed another TMC MP Kunal Ghosh as CEO of their media groupFor keeping their Corporate image, they donated motorcycles to Kolkata Police. They also persuaded CM Mamta Banerjee to auction her paintings, which they bought for Rs 1.86 Crores. For getting themselves establish in social culture of Bengal they also invested in Foot Ball clubs like Mohan Bagan & East Bengal.

The group had also enjoyed the political patronage from various politicians. Kunal Ghosh TMC MP was working for them for a salary of Rs 15 lakhs per month. Another MP Srinjoy Bose was directly involved with their group’s media operations. Transport Minister Madan Mitra was the leader of their Employees Union. The group also took over a loss making company Landmark Cement, which was co owned by Shyamapada Mukherjee and there were many more political connections. Politicians from outside Bengal were also benifciaries of Saradha group. Sudipto Sen said he paid Rs 25 Crores to Manoranjana Sinh, wife of Central Minister Matang Singh, and Rs 3 crore to her father KN Gupta. There was wide spread saying in the private circles that Sudipto Sen is surviving because of Political Patronage.

In Dec 2012 RBI Governor wrote to West Bengal Govt that they should start criminal proceedings against companies who are not following RBI/SEBI guidelines and are engaging in malpractices. In Jan 2013, it so happened that for the first time Saradha’s group cash inflow was less than cash payouts. On 6^th Apr 2013 Sudipto Sen wrote a long confessional letter to the CBI, where he admitted that he had paid large sums to several politicians. He also admitted that TMC leader Kunal Ghosh had forced him to enter into loss making media business ventures and also blackmailed him to sell one of his TV channel at below par value. Sen fled after posting this letter.   He along with Debjani Mukherjee and Arvind Singh Chauhan were arrested from Sonmarg, Kashmir on 23^rd Apr 2013. On the same day SEBI asked Saradha group to refrain from taking investments in the form of Chain marketing and Forward Contracts, as these two are forms of Chit Fund Investment scheme, and asked them to return all deposits within next three months. Immediately after this state govt set up a fund of Rs 500 Crores, so that small investors could be paid back and they do not become bankrupt. This was just a ploy by Mamta Banerjee’s govt, so that the TMC politicians can be  saved.

In early 2014  SC directed CBI to take over investigations, and immediately after many prominent personalities were arrested for their involvement in this scam, including MPs Kunal Ghosh and Srijoy Bose, Former State Director General of Police Rajat Majumdar, Sports and Transport minister of West Bengal Madan Mitra and Football club Official Debabarta Sarkar.

The financial crash of Saradha group and Sudipto Sen’s letter open up  a Pandora’s box in Political circles. CPM accused TMC of their association with Chit Fund scam. TMC alleged that Union Finance Minister’s wife Nalini Chidambaram was Saradha’s group Lawyer and taken her fees for incorporating the companies of Saradha group, and  they further  stated that she also should be investigated. This scam became a major campaign issue during  General Elections in 2014. Congress and BJP accusing TMC for facilitating and making profit from the scam. BJP’s PM nominee directly accused CM  Mamta Banerjee for taking money from Saradha group via the auctioning of her paintings which were bought by Saradha group for Rs 1.8 crores.

In May 2014, SC transferred all investigations into 44 Chit Fund Companies includind Saradha group to CBI. As per SC order state govt appointed SIT was asked to handover all the papers to CBI, and all the arrested suspects including Sudipto Sen, Debjani Mukherjee and Kunal Ghosh to CBI.As earlier stated Prominent personalities were questioned by CBI including State’s DGP Rajat Majumdar and many more. In Nov 2014 CBI arrested another TMC MP Srinjoy Bose, and in Dec 2014 arrested Transport Minister Madan Mitra on the charges of conspiracy, cheating, misappropriation and getting benefits from Saradha group.

The  CBI is still continuing with the inquiry, and in the mean time in Feb 2014 Sudipto Sen was convicted in a case of failure to deposit Employees PF, and was sentenced for 3 years. He appealed against the verdict and was granted bail in this case.

After this nothing much has been heard about this case in media, friends if any of you have any further details on this matter, my request is to share the same.

Awaiting for your views/comments/feed backs.

Anil Malik

Mumbai, India

18th Sep 2018.