Enforcement Directorate found that funds were funnelled into a single account before transferring it to 18 fake accounts. Huge amounts were then diverted to various individuals and entities.
Published Oct 27, 2024 | 9:00 AM ⚊ Updated Nov 02, 2024 | 9:27 AM
Money trail in Valmiki corporation scam as traced by ED. (Supplied)
The Enforcement Directorate’s (ED) chargesheet on the alleged irregularities in the Karnataka Maharshi Valmiki Scheduled Tribes Development Corporation Ltd (KMVSTDC) has unveiled a trail of illegal fund transfers. Funds were allegedly funnelled into a single account before transferring it to 18 fake accounts. Huge amounts were then diverted to various individuals and entities.
This elaborate operation was carried out by a group of conspirators in collusion with a few bank officials. The ED said the group was led mainly by former minister and Ballari Rural MLA B Nagendra of the Congress. He was the minister for scheduled tribes welfare when the alleged scam took place.
ED claims that funds from the Valmiki Corporation’s account were initially transferred from Union Bank of India‘s Vasant Nagar branch to MG Road branch in Bengaluru.
Nagendra and KMVSTDC managing director JG Padmanabha allegedly played pivotal roles in executing the transfers without the necessary approvals.
The conspirators, ED alleged, transferred a substantial amount from the Corporation to the MG Road account. Over just three months, ₹187.33 crore was transferred into Union Bank of India’s MG Road Branch account, laying the groundwork for the subsequent fraudulent activities, the chargesheet said.
It further stated that the conspirators opened 18 fake accounts in the names of existing companies at the Banjara Hills branch of RBL Bank under the main account of First Finance Credit Cooperative Society Limited.
These 18 fraudulent accounts under the name of various entities/firms, created using forged documents, served as the primary vehicles for siphoning off money from the Corporation’s account.
In a series of calculated transfers, hefty sums were shifted from the Corporation’s MG Road account to these fraudulent accounts, facilitating the embezzlement of nearly ₹90 crore.
Once the funds were deposited in the fake accounts, the conspirators further redirected the money through e-banking to various other entities and individuals.
The initial FIR regarding the Valmiki Corporation scam was lodged on 28 May 2024 at the High Grounds police station in Bengaluru. Subsequently, the state government assigned the probe to a Special Investigation Team (SIT) of the Criminal Investigation Department (CID).
On 6 June 2024, the ED registered an Enforcement Case Information Report, leading to Nagendra’s arrest on 12 July. The ED submitted a 127-page chargesheet to the court in September 2024.
The funnelling of funds began on 21 February 2024, when the Corporation’s savings account was transferred from the Vasant Nagar branch to the MG Road branch.
This transfer was conducted by the then Corporation’s managing director JG Padmanabha, who acted without following due procedures and securing the necessary approval from the Corporation’s Board of Directors. It was allegedly done based on Nagendra’s verbal instructions.
Once the account was moved to the MG Road branch, Padmanabha came under pressure from Nekkenti Nagaraj and Nageshwar Rao, both close associates of Nagendra, to transfer a significant amount of funds into the new account.
Between 4 March and 21 May 2024, ₹187.33 crore was transferred to the MG Road account. This included substantial sums from other Corporation accounts, which were consolidated in a deliberate attempt to siphon off the money.
Among these transfers was ₹43.33 crores, credited to the Corporation’s account from the State Treasury under the Ganga Kalyana Scheme.
Money transactions in Valmiki scam. (Supplied)
The money was transferred from the Corporation’s accounts meticulously. On 5 March, ₹25 crore was transferred from a Bank of Baroda account to the Union Bank of India’s MG Road branch.
Two days later, another ₹25 crore was transferred from the account. Further transfers included ₹44 crore from a Bank of Baroda account on 21 March.
On 25 March, ₹43.44 crore from the Government Treasury was deposited into the MG Road branch account. The final major transfer occurred on 21 May, when ₹50 crore was moved from the Bank of Baroda to MG Road.
Throughout this period, multiple accounts under the Corporation were consolidated, and funds from both the Corporation and the State Treasury were systematically pooled in furtherance of the scheme to siphon off the money.
The entire process was facilitated through the misuse of authority by Valmiki Corporation’s key officials, the creation of fake documents, and the involvement of external associates like Nekkenti Nagaraj and Nageshwar Rao, who worked closely with bank officials to enable the fraudulent transfers.
The transfer of funds set the stage for the subsequent diversion and diverting money into various illegal accounts.
Fake accounts in Valmiki scam. (South First)
The central element of the fraud was the creation of 18 fake accounts at the Banjara Hills branch of RBL Bank, allegedly at the direction of chairman Etakari Sathyanarayana, according to ED charge sheet. One Kaki Srinivas reportedly forged the necessary documents.
The operation began in February 2024, when the conspirators, having devised a plan to siphon off funds from the Corporation’s account, opened the first set of fake accounts at First Finance Credit Cooperative Society Limited (FFCCS). These accounts were crucial for the scheme, as they provided a legitimate facade for the fraudulent transfer of funds.
On 14 February, four accounts were opened (see graphics). Once the accounts were opened, the alleged fraudsters initiated more fake accounts. On 6 March, the next phase of the plan was put into action when Accord Business Services and Happiest Minds Technologies were registered as entities in the cooperative society.
