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Ponzi Prince Sen knew Saradha crash was coming, SFIO report reveals

por Dixie Nail (2020-01-20)


Saradha Group Chief Sudipta Sen being produced at court

The Sen song of the Saradha Scam has been unveiled, and it makes for some pretty interesting listening. 

Ponzi Prince and chief architect of the Rs 2,459- crore Saradha scam Sudipta Sen knew well before the whistle finally blew that his game was up. 

The high-profile investigation into the investment scam that continues to rock Bengal's political establishment and snare heavyweights has now revealed that Sen, in his deposition recorded under Section 240 (2) of the Companies Act, 1956 stated that "the returns at higher rates were promised but it is not possible to provide such returns with a business model followed by the companies". 

Corroborating Sen's line of thinking, his accomplice in the defrauding of thousands of investors, Debjani Mukherjee, said in her statement before the Enforcement Directorate: "It was known to Sudipta Sen by April 2013 that the company was doomed. Whenever she asked him (Sen) whether the company would be able to continue to pay the returns to the public, Sen said he knew "how to return the money to the public. The business belongs to him, but it is true, maybe not in April 2013, but someday it will come down crashing."

As much as 93 per cent of the total collections were in cash. No less than Rs 1,983 crore of the Rs 2,459 crore is still outstanding from depositors who put in less than Rs 50,000 each. Of this, Rs 242.62 crore has been misappropriated by Sen, Mukherjee and other directors for their personal benefit. 

The source 

An extremely damaging 516-page Serious Fraud Investigation Office report reveals this and much more. A report by the SFIO - part of the Ministry of Corporate Affairs set-up to investigate white collar crime - provides a comprehensive and overarching account of the way Saradha Group companies deceived and fraudulently induced depositors, by offering an abnormally high 18 per cent return. It also shows how the Sen cookie crumbled. 

Monthly Income Scheme (MIS) deposits, for instance, collected Rs 416.30 crore over 34 months and a paltry Rs 89 crore was paid out as part of the pyramid scheme to investors. 

Saradha Realty India Ltd collected Rs 774.32 crore from 2008-09 to 2012-13. In 2010-11, it collected Rs 397 crore and repaid Rs 175 crore. 

The following year, collections fell significantly to Rs 174 crore, and consequently payments fell drastically to Rs 16 crore; in 2012-13, collection and repayments were reduced to Rs 88 crore and Rs 1.53 lakh respectively. 

Thousands of investors were duped of crores by Saradha Group

These four companies had meagre income or revenue, if any, from their declared business activities as specified in their memorandum of association.

Explaining how the scam was constructed, the SFIO goes onto say that these companies could repay the money only from the fresh collections as they were not generating any significant revenue. 

Paperwork was created to show the funds collected as having been put together for sale / transfer of land / flats / apartments or tour packages, whereas the intention was always to refund the collected amount with interest on maturity only to some of the depositors and never to refund to the vast majority in the absence of any credible mode of generating a surplus - the characteristics of a pyramid scheme.

During the course of his deposition under oath, Sen also revealed that former West Bengal police chief Rajat Majumdar was appointed as a consultant at a salary of Rs 7 lakh per month. 

At Majumdar's insistence, Saradha agreed to become the prime sponsor of the Bishwa Banga Sammelan 2012 held in Las Vegas in the hope of getting business in the US. Close to Rs 4 crore was blown up on this jaunt. 

That Saradha Group CMD Sudipta Sen had predicted his downfall by April 2013 was corroborated by his partner-in-crime Debjani Mukherjee

In a startling revelation, the SFIO points out that Debabrata Sarkar alias Nitu, the de facto secretary of East Bengal Football Club, met Sen and took Rs 5 crore and close to Rs 70 lakh per month (from February 2011 to February 2013) to settle the Securities and Exchange Board of India (SEBI) matter. These payments were mostly in cash and if at all in cheque, then in the name of Revlon Commercials with whom Saradha had no trade dealing whatsoever. 

While Sen in his statement claimed that this continued for four years (Rs 70 lakh per month is Rs 8.4 crore per year, or Rs 33.6 crore in four years), Debjani claims that this process lasted two years.

