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IN A nationwide raid, the Enforcement Directorate (ED) has unearthed a maze of over 1,000 shell companies, including those reportedly linked to NCP leader Chhagan Bhujbal, YSR Congress leader Y S Jaganmohan Reddy, former BSP leader Babu Singh Kushwaha and former Uttar Pradesh chief engineer Yadav Singh among others. “The raids have been conducted based on the money trail found in various cases of Foreign Exchange Management Act (FEMA) and Prevention of Money Laundering Act (PMLA) being investigated by the agency, apart from information and intelligence provided by the Serious Fraud Investigation Office (SFIO) and Financial Intelligence Unit,” said ED Director Karnal Singh.
According to ED, the raids were conducted simultaneously on Saturday in 16 states, where 110 premises linked to 300 known shell companies were searched. These searches led to unearthing of more shell firms, adding up to a total of over 1,000 such companies, said an ED official. “Some of the companies were involved in major money laundering cases related to Chhagan Bhujbal, Y S Jagan Mohan Reddy, Yadav Singh, NHRM, AGS Infotech, Rajeshwar Exports etc, while some other entities were found to have been used for laundering demonetised currency during post-demonetisation period,” said an ED statement.
The premises of Delhi-based chartered accountant S K Gupta was also raided. ED sources said Gupta was suspected to have moved several crores of rupees belonging to politicians from Uttar Pradesh. “He had floated 200 shell companies. Many entries have been found to be connected to some prominent UP politicians. We are still questioning him and verifying the documents recovered from his premises,” said an ED official.
Among the documents recovered during the raids was an identity card belonging to one Chetan Shah, identifying him as “Special Agent, Anti-Terrorism Division, Interpol”.
According to the ED:
* In searches conducted in Mumbai, one Jagdish Prasad Purohit admitted that he had formed around 700 shell companies using 20 dummy directors, out of which 130 companies are still in existence. He also provided ‘accommodation entry’ of Rs 46.7 crore to Bhujbal.
* Searches at the premises of a market entry operator linked to M/s Rajeshwar Exports revealed that the company had made remittances to the tune of Rs 1,476 crore for import of diamonds which were grossly overvalued.
* Searches at the premises of chartered accountant S K Gupta at Barakhamba Road in New Delhi revealed that he had set up over 200 shell companies and had given ‘accommodation entries’ to a number of people in Uttar Pradesh. ED sources said many of these were prominent politicians. He was also found to be involved in conversion of black money for some members of the sand mafia in Uttar Pradesh.
* In Kolkata, more than 50 companies had the same registered address, which on verification was found to be vacant residential premises. The landlord said he had rented it to a man around three years ago, and the tenant had disappeared within three months. The landlord had received loan recovery letters against two companies registered at the address. These two companies are already facing investigation in a PMLA case.
* Certain shell companies were found to have remitted huge amounts to other countries for imports which were not made. “A sum of Rs 20 crore was found in the bank account of one entity and the same will be considered for attachment,” said ED.
* In another case, a shell company was found to have exported carpets to its sister concern incorporated outside India. The export proceeds were never realised and the person behind these companies had applied to RBI for write-off of outstanding export proceeds.
ED sources said the raids were part of the agency’s drive against shell companies as mandated under the Special Task Force set up by the PMO to crack down on black money. On March 21, the agency arrested two market entry operators, Surendra Kumar Jain and Virendra Kumar Jain, who are suspected to have laundered about Rs 8,000 crore in the last three months. The agency’s investigations, based on a case lodged by the SFIO, involve 90 shell companies with 559 beneficiaries and the movement of close to Rs 11,000 crore.
According to the ED, the duo would allegedly accept black money from clients and convert it into share premium transactions through the shell companies for a commission. The agency also attached investments worth over Rs 64 crore made into Radisson Blu Hotel in Delhi in connection with the case. Shell companies, which have little paid up capital, nominal turnover and hardly any employees, are typically floated by unscrupulous businessmen and traders to create a maze of investments through which undeclared money can be moved both inside the country and abroad.