West Bengal: Deadly Investment that Ruined the Poor

by Arun Srivastava

Goebbels has come alive in West Bengal. The collapse of the Saradha Chit Fund, which has ruined lakhs of poor people of Jharkhand, Bihar, Bengal, Assam and Odisha, has exposed the worst nature of political deceit and lack of transparency in governance in West Bengal notwithstanding the claim of the Chief Minister otherwise. At least ten people, investors and agents, have committed suicide during the last fortnight. What has been most shocking is the posture of innocence adopted by the Chief Minister Mamata Banerjee, with the sole motive to protect her MPs and leaders who patronised Saradha and are deeply involved in the scam. They lived a luxurious life on the money of the poor people. Ever since the scam bust she has been systematically harping on one line that she came to know of the scam only on Poila Baisakh, April 15. This admission is bizarre. Her statement in fact censors her claim of governing the State. How could a Chief Minister not know that a scam of this magnitude had taken place in her State? She is certainly not naïve not to know of the scam. She has been trying to fool the gullible lower middle class and poor Bengalis.

At her public meetings she has been accusing the CPI-M leaders for patronising Saradha and ignoring the scam. As if this was not enough, she on May 4 openly declared that “I will turn the CPI-M leaders into posters” if they continue to malign her party leaders. This statement is not ambiguous. It has many implications and dimensions. She has already started seeking the concerned files from the departments and keeping with her. Saradha had a consumer net of 1.3 crores and obviously to protect its interest it needed the political patronage. By now it is clear that the private assistant to the former Finance Minister, Ashim Dasgupta, was the main advisor to the Saradha boss, Sudipto Sen. He has already been sacked from the party. But Mamata is yet to initiate any action against her partymen who enjoyed financial benefits. Sen in fact has already named these persons in his letter to the CBI.

In his 18-page letter to the CBI, Sudipto Sen has named powerful Trinamul Congress MPs, Kunal Ghosh, CEO of the Saradha Media Group, and Srinjoy Bose, editor of a Bengali daily, who allegedly had been “blackmailing” him. Two Ministers have also been named by Sen. But instead of taking actions against them, Mamata has preferred to shift the focus on the CPI-M. Despite Sen mentioning the names of a number of senior Trinamul leaders in his letter, Mamata has consistently denied or downplayed the party’s links with Sen and Saradha. Evidence, however, underlines that the TMC, and its Ministers and leaders, had been working closely with the company even before coming to power. Their relations with the Saradha group have been revealed in a PIL that came up for hearing in the Calcutta High Court on April 25.

Laloo Prasad and his associates had swindled the poor men’s money but he did not have the temerity to outright deny and implicate some other persons. But Mamata is playing this game. There are a few takers, only from her party, that she was not aware of the scam till April 15. In fact the Home Ministry, she is the Home Minister, had written to the Finance Ministry about the scam and urged it to take action. The SEBI had approached the State Government to take action. The RBI had written four letters. How come these developments and letters evaded the eyes of Mamata who claims to provide good governance? Even her Finance Minister, Amit Mitra, knew of it. The bankers had apprised him of the disastrous impact of the Ponzi operation. At the 122nd meeting of the State Level Bankers’ Committee, to be held in the first week of June, Mitra will have a tough time answering queries on why the State Government remained passive to the wake-up calls from them at the September 25, 2012 meet.

The bluff of Mamata has been exposed. But even then she continues to stick to it and is threatening her opponents. She is also opposed to having the scam investigated by the CBI though it has an inter-State ramification. In fact she is scared that allowing the CBI would bring disaster for her and she would not be able to prevent the exposure of the rot that has overtaken her party. The best course left for her is to reinvent Goebbels and resort to his philosophy. Handing over the case to the CBI should have ensured action against her adversaries, if they were really involved in the scam. But Mamata is not willing to accept even this proposition. She is scared of the CBI. She is aware that a CBI inquiry would ruin her politically. She has ordered a judicial inquiry. This is purely a mechanism to protect her men. She knows that the inquiry commission has no power to penalise the guilty persons and moreover it would take a long time for the people to forget the scam. It is beyond comprehension as to why she did not choose to have a CBI inquiry into the scam. Interestingly, the affidavit filed by the Trinamul Congress before the High Court in response to a PIL accepts the fact that the Trinamul Government came to know of the scam in 2011. Even the senior Minister in charge of Consumer Affairs, Sadhan Pandey, accepted this. But Mamata is reluctant to accept this bare fact publicly.

