Chit Fund Scam: TMC-Saradha Nexus Puts the Poor at the Mercy of Predatory Capital

On 15th April, the Bengali New Year day, a strange drama was being played out on television sets across West Bengal. Anchors and technicians of Tara Music, a popular music channel, were putting up a tear-jerker funded all by themselves. The channel owners had decided to shut shop. Little did people realize that, this was signaling towards one of the biggest financial scams that the state has seen in recent times. The closing of Tara Music along with a host of other print and television media houses meant that Saradha Realty, the Ponzi scheme company behind this vast media empire, had collapsed. For millions of urban and rural poor, this meant losing their life’s hard-earned savings. Now they are angry and desolate. Protests spread rapidly after the news came. Angry depositors and agents vandalized Saradha offices across the state. At many places they pitched themselves against local Trinamool Congress (TMC) leaders, who were known to be close to Saradha Realty. People everywhere demanded that the State Government bring the swindlers to book. The Shyamal Sen commission, a body set up by the state government to probe the scam, have received close to three lakh applications by irate depositors and agents duped by Saradha Realty. According to government sources, till date 20 people have committed suicide. Most of them belong to the rural and urban poor households. An economic scam has thus metamorphosed itself to a veritable social crisis in West Bengal. Even after Sudipto Sen, the absconding owner of Saradha Realty, along with two of his associates, was arrested from Kashmir, the protests have continued, demanding that the government take stern action against its own ministers and MPs involved in the scam.

It is now clear that the TMC and Sen were in a symbiotic relationship. The print and television media funded by him was avowedly pro-government. Mamata Banerjee not only inaugurated the Urdu daily “Kalam”, but had also instructed libraries throughout the state to stock certain newspapers, including “Sakalbela”, both published by the Saradha group. Kunal Ghosh, a Rajya Sabha member of the TMC, was CEO of that media-empire. Madan Mitra, the state transport minister, doubled up as President of Saradha’s agents’ union. Satabdi Roy, another MP, was the brand ambassador. Many Trinamool leaders were on the Saradha payroll, drawing fat paychecks. It has been revealed that Saradha had sponsored the ambulances and cycles that were distributed in Jungle Mahal last year. Allegedly, Sen bought a painting by Mamata Banerjee, for a whopping sum of 1.86 crore rupees! Sen himself has claimed that as many as 22 TMC leaders were involved. Among them, Kunal Ghosh and Srinjoy Bose are two Rajya Sabha MPs whose arrests are being demanded very strongly. But all this patronage also meant that Sen could work without hassle and Saradha’s proximity to the ruling disposition ensured that depositors felt secure.

Mamata Banerjee tried to downplay the incident at first, terming all protesters as CPI(M) agents and marking the affair as another conspiracy against her government. She also tried feigning ignorance about the looming chit fund menace in the state. But this story does not hold water as her own party MP had written to the Prime Minister raising an alarm on this issue, her government had also received alerts from the Reserve Bank of India (RBI), the Securities and Exchange Board of India (SEBI), and the Central government on the need to regulate the activities of various illegal fund-collecting companies, including Saradha. As public pressure grew, Mamata Banerjee hastily promised to pass an ordinance in the state assembly which she claimed, would empower the state government against Saradha-like schemes. This measure commands little credibility, as Sen cannot be tried under this proposed new ordinance. But even more than her dilly-dallying as the Chief Minister of the state, her desperate attempts to shield the culprits within her party and government is what has really put Mamata Banerjee in the dock.

West Bengal government has formed a SIT, a 41-member team of crack cops from the CID and Kolkata Police and headed by DGP Naparajit Mukherjee. But it has been missing conspicuously in action. Though it is empowered to assume control of all cases it has been reluctant in doing so. Inactivity of the SIT have strengthened the demand for CBI inquiry in the state. Though Mamata Banerjee was first to demand a CBI probe on any issue when Left Front was in power, now she is adamant on not letting CBI take up the investigation. In a dramatic volte face, Sen says he is quite comfortable with the State’s Special Investigation Team (SIT) and has lost faith in the CBI. All this gives credence to the suspicion that the government is doing more to shield the culprits, than leading any creditable investigation process.

The entire political opposition in West Bengal is understandably on the streets, but neither the CPI(M) nor the Congress can wash their hands off the affair. A Congress leader and Union Minister for State, Abu Hasem Khan Choudhury from Malda, had complained against Saradha group to the PM, only to withdraw his complaint and give it a certificate of sterling service a few weeks later. Nalini Chidambaram, wife of Union Finance Minister P Chidambaram, among others, looked after the legal affairs of the group.

Sen’s meteoric rise took place when the Left Front was in power. It has been alleged that Sen acquired thousands of acres of land in Bishnupur in the district of South 24 pargana in direct connivance with local CPI(M) leaders. A Bill to act against irregularities of chit funds was first proposed in 2003 but it apparently took six years to send it for the President’s approval. Then the whole process went into a stalemate. Both the Tarun Gogoi government in Assam and the Manik Sarkar government in Tripura have been alleged to be complicit in Saradha’s operations in their respective states.

The scam is bound to leave a deep and lasting dent on the TMC’s image. Those affected by the scam are typically pro-TMC, and the growing anger and mistrust of the people with corrupt Trinamool leaders has given a serious blow to the Trinamool support base among rural and urban poor. The scam may well make Mamata as vulnerable to Congress manipulations (through CBI) as Mulayam and Mayawati.

