The crisis continued to deepen for the Mamata Banerjee government in West Bengal with the Union government moving ahead with a crackdown by multiple agencies on chit fund companies indulging in Ponzi schemes across the nation. Ms Banerjee’s image also received a body blow with video clips showing her as chief minister distributing ambulances and motorcycles donated by the Saradha Group in the Jangalmahal area of West Midnapore on July 19, 2011. As West Bengal continued to boil with rage against the Saradha Group and the state administration, another investor who had deposited his personal savings of `4 lakh with the scam-ridden chit fund company committed suicide on Saturday.
The government declared that all companies engaged in fraudulent chit fund activities were being probed by Sebi, RBI, the corporate affairs ministry, Enforcement Directorate and income-tax department. The ED has also initiated a probe into money-laundering allegations against Mr Sudipta Sen and his Saradha Group.
Alarmed by the mushrooming of chit fund companies across West Bengal and the rest of the country, Prime Minister Manmohan Singh on Saturday said the “unauthorised collection of deposits in exchange for the promise that exorbitant rate of return will be given, this is something which has to be curbed”. Incidentally, there are 73 chit fund companies operating in Bengal.
The corporate affairs ministry stated that “promoters of such companies are allegedly siphoning money collected and are using a sales network comprising local persons who are offered hefty commissions, in a manner similar to Ponzi schemes”. Ponzi schemes are used for activities involving collection of money from a large number of public investors with a promise of huge returns, which are typically paid from the deposits taken from new investors. The old investors and agents get hefty commissions for bringing in new investors. The corporate affairs ministry has set up a special task force under the Serious Fraud Investigation Office (SFIO) to probe the top four chit fund companies and its group of companies in West Bengal. All these chit fund companies were mushrooming, allegedly following political patronage. The chit fund companies to be probed include Sunshine India Land Developers Ltd and eight group companies, Icore E-Servies Ltd and 10 group companies, Saradha Realty India Ltd and 13 group companies and Rose Valley Real Estate and 18 group companies.
Regarding Saradha Realty India Ltd, the ministry said Sebi on April 23 directed the company to “wind up its existing collective investment schemes and refund the money collected under the schemes, with returns which are due to investors as per the terms of offer, within a period of three months”. Failing this, prosecution proceedings would be pursued by Sebi against the company.
Ms Banerjee is facing a major backlash following video clips showing her alleged association with the group. It has also come to light that Mr Sudipta Sen had also donated motorcycles to the Kolkata police. Some motorcycles with “KP (Kolkata Police)” written on them have been traced to the Saradha Group office at Salt Lake.
The police is looking into allegations that most of the ambulances were used by the Saradha Group to “transport unaccounted money” at night. Apart from the chit fund, the Saradha Group was also being probed for allegedly duping investors with false promises over its housing project “Saradha City” at Bishnupur, in South 24 Parganas. It may be recalled that Trinamul transport minister Madan Mitra, while showering lavish praise on group chairman Sudipta Sen in 2009, had said: “I am proud to represent the constituency (Bishnupur) ... the birthplace of Saradha Group.”