Enforcement Directorate hunts 300 shell companies; Bhujbal, Jagan Reddy on radar

ED raided the offices of 300 firms suspected of being involved in money laundering and illegal foreign exchange transactions.

India’s financial crime investigation agency on Saturday raided more than 100 locations across 16 states in a sweeping crackdown on dubious companies suspected of money laundering on behalf of businesses and individuals including two top politicians.

ED has renewed efforts to crackdown on shell companies. Senior ED officials said while no one was arrested during Saturday’s raids, questioning of the suspects was underway.(Representative image)

The Enforcement Directorate (ED) launched the early morning raids targetting 300-odd shell companies, many of which are fronts for a slew of illegal transactions and crime and act as the backbone of India’s huge shadow economy. The raids were carried out under ‘Operation Shell Companies’.

“Some of the companies were involved in major money laundering cases related to Chaggan Bhujbal, YS Jagan Mohan Reddy, Yadav Singh, NHRM, AGS Infotech, Rajeshwar Exports etc while some other entities were found to have been used for laundering demonetised currency during post demonetization period,” the ED said in a statement.

Some of the searches were also in connection with a scam in the National Rural Health Mission scam in Uttar Pradesh as well as one involving the Jain brothers of Delhi, who were named by the agency when it attached a hotel in Dwarka managed by Radisson Blu in a money laundering case.

An agency official said the operation had three specific targets -- bogus import businesses, premises being used for conversion of black money to white and entry operators, actual people involved in money laundering.

“Investigations had revealed that certain entry operators and fraudsters were using network of companies (to launder money), some of which have been used repeatedly while some other were discarded after use or kept dormant for a long period,” said ED spokesperson AK Rawal.

“Some other entities were found to have been used for laundering demonetised currency during the post-demonetisation period,” Rawal added.

WHAT ED FOUND OUT DURING THE RAIDS

Among the 110 locations raided by ED included one allegedly belonging to a person named Jagdish Prasad Purohit. Purohit allegedly admitted that he had formed around 700 shell companies using 20 dummy directors. Out of 700 fake firms 130 are still in existence. “He had also provided accommodation entry to the tune of rupees 46.7 crores to Chhagan Bhujbal,” ED said in a statement.

The directorate said that in Kolkata, more than 50 companies had the same registered address which was found to be a vacant residential premises . When questioned, the landlord of the premises said he had let out the premises three years ago to an individual who disappeared in December.

An entry operator connected to Rajeshwar Exports was also searched by ED. The company, according to ED, had made remittances to the tune of Rs 1476 crores for import of diamonds which were grossly overvalued.

A chartered accountant located at Delhi’s Barakhamba Road was found to have formed 200 shell companies

A shell company was found to have exported carpets to its sister concern incorporated outside India. The export proceeds were never realised and the person behind these companies had applied to RBI for writing off of outstanding export proceeds.

An operator in Mumbai, identified as Jagdish Prasad Purohit, was allegedly found to be running 700 shell companies with 20 dummy directors. The operator is accused of converting ₹46.7 crore of illegal cash to legal money for Bhujbal, a former Maharashtra deputy chief minister who is in jail on laundering charges.

After the government pulled out 86% of India’s cash in circulation last November to stamp out corruption and illegal transactions, many of these firms helped tax evaders convert slush funds into legal money, experts say.

Senior ED officials said while no one was arrested during the raids, questioning of the suspects was underway.

Officials said multiple teams of the ED raided premises of suspected shell firms in Delhi, Chennai, Kolkata, Chandigarh, Patna, Ranchi, Ahmedabad, Bhubaneswar and Bengaluru, among others.

An HT investigation in January found thousands of phantom businesses and drop-box addresses masquerading as company headquarters registered in Delhi and Kolkata alone.

A source in the agency said some shell companies were found to have remitted huge amounts to other countries for imports which never took place. These companies, the sources said, are being probed for their alleged links to Reddy. The official added that Yadav Singh and Bhujpal are being probed for conversion of black money to white.

The drive was part of a recent PMO directive to check the illegal operations of these companies.

At one of the premises in Mumbai, a scanned copy of an apparently fake Interpol ID card bearing the name of one Chetan Shah was found on a laptop.