During her examination by the CBI prosecutor, Radia told the court that at the time of grant of licences, dossiers were in circulation which said Swan Telecom Pvt Ltd belonged to Reliance Communications
Appearing in the court for the first time, former corporate lobbyist Niira Radia today said she felt that Swan Telecom Pvt Ltd “was not eligible” to get the 2G spectrum licences as it was said to belong to Reliance ADAG group company Reliance Communications.
Testifying as a prosecution witness in CBI court in the case, she said that during the time of grant of spectrum, there was a very strong public perception that Swan Telecom Pvt Ltd (STPL) was not eligible.
STPL’s promoters Shahid Usman Balwa and Vinod Goenka are facing trial in the case.
“During the time of grant of spectrum, there was a very strong public perception created by the media of eligibility and non-eligibility. Through the public perception and advice of Tata advocates, I came to know that this company (Swan Telecom) was not eligible,” Radia told Special CBI Judge OP Saini.
During her examination-in-chief by the CBI prosecutor, she told the court that at the time of grant of licences, dossiers were in circulation which said Swan Telecom Pvt Ltd belonged to Reliance Communications.
“At that time, there were dossiers in circulation that the company (Swan Telecom) belonged to Reliance Communications, though I do not have any authentic or personal knowledge,” she said.
Radia said her public relations company was advising Tatas on telecom matters and Tata Teleservices (TTSL) had applied for dual technology licences in 2007.
Crime Branch officials of the Kerala police arrested Amway India’s managing director and chief executive William Scott Pinckney and two directors, Anshu Budhraja and Sanjay Malhotra of the multi-level marketing (MLM) company for alleged money laundering and breach of trust. The arrests were made under the Prize Chits and Money Circulation Schemes (Banning) Act 1978 (PCMCS Act), which only goes to prove that the Act is not as toothless as various state governments have liked to claim. Moneylife and Moneylife Foundation have always said that Amway and several other multinational chain-schemes do fall foul of the PCMCS Act and there are clear high court judgements to this effect.
Last month, after the collapse of Saradha group, the ministry of corporate affairs (MCA), in a face saving measure, has decided to hand over probe of such chit-fund, MLM, Ponzi and pyramid scheme operators to the Serious Fraud Investigations Office (SFIO). The ministry said the probe has been ordered in view of a larger public interest involved in the issues, although the state governments are the appropriate authorities for regulation of such chit fund companies and schemes under the Chit Fund Act, 1982. Since then dozens of schemes in Kolkata, which claimed to be chit funds have collapsed. Over 18 people have committed suicide out of despair over the loss of their life savings in Saradha alone.
Interestingly, the PCMCS Act, 1978, was promulgated only after large-scale loot by these dubious companies and a report by the James Raj Committee (1974) called for a total ban on such schemes arguing that they were prejudicial to public interest. Over the past 35 years, the Prize Chits Act has been rendered ineffectual because of the refusal by state police to act quickly enough—the only exceptions to this have been exceptional police officers like VC Sajjanar from Andhra Pradesh (AP) and sporadic action in Kerala.
The fact is there has been plenty of litigation on the issue, precisely because various authorities consider that the operations are illegal under the PCMCS Act of 1978. Moneylife Foundation, an NGO working towards spreading financial literacy, has repeatedly warned people about falling for MLM and pyramid companies with innumerable examples of losses incurred. Moneylife Foundation sent a representation to the prime minister, finance minister, governor of RBI and SEBI.
A set of powerful MLMs, which are part of an exclusive closed club, called the Indian Direct Selling Association or IDSA (on the lines of the Direct Selling Association of the US) has been lobbying hard to make a distinction between their operations and those of others, who they call, fly-by-night operators such as Speak Asia and Ad Magnet. In fact, the tens of thousands Ponzi/double-your-money schemes that exploit poor financial literacy cause the biggest losses to Indians across the economic spectrum today.
Amway can be at best a source of pocket money
Senior Amway representatives had met Moneylife to clarify their views on Amway. Richard N Holwill and Rajat Banerjee , who met us, admitted that although some distributors tend to go overboard in pitching the scheme, income from being a distributor of Amway can, at best, be a source of additional income or pocket money for most people. It is not the pathway to riches as MLM companies make it out to be. However, Amway also insisted that there is no longer any joining fee and the model does not necessarily require enrolment of distributors. However, there was no answer to expensive nutraceuticals being prescribed by doctors, whose wives or relatives were Amway agents.
