Companies & Sectors
The Life Insurance Corporation coughs up crores for tobacco investments

LIC has invested Rs3,600 crore in three tobacco companies in 2010-11, and has acquired more shares of ITC over the years. This has been revealed through an RTI query

Business moves do not get more ironical than this. When tobacco has been identified as the biggest preventable cause of death across the globe, public sector behemoth Life Insurance Corporation of India (LIC) has coughed up a huge amount to invest in tobacco companies.

LIC has invested more than Rs3,600 crore in three tobacco companies in 2010-11, an RTI query has revealed. Anti-tobacco activists and cancer specialists are outraged, and believe that it is unethical and ironical that India’s largest insurance company would invest in something that is injurious to health.

The information was sought by an activist’s consortium called Voices of Tobacco Victims. The public information officer’s (PIO) reply shows that LIC has invested Rs3,600 crore in three tobacco companies. Indian Tobacco Company (ITC) has seen the biggest investment of over Rs3,500 crore last year, while the other two companies are VST Industries and Dharmapal Satyapal (DS) Ltd, which manufactures smokeless (chewing) tobacco. LIC also owns shares of ITC, and the number has steadily gone up over the years—from 51 crore in 2009 to over 99 crore on 31 March 2011.

However, instances of the government holding shares in big companies are not new. The Specified Undertaking of the Unit Trust of India (SUUTI) held substantial shares in Axis Bank, ITC and Larsen and Toubro (L&T). These companies, though professionally managed, want the government to hold stock for fending off hostile takeover bids. British American Tobacco (BAT), the parent company of ITC, holds almost 32% stake in its Indian arm; and its attempts to gain a majority stake have been well-publicised.

Though the public insurer’s strategy may be perfectly legal, it is ethically incorrect for LIC to invest in tobacco companies without the prior approval of the investors, said Dr Vishal Rao, convener, Tobacco Free Bangalore and national executive member of the Federation of Head & Neck Oncology. “India is one of the early signatories to an international treaty called Framework Convention for Tobacco Control (FCTC). The huge investment by LIC in one of the biggest tobacco companies of India is surely against the spirit of FCTC,” he said.

In her reply, LIC CPIO (chief public information officer) Saroj S Dikhale has said that LIC does not charge any extra premium from tobacco users and smokers for issuing an insurance policy. “Depending on quantity, duration and type of tobacco consumption, while large numbers of customers are accepted without any extra premium, some of the applicants may be charged higher premium,” the reply said. However, it is not known how many claims have been rejected by LIC due to the insured’s habit of tobacco consumption.

According to a WHO (World Health Organization) study in 2010, around 34% of the population above 15 years in India consume tobacco in different forms. Minister of state S Gandhiselvam said in a written reply in Parliament a few months back that around eight to nine lakh Indians die every year due to diseases that result from tobacco consumption.

Dr PC Gupta, director, Shekharia Institute of Public Health said, “It is a shock that the investment with ITC has doubled in the last two financial years rather than coming down over the year. On one hand, the government is spending nearly Rs10,000 crore on treatment of tobacco-related illness and on the other hand, they are investing Rs3,500 crore in a leading cigarette manufacturer.”

A case against the harmful effects of gutka (chewing tobacco) is pending before the Supreme Court for an outright ban. “If the Supreme Court bans it, then what will happen to the invested public money in DS Group?” remarked Dr Pankaj Chaturvedi, associate professor at Tata Memorial Hospital, who has been working closely with the activist group.

Will LIC dump its tobacco shares? Only the health ministry can take a call—but the insurance giant is under the ambit of a different regulator.

User

COMMENTS

malq

5 years ago

It is also likely that Life Insurance Corporation of India invests in tobacco companies like LIC to assist its bottom line. A memorandum from Philip Morris to the new Czech governement was (apparently) leaked to the press in the early 90s. It argued that the medical cost of lung cancer and other smoking-related diseases was more than offset by the early deaths - and therefore lower pension payments - caused by the same diseases. In India, the same could be true at LIC - more smoking, earlier deaths, lower payouts.

citizenindia

5 years ago

personally i think banning tobacco is not a solution. as it will foster illegal industry , something our law will never be able to contain. the awareness has to come from within. try and discourage smoking so that it stops as a result of changed consumer behaviour. and if someone still wants to consume tobacco inspite of it being taxed and warned, so be it . gutka industry isnt regulated the way cingarette is. and itc isnt just a tobacco co anymore. its big in hospitality , retail , entering agri . tobacco is the cash cow. i think itc makes a good investment bet . the morality part can be debated though. if i were the govt, id sell itc stake to the foreign promoter at a premium, use the money to spread awarness against tobacco.

REPLY

Uma

In Reply to citizenindia 5 years ago

If bans dont work, then legalize the Opium trade too because it is source of several life saving drugs.

Why people try to teach morality to "Janta" only why cant the tobacco industry follow the path of morality?

How long are we going to be fooled that ITC is not a tobacco company!!!

If teaching values was so simple, world be such a nice place to live.

How can an industry blissfully watch the disaster unleashed by their own product and continue to blame it on "personal choice"?

Obama had access to the best health care and found it so difficult to quit smoking....what do you expect from poor Indians!

malq

In Reply to citizenindia 5 years ago

90% of ITC profits/revenues come from the tobacco business, one way or the other, and that's a simple fact. For a moment ignore the colonial vestiges and ownership aspects. And as for LIC:- LIC's Mission Statement, here:- ""Mission :- Explore and enhance the quality of life of people through financial security by providing products and services of aspired attributes with competitive returns, and by rendering resources for economic development." The first thing is "quality of life". http://www.licindia.in/mission_vision.ht... . . . So how does tobaccio enhance "quality of life"?

vivek p

5 years ago

Dear malq,

Thanks to RTI , today there is some avenue to get some info.But it does not give stariaght line info.

Having worked in insurance & banking profession (in PSUs as well), I know the inside rules and “actual practices”. If you come to know “how and why” decisions are taken in PSUs, you will feel that public money is channelized into private pockets of a team of sr. executives at insurers/banks and finance ministry officials.

