The Ponzi scheme
In the early 2000s, businessman Sudipto Sen set up the Saradha Group, and launched what the securities market regulator Securities and Exchange Board of India (SEBI) later categorised as a collective investment scheme. The Saradha Group used a consortium of companies to tap small investors, promising them very high returns. Like in a classic Ponzi scheme, money was collected through a wide network of agents, who were paid commissions of over 25%.
In a few years, Saradha’s raised about Rs 2,500 crore. It built its brand through filmstar endorsements, investments in popular football clubs, ownership of multiple media outlets, and sponsorship of cultural events such as Durga Pujas. The scheme expanded to Odisha, Assam, and Tripura, and the number of investors reached close to 17 lakh.
How Saradha operated
Saradha began by issuing secured debentures and redeemable preferential bonds to the public in violation of SEBI rules that bar companies from raising capital from more than 50 people without issuing a proper prospectus and balance sheet. Companies must also have SEBI permission to operate, and must get their accounts audited.
After SEBI raised a flag in 2009, the Group diversified, opening 239 companies, and building a complex corporate structure. Through schemes involving tourism packages, forward travel and hotel booking, timeshare credit transfer, real estate, infrastructure finance, and motorcycle manufacturing, the Saradha Group continued to raise capital from ordinary people. The bulk of the investors put in around Rs 50,000 each.
Many others invested through chit funds under the Chit Fund Act, 1982. Chit funds are regulated by the state government.
When the Saradha scam broke
By 2009, politicians in West Bengal had begun to discuss Saradha’s alleged fraudulent ways. In 2012, SEBI, which was already watching the Group, asked it to stop accepting money from investors until it got the regulator’s permission. Alarm bells started to ring in January 2013, when for the first time, the Group’s cash inflow was lower than its outflow — another classic event in a Ponzi scheme.
By April 2013, the scheme had collapsed, and investors and agents lodged hundreds of complaints with the Bidhannagar Police. Sudipto Sen fled West Bengal after writing an 18-page letter, in which he accused several politicians of arm-twisting him into making poor investments that led the company to collapse. An FIR was registered, and Sen was arrested along with his associate Debjani Mukherjee in Sonmarg on April 20, 2013.
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Investigations found the company had laundered investments in locations such as Dubai, South Africa and Singapore. Mamata Banerjee’s government set up a Special Investigation Team (SIT) to probe the case after clubbing all the FIRs. Around the same time, the CBI began investigations in Assam after the state government handed over the probe to it. Based on state police FIRs, the Enforcement Directorate registered cases of alleged money laundering, and arrested several people.
In May 2014, the Supreme Court transferred all cases to the CBI, given the inter-state nature of the alleged scam. The SIT, which had by now conducted a year-long probe, had to hand over to the CBI all case papers, evidence, and the accused it had arrested.
The Trinamool connection
Along with his brand, Sen had worked on building political relations. He had acquired media organisations and invested in the Bengali film industry. Actor and TMC MP Satabdi Roy and former Bollywood hero and Rajya Sabha member Mithun Chakraborty were Saradha’s brand ambassadors. Then TMC MP Kunal Ghosh was appointed CEO of the media group in which Saradha invested Rs 988 crore and hired close to 1,500 journalists. By 2013 it was running eight newspapers in five languages. Ghosh was said to be drawing a salary of Rs 16 lakh per month.
Another then TMC MP, Srinjoy Bose, was involved in the Group’s media operations. Then West Bengal Transport Minister Madan Mitra headed the Group’s employees’ union.
Saradha gifted patrol motorcycles to Kolkata Police. The government deployed and distributed ambulances and motorcycles sponsored by Saradha in Naxalism-hit areas of the state.
The Group allegedly also had connections with Congress leader and former union minister Matang Sinh, and the Assam BJP leader Himanta Biswa Sarma, who was then in the Congress. The ED questioned Sarma’s wife Rinki in February 2015 for accepting money from the Saradha Group to run advertisements on her TV channel in Assam. The agency also questioned TMC MP Arpita Ghosh in the case.
The CBI questioned over a dozen TMC MLAs and MPs, and arrested Srinjoy Bose, Madan Mitra and Kunal Ghosh. Among those questioned were then TMC vice president and former West Bengal DGP Rajat Majumdar, Trinamool Youth Congress chief Shankudeb Panda, and MPs Satabdi Roy and Tapas Paul.
Mukul Roy, who was once among Mamata’s closest confidants and is now with the BJP, was also questioned, as were the Assamese singer and filmmaker Sadananda Gogoi and former Odisha advocate general Ashok Mohanty.
Former Assam DGP Shankar Barua committed suicide after CBI questioned him and searched his house.
Where top cop comes in
Kolkata Police Commissioner Rajeev Kumar headed the SIT constituted by the Mamata government, which investigated the Saradha case for a year. CBI has claimed that it has been trying to question the members of the SIT, including Kumar, for one and a half years to get information on some missing evidence, but Kumar and his colleagues have been avoiding the agency.
CBI sources claim communication, notices, and summons to members of the SIT and the West Bengal Police asking for cooperation in the investigation have been sent on 18 occasions since September 2017, but no one has turned up for questioning. The sources say that the Kolkata Police and SIT officials have given ill health or personal engagements as reasons to stay away, and then asked for a mutually agreeable venue to sit and discuss the case.
According to CBI Joint Director Pankaj Srivastav, who is in charge of the Kolkata zone, Rajeev Kumar alone has been sent five notices and summons to appear before CBI since October 2017. The first of these summons was sent on October 18, 2017, and the latest one on December 8, 2018.
To the last summons, the West Bengal DGP replied that queries could be sent in writing which would be replied to and, in case the need arose, a meeting could be arranged between the CBI and SIT at a “mutually convenient place”, CBI sources said.
According to CBI, the SIT had not handed over a diary of Sudipta Sen that has details of payments made to prominent people, apart from other evidence. “Our multiple requests to hand over all documents seized by the SIT have fallen on deaf ears. They have the diary, interrogation reports of several accused — some of them recorded on video — some pen drives, and material recovered from a bank locker owned by Sen. Several of these things were not brought on record by the SIT. We learnt of them during interrogation of the accused,” Srivastav told The Indian Express.