Citizens' Issues
Bailouts for Crooks

With the WB government bailing out Saradha, we have set a dangerous precedent and reached a new low in accountability

In mid-April, the Saradha group, a Ponzi scheme in Kolkata, went down, taking the savings of poor people from across the state. This will not be a surprise to readers of Moneylife. Our regular readers know that we have been badgering various authorities—from the Reserve Bank of India (RBI) to the prime minister’s office (PMO) to the ministry of corporate affairs (MCA) to do something about multi-level marketing schemes (MLMs) and Ponzis. We have pointed out that:

    Unregulated chit funds, pyramid/Ponzi or MLM companies are able to lure people to part with several thousand crore rupees each without any regulation, investigation or supervision.
    A massive group, like Sahara, with its logo emblazoned on the shirts of cricketers in a cricket-worshipping nation, operates almost entirely outside any formal regulation. It flaunts its cosy equation with politicians across the spectrum, sports stars, film stars, media stars, judges, god-men, bureaucrats and sundry fixers. Nobody questions its business arithmetic and no one can tell us which of its businesses earns it the kind of post-tax returns that allow for mega-sponsorship deals or Subrata Roy’s lavish lifestyle. Details of taxes paid by the group in the past 10 years are unknown. Yet, according to its own advertisements, it has raised and repaid a mind-boggling Rs73,000 crore as deposits in a residuary non-banking finance company supervised by RBI.

    Multinational MLMs, registered abroad such as Amway, Herbalife, Tupperware and more dubious ones such as QNet, are known to be in violation of the Prize Chits & Money Circulation Act, but the government makes no effort to act against them. They are big sponsors of television programmes with top sporting stars as their endorsers.

    Whether SpeakaAsia, Saradha, Rose Valley or MPS Greenery—the business model has a pattern—media support through advertisements or by setting up television channels and newspapers and cosy relationship with regional political parties. Moneylife’s website has many articles on these.

    In May 2011, Moneylife Foundation wrote to the prime minister about the need to act against SpeakAsia and other MLM schemes. Moneylife has repeatedly reported that over 10,000 Ponzi companies and dubious chit funds (as collective investment or chain schemes masquerading as chit funds) operate in every Indian state. The big ones raise upwards of Rs1,000 crore in a matter of months by handing out returns in excess of 100%, which are tied to luring new investors into the scheme.

    In July 2012, former union secretary, EAS Sarma, at our request, wrote to the prime minster, revenue secretary, MCA and the RBI governor about the dangerous proliferation of MLM/pyramid or money circulation schemes that “swindle the unwary public by offering them misleading inducements and depriving them of their hard-earned savings.” He called them a ‘scourge on society’ and asked that they be dealt with an iron hand. Mr Sarma also pointed to their political links. Nothing happened.

This is the India that we live in. Yet, as soon as a big collective scheme blows up, intellectuals and columnists clamber on to a high moral platform to berate people for their greed and gullibility in falling for the promise of extraordinarily high returns offered by these Ponzis. My question is the opposite. Why should an ordinary person assume that a company that owns IPL teams, or whose founder shares the stage at public events with top political leaders, be anything but law-abiding? And, if this is untrue, why shouldn’t the buck stop at the very top?

Every politician who protected and helped legitimise the dubious Saradha group, Rose Valley and MPS Greenery in West Bengal—to name just a few—should be held accountable for its collapse. Would a group like Saradha have been allowed to start a newspaper and a television channel if union ministries had questioned and scrutinised its source of funds?

It is time we, the people, began to ask these questions. Over the past two decades of a liberalised economy, we have allowed policy-makers, regulators and ministers (Union ministers and state governments are equally culpable) to obliterate the distance that used to be maintained between government and the businesses that it regulates. Now, many of the shadiest businessmen are inside parliament and involved in policy-making. Meanwhile, each new scam is buried after some perfunctory noise in parliament largely to empty benches. Even joint parliamentary committee (JPC) reports have only served to delay investigation until public anger cools down.

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, 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?

Even in the Saradha case, West Bengal chief minister, Mamata Banerjee is only containing the political fallout of a situation where some distraught investors committed suicide. But her hasty action sets a dangerous new precedent. Mamata Banerjee has created a Rs500-crore ‘relief fund’ to be raised through a 10% tax on tobacco and tobacco products; this will be supplemented by proceeds of the seizure and auction of Saradha group’s property. A commission will ensure that ‘most ordinary and small investors’ are taken care of. She is mum about the fact that Trinamool nominee to the Rajya Sabha, Kunal Ghosh, headed the now shuttered media business of Saradha.

It is ironic that the former FICCI general secretary, Amit Mitra, will rubber-stamp this desperate idea of his financially illiterate chief minister, which is likely to be emulated by corrupt state governments across the country in future Ponzi failures. Consider the consequences.