Examples below explain you the true picture (and each example can be subject of a RTI query) -

1. Investment department of PSU insurance companies is influenced (bribed) by all concerned – brokers (for brokerages), companies (for funds), PE/investment guys to control short term as well as longterm movement of stocks. You will be surprised to know that how many times call money market is used to park funds to delay a particular level investment to help the influencers. The yearly fund available for investment vary from Rs. 5,000 crore to Rs. 100,000 crores depending upon the PSU insurer/bank. Add to this a 10 times bigger no. for the funds already invested in previous years. You get minimum funds available for investment/movement to the tune of Rs. 25,000 crore to more than Rs.100,000 crore (LIC) with each PSU entity.

2. Calculate 0.01% to 0.1% of the above amount and you will get the commissions/bribes numbers available as a bounty to be shared among....

3. Children of sr. executives are working in private banks/PE/investment arms of corporates who are given the jobs because of their fathers’ position only. You can understand the way investment decisions will be taken.

4. From one to three years before retirement/quitting PSUs, the sr. executives start advising the firms of the influences with the pre-agreement that after retirement/quitting, they will join them as consultants/advisors/directors. Check the consultants/stock/insurance brokers/TPAs working with insurance companies and behind majority of them are retired PSU executives. No doubt such brokerages/TPAs are always getting business irrespective of professional level of services given by them.

5. Bad debts or sunk investments –IRDA only came into existence in 1999 and for many years IRDA did not have a reporting format. Even today IRDA only receives report. It does not ask how & why of sunk investments. Insurers have shares (physical) of companies which even do not exist today.

6. Bribes are given both in cash and kind – five star hotel dinners, club memberships (paid by influencers), foreign trips with family all paid, jobs to children in corporates, shopping, movies tickets, wines, women and all…

7. At one point of time a union activist had extracted info that all sr. executives of a PSU insurer/bank had taken their families to Europe & America and found out actually who paid the hotel/airline bills. It was paid by the “influencers”. Incidentally, the Sr . executives also claimed the bills (for themselves, not the family) as a reimbursement of official tour travelling and hotel expenses. On enquiry, the hotel/ airlines revealed the real paying parties and the family details who accompanied them.

Sad part is that there are hundreds of such trips every year in insurers/banks and this kind of scam is still RUNNING in all PSUs. Even today personal trips of children/wives of sr. executives are financed by corporates by pre-arranged air-tickets/taxis/guest houses/shoppings all over India and internationally.

(Nothing happened even after reporting the facts with documents to Finance ministry as one Finance ministry official called the complainant and told him that he is being sent a letter for two two months training in London by the company).

8. On training I recall that one engineer at one of Oil PSU ( now sold to privates) saw in his personal file that he was nominated for attending a training program in Germany for 3 months where as he was never informed. On complaint to the Petroleum Minister with copy to Prime Minster, President of India , it was found that one official from the ministry had gone in his place. And it was happening for many engineers for many years. Later on all engineers were sent to Germany but no action was taken against the ministry officials.

9. Harshad Mehta was a clerk in investment dept of a PSU insurers and he leant from his seniors workings. No doubt he failed because he gambled on hundreds of crores by becoming a manager of the show rather than working like his seniors who only took bribes/favours of a few thousand to few lakhs.

10. I don’t file the RTI app as I know the facts and numbers and more importantly the authority to whom we’ll complain i.e. CVO of each insurer/bank and CVC organization are part of the same team. Many officials have done bungling of crores and after “managed minor punishment” (means censure/warning and no promotion for 3 years) they are back to prime postings with normal promotions. (It will be a another big report in itself how CVO and officials in the Vigilance/Audit departments are posted in PSU insurers/banks)

REPLY

Mohit

In Reply to vivek p 5 years ago

Great one Vivek, I have in the past tried to address such problems to Money Life folks as well as regulators but to no vain. The redent HDFC front running is a classic case how this will be muted by powerful Deepak Parekh. Both SEBI and IRDA keep mum when it comes to PSU - dont have to ask why. Yes in many ways both Private sectors and public sectors do play hand in hand when it suits them. Why dont you post this in facebook. We have to get some jouranalist to cover thiese stories as well.

uma

In Reply to vivek p 5 years ago

that is awesome....you seem to be a whistle blower.....you seem to be doing an ANNA! keep it up...dont lose heart.

vivek p

In Reply to uma 5 years ago

thanks for encouraging words. Real issue is the punishment mechanism is not good. For which we support ANNA's janlokpal so that at least those who are caught get due penalty.

malq

In Reply to vivek p 5 years ago

Dear Vivek P, thanks for writing in.

Please let us know if you would like to send copies of your correspondence to us c/o MoneyLife for possible follow up?

Thanks/VM

vivek p

In Reply to malq 5 years ago

Old cases' guilty parties are now retired and enjoying in private firms/consultancies.

Like ur exposure of SEBI, lot of dirty dealings are there in insurers/banks also including IRDA,RBI.

Sure I'll give you copies of new cases from now onwards.

Voice of Tobacco Victims

In Reply to malq 5 years ago

Dear Vivek P,
could you please share some of you knowledge and work done so far with the VoV team? You can write @[email protected]

vivek p

In Reply to Voice of Tobacco Victims 5 years ago

through this article I came to know about VOTV. But apart from ethical/moral/social angle , how can we stop them legally? I am happy to join you thorugh my little efforts.

Does fundamental right to life - Art 21 can be used in Supreme Court to force govt to ban tobaccco as it, in a way, restricts life?

B V Vijaya BE CIS

5 years ago

Each action has its own consequences. Here LIC invests to make profit by investing in “Good & Strong” shares available in the capital market. Neither it is producing cigarettes nor advices smoking.
If you think of ethics, well LIC should not invest in Tobacco companies. Mahatma Gandhi was against liquor & wanted people to ban. But all Govts get their major income from this sector. The expenses in solving liquor related crisis thru Police Dept, Judicial wing & financial loss to dependents of persons dying because of liquor, loss to Nation by virtue of loss of productivity of & social impact are far much more than the income the Govt. gets of this sector. So also with smoking.
Let each of us think on this element. The media should also think of their responsibility & not to high light or make more glamour by publishing such articles.
There TWO Mutual Funds who do not invest in shares of liquor manufacturing.
Media should also think of not glamorising / giving too much of importance for facts which are some times controversial. There are so many subjects which could be thought form the over all health of society & Nation. Let us think in the right direction.
MERA BHARAT MAHAN HAI

REPLY

uma

In Reply to B V Vijaya BE CIS 5 years ago

Vijaya, it is sad that a company that earns most of it profit from sale of a product that is designed solely to kill is considered is "good and strong" in your mind. I agree that liquor is equally disastrous but it boasts of safe level unlike tobacco that is harmful regardless of dosage and duration.

