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Enforcement Directorate raids shell firms nationwide

Nationwide searches are being conducted under the Foreign Exchange Management Act (FEMA) and Prevention of Money Laundering Act (PMLA) in 16 states. 

Published: 01st April 2017 04:59 PM  |   Last Updated: 02nd April 2017 12:11 AM   |  A+A-

Enforcement Directorate, ED

Enforcement Directorate(Image from official website)

By Express News Service

NEW DELHI: In a hell-for-leather assault on money-launderers, the (ED) on Saturday sent out its entire work force of 800 personnel across the country to suss out fishy transactions by shell companies.

The agency was tightlipped about the particulars but sources said this is one of the biggest such operation ever undertaken, comparable to similar sweeps conducted during the Emergency.

Details dribbling out from ED’s Twitter account said searches were being carried out at 100 locations in 16 states. Some 300 shell companies were subjected to inspections.

The operations began early in the morning and were continuing at day’s end. The premises searched included market places, business centres, residential premises even houses rented out by cut-out companies.

The ED personnel were armed with data on high-value transactions gathered during the demonetisation period by entities and personalities, including politicians, associated with some of the most prominent corruption and black money cases being probed in the country at present.

Searches at the Andheri (W), Mumbai premises of one Jagdish Purohit revealed that he was running as many as 700 shell companies out of that one address with 20 dummy directors. He allegedly converted Rs 46.7 crore at the behest of jailed former Maharashtra deputy chief minister Chhagan Bhujbal.

Another politically significant search was of a shell company, Rajeshwar Exports, associated with Y S Jagan Reddy, who is the leader of opposition in the Andhra Pradesh Assembly and the president of the YSR Congress, which has a blow-hot-blow-cold relationship with the BJP. He faces several corruption cases being prosecuted by the Enforcement Directorate and CBI, the hearings of which are coming up later this month.

Another person in the ED’s crosshairs is the former NOIDA chief engineer Yadav Singh, who is facing cases of corruption, possession of disproportionate assets and money laundering.

Mumbai
ED officials raided around 30-35 places in Mumbai and are said to have found several sensitive documents from the office of one Jagdish Prasad Purohit in Andheri. He is said to have aided former deputy CM Chhagan Bhujbal in laundering over Rs 46.7 crore through a network of 700 shell companies run from the one address.

Bhujbal was arrested on March 14, 2016 by ED in connection with the Maharashtra Sadan scam and Kalina land case in which he and his relatives were alleged to have received kickbacks.

On June 17, 2015, ED had filed a case under the Prevention of Money Laundering Act (PMLA) against Bhujbal and his relatives. This came after the Maharashtra Anti-Corruption Bureau (ACB) searched 26 properties belonging to Bhujbal as part of its investigations into alleged irregularities in the award of a contract of over Rs 100 crore for three projects in 2006 when Bhujbal was the deputy CM and PWD minister.

The contact, which was given to M/s Chamankar Developers, included construction of Maharashtra Sadan in Delhi, a new Regional Transport Office (RTO) building in Andheri, Mumbai, and a state guest house at High Mount, Malabar Hill, Mumbai.

It is alleged that the contracts were awarded without following rules and, in return, firms and trusts controlled by the Bhujbal family received kickbacks. In 2009, a report by the Comptroller and Auditor General (CAG) passed strictures against the Bhujbal-led PWD and other state departments for “acts of omission and commission” that had led to windfall gains for the contractor. While the ACB probe pegged the losses to the government from the three projects at Rs 2,867.25 crore, a probe by the Public Accounts Committee (PAC) of the Maharashtra legislature put the notional losses at between Rs 5,000 crore and Rs 6,000 crore.

"Bhujbal is in jail over charges of money laundering. But, that is not sufficient. Several shell companies were used by him or his agents for money laundering. Hence it was necessary to find out whom else these agents helped. With the scale of ED raids today it appears that the work on that part of the case has begun," BJP MP from Mumbai Dr. Kirit Somaiya, who played an important role in taking the case to the Enforcement Directorate, told The New Indian Express.

Bengaluru
The premises of seven different firms in Bengaluru were raided on Saturday, starting early in the morning and going on into the evening. The companies' offices were located in  localities such as Sadashivanagar and Vasant Nagar in Bengaluru.
One of the companies raided is owned by a businessman Ramanareddy who allegedly cheated a bank to the tune of Rs 70 crore.
 
Kochi
ED officials said some 10 shell companies in Kochi were subjected to inspections on Saturday, but the searches yielded no results and, hence, no case was registered.

"We could not find any evidence regarding violation of Prevention of Money Laundering Act (PMLA) and Foreign Exchange Management Act (FEMA) involving these companies," an ED official said.

ED officials said after demonetisation, the financial activities of some shell companies were surveilled. This included some companies involved in the export-import business.

Madhya Pradesh
Reports from Bhopal said an ED team from Indore searched the residential and business premises of two coal trader brothers in Katni, 375 km from Bhopal. The siblings, Satish and Manish Saraogi, considered close to mining baron and minister Sanjay Pathak, are suspected of being the masterminds of a Rs 2000 crore hawala racket.

According to ED sources, the raid at the Saraogis' three-storeyed building in Katni's Ghantaghar locality started at around 2.30 pm Saturday and was continuing till late in the evening.

Over 100 shell firms with accounts in various banks in Katni were used to park and siphon off proceeds of illegal mining activities between 2006 and 2010, sources said.

Satish Saraogi was arrested by the Katni police from Jabalpur on March 16 and is presently undergoing treatment at a hospital in Bhopal.

In January and February, an ED team had camped in Katni, known as MP's aluminium and limestone mining hub, investigating the siblings’ operations.

Kolkata
Some seven locations in Howrah and Kolkata were raided by ED officials on Saturday. Some five shell companies located in Kolkata are on the ED radar. Sources said the raids were completed by mid by afternoon.  No names of any politicians involved with any of the shell companies were revealed. 


What are shell companies?
Shell companies are firms set up with nominal paid-up capital with the purpose of standing as a front for money laundering by overinvoicing. Typically, they have reserves and surpluses. They report a high share premium and tend to invest in unlisted companies. They have no dividend income or high cash in hand.

Such firms are characterised by having private companies as majority shareholders, low turnover and operating income, nominal expenses, nominal statutory payments and stock in trade and minimum fixed assets.

What is ED?
The Enforcement Directorate is a specialized financial investigating agency that reports to the Department of Revenue, Ministry of Finance. It enforces the Foreign Exchange Management Act,1999 (FEMA) and the Prevention of Money Laundering Act, 2002 (PMLA).

Its officers are empowered to investigate contraventions of foreign exchange laws and detect investigations assets derived from the proceeds of crime.

Some big targets
·         Chhagan Bhujbal, former deputy CM of Maharashtra
·         Y S Jagan Mohan Reddy, leader of opposition, AP
·         Yadav Singh, Noida engineer


 Where

·Kolkata
·Mumbai
·Ahmedabad
·Panaji
·Kochi
·Bengaluru
·Hyderabad
·Delhi
·Lucknow
·Patna
·Jaipur
·Chandigarh
·Jalandhar
·Srinagar
·Indore
·Haryana.

The operations are based on investigations done by us and some others as part of our anti-black money crackdown charter.
-- Karnal Singh, director, Enforcement Directorate



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