West Bengal came up with a tax on tobacco companies, probably because ITC Ltd is headquartered there. Other state governments may tax alcohol or automobiles, depending on their presence in the state. Some may come up with a populist tax on multinational company products—especially if a global Ponzi goes bust. Where does it stop? Can taxes be raised to pay for losses caused by the failure of Ponzi schemes?
Mamata Banerjee’s bailout for Saradha investors signals that the gullible will be protected if the Ponzi collapse is big enough to have political consequences. Those who avoid such schemes, opting for safe, taxable and bank fixed deposits with lower returns, will feel foolish and end up paying the bailout tax. Does the government really want to signal that it is stupid to be prudent and careful? Do we really want to allow politicians to start a new bailout tax or scam tax to pay for the financial scandals caused by their inaction or complicity?

We are, indeed, in a strange situation. Regulators and tax authorities will harass and hound legitimate businesses over compliances, taxes and permissions, while the most dubious businesses will be allowed to lure people and destroy their wealth with impunity. We have now moved to yet another level of lunacy, when the exchequer will foot the bill for such private scams. We need to do something to stop this madness now.

Sucheta Dalal is an award-winning journalist and the managing editor of Moneylife. She can be reached at [email protected]



Vinay Joshi

4 years ago

Hello Ms. Sucheta,

Well articulated post after a long time under your byline. Hope you read my comments with due diligence & respond.

Is it not that the fourth estate & third estate predominantly safeguarding falling democracy?

Modi’s Govt. on May1, released full page ads in print media in Mumbai, including English dailies about its highlights.

None, by the Maharashtra state Govt. [possibly it had nothing to state OR things are taken for granted.]

All were busy on April 30, to launch the ‘MARATHI’ channel ‘Jay Maharashtra’ of ‘SAHANA’ group, politicians of all hues, glitterati of stars & bigwigs attended the inauguration in the five star hotel. The Charman & MD of ‘SAHANA’ is Sudhakar M. Shetty. The said channel aired since May 1.

The said promoter of the channel, erstwhile owner of dancing bar ‘Deepa Bar’, in western suburb was raided arrested & the dancer worth 100K, history sheeter.

The function was attended by Sushilkumar Shinde [MoHA] whose ministry clearance is most important.

So as Manish Tewari vehemently claims that ‘permission[s] is granted to co’s not individuals. His IB ministry gives all clear to air the channels. [actually he was speaking on ‘chitgate’ as Cong. spokesperson.]

Further, May 1, paying homage to ‘Hutatmas’ at Hutatma Chowk, certain Shahirs wanted to sing in praise, WERE NOT ALLOWED as being silent zone!? It was just one hour programme. No soul around at the HC or other functional banks or any residency in the vicinity – so as to coz any disturbance.

But within a km radius i.e Churchgate & Marine lines – ‘DECLARED SILENT ZONE AS PER HC ORDER’, gala wedding receptions & parties can be had with blaring music DISTURBING the residents UP TO past midnight. So the might & BLATANT SUPPRESSION by the mighty.
Now ‘F’ & ‘D’ road citizens are bound to approach the court.

The above out of the context as in finance products essentially meant to highlight the might.

In KP scenario Advani prevailed to bail out A’bad coop bank. [Mercantile.] WHY?

The kingpin of HM scam is yet not got, unknown. HM was to be an Economic Minister at the center. You have written books on him. Yet KP is trading. [now SEBI desires lo-co access to retail investors!?]

What has happened to Telgi scam?

WHY NO PONZI SCHEME – after Charles Ponzi, 1929- in US have taken place?

I’m prepared to debate the biggest PONZI in US of 2008, ‘quants & algos’, but not in the shade of gullible poor looted in small town & cities of India including metros.

When poor get cheated we talk about easing financial inclusion. See the dichotomy – KYC not adhered to results in massive – so called – ‘money laundering’.

Again allowing ‘non banks’ into inter bank card payment system [as announced in annual rate policy] IS REQUIRED TO BE VETTED!!?

As regards Sahara all things will now fall in place. The aspects are under the apex court scrutiny, the designated retd.Judge & the staff has to submit its report on verification in the warehouses of SHCIL & other. This exercise is at a cost of 80CR, to be recovered from Sahara.

U.K Sinha is not a person to leave it. [What about RIL? Insider trading!]

Ms. Sucheta, we require first amend the laws to ‘PROSECUTE’ the culprits, put the ‘EXACT’ violation & ‘breach’ of ‘financial system’ as in place.

The Achilles heel in respect of WB adopted law – empowering the state to seize properties, no formal complaint required. Well, GOOD!!?

