New Delhi: The Enforcement Directorate, the economic intelligence and prosecuting agency investigating financial fraud worth thousands of crores, seems to have been more active than ever before in the last one year. It has secured 11 convictions in eight months, as opposed to just three between 2002 — when it started investigating criminal cases under the Prevention of Money Laundering Act (PMLA) — and 2017.
The ED falls under the finance ministry’s Department of Revenue. It was formed in 1957 to look into cases of foreign exchange-related violations, a civil provision. But in 2002, after the introduction of the PMLA, it started taking up cases of financial fraud and money laundering, which were of criminal nature.
Of late, the ED has not just taken up high-profile cases, mostly against members of opposition parties, but has also actively started investigating them, filed charge sheets in many long-pending cases, attached properties in a series of cases worth Rs 58,000 crore, moved applications, and even secured extraditions.
Sample this: Ratul Puri, nephew of Madhya Pradesh Chief Minister Kamal Nath, escaped the agency’s office where he was being questioned in connection with the Rs 3,600 crore AgustaWestland chopper deal case on the pretext of going to the bathroom.
Soon after, Puri moved for anticipatory bail in a Delhi court, but before the court could pronounce a verdict on his bail, the ED registered another case of bank fraud against him and arrested Puri after aggressive searches.
The ED has also gone after fugitives who have left the country — it was the first to move an extradition request for businessman Nirav Modi for his alleged involvement in the multi-crore Punjab National Bank (PNB) fraud case, and was also the first to trace the location of the international business head of Gitanjali Gems, Sunil Varma, to the US. The process of extraditing him too was initiated by the agency.
Allegations of political vendetta
The ED has often been attacked for initiating investigations, raiding and questioning leaders of opposition parties, be it under the current Narendra Modi-led NDA regime or under past governments.
From Congress leaders like P. Chidambaram and D.K. Shivakumar to the Nationalist Congress Party’s Sharad Pawar and Praful Patel and even Samajwadi Party chief Akhilesh Yadav, many opposition leaders have faced ED probes in the past few months.
Panchkula land case: On 26 August, the agency filed a charge sheet against former Haryana CM Bhupinder Singh Hooda and fellow Congress leader Motilal Vora in the case involving the allotment of land in Panchkula to the Congress-promoted Associated Journals Limited (AJL).
“AJL, Motilal Vora and Bhupinder Singh Hooda were directly involved in the process/activity connected with acquisition, possession or projection of ‘Proceeds of Crime’ i.e. Plot No.C-17,Sector 6, Panchkula to the tune of Rs 64.9 crore,” the ED said in a statement.
It is alleged that the property was allotted to AJL in 1982, but was taken back by the Estate Officer, Haryana Urban Development Authority (HUDA), on 30 October 1992, since AJL did not comply with the conditions of allotment.
The ED has alleged that Hooda, as chief minister and chairman of HUDA in 2005, blatantly misused his official position and allotted the plot afresh to AJL at original rates plus interest, in violation of necessary conditions, causing wrongful loss to HUDA and wrongful gain to AJL.
Other Congress leaders and kin: On 3 September, the ED arrested Congress leader and former Karnataka minister D.K. Shivakumar after questioning him for two days, in connection with a charge sheet that was filed by the Income Tax Department last year over tax evasion and recovery of unaccounted wealth from his residence in Delhi.
The INX Media case, too, is an example of the agency’s recent ardent approach. Chidambaram was not only booked for alleged irregularities in foreign exchange clearances to the company for overseas investment while he was union finance minister, he was also arrested by the CBI. Now, the ED has moved court to grant it Chidambaram’s custody for questioning.
Another example is the case of Robert Vadra, son-in-law of Congress interim president Sonia Gandhi. In December 2018, the ED raided the offices of Skylight Hospitality in connection with two properties owned by Vadra, which he allegedly purchased through arms dealer Sanjay Bhandari in London. The ED was the first to question Vadra in the case, and has now moved the court to cancel his anticipatory bail application.
Even in the Sterling Biotech bank fraud case against Gujarat businessmen Chetan and Nitin Sandesara, the ED has questioned Congress leader Ahmed Patel’s son Faisal and son-in-law Irfan Siddiqui.