In India, AP was the first state to enact a law to ban money circulation schemes in 1965. Both the Supreme Court and several high courts have passed landmark judgements against the operation of these schemes as they violate the law of the land and are detrimental to the interests of the public. There are on-going cases against Speak Asia and Amway, to cite two examples.
After the decision of AP High Court, a spokesperson for Amway India had said that the company had filed a special leave petition (SLP) before the Supreme Court. The HC in its ruling observed that the company's business model may come within the mischief of money circulation scheme under the PCMCS Act.
VC Sajjanar, a former superintendent of police, Economic Offenses Wing, Andhra Pradesh, who was involved in the investigation of Amway, said this (the comment of the spokesperson) was nothing but a propaganda used by the company to continue its MLM operations. “Section 3 of the PCMCS Act prohibits any entity from promoting, conducting any prize chit or money circulation scheme, enrolling any member of any such chit or scheme, or participating in it otherwise, or from receiving or remitting any money in pursuance of such chit or scheme. This is the provision we used to ban Japan Life, Amway and GoldQuest,” said the officer, who is now DIG at Hyderabad.
Moneylife has been writing about the menace of MLM schemes, including GoldQuest, QuestNet, Stockguru.India, Japan Life, Amway, Speak Asia, NMart, AdMatrix and so on. On the other hand Moneylife Foundation is helping people to become aware about money circulation or MLM schemes and is actively involved in making changes in the government policies through representations, memorandums etc.
Moneylife had been the first to flag Speak Asia as a fraud, way back in October 2010. In December 2010, Moneylife had reported about the dubious modus operandi of Stockguru.India and advised investors to stay away from investing in the company. It collapsed much later. Similarly, in August 2011, we informed our readers, how Surat-based NMart Retails, a division of Newlook Multitrade Pvt Ltd, is running a collective investment scheme (CIS) based on MLM model, under the guise of selling products through its retail chain. Needless to say all the three mentioned above duped lakhs of people. There are scores of other such examples.
EAS Sarma, former secretary to the Government of India (GoI), has written several letters to the prime minister, ministry of corporate affairs, ministry of finance, Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI) and others, on MLM menace.
“Many of these (MLM) companies are not even registered under the Companies Act. Even those registered evade regulation. Those booked regroup under different names and continue to cheat the people. All these companies and those that promote them should be dealt with an iron hand and be prosecuted effectively,” he said.
Kerala, said to be the country’s most literate state, is flooded with numerous “get-rich-quick” or “earn-huge-return” schemes offered by money swindlers. While the state director general of police has admitted noticing frauds amounting to over Rs1,000 crore, the worrying factor is that even a few policemen have been found to be involved in these MLM schemes.
The Kerala police have also warned hotels, restaurants and convention centres across the state, not to allow money-chain companies to hold any meetings on their premises.
MLMs, chain companies or networking companies—also known as chit funds or blade companies—have turned very powerful in several states, which are ruled by regional parties and have strong political connections. Their political funding protects them from any action. Also, as Mr Sarma has pointed out, “Many of these promoters have political links and they approach various ministries in the guise of marketing companies and make overtures to protect themselves. They know that they can play one ministry against the other and get away with their loot.”
Independent regulators are all IAS officers who owe their jobs to being compliant or their willingness to act as hatchet persons for politicians (barring the singular exception of Vinod Rai as Comptroller & Auditor General of India, (CAG). Nobody in the system is under pressure to prevent wrongdoing; hence, no regulator, bank chairman or union minister has lost his job in the past 20 years, despite the sharp increase in the size and number of scams. If this is true of massive scams and misappropriation of funds unearthed by the CAG (2G, coalgate, irrigation, aviation, mining, defence procurement, disbursement of government subsidies, etc), where is the question of holding anyone accountable for failing to go after MLMs, Ponzis and chit funds?
Remember, Saradha chit fund from West Bengal? Millions of people were connected to the chain-money or chit fund companies in West Bengal. These created the wrong kind of jobs and dubious economic growth, which is under threat with no new businesses coming up and chit funds unravelling.