Can such a law entail to ‘override’ mortgages & seize assets from banks? Mortgaged assets!
The banks are likely to petition the courts.

Further the laws [proposed] does not prohibit ‘FIRMS’, in accepting public deposits.

Ms. Sucheta, I’m prepared to file a petition in SC against Amway & Tupperware – PROVIDED – you highlight the ‘LEGAL VIOLATIONS’ in accordance to the laws & rules & regulations.
[so read my earlier para re amend laws.]

When gullible believe in ‘tantriks & mantriks’, [no law[s] have been curbing it] so how you think ‘financial tantriks’ will not swindle?

In which manner you thought that writing to PMO including PM or otherwise a corrective action will be taken?

WHY you didn’t approach – straight away – LS & RS filling up the respective form[s] & documentation? Mr. E.A.S Sarma new the politicians but didn’t advise you the course of action to ‘NAIL’ them.

WHY STILL NOT TAKE IT? Of course today spilling the beans will be of no use as it will be futile an exercise. [what can the soft talking headmistress [contemplating to contest from Punjab, learning Punjabi] & the Principal of the school do with students abandoning classes with impunity? Got it.

Why it took 22 mnths for the scam to surface perpetrated earlier? Any idea?

We the ‘people’, is just a preamble, none know the definition of the ‘Republic’, least of all the politicians.

We the people want Ashwani Kumar & Pawan Bansal to be ousted! What can we do?

All JPC’s & PAC’s is a farce for the intelligent just as ‘chit funds’ is for the gullible, DUPED!

Mercurial Didi is no subject matter, is she a CM or activist. Her only fame was that while in Cong, she won against the stalwart Somnath Chateerjee, in the wave of 1984. Nothing else!?
In which manner she will curb rampant smuggling of tobacco products from neighbouring states? More than 30KCR is the amount in her state.

Why you talk of Amit Mitra & not Derek O’Brien? Amit Mitra should come out & state that Singur people are most affected in this ponzi, coz of political bosses.

WE NEED TO GET 49[O] MANDATED IN EVM’s – ‘none of the above’, instead of exercising it individually – ‘which is not’ secret ballot as per constitutional provisions. First past the post should be abolished.

Russell’s Paradox.


anantha ramdas

4 years ago

Instead of taking to task her own partymen, Mamata Banerjee wants people to smoke more so that she can collect additional taxes to cover the disaster that Saradha has caused.

She may have helped in changing the communist rule in the state but, in the process, all that she has done so far is putting tantrums at will. It is very doubtful if TMC will ever come back to power considering the catastrophies of hospital fire, cash going up the smoke thru Saradha. And we do not know what else is in store for the poor affected people of Bengal.

Thanks, Sucheta, once again for writing about this.


4 years ago

Sucheta & co are right on the nail. No surprise there.

This insanity is just another example of the fortune-at-the-bottom-of-the-pyramid. Steal 10 bucks a month from each of a billion Indians, and you can easily live a life of luxury.

The problem here lies in enforcing the separation between the fence and the raiders. If they're the same, the crop is kaput.

Funnily enough, the current descent of capitalism is echoed across the globe: witness the US Supreme Court's decision allowing PACs in.

Hard to say where this will lead us all.


4 years ago

Payback for the paintings he bought of didi!
On a serious note this says well start a ponzi scheme, loot millions of innocent investors, bring on some political heavy weights and they will see to it that no harm comes to the bosses.


4 years ago

Bang on target, Bull's Eye.Salutes to the author.

nagesh kini

4 years ago

In humans "multi-organ failure" leads to death". What we are facing to day is a classic case of "Multi-Regulatory Failures". Why any of these money multiplying schemes do not within the Regulatory ambit of either MCA, RBI, SEBI or ITDA beats logic. Now all of them have woken out of their slumber. Each investigator wanting to guard its own turf will seize some records and it will be a Satyam repeat. The AP Police were also in the game!

In the current scenario Saharadha is only the tip of the iceberg, there are other time bombs waiting to happen.

Gaurang Shah

4 years ago

Can this order of WBG challenged in a court of law?

Vinayak Bhimarao Mudholkar

4 years ago

Hats off to Sucheta & her team!!!

Gaurang Shah

4 years ago

Please refer to my emails to you on Empower Network, USA which is a cousin of SpeakAsia and now being promoted in India.
ML is the only magazine crusading against fake MLMs and IDSA needs to be more active in order to separate the wheat from the chaff.

Arun Mehta

4 years ago

All other scams pale in comparison to SAHARA ,a PONZI scheme promoted nurtured by a master con with a veneeer of a true "Son of Bharat maata" and any one pointing a finger at him is a"True enemy of Bharata Maata" and an "evil' force.

