The Kerala police on Monday arrested the CEO of Amway India,Williams S Pinckney,and its two directors on charges of cheating. The case has been registered under the same law under which Saradha and other chit funds are being prosecuted by the central and state governments.
Interestingly,companies such as Amway,under the banner of Indian Direct Sellers Association,have asked the government to amend the Prize Chits and Money Circulation (Banning) Act 1978 to distinguish between them and the multi-level marketing companies and similar frauds.
The Amway officials were arrested from the Crime Branchs Kozhikode office,where they had been called for questioning for the second time in two months. While they had obtained anticipatory bail in some cases,Pinckney,Sanjay Malhotra and Ansu Budharaja had failed to do so in three cases pending in Wayanad district. Investigating officer T C Venugopal said they would be produced before a magistrate court in Kalpetta in Wayanad.
A company spokesperson said the trio were taken into custody by the Wayanad police,Kerala,for another case filed in 2011. We would like to clarify that with respect to (the) case,the company or its officials were not issued any summons to join the investigation,nor was any information sought by the police. The company management would have cooperated with respect to the 2011 matter as well,as we always have,as law- abiding corporate citizens.
Amway India,the countrys leading direct selling FMCG company,reported a turnover of Rs 2,288 crore for the last fiscal.
Last year,during the course of a crackdown on several Ponzi schemes,the Kerala government had also raided Amways offices and godowns and seized products worth Rs 2.14 crore. A woman in Kozhikode had complained that she had bought various products worth Rs 3 lakh,but could not market them and so lost her money.
Meanwhile,a senior corporate affairs ministtry official said: We have not received any complaints. The multi-level marketing issues dont fall under the ministry. We can take action only when there is a violation of the Companies Act,1956.
But Corporate Affairs Minister Sachin Pilot had recently said that 87 companies are under the government scanner for allegedly running illegal MLM investment schemes,of which seven are being probed for serious frauds.
An official in the Union Ministry of Consumer Affairs,which has been spearheading a move to bring regulatory clarity to promote direct selling,said these problems would recur as the legislation has fallen between too many ministries.
An inter-ministerial group formed last year,comprising representatives from the finance ministry,consumer affairs ministry,RBI,SEBI and the Central Economic Intelligence Bureau to draft model rules on MLM companies and chit fund schemes,has so far not yielded any results. The IMG was also tasked with framing guidelines on how to distinguish between genuine direct selling companies and money circulation schemes.