Sharad Pawar and MSC Bank: The ED also summoned NCP chief Pawar in connection with the Rs 2,500 crore loan fraud in the Maharashtra State Cooperative (MSC) Bank, and called him a “key player” in the scam.
A criminal PIL was filed on 28 January before the Bombay High Court in case of MSC Bank scam, following which the court, on 22 August, directed the economic offences wing of the Mumbai Police to register an FIR. The FIR was filed, and consequently, an Enforcement Case Information Report (ECIR) was recorded by the ED on 23 September against the chairman, managing directors and directors of the bank, along with Sharad Pawar, Ajit Pawar, Dilip Rao Deshmukh, Isharlal Jain, Jayant Patil, Shivaji Rao Nalvade, Anand Rao Adsul, Rajendra Shingane, Madan Patil and others.
According to the ED, it is alleged that there were irregularities in loan disbursements to cooperative sugar factories, and that the loans were sanctioned despite them having weak financials. In many cases, loans were sanctioned without any collateral. The cooperative sugar factories were shown to be sick and allegedly sold to close relatives of certain politicians.
Another NCP leader, Praful Patel, was questioned in connection with a money laundering probe linked to the illegal assets of the late Iqbal Mirchi, an aide of underworld don Dawood Ibrahim.
Leaders of other parties: The ED was also the first to question Farooq Abdullah in a case of misappropriation of funds provided by the Board of Control for Cricket in India to the J&K Cricket Association.
In 2017, less than three months before the UP assembly elections, the ED had detected over Rs 104 crore in an account linked to the Bahujan Samaj Party and around Rs 1.5 crore in the account of party chief Mayawati’s brother Anand Kumar. In January this year, the ED also raided locations in UP in the Rs 1,400 crore Dalit memorials scam that allegedly took place when Mayawati was chief minister.
Also this year, the ED also registered a money-laundering case against former UP chief minister Akhilesh Yadav in an illegal mining case.
Going ‘soft’ on BJP leaders and associates
While on the one hand the opposition alleges a “selective witch-hunt” by the ED, it also alleges that no action is being taken against leaders of the BJP and those who joined the party from other parties.
For example, Mukul Roy and Himanta Biswa Sarma, both accused in the Saradha chit fund scam, are yet to be questioned. While Roy switched to the BJP from the Trinamool Congress (TMC), Sarma joined the BJP from the Congress.
This, however, is not new. Allegations of being used as a tool to harass opposition politicians were also levelled against the ED under the UPA government.
A money-laundering case was registered against Jagan Mohan Reddy, when his YSR Congress Party was in a tussle with the Congress in Andhra Pradesh. The ED, in its probe, based on a CBI FIR, had stated that since May 2004, when his father Y.S. Rajasekhara Reddy was the Congress chief minister, Jagan floated a number of companies in which beneficiaries of state government decisions made investments.
Poor rate of conviction
Until 2017, the ED had just managed two convictions, involving relatively smaller amounts (Rs 3 lakh to Rs 4 crore) than the thousands of crores it usually probes. Both convictions came in 2017, the first being in January of that year, when a special PMLA court sentenced a former Jharkhand minister, Hari Narayan Rai, to seven years in prison for laundering Rs 3.7 crore.
The second conviction followed two months later, in March 2017, and pertained to a drug trade case against Kolkata resident Allauddin, who was sentenced to eight years’ rigorous imprisonment and fined Rs 2 lakh. The Narcotics Control Bureau had seized 30 kg of opium and 550 kg of poppy husk from him, and investigations revealed that the money earned from drug sales was invested in property. This is when the ED took up the case and traced two immovable properties, valued at Rs 3 lakh, which were later attached.
The third conviction came in October 2018, when a special court in Patna sentenced one Mohammad Naushad to five years’ imprisonment for trading illegal arms. The ED had launched its investigation against Naushad in 2013, and seized fake Indian currency with a face value of Rs 1.4 lakh from Naushad’s residence. It was also found that he used his ill-gotten wealth to purchase property valued at Rs 22.6 lakh. His assets were confiscated and he was also ordered to pay a fine of Rs 5 lakh.
