director Sudipto Sen, Bengal’s king of ponzie scheme — paying returns from the money paid by subsequent investors, rather than from the profits generated from legitimate businesses.
There’s more. Lakshman Garai, a Saradha group agent in Diamond Harbour in South 24 Parganas, committed suicide by consuming poison as his clients demanded their money back after the run on the Saradha group.
By the time the government made moves to arrest Sen, the damage was already done. Sen vanished, with about Rs. 20,000 crore.
The warning bells, in fact, began ringing in October 2012 when the Serious Fraud Investigation Office (SFIO) of the corporate affairs ministry started probing the chit funds operating in Bengal.
According to SFIO estimates, the chit funds mopped up around Rs. 30,000 crore in the state between 2008-09 and September 2012. The agency said more than 100 such funds were operating in the state, with several big players still collecting deposits in rural and semi-urban areas.
Foremost among them, said an SFIO official involved in the probe, was the Alchemist Group owned by Trinamool Rajya Sabha member KD Singh with interests in food processing and retailing, among others. Alchemist was the first company that the SFIO started probing.
The official alleged that the agency did not get any specific information from the state government on the chit funds even after repeated requests. “They (the state government) did not have a department to deal with such companies. Neither did they have specific legal provisions to take action against them.”
SFIO sources, however, claimed that it had stumbled upon a nexus between chit fund-owners and political leaders, especially from the ruling Trinamool Congress, and their relatives.
“Many influential political personalities and their relatives, former bureaucrats and IPS officers and former bank officials were on the boards or payrolls of the chit funds,” the SFIO official said.
Even before the SFIO came into the scene, Trinamool Congress MP Somen Mitra wrote to Prime Minister Manmohan Singh on July 27, 2011, seeking action against the chit funds. “Had action been taken then, things would not have been so bad now,” said Mitra.
In April 2012, union minister of state for health Abu Hasem Khan Chowdhury of the Congress wrote to the Prime Minister, alleging that chit funds were financing the Trinamool Congress. Minister of state for urban development Deepa Dasmunsi confirmed, “That’s why the state government allowed such companies to mushroom.”
In fact, then corporate affairs minister Veerappa Moily also alleged there was a direct collusion between the chit funds and the ruling Trinamool Congress. He even accused a TMC MP of acting as a go-between.
The RBI and the state-level bankers’ committee (SLBC), West Bengal, also cautioned the state government both in public and in closed-door meetings. On December 7, 2012 RBI governor D Subbarao said in Kolkata that the state government was supposed to initiate suo motu action against such companies.
Only after bank representatives insisted on strong actions at SLBC meetings, chaired by state finance minister Amit Mitra, did the state’s finance department ask the district magistrates in January 2013 for reports on the chit funds operating in their districts. Not a single report has reached the government yet.