J V Bhat

5 years ago

Very sad to note that a company like LIC which was once the pride of India is nowadays in news for all the wrong reasons. Since the last decade LIC is undergoing a massive transformation. While a certain percentage of it may be good for the Insurer, it is equally important to note that there have been several protests in LIC where the employees have blamed the management for mismanaging the company. Secondly in 2005 or 06 it sponsored the Zee Cine awards by spending hundreds of crores, but later it was learnt that the Chairman at that time had some vested interests in that sponsorship. From then onwards LICs reputation has always been at stake. From controversies to large scale corruption. I think the CBI should initiate a proper unbiased inquiry of how LIC has been investing its funds for the past decade. It will surely open a can of worms but will also wipe off the stained corridors of LIC and LIC will once again be called the pride of the nation.

D N RAO

5 years ago

It is a shame on the part of LIC to invest Rs.3600 crores in TOBACCO companies which are ruining the lives of human beings. How come LIC Invests in TOBACCO companies without the approval from LIC Policyholders. Central Govt. officials should take stringent action against the erring officials of LIC for having invested the public money in the TOBACCO companies that are destructive to human beings. The concerned officials shall be dismissed from service. The invested money should be brought back and reinvested in constructive companies that are useful to human beings.

REPLY

UMA

In Reply to D N RAO 5 years ago

The current value of LIC's share in ITC is 20,000 crore. UTI has shares worth 18,000 crore as recently published. Other Govt agencies - Oriental, New India, General insurance companies have shares nearly 2000 crore each. It seems Govt of India is running this tobacco company!! What a shame!

malq

In Reply to D N RAO 5 years ago

DN Rao, thank you for writing in.

A simple RTI applicatio on the subject would be enough to start getting the truth out on this one.

Humbly submitted/vm

sapan

5 years ago

its ok no problem. NAV should go up.

sumana roy

5 years ago

So much of righteous indignation about an article that merely reports what an anti-tobacco association has said.
This smacks of the same intolerance shown by the guys who bashed up Prashant Bhushan.
But lets get serious... Is LIC increasing its stake in ITC only because it is a great investment opportunity?
Or is this a part of the strategy where so-called "professionally" managed companies - ITC, L&T wanted govt institutions to hang on to a chunk of their equity to prevent a hostile takeover. In ITC's case its largest shareholder BAT is seen as hostile by incumbent management and in L&T it happened after the Birla takeover attempt. Axis Bank is another example but for different reasons...

REPLY

UMA

In Reply to sumana roy 5 years ago

How can you label a tobacco company "responsible" and "professional". Every consumer product has a grievance redressal mechanism. Tobacco companies are the only once who leave their customer high and dry.....most of them have disease and disability but blame destiny not industry.

John Pinto

5 years ago

Does the MDT do any real research. then they will know that ITC is a diversified company with interests in many more things like FOOD, Consumer durables, FMCG, Agriculture, paper etc. Investment in ITC is much more that just investment in Tobacco and tobacco related products. Voices of Tobacco Victims and MDT is it one blind man leading another

REPLY

UMA

In Reply to John Pinto 5 years ago

one must know how to hide your ignorance. ITC's 90% profit still comes from cigarette! Diversification is a careful strategy to fool society, investors and government. Their entry into kid's FMCG ( biscuits, noodle, stationary, wafers) is a way to build their image among their potential cigarette buyer...kids and adolescents!

malq

In Reply to John Pinto 5 years ago

John Pinto, if ITC is a "diversified company", then all of us are the red-nosed reindeer and Yogi Deveshwar is Santa Claus. Barring hotels, where also much remains to be understood on realities, the core business of ITC does happen to be tobacco in all its different forms.

AND your good ITC has a lot to answer as far as Operation Berkshire goes, too . . . http://en.wikipedia.org/wiki/Operation_B... . . .

Humbly submitted. from Monghyr.

Raghav Jain

5 years ago

LIC earns huge profits by investing in Blue chip companies. ITC is a giant and needs no introduction. The profits earned by LIC are distributed among the policy holders in way of Bonus. It is in the interest of Public. LIC has nothing to do with cigarette smoking.

REPLY

malq

In Reply to Raghav Jain 5 years ago

Raghav ji, so if next week a well known "giant" like the Medelin Cartel group or the "D Company", both of whom also have plenty of legitimate businesses,decided to ask for funds from LIC, then on the basis of profits alone your due diligence would be complete, and you would have no objections?

Brilliant. Maybe you should apply for a post at ITC CorpComm/PR. Or wait, Pinto ji go gusaa aa jayega. . .

Humbly submitted/malQ

Manoja

In Reply to malq 5 years ago

Malq,

The last I heard, Medelin Cartel and D Company are both declared terrorist organisations or criminal organisations. So they will fail at the very first step of due diligence carried out.

Same is not the case with ITC. They are carrying on a perfectly legitimate business in an organised manner. Unless there is a law which declares smoking to be a criminal activity, I dont see any reason why ITC should not be a sound investment option.

malq

In Reply to Manoja 5 years ago

Manoja, the words I used was "like", in the case of Medelin, D Company or ITC. As far as laws pertaining to smoking are concerned, they are evolving, and you may be well advised to read the risks associated with, for example, the MSA:-

http://en.wikipedia.org/wiki/Tobacco_Mas...

There is a sufficient risk involved in investing in tobacco companies in India, too, which LIC is not empowered to place public funds into.

Is smoking a criminal activity in India? Yes, it is, increasingly so.

Can people be prosecuted for selling aids to smoking? Yes, they can.

Is ITC carrying out an organised business in a legit manner? Well, there does happen to be more than one school of thought here.

Humbly submitted.

UMA

In Reply to Manoja 5 years ago

Manoja ji, that is the irony. D company may have killed few hundred people and you call them terrorists. One million Indians die every year due to tobacco and you call them legitimate. It is indisputable that ITC is the leading cigarette maker of India. LIC is supposed to insure life and not ENSURE DEATH!