Going beyond immediacy, this incident shows how vulnerable the downtrodden people are to Saradha-like shady financial institutions which promise them a better return on their hard-earned savings. Saradha is only the tip of the iceberg. According to Ashok Mitra, leading left intellectual and ex-finance minister of the state, an industry of more than 50,000 crore rupees (more than double the annual planned budget of the state!) of chit funds with dubious track records are operational in West Bengal. On March 14, Corporate Affairs Minister Sachin Pilot presented a list of 87 such companies in Parliament, against whom complaints had been received for indulging in Ponzi schemes. Seventy-three of these were from West Bengal. Eight companies of the Saradha Group figure in the list, as do 16 companies owned by Rose Valley, a sponsor of the IPL team Kolkata Knight Riders. Also on the list are the MPS Group (four companies), Vibgyor Group (two companies), Prayag Group (four companies), and the Rahul Group, among others. These companies take money from investors in the name of tour packages, agribusiness ,or purchase of plots or homes in prime locations over a specified period of time, with a money-back option added at the end of the maturity period. Investors are encouraged to cancel their bookings and re-invest the money in new projects, since, in most cases, there are hardly any projects on the ground, or they fall way below the value of the investment garnered. The money thus raised goes into the pockets of the promoters of such schemes. Many of these groups have invested heavily in both entertainment and media industries. In fact, a Rose Valley sponsored feature film has recently bagged a national award. All this ensures that these financial institutions gain respectability and also investment in media-empire is a sure shot way to influence the political institutions so that they remain more or less blind to the shady dealings by them.

With banking facilities shrinking for the poor, even small-scale saving schemes are systematically being made defunct. West Bengal had particularly been hit hard. Net collection from small saving schemes was more than 12,000 crore in 2010-11, but net collection fell to 1700 crore in 2011-12. While demanding a ban on irregular financial institutions, it is important to stress that only by strengthening and spreading our banking system and small savings schemes for the rural and urban poor can necessary objective conditions be built to prevent proliferation of future Saradhas. The rise of chit funds has meant diversion of potential savings away from small savings schemes of the government, a key reason why the government has to resort to market borrowings in a big way. The rise of Saradha and growing indebtedness of the WB government are two sides of the same coin.

But, even as we demand an impartial probe and effective compensation package for the depositors, let us not treat Sen and his empire as an aberration of the present system. As noted Marxist scholar, David Harvey, has noted about financialization of economy under liberalism “Deregulation allowed the financial system to become one of the main centers of redistributive activity through speculation, predation, fraud, and thievery. Stock promotion, Ponzi schemes – all this became central features of the capitalist financial system.” Trinamool Congress which tried to offer a quick fix solution to the West Bengal’s deep-rooted problems, has instead directed the impoverished people of the state, straight to the quagmire of predatory capital.

Box matter 1

Sajjan Kumar Acquittal: Massacre of Justice

The acquittal of Congress leader Sajjan Kumar by a sessions court in the 1984 anti-Sikh massacre case is a shocking miscarriage of justice. The acquittal flies in the face of the CBI’s own allegation of a ‘terrible conspiracy’ between Sajjan Kumar and the police, and the evidence of eyewitnesses who have testified to Sajjan Kumar having incited mobs to attack Sikhs.

The evidence of these eyewitnesses has resulted in the conviction of five others, but their credibility has been discounted when it came to Sajjan Kumar.

The anti-Sikh pogrom in India’s capital city in 1984, following the assassination of Prime Minister Indira Gandhi, was a state-sponsored massacre in which the highest echelons of Congress leadership – including Sajjan Kumar, Jagdish Tytler, HKL Bhagat, and Kamal Nath - were implicated. Shamefully, none of them has been punished, in spite of the evidence against them.

The acquittal of Sajjan Kumar is a judicial massacre to compound the massacre of 1984. The anger of the 1984 survivors and witnesses has unleashed a fresh wave of struggles for justice. However, parties like the BJP and the Akali Dal that are trying to cash in on the 1984 issue need to be reminded that BJP which is in the dock for the Gujarat 2002 massacre and its allies including the Akali Dal have no moral right to speak of justice for 1984.

The democratic forces will continue the struggle for justice for 1984, 2002 and every single communal pogrom.

Box matter 2

CPI(ML) Welcomes Pakistan Elections

The CPI(ML) welcomes the historic Pakistan elections, in which for the very first time in the history of that country, a transition has taken place through democratic elections from an elected civilian government to another. The people of Pakistan must be congratulated for defying all odds to assert their democratic rights.

Apart from the return of Nawaz Sharif, another significant development in these elections has been the emergence of the Tehreek-e-Insaf party led by Imran Khan as a significant Opposition force which has emerged victorious in Peshawar. The latter’s success in Peshawar can be attributed in large part to his promises to resist the American drone attacks that have claimed numerous civilian lives there in the name of fighting terrorism.

The CPI(ML) wishes the people of Pakistan well in their struggle to overcome the many challenges that face them, calls for strengthening the unity of the people of Pakistan and India against imperialism, war-mongering and fundamentalism, and calls upon the Indian Government to seriously pursue dialogue and friendly relations with Pakistan.

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