At the heart of the day-long raids by the CBI at the residences of former finance minister P Chidambaram and his son, Karti, lie New Delhi’s attempts to lift the thick smokescreen that — for decades — has helped many route illegal cash: India’s growing menace of suitcase companies

At the heart of the day-long raids by the CBI at the residences of former finance minister P Chidambaram and his son, Karti, lie New Delhi’s attempts to lift the thick smokescreen that — for decades — has helped many route illegal cash: India’s growing menace of suitcase companies.

Although a bulk of the raids by the country’s premier investigating agency and other agencies took place in Delhi, Chennai and Gurgaon, the Ministry of Finance continues to focus on Kolkata, home to hundreds and thousands of such shell companies.

And how many of them were owned by Karti and his close associates? The raids on the residences of the former finance minister and his son, claimed sources in the CBI, was mainly to get this very grip on the shell companies Karti had allegedly created to divert what the investigators claimed as illegal cash. Top income tax officials in Delhi said raids have continued unabated — slowly, yet steadily — on chartered accountants in Kolkata who helped open such dubious companies whose owners are businessmen, traders and brokers from Chennai, Ahmedabad and Mumbai.

"We are probing because we had information that Karti has a number of such shell companies operating out of Kolkata," said a top CBI source on condition of anonymity.

Chidambaram Sr, meanwhile, refused to comment on the raids and whether his son had shell companies. "I don't subscribe to the idea of debating charges in the media, my initial statement is sufficient," he said in a texted message to this reporter. Earlier, when the raids took place, the former FM had blamed it on a vendetta and said he was being targeted by the ruling BJP for being vocal as an Opposition leader.

In a recent meeting with bureaucrats, Prime Minister Narendra Modi made it explicitly clear that he wants to eradicate corruption at any cost. "The prime minister made it known that he wants to see who owns what," claimed Gopal Aggarwal, the head of the BJP’s economic affairs cell, and a seasoned tracker of black money.

The finance ministry and its investigating agencies are slowly getting a grip on these shell companies — some of them operating out of letterheads and visiting cards — owned by various brokers and traders fronting for corporate entities and even politicians, claimed Aggarwal in an interview.

"The prime minister’s emphasis was on corruption, especially in the financial and commodities markets, and the nexus between corrupt bureaucrats and ministers and corporate captains. This is no witch hunt... May I humbly remind critics of this raids that probe into Karti’s companies started more than a decade ago, but stopped midway for no reason?" asked Aggarwal, who has done meticulous research into black money and its origins in India.

This is not all.

Aggarwal said the finance ministry has gathered clinching evidence where brokers have used corrupt bureaucrats to pressurise (read influence) financial institutions and market regulator Securities and Exchanges Board of India (SEBI) to suppress operations conducted through these very shell companies, both in India and abroad. "Once caught, those who own these shell companies do everything to come clean. They try hard to prevent tough actions by SEBI. They routinely challenge SEBI’s actions in the Security Appellate Tribunal (SAT). It has come to the government’s notice that these brokers and traders even try to influence SAT members to circumvent the actions initiated by SEBI. There have been occasions when they have managed to get away scot-free," said Aggarwal.

In one such case, a senior bureaucrat, allegedly close to the former finance minister, did not make the mandatory disclosure on joining SAT as a member that his daughter was employed with the National Stock Exchange (NSE). "How will the member handle cases of NSE in SAT, won’t his impartiality come under question?"

The raids on the residences of the former finance minister and his son, claimed sources in the CBI, was to get a grip on the shell companies created to divert illegal cash.

"It’s a very complex maze of companies and companies within companies. But in a lot of work that has been done, the investigating agencies have joined up the dots to understand the complex nature of these structures," said Deepak Kanth, head of the BJP I-T cell.

And in probing Karti, the CBI investigators have now come across a host of such shell companies the son of the former finance minister allegedly created to hoodwink the government.

Worse, in most cases, sources in the CBI revealed, loyal retainers of the 'babus' are appointed as directors and shareholders in the companies. In some cases, even lowly attendants, office secretaries were listed as directors of the companies owned by Karti. Interestingly, many of the CBI’s recent cases deal with busting bank frauds, where the shell companies were used to draw up fake invoices and challans to route out money taken as loans from the banks.