Dr Vaibhav G Dhoka

5 years ago

Investment by L I C or any other financial institution in any company without any malafide intention is RIGHT.After all any investment by them should be in the interest of of public. Because companies like ITC have entered in many many new business propositions and therefore should not be seen as wrong.

REPLY

Uma

In Reply to Dr Vaibhav G Dhoka 5 years ago

you need to know more about ITC and other tobacco companies...you seem to be too innocent. Tobacco has survived only because of malpractices and deceit. LIC can not not feign ignorance of facts that are well known to even common man.

SDM

5 years ago

This is a patently absurd argument that LIC must not invest in ITC (or other tobacco companies). Investment by LIC in ITC shares does not make LIC policy holders light up a cigarette

Extending the argument, maybe the Govt should stop tobacco cultivation?

Or allow manufacture of cars that can be driven above the speed limit!

REPLY

uma

In Reply to SDM 5 years ago

1. having 21% share in a company which earns 90% profits by sale of cigarettes holds LIC accountable for 20% of deaths caused by these products.

2. Govt can not stop tobacco cultivation because of the massive pressure of the tobacco lobby that enjoys huge political patronage. One of the NCP top leader is called BIDI king!

3. ITC doled out nearly 10 crore as political donations to all major parties in 2010-11!

4. Believe me, one can live without a cigarette...you cant without a car. I would certainly ban a particular car that kills every third user! This is exactly what tobacco does.

malq

In Reply to SDM 5 years ago

SDM ji, the argument is not absurd, it is very valid.

# From the point of view of life insurance, tobacco/smoking reduces the lifespan, thereby increasing premiums since payouts will end up being earlier.

# From the point of view of legalities, under the Companies Act Section 68, it would be interesting to know and see what disclosures ITC made to LIC about their products when soliciting funds.

Humbly submitted/vm

Deepak Khemani

5 years ago

Well MDT is only reporting the news. As far as LIC's investment in these companies goes it has be seen as only that. INVESTMENT period.
LIC as an investor invests crores of Policy holders' money for the long term(a typical LIC Endowment policy has a period of 15-20 years). These investments generate dividends and capital appreciation which is paid out as bonuses to policy holders every year. To see this investment in isolation is taking things a bit too far.
If it was wrong to invest in these companies then these companies should be banned and not allowed to make products that kill!

REPLY

uma

In Reply to Deepak Khemani 5 years ago

20,000 crore investment in a company that in your opinion should be banned from doing business! it is sad that you dont see anything wrong in it! LIC does not charge higher premium from smokers, it rejects claims if disease is related to tobacco. Isnt this sound paradoxical....who is the ultimate loser? The smoker! who is the biggest gainer - tobacco industry! We are the fools believing that someone will stop this trade of miseries and blood money!

John Pinto

In Reply to Deepak Khemani 5 years ago

Perfect.. Selling cigarets is not a crime.. Smoking them well that another matter . It is slow suicide ad that what the association of cancer victims should concentrate on.

malq

In Reply to John Pinto 5 years ago

Probably those who make more profits also out of this business of smoking are undertakers, right, "John Pinto"? Terrible choice of pseudonyms . . .

Govind Shanbhag

5 years ago

MDT - what is the big deal. ITC is a corporate with various activities and mfg.of cigarette is only one of their diversified activities. Why investment in ITC is big hue n cry ???

REPLY

John Pinto

In Reply to Govind Shanbhag 5 years ago

Every Choice has its consequence.You smoke you deserve cancer. LIC is right in investing in any company .. These associations should concentrate on helping people instead of targeting the Investors or the Cigarette companies.. This article is foolish

UMA

In Reply to John Pinto 5 years ago

john, go to the nearest cancer center or a hospital and witness the tragedy perpetrated by your favoured company! No one make conscious choices at 12 years of age ( age of tobacco initiation in India)! You are only pushed into it by shrewed marketing and peer pressure. By the time you become conscious, you are addicted and tobacco wont leave you till death!

malq

In Reply to John Pinto 5 years ago

There are deeper issues. There is excise evasion, for which ITC Directors went to jail, still unresolved. There is this business of selling loose cigarettes, which is not permitted as per law. There is the whole situation of resisting "smoking kills" labelling. There is the subject of clone marketing using tobacco brands for unrelated products.

LIC has a charter to the larger interests of the Nation. Not to take forward slow death and then pay for the medical bills also.

A movement to get LIC and other government agencies to stop lending to tobacco companies needs to be launched. And tobacco farmers need to be given an incentive to grow other crops which will support the other business interests of ITC. Win win for all.

Except John Pinto. Pinto ko gusaa kyon aataa hai, re? Is he from that undertaker's group?

UMA

In Reply to malq 5 years ago

malq, tussi great ho! Infact, ITC is investing in everything and indulging all forms of CSR except crop subsititution. Infact, Indian tobacco industry has been actively trying to derail alternative farming issues. In this whole trade, ITC is amassing vulgar profits while farmers remain where they were surrounded by poverty. Tobacco industry infact exploits farmers!

Hemant

In Reply to John Pinto 5 years ago

Well said.

Emerald Multi Marketing is rapidly expanding and MLM schemes keep sprouting like mushrooms after a cloudburst. Why are regulators silent?

Despite constant attempts by Moneylife to warn the public from ‘investing’ in MLM, get-rich-quick, pyramid and Ponzi schemes, the authorities have taken no notice. Nobody has learnt from the Speak Asia fiasco. Now, Emerald Multi Marketing, an MLM company registered in Mumbai, is rapidly increasing its customer base

Rapidly-mushrooming multi-level marketing (MLM) schemes, which dupe people for several crores and then do the vanishing act, has heightened the need to introduce a stringent law, curbing and regulating such fraudulent offers.

Moneylife recently reported (See: Speak Asia advisor finally confesses the company was running a Ponzi scheme) that Speak Asia’s financial consultant, Sanjeev Dandona, confessed to the Economic Offences Wing (EOW), that his company was running a Ponzi scheme.

But despite the police action and widespread publicity, many chain-marketing schemes continue to thrive. Be it income on filling e-surveys, direct selling, or forex trading, Ponzi schemes have made their presence felt everywhere.

The latest is Emerald Multi Marketing Pvt Ltd, which by all looks is an MLM scheme. The company was started in 2010 and is registered in Mumbai. Its business operations are similar to a direct-selling model, where an ‘investor’ sells kits of various products as an agent, and gets income.

