Moideen ignored two earlier notices by the ED, given the possible damage it would cause to the party in the Puthuppally by-election.
The Karuvannur cooperative bank in Thrissur where irregularities worth over ₹150 crore have been detected. (Special Arrangement)
The legacy of Kerala’s ruling CPI(M) as a political force that facilitated the country’s most vibrant network of cooperative banking enterprises by placing workers and social welfare before profit is facing a tough challenge now.
The Enforcement Directorate (ED) issuing a fresh notice to the party’s State Committee member and sitting MLA AC Moideen for questioning in connection with alleged money-laundering in an infamous bank scam rocking the state has dented the CPI(M)’s image.
A C Moideen
A former industry minister of the state and one of the top leaders of the CPI(M), Moideen ignored two earlier notices issued to him by the ED for questioning, given the possible damage it would cause to the party in the by-election held in the Puthuppally Assembly constituency.
The party reportedly instructed him to ignore the summons until after the bypoll, as there was apprehension that the former minister would be arrested in connection with the case after questioning. Moideen reportedly went underground to evade arrest.
As per the latest notice, Moideen must appear in person at the ED office in Kochi on 11 September.
The cooperative sector of Kerala, where the CPI(M) enjoys a near-total monopoly, is now witnessing several financial frauds.
The Karuvannur Cooperative Bank scam, to which Moideen is now being linked, is the largest among them.
According to the information provided by Kerala’s Cooperative Minister VN Vasavan in the state Assembly, 399 significant financial frauds were unearthed in different cooperative bodies across the state last year.
Many of them were reported in cooperative firms operated by CPI(M) members, and the emerging situation has landed the party in an unprecedented crisis of faith.
According to ED sources, Moideen helped and protected the benamis and beneficiaries who siphoned off more than ₹150 crore from the Karuvannur Service Cooperative Bank in the Thrissur district. When the scams occurred in the bank, Moideen was the Thrissur district secretary of the CPI(M).
The ED initially issued a summons to Moideen directing him to appear for questioning on 31 August and rescheduled it to 4 September.
On its part, the CPI(M) extended full support to Moideen, terming the action against him as politically motivated just ahead of the Puthuppally bypoll, which was held on 5 September.
On 22 August, the ED conducted a 22-hour-long raid at Moideen’s residence and claimed that the investigation revealed many benami loans that were disbursed from the bank on Moideen’s instructions.
The agency also froze bank deposits and fixed deposits — worth ₹28 lakh — in Moideen and his wife’s name.
That was the first time that the central agencies raided the residence of a CPI(M) senior leader in Kerala for committing fraud.
In the meantime, the ED arrested PP Kiran and P Satheeshkumar for orchestrating the financial fraud.
ED sources told South First that Satheeshkumar was allegedly the mastermind behind the fraud worth ₹150 crore, and that he arranged benami borrowers, including Kiran, to whom loans were released without necessary documents.
It has been alleged that Kiran was granted a loan of ₹14 crore without any documents.
Properties of both Kiran and Satheeshkumar were raided, along with Moideen’s house, in August.
The ED searches had led to the seizure of 36 properties valued at ₹15 crore, which were found to be proceeds of the crime.
Banking experts think the ED’s investigation into the Katruvannur case would create a situation in which all the cooperative finance scams committed in Kerala are probed independently.
According to Opposition leader in Kerala Assembly VD Satheesan, most investors in cooperative banks were ordinary people, and fraudsters were looting their hard-earned money.
“People who live on shoestring budgets deposit their savings in such banks for a secure future. Targeting such people, the scammers forge papers and use their administrative powers to escape punishment,” Satheesan said.
Kerala has an estimated 15,000 cooperative banks and societies, and they once boasted of their social commitments.
Scams surfaced in many of them when Kerala’s cooperative sector struggled to recover from the effects of an economic downturn, Covid-19, floods, and demonetisation.
“Till recently, Kerala’s cooperative banks were known for their stellar performances. They rolled out funds for flood rehabilitation in 2018 and performed well even in the case of Covid-19 compensation. Even the government availed their help to roll out recovery measures to the KSRTC and to continue with various welfare pensions,” says J Devika of the Centre for Developmental Studies in Thiruvananthapuram.
“The fraud reports demand strong measures from the government, even against CPI(M) leaders who committed irregularities. Party politics must not hinder regaining people’s lost confidence in cooperative establishments,” she told South First.
According to news reports, scams have surfaced in cooperatives run by the BJP, the Congress, and the Indian Union Muslim League (IUML) as well.
Auditors recently detected a mortgage loan of ₹1 crore given by a cooperative bank in Haripad near Alappuzha to an individual without seeking any jewellery or other valuables as collateral.
In some cases, those who repaid their borrowed loans in time detected transactions they never did in the passbook and bank accounts. Bank officials might have manipulated their accounts to transfer money they siphoned off from others.
Observers blame the rampant political interference prevailing in the cooperative sector for its current plight. They said such interference extended from granting loans and accepting deposits, to transfers, and even auditing.
According to CN Vijayakrishnan, who heads several well-performing cooperatives in the state, including a high-profile cancer hospital, though only a few cooperatives have erred, the image crisis now affects even honest enterprises in the sector.
“The government must act tough in the case of fraudsters and evolve alternative mechanisms to restore the lost money of depositors. At the same time, it’s the responsibility of all to stand with socially responsible and honest cooperative firms which aim for the overall well-being of the state and its people,” he said.
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