Karnataka Ponzi scam: Central Crime Branch sees 'Red'dy

Janardhan Reddy. Photograph:( Zee News Network )

WION Delhi, India Nov 08, 2018, 05.49 PM (IST) Nischita Verrendra

Just a day after the Bharatiya Janata Party lost out its Bellary bastion to the Congress in the parliamentary bypoll, there came more bad news. Mining baron and former minister Gali Janardhana Reddy's name has surfaced in a Ponzi scam in Karnataka, amounting to a whopping Rs 600 crores.

While there is no evidence of Reddy being directly involved in the scam, preliminary investigations have indicated that Janardhana Reddy might have been given Rs 18 crores in gold by the owner of the fraudulent company, to influence the Enforcement Directorate probe into the scam. 

What is the ponzi scheme all about? 

Ambidant Marketing Private Ltd was started by Fareed and his son in December 2016. The chain-link investment fraud scheme by Ambidant promised 30-40% returns to its investors.

In order to build faith, the company initially delivered the returns that it promised. However, things started unravelling by April 2017, when investors in large numbers approached the Bengaluru city police and also staged protests.

The Central Crime Branch team headed by Alok Kumar, Additional Commissioner of Police that initiated investigations, found that nearly 15,000 investors were duped to the tune of Rs 600 crore.

In January this year, when the police team raided Ambidant, it found that Fareed had transferred as much as Rs 18 crore to one Ramesh Kothari, a jeweller from Bengaluru. This money was then converted to 57kgs of gold bullion and handed over to another jeweller by the name Ramesh in Ballari.

When Ramesh (Ballari) was questioned about the same, he told the police that the gold was handed over to Ali Khan, a close aide of Janardhana Reddy. 

While Janardhana Reddy and Ali Khan remain inaccessible, CCB teams have raided the former minister's homes in Bengaluru and Ballari. At least four teams of the Central Crime Branch are on the lookout for Reddy and Khan, who have moved a Telangana court seeking anticipatory bail.

Reddy's troubled past 

Gali Janardhana Reddy, once the invincible mining baron of iron-rich Bellary, was arrested in September 2011 for his involvement in the infamous mining scam of Karnataka. Reddy was then the Tourism, Youth and Infrastructure minister of Karnataka.

In an extensive report filed by the then Lokayukta Justice Santhosh Hegde, Reddy was accused of illegal mining, tampering with state borders and forest laws and also laundering money through international tax havens among other offences.

After three years in jail, Reddy was granted bail in January 2015 by the Supreme Court on the condition that he will not enter Ballari. Despite the restrictions, Reddy campaigned for several BJP candidates during the 2018 State Assembly elections. 

In an exclusive conversation to WION, Former Lokayukta Justice Santosh Hegde, said that the latest development shows that Reddy was still wielding considerable influence, despite being out on bail.

"Whether he has done it or not he has given information to the other side he can control the ED and close the case for Rs 20 crore. It indicates that he's still powerful, isn't it? Obviously he has a clout through the administration and his words are still believed in the market. Certainly, I think it is a very good ground for cancellation of bail because one of the basic conditions is that you should not indulge in unlawful activities when you're on bail. I'm sure whoever is the concerned should file an application for cancellation of bail." says Justice Hegde. 

Political implications of Reddy's troubles

Soon after the mining scam erupted under the BS Yeddyurappa administration in 2011, the Bharatiya Janata Party had distanced itself from Gali Janardhana Reddy. The sacking of Reddy brothers soon after the arrest, even led to their close aide B Sriramulu forming a separate political outfit.

The disintegration of the state BJP (Yeddyurappa forming KJP, Sriramulu forming BSR Congress) led to the terrible electoral failure of the party in 2013 assembly elections. 

Having learnt its lessons, we could see more of the Reddy factor to 2018 Assembly elections. Though Supreme Court did not permit the mining baron to campaign in Ballari, he was seen actively partaking in processions in Chitradurga and Bengaluru.

In April, Reddy also shared the stage with BJP state president BS Yeddyurappa, Madhya Pradesh Chief Minister Shivraj Singh Chouhan and B Sriramulu. So what will the BJP do now, especially since its position has further been weakened in Ballari by the bypoll defeat? 

"Janardhana Reddy was never in the forefront of BJP politics. He was always doing things from the back. He has always been frowned upon by the central leadership of the party. This gives an opportunity to the central leadership of the BJP to sideline the state leadership, as they have been waiting for an opportunity to do that. This allows the central leadership to micromanage the state in the BJP. It is difficult for them to replace Yeddyurappa at this stage, but in the next few months he will be sidelined and all critical decisions will happen from the national level", says Sandeep Shastri, Political Analyst.  

The importance of Ballari  

Ballari is a crucial constituency for the Bharati Janata Party as it formed the backbone of the state funding for electoral campaigns. The Reddy's once again getting into legal mess will only further force the central leadership to distance themselves from the powerful mining baron. The recent failure on part of the Reddy brothers to muster majority during floor test and the assembly elections have broken the cash-rich backbone. 

In the past, 1999 had seen the district get national attention when Sonia Gandhi was pitted against Sushma Swaraj. Gandhi had won the election by a slender margin of 53,000. However, BJP won every consecutive election thereafter (until 2018), sealing the region as a saffron party bastion.

Story highlights

Soon after the mining scam erupted under the BS Yeddyurappa administration in 2011, the Bharatiya Janata Party had distanced itself from Gali Janardhana Reddy.