There are more than 50 major schemes operating in the eastern India, commonly called chit funds, but really in the 'business' of paying old deposits with the new ones, thriving on the potent cocktail of illiteracy, greed and regulatory inaction. There are a few thousand smaller schemes that are also conning people with the same modus operandi. And, they are now imploding.
After the Saradha case blew up mid-April, the flow of money has completely stopped. The collapse of Saradha, with ostensible businesses in automobiles, cement, media etc., has claimed several lives.
The media too will be deprived of an important source of revenue. The Bengali print and TV media and the hoardings, thrived on advertisements from Rose Valley and MPS Greenery. Rose Valley has set up its own TV channel now but continues to advertise in popular media outlets like ABP’s Ananda channel. In a last burst of that cosy relationship, the print media is now getting huge ads from the surviving several chain-money schemes which are asserting that they are different from Saradha.
While the RBI has maintained that the deposit-taking companies does not fall under its jurisdiction, market regulator SEBI tried to rein in such companies in the past under its collective investment schemes (CIS) regulations. However, these companies managed to subvert the SEBI orders and continued to flourish with political patronage.
Another interesting aspect of all deposit-taking companies is the source of money. Nobody knew exactly where the money was coming from for these companies, but everybody suspected that it was some kind of a pyramid marketing scheme, made infamous 30 years ago by the failed Sanchaita Investments. Sanchaita Investments went bust in 1980s leaving behind a long trail of ruin and suicides by number of agents and depositors in West Bengal.
So far, all deposit-taking companies, chit funds and CIS operators have received patronage from politicians across the party lines. Especially in West Bengal, the ruler got changed but patronage has remained the same. The CID and state finance department officials had once raided Rose Valley’s office in Tripura, but to everyone's surprise, no arrests were made. Many people had attributed the outcome to Rose Valley's cosy relations with the Left Front.
The Saradha group is reportedly known to be close to Trinamool Congress leaders and the government.
According to Robert FitzPatrick, President of US-based Pyramid Scheme Alert, schemes like Amway, QNet or GoldQuest are an “endless chain”, or a “pyramid scheme”.
“I believe this form of fraud is a clear danger to national economies. They subvert efforts to accumulate wealth. They divert energy and funds from real businesses. They often divert people from seeking more education with their promises of fast wealth. They destroy savings and equity of lower income people. They confuse people as to what a legitimate value-based business is. Unless the regulators and analysts recognize and are willing to assert that this form of business is ‘inherently’ fraudulent and harmful, it is rather difficult to stop any one particular company. Such a fraud, whether the products are soaps, gold coins, vitamins or air in a box, will always cause 90%-99% of the investors to ‘fail’. Whether some of the people engage in retail selling or not, the income promise that relies on continued expansion is deceptive, that is, it is a lie. The financial harm to the vast majority is predetermined. Calling it a business does not make it so. A real business requires an exchange of value,” wrote Mr FitzPatrick to us. He is actively exposing several pyramid, Ponzi and MLMs.
Here are some of the important stories written and representations made by Moneylife over the years…
In May 2011, following the exposé by Moneylife on Speak Asia Online Pte Ltd and its MLM scheme, Moneylife Foundation sent a representation to prime minister Dr Manmohan Singh, (the then) finance minister Pranab Mukherjee, finance secretary Sushama Nath and Reserve Bank of India (RBI) governor D Subbarao urging them to ban all MLM companies and their schemes in the country, or to bring all MLM companies under the regulation of either the RBI or the Securities and Exchange Board of India (SEBI), to stop them ensnaring gullible people.
The massive money, which is raised surely shows somewhere on the balance sheet of the company, filed regularly with the MCA. The primary recipient of the information about these companies is the MCA, and surprisingly the MCA is the least proactive in the entire process of bringing these perpetrators to regulatory focus, sooner before tonnes of money vanish.
Dubious pyramid schemes or money-circulation schemes are looting Indians across economic strata, finds Sucheta Dalal. This will continue since Central and state governments seem unconcerned.
Pyramid marketing companies are looting the public easily, while the government watches. Many countries have banned them outright.