Interestingly, according to its website, Emerald has gold & diamond jewellery as its products. It claims that it is introducing a ‘new’ business model, which is a combination of retail marketing and MLM. It says, “So in this business we (have) just done an experiment by bringing together both retail and multi-level marketing which we called “Multi Retail Trade”. This is a very new concept in the world of MLM business which will give you more and more benefits together from both MLM and (the) retail market.”

The company claims to be in association with gold jewellery showrooms from three districts of Maharashtra for “easy accessibility” to its ornaments. According to its website, it plans to tie up with more jewellery stores in local areas.

This is how this racket operates: In the beginning, one has to purchase or book a gold product deal, which fetches you ‘treasure cookies’, ranging from 10 to 1,000, along with freebies. On becoming a channel partner, you are entitled to “commissions, benefits, rank, bonus etc from the company, by joining new customers under your down-line (A: B) leg.” This is one of the typical features of a Ponzi swindle—the money that you can ostensibly make depends on the number of people whom you who can rope into the scheme.

In the Emerald game, there are two ways to become a channel partner. One way is when you are promoted/referred by your ‘Up-Line Channel Partner’. Here you can collect your ‘Spill Code’ and ‘E-Pin’ from your ‘Up Line’, then take a printout of the application form and customer-purchase form, fill up the necessary information, and make the purchase of your choice from the company’s associated jewellery products.

The second option is when if you are a direct customer, you can go to the company’s associated jewellery showroom in the specified area and make the purchase of your choice. But the purchase has to be done according to the value mentioned in Emerald’s purchase chart. The MLM company also promises that it will deliver high returns. “Minimum purchase value is mentioned according to the pure return percentage, starting from 70% to 100%,” says the website.

Emerald has more goodies in its kitty—there are various product packages including solar-energy pendants, watches (including the high-end Rado, no less), magnetic bracelets, etc.

And of course, the company promises binary commission, referral income, and royalty bonus. Binary commission increases from Rs200 to Rs10,000—depending on the number of new people that an investor can rope into the company. The company also claims to give ‘rank commission’, which it promises is a laptop. This machine will be gifted to a person who has introduced 500 new people on both sides of his down-line channel (500:500).

Now what will it take for the authorities before Emerald is exposed for its filthy lucre?

Moneylife has persistently exposed MLM companies promising extraordinary returns.

You might also want to read (these are just four examples of our previous stories on various pyramid schemes):

User

COMMENTS

MONIL DARU

5 years ago

sir,
what about tycoon empire international ltd. & abhinav gold international marketing pvt ltd.( bhilwara )?? will they pay to the invesors?? reply me soon

REPLY

Pramod

In Reply to MONIL DARU 5 years ago

Have you received back your money? Most probably not.

file a police compliant.

Kishore N

5 years ago


Tycoon Ponzi Fraud

Report (18.10.2011)

Maharashtra EOW in Kerala.

EOW approached Payyoli (Kerala State) Magistrate Court for the custody of the accused.

REPLY

Kishore N

In Reply to Kishore N 5 years ago

Tycoon Chain -marketing fraud

One more director arrested

Director Mr. Kripakaran arrested by Kerala police

Kishore N

5 years ago

# B R E A K I N G N E W S #

TYCOON EMPIRE DIRECTORS KAMALAKANNAN AND SADASIVAM ARRESTED


Chennai: Managing directors of Tycoon Empire International Ltd which ran a ponzi scheme and defrauded customers to the tune of Rs 400 crores were arrested Saturday.

The Special Investigation Team led by Crime Detatchment DySP P.P. Sadanandan nabbed Kkamala Kannan and Sadashivam both natives of Tamil Nadu from Chennai.

The SIT had earlier arrested nine persons in this regard.

The firm which started functioning from a two-room shop advertised itself as a multi-functional shopping mall and duped investors from Kerala.


http://english.manoramaonline.com/cgi-bi...

Vikas Gupta

5 years ago

Please tell me How Regulators decide which Co.s to be taken action against? Why they took action against Speak Asia but not against INSTANT FOREX?

REPLY

Kishore N

In Reply to Vikas Gupta 5 years ago

Why cant you put this question before the regulator? You may please send an RTI query to the regulator.

Sandeep

5 years ago

Hello Money life,
I appreciate your Loyal (lol) research on mlm or direct selling industry. one thing i want to inform you, direct selling or mlm is started in 1942 in USA, which is very much legal there and most of the products are moving through the mlm industry. Many famous peoples are in to this industry, even former president of USA Mr. Bill Clinton is supporting and he is also in to the mlm system. In India this industry started in 1991 and in 2002, supreme court and parliament of India considered this industry is legal and also informed this will not come under money scheme/ chit fund or money circulation ban act. That means the mlm or direct selling is very much legal in India and all over the globe. mlm is not scheme, it’s a business.

I request Money life to understand MLM or direct selling is not scheme which will vanish in few months. It’s a business of generations.

i want to ask one thing, if MLM or direct selling is illegal, then why there is a association? if it’s illegal how supreme court and parliament of india accepted the mlm and direct selling is legal in India?

For direct selling association you can check the official website http://www.idsa.co.in

i will not talk about the survey filling, cos I’m illiterate on that. But direct selling is legal and have more than 100 million family is surviving on this.

if Money Life consider mlm is illegal, will it give employment to those 100 million families? No right? Just to make yourself popular, don’t publish rubbish on the net.

REPLY

Kishore N

In Reply to Sandeep 5 years ago

MLM gave 100 million families employment?

hahaha

100 million families ruined due to MLM.

Bill Clinton

In Reply to Sandeep 5 years ago

The 10 Big Lies of Multi-Level Marketing
http://www.consumerfraudreporting.org/cf...
Copyright 1997, Robert L. Fitzpatrick
The multi-level marketing (MLM) field grows and its member companies multiply. Solicitations to join the movement seem to be everywhere. The impression accordingly grows that it is indeed the wave of the future, a business model that is gaining momentum, growing in acceptance and legitimacy and, as its promoters claim, will eventually replace most other forms of marketing and sales. Many are led to believe the assertions that success can be found by anyone who faithfully believes in the system and steadfastly adheres to its methods and that eventually all of us will become MLM distributors.

