Key accused in Karnataka ST corporation fund fraud was arrested for Chhattisgarh farm fund fraud in 2022, finds probe

Verma splurged part of the stolen funds from the ST Corporation in Karnataka between March and April of this year on a Lamborghini worth Rs 3.3 crore, a Mercedes Benz worth Rs 1.7 crore, and jewelry worth Rs two crore within days of receiving funds earlier this year, the SIT probe has revealed.

Verma has emerged as the key player behind the setting up of the massive fraud – in which Rs 94.73 crore of Rs 187 crore of funds deposited in a Karnataka Maharshi Valmiki Scheduled Tribes’ Development Corporation account in Bengaluru by the state treasury was stolen by diversion to 18 bank accounts of fake companies floated for the purpose of the fraud.

The Enforcement Directorate (ED) incidentally arrested B Nagendra, 52, a former minister for the welfare of scheduled tribes in the Congress government in Karnataka, on Friday for being one of the alleged recipients of funds from the Rs 94.73 crore ST Corporation fraud.

Congress MLA Basanagouda Daddal, who is the chairman of the Karnataka Maharshi Valmiki Scheduled Tribes’ Development Corporation, is also currently under the scanner of the ED for being an alleged recipient of the stolen funds from the ST Corporation as well.

The elaborate scam with political links involved coercing officials of the Scheduled Tribes Development Corporation – allegedly by the then tribal welfare Congress minister Nagendra – to move the corporation’s bank account to the MG Road Branch of the Union Bank of India, where bank officials allegedly issued cheques and authorization to unknown persons.

Over 20 persons have been linked to the fraud so far, with 14 persons arrested by the CID SIT. The accused include six officials of the Union Bank of India, two officials of the tribal corporation in Karnataka – its MD Padmanabha G J and accounts officer Parashuram Dugganavar – and eight private persons, including close associates of ex-minister B Nagendra.

The SIT was still probing the roles of the minister and the chairman of the corporation Basanagouda Daddal – a Congress MLA, when ED began its money laundering probe against the duo and carried out searches for two days on their premises before arresting Nagendra late on the night of July 12.

The SIT has obtained statements from the already arrested persons indicating that the former minister, possibly B Nagendra, played a role in the fraud and that his personal aide was given a portion of money from the fraud along with the personal aide of the chairman MLA, according to applications filed in court by the SIT while seeking custody of arrested accused.

A CBI case has also been registered in the ST Development Corporation fraud case. The CBI is investigating the role of officials of the Union Bank of India in the diversion of funds.

The modus operandi

The SIT probe in Karnataka meanwhile has found that the 36-year-old Satya Narayan Verma from Hyderabad was the lynchpin in executing the fraud after the change of bank branch and diversion of funds was done in Bengaluru by the corporation officials in alleged cahoots with officials of the Union Bank of India.

The SIT has recovered a total of Rs 14.33 crore of stolen funds from Verma and his associates – Satyanarayana Ittageri from Hyderabad, and Nageshwara Rao from Bengaluru – including the Rs seven crore splurged by Verma on cars and jewelry, according to SIT’s court documents.

“The Lamborghini that was bought by Verma within 10 days of receiving the stolen funds has been returned to the showroom in Hyderabad, and Rs 3.3 crore is deposited in a state account. The process of recovery of the funds used to buy the Mercedes is underway, and the funds with which jewelry was bought are recovered,” sources in the CID SIT said.

“The main accused in this case, Satya Narayana Verma, has been accused in a criminal case for committing fraud in the Axis Bank of Raipur, and in this case too a similar fraud has to be investigated of opening of duplicate accounts,” the SIT has stated in recent court documents.

In the Chhattisgarh Rajya Krishi Mandi Board, the probe revealed that the accused connived with a bank manager to get a chequebook for the board’s account and misused the cheques to siphon Rs one crore from the Raipur branch of Axis Bank in 2022. The stolen funds were transferred to fake accounts in multiple banks created by Verma.

The probe in the ST Corporation fund fraud in Karnataka has revealed that Verma sent fake documents of companies on WhatsApp to his associate in Hyderabad, Satyanarayan Ittageri, 40, who is the MD of a firm called First Finance Credit Cooperative Society.

Ittageri allegedly used the fake documents to start fake RBL Bank accounts using the names of 18 genuine companies – including the IT firm Happiest Minds Technologies from Bengaluru – in Hyderabad and Vijayawada.

The Rs 94.73 crore of funds that was stolen from the Karnataka ST Development Corporation between March and April of this year landed in these 18 fake accounts before being moved out through various routes by Verma and his gang.

“According to the statement of Satyanarayana Ittakari, it was Satya Narayana Verma and Chandramohan (an associate) who met him in Nizampet, Hyderabad, and told him about the creation of fake accounts,” the SIT has said in a recent police remand plea on July 10.