A strange deposit scheme that is proliferating in the states of Orissa, Chhattisgarh, Karnataka and Maharashtra has already collected almost Rs1,000 crore and is expanding virtually unchecked. The scam has elements of money-laundering and possibly the use of fake and forged currency as well; however, the banking regulator would like to pass off the investigation to the respective state governments for investigation under the antiquated Prize Chits and Money Circulation Schemes (Banning) Act.
An international network marketing scheme hawking expensive limited edition coins is attracting a huge following. Sucheta Dalal examines this strange quest.
Moneylife readers know how MLM schemes ensnare lakhs of people by promising extraordinary returns. We learn from the ministry of consumer affairs that the government is now waking up to the need for better regulation of MLMs and Ponzis. At the same time, the powerful Direct Selling Association of the US is lobbying hard for an amendment.
Pyramids are pure fraud. Their business is unsustainable-they promise payment for goods or services of dubious value. The hallmark of these schemes is the promise of sky-high returns in a short period of time, for doing nothing other than simply handing over your money to them, and getting others to do the same.
Even as India bans pyramid schemes under a statute called the Prize Chits and Money Circulation Schemes (Banning) Act, 1978, the country continues to be a happy hunting ground for pyramids because our legislation is deliberately unworkable.
Investors losing money, or falling for dubious Ponzi schemes, is not a recent phenomenon; this has been happening for decades and it is not restricted only to India. Why is it that people repeatedly fall prey to such schemes in spite of being aware of the frauds perpetrated by conmen under different guises?
EAS Sarma, former power and finance secretary, said the ministry of finance, RBI, SEBI, and the investigating agencies should collectively tackle this problem without any delay, as every day of procrastination will only result in thousands of hapless families cheated by the promoters of these schemes.
Spokespersons and dealers of MLM schemes or network marketing schemes respond to questions about their legitimacy by brandishing a 2003 letter issued by the then secretary, ministry of corporate affairs (MCA). What they omit to mention is that the letter was subsequently annulled following complaints about its misuse. This means, the letter used by these scamsters is no more valid.
While there are existing laws such as Indian Penal Code (IPC), the Prize Chits and Money Circulation Schemes (Banning) Act, 1978 (PCMCS Act) and others under which concerned agencies could prosecute the culprits, there is no effective mechanism in place to ensure a coordinated approach to identify the fraudulent operators in advance and book them well before they destroy the livelihoods of thousands of households and launder the ill-gotten funds to unknown destinations.
A set of powerful MLMs, which are part of an exclusive closed club, called the Indian Direct Selling Association or IDSA (on the lines of the Direct Selling Association of the US) has been lobbying hard to make a distinction between their operations and those of others, who they call, fly-by-night operators such as SpeakAsia and Ad Magnet.
QNet, the controversial Hong Kong-based multi-level marketing (MLM) operator with multiple names (GoldQuest, QuestNet, QNet, QI Ltd and QI group are the better known names) refused to answer simple questions like how much money their independent representative (IR) earns on an average every month and why their products are priced so highly. Instead, it sent us a threatening and defamatory mail that raises more questions as to their real motive.
If 2010 was the year of great Indian scams, 2011 was rather of Ponzi and MLM frauds. SpeakAsia managed to top the chart, but soon many others joined the bandwagon, duping gullible investors for several thousand crores.
Nothing comes free in this world, especially money. The universal truth is you need to earn your money by hard labour all the time and there are no shortcuts to double it in the shortest span of time. Therefore, even if your near and dear ones tell you he/she will double, triple, quadruple your money within a few days/months, politely reply to them that it is not possible and what they are advocating is a pure “get-rich-quick” type of scam.
Herbalife, a global MLM scheme also prevalent in India, is believed to be worthless according to hedge fund manager Bill Ackman, who made a detailed presentation on why consumers should avoid buying the company’s products and stay away from the MLM.
Performance appraisals or annual confidential reports of government servants are not exempted under Section 8(1)(j) of the RTI Act and should be disclosed, ruled the CIC. This is the 101st in a series of important judgements given by former Central Information Commissioner Shailesh Gandhi that can be used or quoted in an RTI application
The Central Information Commission (CIC), while allowing an appeal, directed the Public Information Officer (PIO) of the ministry of labour and employment (MLE), Government of India to provide information about annual confidential reports (ACRs) of 17 officers from the Central Labour Service (CLS) category.