With fourteen years experience in corporate consulting in the distribution field and after more than six years of research and writing about the MLM model, I have gathered information, facts and insights that show the MLM business model to be essentially a free market hoax. It is analogous to calling the purchase of a lottery ticket a 'business venture' and winning the lottery a 'viable income opportunity for everyone.' MLM industry claims of distributor income potential, its glorified descriptions of the 'network' business model and its prophecies of a reigning destiny in product distribution have as much validity in business as UFO sightings do in the realm of science.

The very legality of the MLM system rests tenuously upon a single 1979 court ruling on one company. The guidelines for legal operation set forth in that ruling are routinely ignored by the industry. Lack of governing legislation or oversight by any designated authority also enables the industry to endure despite occasional prosecutions by state Attorneys General or the FTC.

MLM's economic score card is characterized by massive failure rates and financial losses for millions of people. Its structure in which positions on an endless sales chain are purchased by selling or buying goods is mathematically unsustainable and its system of allowing unlimited numbers of distributors in any market area is inherently unstable. MLM's espoused core business - personal retailing - is contrary to trends in communication technology, cost-effective distribution, and consumer buying preferences. The retailing activity is, in reality, only a pretext for the actual core business - enrolling investors in pyramid organizations that promise exponential income growth.

As in all pyramid schemes, the incomes of those distributors at the top and the profits to the sponsoring corporations come from a continuous influx of new investors at the bottom Viewed superficially in terms of company profits and the wealth of an elite group at the pinnacle of the MLM industry, the model can appear viable to the uninformed, just as all pyramid schemes do before they collapse or are prosecuted by authorities.

Deceptive marketing that ably plays upon treasured cultural beliefs, social and personal needs, and some economic trends account for MLM's growth, rather than its ability to meet any consumer needs. The deceptive marketing is nurtured by a general lack of professional evaluation or investigation by reputable business media. Consequently, a popular delusion is supported that MLM is a viable business investment or career choice for nearly everyone and the odds of financial success in the venture are comparable or better than other trades, professions, employment or business ventures.

MLM's true constituency is not the consuming public but rather hopeful investors. The market for these investors grows significantly in times of economic transition, globalization and employee displacement. Promises of quick and easy financial deliverance and the linking of wealth to ultimate happiness also play well in this market setting. The marketing thrust of MLM is accordingly directed to prospective distributors, rather than product promotions to purchasers. Its true products are not long distance phone services, vitamins or skin cremes, but rather the investment propositions for distributorships which are deceptively portrayed with images of high income, low time requirements, small capital investments and early success.

Lie #1: MLM is a business offering better opportunities for making large sums of money than all other conventional business and professional models.

Truth: For almost everyone who invests, MLM turns out to be a losing financial proposition. Less than one percent of all MLM distributors ever earn a profit and those earning a sustainable living at this business are a much smaller percentage still.

Extraordinary sales and marketing obstacles account for much of this failure, but even if the business were more feasible, sheer mathematics would severely limit the opportunity. The MLM type of business structure can support only a small number of financial winners. If a 1,000-person downline is needed to earn a sustainable income. Those 1,000 will need one million more to duplicate the success. How many people can realistically be enrolled? Much of what appears as growth is in fact only the continuous churning of new enrollees. The money for the rare winners comes from the constant enrollment of armies of losers. With no limits on numbers of distributors in an area and no evaluation of market potential, the system is also inherently unstable.

Lie #2: Network marketing is the most popular and effective new way to bring products to market. Consumers like to buy products on a one-to-one basis in the MLM model.

Truth: If you strip MLM of its hallmark activity of continuously reselling distributorships and examine its foundation, the one-to-one retailing of products to customers, you encounter an unproductive and impractical system of sales upon which the entire structure is supposed to rest. Personal retailing is a thing of the past, not the wave of the future. Retailing directly to friends on a one-to-one basis requires people to drastically change their buying habits. They must restrict their choices, often pay more for goods, buy inconveniently, and awkwardly engage in business transactions with close friends and relatives. The unfeasibility of door-to-door retailing is why MLM is, in reality, a business that just keeps reselling the opportunity to sign up more distributors.

Lie #3: Eventually all products will be sold by MLM. Retail stores, shopping malls, catalogues and most forms of advertising will soon be rendered obsolete by MLM.

Truth: Less than 1% of all retail sales are made through MLM and much of this sales volume is accounted for by the purchases of hopeful new distributors who are actually paying the price of admission to a business they will soon abandon. MLM is not replacing existing forms of marketing. It does not legitimately compete with other marketing approaches at all. Rather, MLM represents a new investment scheme that uses the language of marketing and products. Its real products are distributorships which are sold with misrepresentation and exaggerated promises of income. People are buying products in order to secure positions on the sales pyramid. The possibility is always held out that you may become rich if not from your own efforts then from some unknown person who might join your 'downline,' the 'big fish' as they are called.

MLM's growth is a manifestation not of its value to the economy, customers or distributors but of the recently high levels of economic fear and insecurity and rising expectations of quick and easy wealth. It is growing in the same way legalized gambling and lotteries are.

Lie #4: MLM is a new way of life that offers happiness and fulfillment. It is a means to attain all the good things in life.

Truth: The most prominent motivating appeal of the MLM industry as shown in industry literature and presented at recruitment meetings is the crassest form of materialism. Fortune 100 companies would blush as the excess of promises of wealth and luxury put forth by MLM solicitors. These promises are presented as the ticket to personal fulfillment. MLM's overreaching appeal to wealth and luxury conflicts with most people's true desire for meaningful and fulfilling work in something in which they have special talent or interest. In short, the culture of this business detours many people from their personal values and desires to express their unique talents and aspirations.

Lie #5: MLM is a spiritual movement.

Truth: The use of spiritual concepts like prosperity consciousness and creative visualization to promote MLM enrollment, the use of words like 'communion' to describe a sales organization, and claims that MLM is a fulfullment of Christian principles or Sciptural prophecies are great distortions of these spiritual practices. Those who focus their hopes and dreams upon wealth as the answer to their prayers lose sight of genuine spirituality as taught by all the great religions and faiths of humankind. The misuse of these spiritual principles should be a signal that the investment opportunity is deceptive. When a product is wrapped in the flag or in religion, buyer beware! The 'community' and 'support' offered by MLM organizations to new recruits is based entirely upon their purchases. If the purchases and enrollment decline, so does the 'communion.'