The CID SIT, following investigations, has recovered nearly Rs 40 crore of the Rs 94.73 crore of stolen funds, including Rs five crore that was frozen before it could be accessed by the fraudsters, police sources said.

Role of officials of the ST Corporation

An amount of Rs 3.92 crore has been recovered from Padmanabha G J, the managing director of the Karnataka Maharishi Valmiki Scheduled Tribes Development Corporation, police said.

The SIT probe has found that Padmanabha was allegedly influenced by the then tribal welfare minister in the Congress government, B Nagendra, to shift the bank account of the Scheduled Tribe Corporation from the Union Bank of India, Vasanth Nagar branch in Bengaluru to an MG Road branch of the bank.

Subsequently, Rs 187 crores was transferred from the state treasury to the MG Road branch of Union Bank of India on March 4, 2024, and within the next 45 days, starting from March 5, small amounts of funds ranging between Rs 4.47 crore to Rs 5.35 crore were siphoned out to the RBL Bank fake accounts in Hyderabad and Vijayawada created for 18 companies.

A total of Rs 94.73 crore was siphoned out before the ST Corporation became aware of the fraud and alerted the police on May 26, 2024.

The fraud incidentally came to light after an accounts superintendent for the tribal corporation, P Chandrashekhar, committed suicide on May 26 over the loss of funds from the bank account of the corporation, for which he was responsible along with the now-arrested accounts officer Parashuram Durganna.

In a note written before his death, the accounts superintendent Chandrashekhar alleged the role of the corporation’s management in the fraud.

During the probe by the SIT, the arrested ST Corporation’s MD Padmanabha and the accounts officer Durganna revealed that they gave Rs 30 lakhs to Pampanna, the personal assistant of the Scheduled Tribes Corporation chairman – the MLA Basanagouda Daddal. The funds were given after they were allegedly received from the lynchpin Satya Narayan Verma.

They have also indicated that the then tribal welfare minister Nagendra met the MD to suggest the transfer of the bank account of the corporation to the MG Road branch.

Role of associates of the former tribal welfare minister

Nekunti Nagaraj, 46, a close associate of the former tribal welfare minister Nagendra, who was also associated with a former political party floated by Nagendra’s associate-turned-rival – the senior BJP leader B Sreeramulu in 2013, is alleged to be the intermediary between the minister and the corporation officials.

Nagaraj, who has been arrested by the SIT, was also found in possession of jewelry that was purchased using some of the funds stolen from the ST Corporation.

“Nekunti Nagaraj went to the office of the corporation and pressured the officials to transfer the account from the existing Union Bank of India, Vasanth Nagar branch to Union Bank of India MG Road branch,” the SIT said in a police remand plea for Nagaraj.

He is alleged to have created the seals, forged signatures, and letterheads of the corporation that were used to request the bank to transfer the ST Corporation funds to the 18 RBL Bank accounts created by Satya Narayana Verma in Hyderabad and Vijayawada. Nagaraj was allegedly given access to the corporation as a close friend of the minister Nagendra.

The bank angle

The ST Corporation bank account in the MG Road branch of the Union Bank of India was created at the end of February 2024, and funds amounting to Rs 187 crore were deposited in the account from the treasury and other bank accounts between March 4, 2024, and May 21, 2024. The deposited funds began being siphoned out from March 5, 2024, according to the bank documents.

The corporation officials went to the bank on May 22, 2024 – after the election code of conduct was relaxed – and asked for cheque books, a passbook, and documents related to the corporation’s account, but the bank allegedly did not comply.

Following this, the corporation officials checked the bank account and found that money was transferred step by step using RTGS and forged signatures and seals of the corporation. Following the discovery of the disappearance of the funds in the corporation’s bank account, the accounts superintendent P Chandrashekhar committed suicide on May 26.

Apart from the main case of the fraudulent embezzlement of Rs 94.73 crore from the Karnataka Maharishi Valmiki Scheduled Tribes Development Corporation, the CID SIT is also probing multiple cases regarding the creation of fake bank accounts using the names of genuine companies like Happiest Minds Technologies, Ram Enterprises, etc.

Karnataka CM Siddaramaiah’s reaction

Karnataka Chief Minister Siddaramaiah, who is also the state finance minister, has stated that the fund transfers from the ST Development Corporation occurred without his knowledge.

“All fund releases from the treasury will not come to my notice. It is the authorities who carry out the release of funds. It does not come to my notice, and I do not sign on it. The probe is still underway,” Siddaramaiah said following BJP claims that the moral responsibility for the scam vests with the finance minister.

“Will Union Finance Minister Nirmala Sitharaman resign for all bank frauds that occur in her tenure by taking moral responsibility? This has happened at the level of the bank. All finance ministers would have to resign over bank frauds (according to BJP demands),” he said.