CBI compromised India’s biggest ponzi scam case worth Rs 47,000 crore The CBI has ‘compromised’ India’s biggest Rs 47,000-crore Ponzi scam investigation. Pearls group MD Nirmal Singh Bhangoo, against whom the CBI had registered a case on 19 February this year for allegedly duping five crore customers by promising them land and goods, was not arrested even for a day. ‘Since he is cooperating with us we have decided not to arrest him,’ the CBI spokesperson said. However, in all other ponzi scams cases, where the amount is not even 10 per cent of this case, the promoters have been arrested. It is alleged that because of pressure from some influential quarters, Bhangoo was not arrested. There’s a strong rumour going around in the corridors of power that more than Rs 100 crore bribe has exchanged hands among powerful people to slow down the investigation into the biggest ponzi scam. According to the CBI, Bhangoo has been interrogated several times in the case, but no arrest or custodial interrogation have been made yet. ‘Since the case is under investigation, we would not like to share details at this point of time. The company has more than 1,000 bank accounts, 300 customer service centres, 100s of associate companies and more than 5 crore consumer base. Such a mammoth case needs indepth investigation,’ the CBI has said. When the CBI filed its FIR, it said this group has duped more than Rs47,000 crore from the poorest of poor from five different states, mainly Punjab and Rajasthan. SEBI has recently ordered the company to refund at least Rs 29,420 crore immediately and wind up all business within 15 days. According to SEBI, the company has mobilised nearly Rs 47,000 crore public fund, twice the amount the Sahara group is in the dock for. But the most significant aspect of this case is that Pearls group operated from central Delhi right in front of the offices of CBI, finance ministry, RBI and serious fraud office. Pearls group continued with its operations year after year while enjoying patronage from the Akali Dal, the BJP and the Congress. Bhangoo was the main sponsor of the Punjab deputy chief minister Sukhbir Singh Badal’s kabaddi world cup tournament by paying Rs 35 crore but that money could not be traced in the government accounts. It is suspected that he shifted thousands of crores abroad. He also bought Sheraton Mirage Resort & Spa in Gold Coast, Queensland for $ 62 million and another $ 20 million was spent on renovations. This group company Pearls Australasia was formed after an Australian government trade mission introduced Bhangoo to Gold Coast-based developers whose previous venture collapsed in 2009. Bhangoo has also ventured into building upscale apartments in Brisbane after striking a deal worth $ 300 million with an Australian group. In Punjab, Pearls group is present through a mega 250-acre residential township in Badal junior’s wife and union food processing minister Harsimrat Kaur’s MP constituency Bathinda besides housing projects in Mohali, Zirakpur and Ludhiana. In the recent Saradha scam case in West Bengal, the state police has kept the promoter Sudipta Sen in custody for more than one year along with Trinamool Congress MP Kunal Ghosh. When the CBI took over the case from the state police, they kept Sudipta Sen under their custody ( he is still in their custody) and arrested a number of people who allegedly helped Saradha group to prosper. In Assam and Odisha, CBI has arrested a number of chit fund promoters and their accomplices against whom the allegation of financial fraud is much smaller. But in Pearls group case, even though there is enough evidence that promoter Bhangoo was close to a number of senior politicians, forget arrest, none of them have been even called for questioning. Pearls group had hired PR firm Adfactors who have been influencing journalists not to publish stories about this scam. Even after registering of the case by CBI, Pearls group had continued to publish ads in different magazines and newspapers and in one of the ads even wished union home minister Rajnath Singh on his birthday. According to a senior CBI official, ‘We have evidence that certain people in the RBI and the SEBI were also a beneficiary of this group like many powerful politicians. But we are unable to go ahead because of directions from the top.’ On 19 February, the CBI booked Bhangoo, charging him with criminal conspiracy and fraud in what has emerged as India’s biggest Ponzi scam. Investigators claim raids on residential and commercial premises associated with Bhangoo and his associates have unearthed evidence of stupendous cash deposits worth Rs 47,000 crore. These were fraudulently obtained from more than 50 million small investors across 20 states and union territories via Pearls Agrotech Corporation Ltd (PACL) and Pearls Golden Forest Ltd (PGF). These are two Pearls firms masquerading as real estate ventures. Moving quickly, a CBI team headed by DIG AS Dhillon immediately froze nearly 1,000 bank accounts operated by Bhangoo, his associates and their firms. It is the mother of all get-rich-quick rip-offs, already at least 20 times bigger than the biggest yet-West Bengal’s infamous Saradha Group scam or the Pal brothers’ Speak Asia Online swindle. As part of the hardsell, PACL’s agents across the country led gullible investors down a virtual garden path of falsehoods: ‘Sixty million people invested in Pearls and have become owners of land,’ Suhasini, a Bangalore-based agent, stated on her blog. Others unabashedly touting the ‘double-your-money’ line, even presented the company as a ‘government undertaking’ or ‘endorsed by the union ministry of corporate affairs’. Contrary to claims that PACL and PGF were engaged in the buying and selling of agricultural real estate, CBI investigators say Bhangoo and his associates were essentially linked to a pyramidal collective investment scheme (CIS). Funds collected from new investors were employed to repay older customers further up the chain or pyramid. This while handing out hefty commissions to agents for luring new investments besides allegedly siphoning off substantial chunks for ventures outside the company. PACL and PGF’s bosses have, however, consistently denied this. ‘We are a real estate company. Customers pay us to buy land in instalments and at the end of their term, they can decide to take a randomly allotted plot, or we will help them sell that plot and get the prevailing land value,’ PACL director Subrata Bhattacharya was quoted as saying in 2011. The company’s records describe deposits as ‘customer advances’ and Alwayspacl, its online customer complaint portal, repeatedly refers to the ‘sale of plots’ to arrange for maturity payouts. But as CBI has now discovered, both Khital and 33-year-old Narinder Saini (name changed), a Haryana-based graphic designer who worked as a PACL sub-agent for five years, say the promised plot of land is merely a ruse to make investors feel more secure about their deposits. Computer-generated receipts or agreements handed out by the company do mention plots of land on maturity but as Saini points out, the promise is notional. ‘Anyway, what would a poor investor in Haryana do with a plot located in some far-flung corner of the country?’ he says. Touting itself as India’s biggest corporate landowner, PACL, in a filing to the Registrar of Companies, claimed possession of 1.85 lakh acres, which is nearly 20 times the land owned by the biggest realty concerns in the country. Bhangoo’s own website-Nirmalsinghbhangoo-claims that ‘Pearls leads the property sector, with a coveted strategic land bank of agricultural, semi-urban and urban parcels totalling more than 1.5 million acres.’ Company officials claim that a 2011 evaluation of the land bank by John Lang LaSalle and CB Richard Ellis pegged it at Rs 70,000 crore. But what they don’t tell you is that this includes unusable tracts like the 10,000 acres of desert wasteland PACL purchased in 2009 and 2010 along the India-Pakistan border in Rajasthan’s Barmer district. PACL and PGF were among some 1,000 firms directed by the Securities & Exchange Board of India (SEBI) to shut shop and refund investors after the new CIS Regulations were notified in 1999. Both companies sought legal remedy. PGF, which petitioned the Punjab and Haryana High Court at Chandigarh, was ordered to close down after repaying its depositors in 2002. PACL however found temporary reprieve in the Rajasthan High Court at Jaipur, where it was registered. Many believe that PACL’s unbridled growth was fuelled by the fact that it was allowed to continue when most other existing Ponzi operations folded up after the SEBI’s order. With a veritable monopoly, the company’s deposits swelled exponentially, quickly surpassing those of the by then defunct PGF. CBI’s present investigation, which comes in the wake of the Supreme Court directions after considering the orders handed down by both the high courts, indicates that ‘investments in PACL were used to repay the old investors of PGF to pre-empt criminal prosecution,’ an official says. Until the present troubles, things seemed to have worked out perfectly with both firms running identical schemes in tandem. The man at the centre of the storm, Bhangoo, started out as a milk-seller-on-a-bicycle in Attari, a nondescript hamlet in Punjab’s Ropar district. CBI officials believe the business model employed in PGF and PACL was essentially cloned from the experience he gained as an associate at Gold Forests India Ltd (GIFL), an early Punjab-based Ponzi operation that folded up following police raids and tax enquiries in 2000. Bhangoo set up PGF in 1983 well before GIFL’s troubles. PACL was floated over a decade later in 1996 as Gurwant Agrotech Ltd, ostensibly engaged in marketing therapeutic pillows and related products. Just a few years later, the company was renamed and switched to PGF’s more familiar albeit ‘dubious’ investment model. Today, Bhangoo controls a corporate conglomerate with projects that transcend international boundaries. Besides PACL India, the Pearls Group includes entities such as Pearls Infrastructure with commercial and residential projects across India, Pearls Broadcasting Corporation that runs the P7 news network, Pearls Spices, Pearls Tourism and the sprawling Gian Sagar Medical College in Punjab. In early 2010, Bhangoo made a significant expansion into Australia purchasing the celebrated Sheraton Mirage resort. Pearls Australasia has numerous projects, including construction of 1,000 apartments in Brisbane and development of 1,000 land lots in Melbourne. When CBI officers currently questioning Bhangoo, his relative and PACL’s MD Sukhdev Singh and five others-Harcharan Singh, Chandra Bhushan Dhillon, Prem Chand, Gurmeet Singh and Subrata Bhattacharya- went to track the trail to try and establish if and how money mopped up from small-time investors was diverted to ventures by other Pearl associates, the agency closely examined the group’s decidedly generous sporting sponsorships. In 2011, Pearls was the lead sponsor for Kings XI Punjab for IPL-4 and also hired Australian fast bowler Brett Lee as brand ambassador. The same year Pearls paid to become title sponsor for the India-West Indies ODI and T20 tournaments in the Caribbean. In 2013, PACL signed a three-year deal to sponsor Raj Kundra and Bollywood actor Sanjay Dutt’s Super Fight League on ESPN, and the Golf Premier League. Investigators have also asked the Punjab government for details of the Rs 35 crore it reportedly received from Pearls over four years to organise deputy chief minister Sukhbir Badal’s favourite sporting tournament, the Kabaddi World Cup. The CBI sources said while the company’s balance sheets reflected the money spent on the events, the balance sheets of the events have no records about the money received from the group. This has led the CBI to suspect that the money pumped into the events was illegal. The Pearl group paid an event management company which organised the sports events. A preliminary probe has revealed that the money neither finds mention in government record, nor was it acknowledged by any authority. However, the World Kabaddi Cup banners and advertisements showed Pearls as its title sponsor. Meanwhile, thousands of investors have been left in lurch. It is suspected that their hard-earned money has been pumped into Bhangoo’s empire outside India. Most of the Pearls investors believe that they may not be able to get their money back following the allegations that a sizeable part of the money collected from them has been invested in foreign countries such as Australia.
Posted on: Sat, 01 Nov 2014 03:39:57 +0000
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