Lie #6: Success in MLM is easy. Friends and relatives are the natural prospects. Those who love and support you will become your life-time customers.

Truth: The commercialization of family and friendship relations or the use of 'warm leads' which is required in the MLM marketing program is a destructive element in the community and very unhealthy for individuals involved. Capitalizing upon family ties and loyalties of friendships in order to build a business can destroy ones social foundation. It places stress on relationships which may never return to their original bases of love, loyalty and support. Beyond its destructive social aspects, experience shows that few people enjoy or appreciate being solicited by friends and relatives to buy products.

Lie #7: You can do MLM in your spare time. As a business, it offers the greatest flexibility and personal freedom of time. A few hours a week can earn a significant supplemental income and may grow to a very large income making other work unnecessary.

Truth: decades of experience involving millions of people have proven that making money in MLM requires extraordinary time commitment as well as considerable personal skill and persistence. Beyond the sheer hard work and talent required, the business model inherently consumes more areas of ones life and greater segments of time. In MLM, everyone is a prospect. Every waking moment is a potential time for marketing. There are no off-limit places, people or times for selling. Consequently, there is no free space or free time once a person enrolls in MLM system. Under the guise of creating money independently and in your free time, the system gains control and dominance over people's entire lives and requires rigid conformity to the program. This accounts for why so many people who become deeply involved end up needing and relying upon MLM desperately. They alienate or abandon other sustaining relationships.

Lie #8. MLM is a positive, supportive new business that affirms the human spirit and personal freedom.

Truth: MLM is largely fear-driven. Solicitations inevitably include dire predictions about the impending collapse of other forms of distribution, the disintegration or insensitivity of corporate America, and the lack of opportunity in other professions or services. Conventional professions, trades and business are routinely demeaned and ridiculed for not offering 'unlimited income.' Employment is cast as enslavement for 'losers.' MLM is presented as the last best hope for many people. This approach, in addition to being deceptive, frequently has a discouraging effect on people who otherwise would pursue their own unique visions of success and happiness. A sound business opportunity does not have to base its worth on negative predictions and warnings.

Lie #9. MLM is the best option for owning your own business and attaining real economic independence.

Truth: MLM is not true self-employment. 'Owning' an MLM distributorship is an illusion. Some MLM companies forbid distributors from carrying additional lines. Most MLM contracts make termination of the distributorship easy and immediate for the company. Short of termination, downlines can be taken away with a variety of means. Participation requires rigid adherence to the 'duplication' model, not independence and individuality. MLM distributors are not entrepreneurs but joiners in a complex hierarchical system over which they have little control.

Lie #10: MLM is not a pyramid scheme because products are sold.

Truth: The sale of products is in no way a protection from anti-pyramid scheme laws or unfair trade practices set forth in federal and state law. MLM is a legal form of business only under certain rigid conditions set forth by the FTC and state Attorneys General. Many MLMs are in gross violation of these guidelines and operate only because they have not been prosecuted. Recent court rulings are using a 70% rule to determine an MLM's legality. At least 70% of all goods sold by the MLM company must be purchased by non-distributors. This standard would place most MLM companies outside the law. The largest of all MLMs acknowledges that only 18% of its sales are made to non-distributors.

monil

5 years ago

what about tycoons empire international co. ltd. - chennai based co.- big scam
any idea?

REPLY

Kishore N

In Reply to monil 5 years ago

# b r e a k i n g n e w s #

tycoon directors Kamalakannan & Sadashivam arrested in Chennai by Kerala police.

monil

In Reply to Kishore N 5 years ago

when invesor"s money will be paid by tycoon ?

Kishore N

In Reply to monil 5 years ago

Pray to God !

Kishore N

In Reply to monil 5 years ago

Some of them have been arrested. they are facing criminal charges in Kerala

mld

5 years ago

117.225.32.48
Removed abuse from Amit ... another
abusive writer from Delhi

REPLY

mld

In Reply to mld 5 years ago

Actually Harayana, Bahadurgarh.
This abuser was using the national internet backbone.
IP 117.225.32.48

Mohan

5 years ago

You have asked a pertinent question - Why are regulators silent?

Reduce halts to gain speed on Mumbai local trains, say experts

Cyclic timetable appears to be a well-tested scientific tool of timetable planning which has benefitted many countries in their public transport operations. It can also be used successfully on Mumbai's vast suburban rail network

Rajaram Bojji, former managing director of Konkan Railway and inventor of the anti-collision device (ACD) has supported the cyclic timetable (CTT) concept for suburban (local) trains in Mumbai. In an email, Mr Bojji said, "I remember for Skybus too, I had proposed a similar concept of running to keep average speeds higher. The halt time makes a difference to the average speed actually. Less halts, more average speed."

Several activists have been requesting the Railways to follow the cyclic timetable on Mumbai's vast rail network. After doing research and due diligence for years, Dipak Gandhi, chairman of the Mumbai Suburban Railway Passenger Association (MSRPA), and his colleagues have proposed a cyclic timetable, which they feel can reduce the passenger load on each local train by about 30% to 40% and also cut the travel time by 20% to 25% for long-distance commuters. Cyclic timetable also makes it possible to introduce 30% more services with the same number of rakes and tracks through super-fast and sector-wise services.

A simple mathematical analysis done by Mr Bojji or B Rajaram, as he is famously known, also shows that use of cyclic timetable can reduce the turnaround time for a local train by around 30% as well as waiting period for a commuter. He said, "A commuter has to wait, skipping a train to board the right one. To some extent, the railway platform may carry a little extra number of passengers. Maybe it is better than crowding the train. There are other factors like percentage failure of signals, track conditions and maintenance speed restrictions, the unauthorised slums crowding the track sides forcing motormen to drive cautiously, which may deny the benefit. However, the idea is worth trying."

Here is the analysis given by Mr Bojji...



The suburban railway system in Mumbai is the most complex, densely loaded and intensively utilised system in the world and has the highest passenger density in the world—69 lakh commuters travel every day. Specifically, a nine-car rake carries over 5,000 passengers against its carrying capacity of 1,700, which leads to unbearably overcrowded trains during peak hours. Traditional approaches of increasing capacity by increasing the number of coaches in rakes have not resulted in significant improvement in the problem of overcrowding. The situation is further aggravated with frequent delays and uneven frequency of trains.