One has to recall his mastery of control of politicians of all hue by an ad published during the times of VPSingh as an FM where he reproduced an full page ad ,which was nothing but a true copy of letter from IT Office listing out names of leading politicians(all parties covered) except the left,who have/had deposited funds with his outfit and the asking for details there of.The fate of the IT officer can be imagined as that the last one heard from the Govt of the day then.
The "Mango" people can only hope for Apex court(thro the current SEBI matter pending with SC) to expose this "Mother of all funding Scams" and expose the politicians nexus once for all(perhaps, too much to hope for).The Apex court is the only body ,the noble son of "Bharat Maata" is scared of.The others he has 'taken care of'.

Truth about Mutual Funds – I: Fifteen reasons why mutual funds are good for you

This is the first of a two-part series on essential facts about mutual funds. The second part will discuss the common mistakes people make and end up losing money and faith in mutual funds

One of the giants of the investment industry, John Bogle, said “Your best hope of wealth creation is by developing a sound investment programme through mutual funds”.


Here are fifteen compelling reasons why mutual funds are good for you.

  1. The single most important function of mutual funds is to help you in earning a regular income or to generate capital gains over a period of time.
  2. Mutual funds do not offer an assured return. But, they have proven to be profitable long-term investments for individuals.
  3. Mutual funds have great potential. They generate higher returns than something guaranteed. They have created wealth for generally cautious investors who prefer safer investment options.
  4. Mutual funds have made investing very simple. You can do it with greatest of ease. And they are very economical and cost effective. But, remember, mutual funds are not perfect. They are almost perfect.
  5. Mutual funds are tightly regulated by the Securities and Exchange Board of India (SEBI). There can never be a case of any mutual fund vanishing with your money. You can be rest assured. It is just not possible.
  6. If you do not have time to research individual companies, then mutual funds are the best way to invest. A team of investment professionals does all the research and investing on your behalf. You just have to sit back, relax! And hold your mutual funds for long periods.
  7. Your money is pooled along with others, to take advantage of investments you normally do not have access to.
  8. Mutual funds are required to adhere to well defined risk management parameters and investment patterns. Your money gets invested with discipline and prudence.
  9. They have a nice way of lowering your risks. By spreading your money across various assets and strategies. Thus protecting you against putting too many eggs in the wrong basket. 
  10. Mutual funds promote good habits of savings and investing. They have protected countless investors against costly mistakes in the stock markets.
  11. Mutual funds help you in managing your future better. By helping you to achieve your financial goals. They help you in getting you where you want to be.
  12. You are free to sell your mutual funds anytime. You can sell them in parts or in small portions to suit your requirement. You get your money back in 3–4 day’s time with no questions asked.
  13. The temptation to engage in the ever so exciting, but self-destructive trading is more or less absent in mutual funds. Remember, in the short run hares may have more fun. But, in the long run it is always the tortoises that win the race.
  14. You don’t have to spend time in picking stocks. Neither are you required to monitor the stock ticker tapes or the stock markets very closely.  It frees up your time for you to do all those things you would like to do.
  15. Mutual funds generally provide terrific value to long-term investors. They are excellent vehicles for accumulating wealth for yourself and your family.

In the second part of this two-part series we will take a look at the essential facts about mutual funds.




4 years ago

Well i would say the above points are good if you r climbing the hill, as soon you reach higher risk will increase.

In short if market is good any stock will boom and as a result mutual fund too and if market crashes mutual fund too crashes Sometimes they even change their names, they sell their fund to some other fund houses.

So its matter of "right time of investment" and currently its right time.

Additionally i would like to point about tax saver mutual fund.They are like most favorite for fund-managers i believe they make their personal income out of it and defend it saying the tax gain is the benefit they have offered.

The author has not written anything magical.



In Reply to uttam 4 years ago

Mutual funds are mostly misunderstood. Thus the objective of this article is to inform readers about mutual funds.

To try and bring out those strong aspects of mutual funds which are normally ignored / overlooked.

Suiketu Shah

In Reply to uttam 4 years ago

Agree 100% Mr Uttam.Also sebi has mad rules for investors in mutual funds so anti-investor and so difficult to understand that people who donot know much about mf rightly prefer bamk fd's which even after tax give 10%/yr.Mutual funds normally give 13-14% per yr long term(if you have the right agent and have entered the right mutual fund when market is down).Is it worth taking risk for 3-4% more esp at a time where 9/10 mutual fund agents are crooks.the answer is a clear no.

R Balakrishnan

4 years ago

Enjoyed reading it. By keeping it so simple, the message gets through nicely.
Well written, Sir.



In Reply to R Balakrishnan 4 years ago

Feeling humbled Sir. Thank you so much for your kind words.

Bailouts for Crooks

With the WB government bailing out Saradha, we have set a dangerous precedent and reached a...

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