These accounts were also created using forged documents.
On 11 March, Volta Technology Services and Nithya Security Services were added to the list of fake accounts.
The fake accounts were not limited to the first set opened in February and early March. In a coordinated move, 10 more accounts of fictitious firms were opened in FFCCS Ltd on 26 March.
The documents for these accounts were also fabricated by Srinivas, using the same fraudulent tactics that had worked previously. Several firms, including Happiest Mind Technologies, have complained against opening fake accounts in their names.
As soon as the accounts were opened, the illegal transfer of funds began. Between 5 March and 6 May, ₹45,02,98,000 was transferred to nine fake accounts in FFCCS.
On 5 March, ₹4,97,83,000 was transferred to Zelliant Training and Consulting Service, and ₹5,35,15,000 was sent to Pifums Management Pvt Ltd. On 7 March, more money was transferred. These transfers of funds continued till 6 May (see graphics).
The transactions, totalling over ₹45 crore, represented the first wave of the fraudulent scheme.
Bank transfers in Valmiki scam. (South First)
In a parallel operation, the conspirators allegedly established a fraudulent Overdraft (OD) account on 30 March 30, 2024, using a fixed deposit of ₹50 crores created in the name of the Corporation as collateral.
The OD account enabled them to draw additional funds by issuing cheques. The account was allegedly created by the branch manager of Union Bank of India’s MG Road Branch in collaboration with the conspirators.
Saiteja, another accomplice, collected the necessary documents from the branch manager and delivered them to Srinivas, who forged the required signatures and used official stamps to give the appearance of legitimacy.
The chequebooks for the OD account were issued immediately, containing 10 cheque leaves that were later used to transfer funds to the remaining fake accounts.
More money, all in crores, was transferred between 30 March and 23 April. The amount transferred came to ₹44,60,01,500. These sums, combined with the ₹45.02 crore transferred earlier, brought the total embezzled amount to ₹89.63 crore.
The money was further diverted through internet banking to various other accounts by Kaki Srinivas, Satyanarayana Varma, and Etakari Sathyanarayana, in collaboration with Nageshwar Rao and M Chandra Mohan.
The diverted funds were either withdrawn as cash or converted into gold, ensuring that the money was laundered and made difficult to trace, ED said. The scheme, intricately planned and carried out over several months, allowed the conspirators to siphon off nearly ₹90 crore from the Corporation’s account.
Funds totalling ₹73.67 crore, diverted to 18 fake accounts, were transferred to several individuals and entities.
Money transfers to individuals or entities in Valmiki scam. (South First)
Among the major recipients, Deepak Kumar, received ₹24 crore. He received funds from the Happiest Mind Technologies Ltd. Funds were further transferred to several other accounts belonging to different individuals and entities, including those of Chaganti Surender Reddy, and Phanindra Reddy, and their associated entities such as M/s Dhanvi Institute of Management.
Ramkarthik Projects was allocated ₹16.38 crore, reflecting its involvement in the operation. This entity received funds from fake accounts opened in the names of Happiest Minds Technologies Ltd, Novel Security, Services Pvt Ltd, Zelliant and Service Training Consulting, PIFUMS Management Pvt Ltd, and Accord Business Services.
Siddhi Jewellers was given ₹4.70 crore, while Rohit Jewellers received ₹1.49 crore. This jeweller received funds from Zelliant and Service Training Consulting, YM Enterprises, Volta Technology Services, Nithya Security Services, Manhu Enterprises, Sujal Enterprises, PIFUMS Management Pvt Ltd, Novel Security Services Pvt Ltd, and Accord Business Services.
Saranya Bullions also received ₹2 crore from GN Industries, ED charge sheet said.
Chandra Mohan, who played a crucial role in the scheme, received ₹3.36 crore. Additionally, individuals and entities linked to him were allocated ₹1.78 crore, further implicating his network in the illicit transactions. He received money from MS Talenq Software India Pvt Ltd.
Gollapalli Kishore Reddy’s Srihitha Shopping Services Private Ltd was another recipient, receiving ₹6.20 crore. This company received funds from Happiest Mind Technologies, Accord Business Services, and Zelliant and Service Training Consulting.
Coastal Trading and Obedient Trading received ₹2.34 crore each. Barcode Enterprises was allocated ₹1.56 crore from V6 Business Solutions.
Nageshwar Rao and his proprietary concern, M/s Sree Nagendra Traders, received ₹1.40 crore from Zelliant and Service Training.
SLS Building Systems received ₹1.10 crore from SLS Building Systems. It was further diverted to Nekkenti Nagaraj and N Ravi Kumar.
In total, these transfers accounted for ₹73.67 crore, with an additional diversion of approximately ₹16 crore to various other entities and individuals. This layering and routing within the accounts were strategically designed to obscure the trail and intended use of the funds, making it difficult to trace the illicit activities back to their origin.
A partial recovery of ₹5 crore took place on 23 May, when funds were returned to the Savings Bank account of KMVSTDCL from the bank accounts of TalenQ Software India Private Ltd, V6 Business Solutions, and Accord Business Services.
This return occurred after the scam was uncovered by employees of the Corporation and other parties involved in the investigation. The Union Bank of India referred to this recovery in its complaint to the CBI on 3 June 2024.
(Edited by Majnu Babu).