  But the worst thing that had to happen was the role of the Securities and Exchange Board of India (SEBI). It is beyond comprehension how the SEBI, which has been after the blood of Sahara chief Subrata Roy for depriving the depositors, similar to the Saradha operation, could ignore the fraudulent operations of Saradha. If the SEBI had seriously moved against Saradha, the company might not have been able to swindle nearly Rs 5000 crores within four years. The clarification of the SEBI is unacceptable that most of such chit fund companies have developed political connections with the ruling party, resulting in a situation where the SEBI is resisted by the State Government and the police. If this be the case how come it succeeded in dragging Subrata Roy of Sahara to the Supreme Court? The fact remains that the SEBI has failed and the reasons for the failure are best known to its bosses.

Apparently one of the reasons for the SEBI’s inaction may be the closeness of Mamata Banerjee with the Saradha chief, Sudipto Sen, who is allegedly a former hard-core Naxalite. Sudipto Sen, in his letter, revealed that he financed Mamata’s activities. When the Saradha Group’s Bengali daily Sakalbela was launched, Mamata Banerjee sent her good wishes. More than a customary message it was an impassioned message: ”We will have to pass the dark night to begin our journey in the light of dawn. An alert conscience, right direction, truth and fearless news is what people like. Today, many papers have deviated from that principle, and news has assumed personal and commercial dimensions. Let Sakalbela fulfil the people’s aspirations.”

With the State Government not inclined to punish the guilty persons, Mamata Banerjee has dared to perform yet another Ponzi, insisting on increasing the tax on cigarettes by ten per cent to help lakhs of poor investors. She would raise Rs 500 crores to help the poor investors. For raising the corpus she appealed to the people to smoke as much as they can. She made this statement even after being aware that smoking was injurious to health. This is the worst form of political gimmick.

A Ponzi scheme is a fraudulent investment operation that pays returns to its investors from their own money or the money paid by subsequent investors, rather than from profit earned by the individual or organisation running the operation. The scheme is named after Charles Ponzi. Interestingly it was invented by Charles Dickens in his 1844 novel, Martin Chuzzlewit, and the 1857 novel, Little Dorrit.

The fall of Saradha also points to the acute shortage of the banking system not only in the rural but even in the urban areas. At present there are 88 scheduled commercial banks (SCBs)—27 public sector banks (that is, with the Government of India holding a stake), 31 private banks (these are publicly listed and traded on stock exchanges) and 38 foreign banks. They have a combined network of over 53,000 branches and 17,000 ATMs. How could these banks cater to the needs of 120 crores of the population? The operational areas of these are also not saturated. In contrast, America has 6000 banks which cater to a nearly 40-crore population. Little doubt that India suffers from financial exclusion. In the absence of banking facility people are forced to depend on such crooked operators. One must understand that banking is a market and since the market is not uniform, the people have to approach such groups to deposit their money and also get the loan. They have in fact become victims of the informal lending system. Unfortunately the money collected by such operators is not used for productive purposes. It virtually performs the task of black money. Lack of the banking system has made the people gullible to believe that they can get a return of 100 per cent in one year. If at all the government intends to curb this menace it must grant licence to scheduled banks, particularly in the rural areas. The growth of Ponzi operations in fact points to the utter failure of the banking system and averseness of the political institutions to help the system reach the poor, as they are not the overtly targeted beneficiaries of the banking system.

The author, a senior journalist based in Kolkata, can be contacted at sriv@gmail.com