While giving this judgement on 18 September 2011, Shailesh Gandhi, the then Central Information Commissioner said, “...this Commission holds that performance appraisals—known as annual confidential reports since the days of British Raj—are not covered by Section 8(1)(j) of the RTI Act and disclosure of these cannot be construed as invasion on the privacy of an individual.”
Kolkata resident VR Sharma, on 20 October 2010 sought information regarding annual confidential reports (ACRs) of 17 officers who were promoted to Grade III based in these reports, from the Public Information Officer (PIO) of MLE. Here is the information he sought under the Right to Information (RTI) Act...
ACR of Central Labour Service (CLS) officers contains eight pages only. Certain officers add a large number of pages in their ACRs having details of the work they have done during the year. Such additional pages are part of Part II of the ACRs. Copies of these additional pages are not required.
Kindly supply copies of following documents/ACRs for the relevant years based on which these officers got promotion to Grade III.
Kindly provide all five years ACRs of the following officers (except additional pages added by them) sent/ forwarded/ submitted by the ministry of labour to the Department Promotion Committee (DPC) for their promotion to grade III of CLS.
Please also indicate when DPC was held for promoting these officers to Grade III-please give dates.
Name of the officers are as follows-
(1) Jag Moran Sharma (2) Devebrata Sinha (3) Prakash Benjamin (4) G Rama Rao (5) MPS Shivkumarswami (6) AA Gilani (7) Lallan Singh (8) KD Saha (9) PP Sarkar (10) S Nagraj (11) G Gopal (L2) BK Sanwarya (13) GM Kadwan (L4) TK Rao (15) Naresh Chandra (16) BK Bhise (17) Smt Mary C Jaikar
Cost of photocopy comes to Rs16 per ACR (8 Pages per year X 2) x5 years=Rs 80 per person.
Rs80 X 17 = Rs1,360 + Rs10 towards RTI fee= Total Rs1,370
IPO of value Rs1,370 enclosed for supply information by registered post at following address: VR SHARMA, LW Commissioner (c), Section A/LW, 4 Floor, RNo-3, Ayudh Bhavan, ORDNANCE FACTORY BOARD, 10-A, SK BOSE Road, KOLKATA-700001(WB)
In his reply, the PIO denied to supply copies of ACRs of the 17 officers. He stated, “With regard to supply of copies of the ACRs of the 17 Grade IV CLS officers on the basis of which they were promoted to Grade III, it is mentioned that seeking personal information of other officers which would cause unwarranted invasion of their privacy and has no relationship to public activity or interest, can not be supplied under Section 8(1)(J) of the RTI Act, 2005.”
Not satisfied with the reply, Sharma, the applicant, filed his first appeal.
In his order, the First Appellate Authority (FAA) stated...
“1. The appellant has now submitted an appeal dated 14 December 2010 (received in this ministry on 20 December 2010) under Rule 19(1) of RTI Act, 2005 mentioning that he has not been furnished the required information.
2. I have examined the matter and found that the CPIO has rightly denied the information under section 8(1)(j) of the RTI Act, 2005. The appellant is entitled to get the information regarding the grading of his ACR but not of the other officers.
3. The appeal is thus disposed of. If the appellant is aggrieved by this order, second appeal against the decision shall lie within ninety days from the date of this order, with the Central Information Commission under Section 19(3) of the RTI Act, 2005."
Sharma then approached the CIC with his second appeal.
During the hearing, Mr Gandhi, the then CIC, noted that the appellant was seeking ACRs of 17 officers and the PIO refused to provide this information claiming exemption under Section 8(1)(j) of the RTI Act.
Under Section 8 (1)(j) of the RTI Act, information which has been exempted is defined as:
“information which relates to personal information the disclosure of which has no relationship to any public activity or interest, or which would cause unwarranted invasion of the privacy of the individual unless the Central Public Information Officer or the State Public Information Officer or the appellate authority, as the case may be, is satisfied that the larger public interest justifies the disclosure of such information: …”
To qualify for the exemption under Section 8(1)(j) of the RTI Act, the information must satisfy the following criteria:
1. It must be personal information: Words in a law should normally be given the meaning given in common language. In common language, we would ascribe the adjective 'personal' to an attribute, which applies to an individual and not to an institution or a Corporate. Therefore, it flows that 'personal' cannot be related to institutions, organisations or corporates. Hence Section 8(1)(j) of the RTI Act cannot be applied when the information concerns institutions, organisations or corporates.