"The basic wishes of any railway customer are fairly simple; he or she wants to travel fast and comfortably for a reasonable price. Furthermore, railway services should be transparent and reliable to provide a choice of service and comfort levels," said Mr Gandhi.

The Railways today is in a position to give not only safe but also speedy and comfortable rides to all its commuters from tomorrow, only if it redesigns its suburban timetable as per principles of timetable construction laid down under the Indian Railways Act and its rules—and in conformity with today's traffic needs, Mr Gandhi added.

Cyclic timetable as the name suggests is a timetable, which repeats itself after a fixed duration. A key feature of this timetable is that commuters do not have to memorise the whole timetable. All that they need to remember is the cycle time at which a train repeats itself; thus, if the cycle time is 12 minutes then even if someone has missed his train he knows that he will have to wait a maximum of 12 minutes to catch the next train.

Here is a sample time table developed by the MSRPA...

                                 SPECIMEN PATTERN

  (Two Fast Services for VR Sector & One MX-VR Shuffle)


This timetable works on four basic principles.

The first principle of CTT states that all the services will have to repeat in a cyclic pattern. In the above table in case of the fast corridor Virar service, after the first service at 17:00 the next will be at 17:12—a gap of 12 minutes. Similarly all the other services will be repeated after a duration of every 12 minutes.

The second principle is Uniform Frequency: this is one of the most important principles on which CTT is based. According to this principle, if the frequency of the train services is uniform it will clearly help to segregate the demand by dividing the commuter traffic evenly in peak hours which is a basic necessity in order to reduce the level of overcrowding and thus the risk of accidents.

The third principle on which CTT works is; Dedicated Sector Wise Clearing as part of which the railway network is divided into various sectors, which are defined on the basis of passenger demand. In any sector a limited number of stations are served and not all the stations overlap or repeat in other sectors. Limited halts ensure that the rakes turn around faster leading to increased services.

Thus, currently, a Virar fast train starts from Churchgate and gets completely filled by the time it reaches Bandra. It then goes on to stop at Andheri and Borivali where there are already a number of people waiting to get in and only a few getting down. This leads to unbearably overcrowded situations and threat to the lives of those who are leaning outside the train. This is a daily pattern.

As per the specimen cyclical timetable illustrated above, the timetable is designed in such a manner that a fast train in the Virar sector would not stop at Andheri and Borivali  ensuring that commuters from Churchgate would reach their destinations faster. It would also ensure that the same rake is available faster for a turnaround and can transport more commuters. In this time table commuters of Andheri and Borivali have no choice but to avoid a Virar train. In between stations would be served by other fast and slow services running for other sectors.

The fourth feature of CTT is Limited Loading: A cyclical timetable is made on par with Section (57) of the Railway Act 1989, according to which railway administration shall fix the maximum number of passengers, which may be carried in each compartment. Unlike the current overcrowded conditions CTT emphasises on limited loading by sequencing the services in such a way that it serves few stations with every service thus distributing passenger load evenly, resulting in limited loading.

According to MSRPA, the CTT, if implemented, would increase the services by 30% using the same number of rakes and railway tracks through super-fast and sector-wise services. It will also reduce overcrowding by 30% to 40% and may help in curbing accidents. Most importantly, CTT can be implemented without much additional cost.

Currently, several countries like the Netherlands, Austria, Belgium, Denmark, Germany, the UK, Norway and Switzerland use CTT for their railway networks. In the Czech Republic, the CTT was implemented during 2004-05 and increased the railway services by 7% in the first year itself. Later it went to 15% during 2007-08 and the railway operations in that country have now achieved stability in services.

While ideas like CTT or ACD sound like a magic wand, history tells us that when it comes to applying indigenous solutions, the Indian Railways and their babus are not the best. Ask Mr Bojji, he is still waiting for the ACDs to see light of day. The biggest sorry mistake is the patent for ACDs is held by none other than the Indian Railways itself and yet the babus don’t want to implement it for reasons known only to them.

User

COMMENTS

P M Ravindran

4 years ago

I have been a frequent visitor to Mumbai and as far as the suburban railway service is concerned the only thing the managers seem to have been able to do is to increase the frequency of the services. In fact on the harbour line they have not even been able to introduce fast trains or provide direct links to places beyond Andheri on the Western Railways! People need to think creatively or atleast listen to people offering creative solutions!

Mumbai Railway

5 years ago

Sensible proposals - hope they are implemented.


The 2012 Indian Railway Budget has been very good for Mumbai city. In addition to 75 new train services, there are concrete infrastructure proposals for the long term viability of suburban local railways in Bombay.

Hope these proposals can be implemented. I guess a lot depends not on the railway minister, but Mamta Banarjee.

Harshad Kanu Kamdar

5 years ago

Introducing CTT is a welcome idea. Another way of increasing available capacity on the Mumbai suburban section is creating a new terminus at Dadar. Between CR Sion & Parel and WR Mahim & Elphistone a huge tract of land is available which is currently used for recreation centre, offices, guest houses etc. All upcountry trains be terminated at this Teminus and tracks released between Dadar & CST/ Bombay Central be converted to suburban tracks. Local trains from Dadar be run in both directions on CR & WR from the new terminus and meet incoming passenger as well as commuter demands. The current activities on the land such as a work-shop, recreation centre, guest houses be relocated.
End use of land will be better and a common terminus will serve Mumbai better. Most up country trains have hardly 10% of residual passengers.

REPLY

malq

In Reply to Harshad Kanu Kamdar 5 years ago

Something needs to be done, and very soon, about commuting in and around Mumbai. Train timetables are one important part of the solution. Best of luck.

Maybe city planners can try to take some examples from Delhi, where there are no fast/slow services on the Metro trains as well as EMUs, but they do have "short services" for partial routes in the middle to assist in reducing the problem for people trying to board from stations en route.

In addition, entry to the platforms is also regulated, and also boarding is denied/blocked if the train is over-loaded and some space is planned for the next stations - this may not be possible in the open station at Mumbai method.

Anyways, good luck, Mumbai deserves a better transport system. From being one of the best in the world to now somewhere at the bottom.

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