"I heard from Sudipta that he was taking money for settlement with SEBI and Reserve Bank of India," she said. (A total amount of approximately Rs 16-18 crore has been made available to Sarkar.) 

During Sarkar's questioning, he said that a MoU dated 23.6.2010 was entered into between East Bengal and Saradha for annual sponsorship of the football team at Rs 2 crore per year. 

East Bengal, he argued, received cheques totaling Rs 2 crore from Saradha, but some of them were dishonoured. On the follow-up, Saradha paid the club Rs 1.51 crore during 2010-11. While he denied receiving any payments in favour of Revlon, he stated that the club received Rs 1.96 crore and Rs 0.61 crore during 2011-12 and 2012-13 respectively in the form of donations as sponsorship against logo used on the chest of the jersey.

Investigators also examined Kunal Jhunjhunwala, director of Revlon Commercial, who said that Revlon had 16 transactions with Saradha Group companies for sale of textiles. 

Total quantum of transaction with Saradha was around Rs 2.46 crore, collecting payment in advance through cheques before delivery. 

The SFIO concludes by saying that the role played by this trinity - Debabrata Sarkar, Kunal Jhunjhunwala and Sudipta Sen - should be referred to the Central Bureau of Investigation. 

  Serious Fraud Office stumbles on bank scam 

By SPS Pannu in New Delhi 

Investigations carried out by the Serious Fraud Investigation Office (SFIO) into the Saradha group fraud have thrown up a major bank scam involving public sector Indian Bank as the leader of a consortium that extended loans in excess of Rs 171 crore to a shell company. 

Global Automobiles Ltd (GAL), a firm purportedly engaged in the manufacture of motorcycles and scooters, was acquired by the Saradha group. 

"It appears that the bank officials, including Malay Mukherjee, the then GM of Indian Bank, were in connivance with GAL and its erstwhile directors, including Santanu Ghosh, Samiran Das and Indrajit Chandra, and are prima facie liable for punishment under Section 420 read with Section 120B of the IPC," the SFIO report states. 

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Share The two sections deal with cheating and criminal conspiracy. The State Bank of India (SBI) also figures among the consortium of lenders. 

The SFIO report further recommends that "a reference may be made to the CBI and the Reserve Bank of India to investigate the grant of loans to GAL against non-existent/highly inflated value of assets and the role of bank officials thereof". 

The report has also recommended referring the matter to the Enforcement Directorate. The SFIO team had calculated the net worth of GAL at a paltry Rs 0.41 crore, based on the figures provided in its balance sheet in 2010. 

However, despite the very low net worth, the Saradha group signed an agreement to purchase 100 per cent equity shares of GAL from Ghosh for Rs 20 crore on October 30, 2010. 

Investigations have revealed that GAL had shown stocks to the tune of Rs 125.49 crore to get the loan, but the actual value of these stocks, which included 80-odd motorcycles and some spare parts such as mudguards, could at most be valued at Rs 13.31 crore. 

Various inspection teams from the banks in question had recorded on May 12, 2011, that although the company was supposed to be engaged in the manufacture of motorcycles and scooters "during the course of our inspection, no production activity was taking place". 

A second inspection report dated October 29, 2011, reiterated the observation. 

"However, sammakka sarakka jatara 2020 dates the minutes of a meeting of consortium lenders held on August 12, 2011, reveal that Indian Bank GM Malay Mukherjee, who also headed the Kolkata zonal office, had undertaken a sudden visit to the factory premises of GAL on August 5, 2011, and observed that ‘manufacturing activities were going on and there were about 300 completed bikes'," the SFIO report points out. 

Interestingly, Sudipta admitted to the SFIO team that the accounts of GAL were falsely prepared by Ghosh and Sudeshna Ghosh with their statutory auditors, and this stock was shown in the balance sheet to take working capital loans from banks. However, no physical purchase was made by the two and the same was written off later through profit and loss accounts. 

Sudipta also disclosed that he had already brought this fact to the notice of Excise Department officials when they came for verification. While being interrogated, he further stated that he had tried to get the GAL stocks physically verified but Ghosh did not allow it. 

Another Saradha group official told the SFIO team that when he undertook a physical verification of the stocks at a later date the inventory with GAL could be valued at a mere Rs 1 crore.

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