And strangely, Kolkata — a city known for its artistic temperament — is in the thick of it.

"We are looking into Karti’s possible involvement in some of these shell companies in Kolkata to route cash," said the sources. Interestingly, the Enforcement Directorate raided some operations of Vasant Healthcare in Kolkata early this year to probe money laundering and tax evasion charges following financial intelligence reports indicating Vasan’s connections with Karti.

Strangely, Vasan has shut down some of its operations in Kolkata.

But the search has opened up a pandora’s box, and officers of the country’s premier investigating agency claim they are over the moon.

The agency has already registered a case against Arti Infosystems Limited for a Rs 138-crore bank fraud using a single shell company. Another company, Maheshwari Ispat is in the dock for a Rs 180-crore bank fraud using a shell company.

In cases of multiple shell companies, the ones that drew the attention of the investigators were Bengal India Global Infrastructure Limited for bank fraud worth Rs 170 crore using six shell companies. K.Live Space Style and Industries duped the banks of Rs 100 crore using four shell companies. There was Global Softech Limited carried out a Rs 126-crore bank fraud using 18 shell companies. SPS Steel Rolling Mills Limited duped the banks of Rs 70 crore using nince shell companies.

The CBI raids have only supplemented what the ED claimed early this year after a nationwide raid on dubious companies suspected of money laundering on behalf of businesses and individuals including two top politicians.

As many as 300-odd shell companies were identified by ED, many fronts for a slew of illegal transactions. Some of these companies were involved in major money laundering cases related to Chaggan Bhujbal, Andhra politician YS Jagan Mohan Reddy, former Noida chief engineer Yadav Singh, NHRM scam in Uttar Pradesh, Hyderabad-based AGS Infotech and diamond importer Rajeshwar Exports.

"Shell companies were formed to launder money and then discarded, in some cases one person opened as many as 700-800 shell companies," said ED spokesperson AK Rawal in a telephonic conversation.

Aggarwal said the prime minister’s message to the bureaucrats was to boost them to weed out corruption, take on dubious corporates, even ministers — both past and present — indulging in corruption.

"The government is keen to bust the unholy politician-bureaucrat-corporate nexus," said Aggarwal, adding, "Especially bureaucrats considered close to the former finance minister."

Sources in Delhi claim it has come to the notice of the government how a host of lobbyists close to Chidambaram Sr were pushing hard to place a number of bureaucrats in plum positions — one of the seats on their radar being the one to be vacated by economic affairs secretary Shaktikanta Das on 31 May, 2017.

In the National Capital, there are enough indications that the CBI could move in to demand the arrest of a host of Trinamool Congress MPs and legislators caught on tape taking cash from an investigative journalist for granting favours for investments in Bengal. "The prime minister is hitting hard at India’s ever-growing shadow economy," said Aggarwal.

Seasoned political commentator MD Nalapat feels that the government is sending out strong signals to weed out corruption. "The prime is hitting where it hurts most, the jugalbandi of corrupt bureaucrats and politicians," said Nalapat.

"The raids on the family of the former finance minister will help the CBI under where Karti used his father’s influence to conduct business and how many shell companies he owned," said Nalapat.

And there have been many instances when the former FM himself avoided questions from the CBI. For the records, Chidambaram — on 6 December, 2014 — told the CBI that he was not aware that Malaysian company Maxis’ investment in Aircel was above Rs 600 crore, when he approved the Foreign Investment Promotion Board’s (FIPB) recommendation on 7 March, 2006. Certain senior finance ministry officials made similar statements to the investigating agency. Now, with both Karti and Chidambaram under the heat, the Aircel-Maxis case, among other cases, are coming to the fore.

CBI and income tax officials are not saying when their probe would end, merely indicating this is the first of many rounds which will soon take place at the homes of the rich and corrupt.

Seasoned political analyst Mohan Guruswamy said the raids must produce results and prove Karti benefitted from his father’s prowess, else the raids will lose relevance. "If the prime minister is keen to clean up the country, there should be no exceptions, else it will be called a vendetta by the Opposition parties."

He remembered when Fidel Castro wanted nationalisation in Cuban agriculture sector, he first took his father’s farm. "We need such examples in India, then the best spring cleaning will happen."