2. The phrase 'disclosure of which has no relationship to any public activity or interest' means that the information must have been given in the course of a public activity. Various public authorities in performing their functions routinely ask for 'personal' information from citizens, and this is clearly a public activity. Public activities would typically include situations wherein a person applies for a job, or gives information about himself to a public authority as an employee, or asks for a permission, licence or authorisation, or provides information in discharge of a statutory obligation.
3. The disclosure of the information would lead to unwarranted invasion of the privacy of the individual. The State has no right to invade the privacy of an individual. There are some extraordinary situations where the State may be allowed to invade the privacy of a citizen. In those circumstances special provisions of the law apply usually with certain safeguards. Therefore where the State routinely obtains information from citizens, this information is in relationship to a public activity and will not be an intrusion on privacy.
Mr Gandhi observed that the concept of ‘privacy’ is a cultural notion, related to social norms, and different societies would look at these differently. “Therefore referring to the Data Protection Act, 1988 of UK or the laws of other countries to define ‘privacy’ cannot be considered a valid exercise to constrain the citizen's fundamental right to information in India. Parliament has not codified the right to privacy so far, hence, in balancing the right to information of citizens and the individual's right to privacy, the citizen's right to information would be given greater weightage,” he said.
The ACR, containing certain information about the officer, is disclosed by the officer to the public authority and such report is prepared by the public authority. This is necessarily done in the course of a public activity. Disclosure of such information cannot be construed as unwarranted invasion of privacy of the officer concerned as it concerns issues raised in the exercise of his public activity as a public servant, the CIC noted.
The Supreme Court of India in Union of India vs ADR in Appeal (Civil) 178 of 2001 and WP (Civil) 294 of 2001 decided on 2 February 2002 observed that persons who aspire to be public servants by getting elected have to declare inter alia their property details, any conviction/ acquittal of criminal charges, etc. It follows that persons who are already public servants cannot claim exemptions from disclosure of charges against them or details of their assets. “Given our dismal record of mis-governance and rampant corruption which colludes to deny citizens' their essential rights and dignity, it is imperative for achieving the goal of democracy that the citizens' right to information is given greater primacy with regard to privacy,” the apex court had said.
Citing the judgement, Mr Gandhi said, “...disclosure of information such as property details, any conviction/ acquittal of criminal charges, etc of a public servant, which is routinely collected by the public authority and provided by the public servants, cannot be construed as an invasion of the privacy of an individual and must be provided an applicant under the RTI Act. The salary of such government officers is also paid from the public exchequer. For these reasons, every citizen has the right to know and obtain information about the performance of every public servant or government officer to ascertain whether the duties entrusted to such public servant or government officer are being carried out.”
The Commission also noted that the terminology ‘Annual Confidential Report’ has been used since the British times when ‘secrecy’ was the guiding notion for the government and consequently, the work done by the latter was not for the citizens' perusal and kept confidential. This was evidenced by the enactment of the Official Secrets Act, 1923.
Over the years, this trend has undergone a drastic change inasmuch as the Indian judiciary recognised the citizen's right to have access to information under the control of government entities in order to bring about transparency and accountability in the functioning of every government department. “The RTI Act endeavours to do away with the notion of ‘secrecy’ which was prevalent in the British era and carried forwarded thereafter inasmuch as Section 22 of the RTI Act specifically provides that the RTI Act shall override the Official Secrets Act, 1923 irrespective of any inconsistency contained in the latter,” the CIC noted.
While allowing the appeal, Mr Gandhi, the then CIC, directed the PIO to provide information about the ACRs of 17 officers sought by the applicant Sharma.
CENTRAL INFORMATION COMMISSION
Decision No. CIC/SG/A/2011/000464/12432
Appeal No. CIC/SG/A/2011/000464
Appellant : VR Sharma
LW Commissioner (C),
Ordinance Factory Board, 10-a,
SK Bose Road, Kolkata-700001 (WB)
Respondent : Prakash Tamrakar
Under Secretary & CPIO;
Ministry of Labour & Employment,
Govt. of India
Shram Shakti Bhavan, Rafi Marg