In 2018, the ED managed to get one more individuals convicted, while in 2019, the number of convictions stands at nine so far.
The overall number, is still bleak, with more than 2,400 cases pending trial.
“The conviction rate is poor due to the long legal process. The courts take a long time to first see if it amounts to a predicated offence or not, then all the evidence is looked into. It also happens that we keep waiting for information from abroad and that takes a lot of time, further delaying the process,” an ED officer explained.
“In all our cases, the court has taken cognisance and charges have been framed, but the trial is taking time. Since the PMLA is a relatively new law, it does take time. Also, one should not ignore there has only been one acquittal,” the officer said.
Properties worth Rs 58,000 cr attached in 10 years
There are 29 laws and 160 sections under which the ED can book an individual. If any person commits a crime under these sections, the money accrued from it qualifies as “proceeds of crime”. If that money is then used to purchase assets, or invested overseas, the case falls under the PMLA and the ill-gotten wealth can be confiscated.
However, while the ED can attach assets of individuals or companies involved in cases under the PMLA, only courts can confiscate them. Confiscation is when the court takes possession of assets attached by the investigative agencies, until further orders.
Once an ECIR is filed with the agency, investigators work to establish a money trail to see where the wealth was invested, its source, and where it was distributed.
After assets are attached by the ED, the decision is confirmed by an adjudicating authority. Once the attachment is verified by the adjudicating authority (to say that it was fair), the agency files a prosecution complaint in court within 60 days.
In the last 10 years, the ED has attached assets worth Rs 58,333 crore. According to a source, assets worth Rs 36,149 crore have been confirmed by the adjudicating authority, but the rest are pending.
The highest number of attachments has been made in the Sterling Bitotech case, amounting to Rs 14,000 crore.
The source told ThePrint that in most cases, the adjudicating authority confirms these attachments, unless they are disputed.
“The quality of attachment in most cases is very good, resulting in its confirmation by the adjudicating authority. In a total of 1,200 orders of attachment, 1,000 have been confirmed, which is a good sign,” the source said.
Between 2005 and March 2018, the agency attached assets worth Rs 27,000 crore, of which Rs 14,000 crore, a little over 50 per cent, pertained to cases of bank fraud.
The second highest share, Rs 8,000 crore or around 36 per cent, comprised cases of corruption.
According to ED officers, getting information on accounts and money stashed abroad to establish a trail is the biggest challenge they face.
The agency sends letters rogatory to different countries to obtain information about individuals and entities offshore. A letters rogatory is a formal communication from a competent court to a foreign court, and is processed by the Ministry of External Affairs on behalf of investigative agencies. But most of these letters go unanswered, severely affecting the investigation. In some cases, this can lead to a court dismissing a case due to lack of evidence.
According to an officer, a case of financial crime needs to be built on circumstantial evidence and to unearth a money trail, the ED needs to look into several links, which becomes extremely difficult without proper support from countries abroad, as, in most cases, the money is parked offshore. However, in most cases, the financial details and returns of the firms under the scanner are not shared by the authorities in these countries because it is not mandatory for them to send a response.
An example of a case being dismissed due to lack of response from foreign countries is the 2G scam, where the ED was unable to establish a trail, and hence, the “proceeds of crime”.
According to a source, several letters rogatory were pending, pertaining to alleged kickbacks of Rs 200 crore allegedly paid by Swan Telecom to telecom minister A. Raja through Kalaignar TV, run by his party, the DMK.
In the 2G case, of the 10 countries the ED sent letters rogatory to, Russia, UAE, Norway, Mauritius, Libya, the Isle of Man and Singapore did not respond, while France and Cyprus did.
The British Virgin Islands too sent a response, but did not share any relevant information, following which a supplementary letters rogatory was filed.
In many cases, countries demand that while seeking information, the agency should mention a direct link between the proceeds of crime and the crime itself. This, ED officers say, is not possible, as at the time of the investigation, they are dealing with a complex web of transactions, offshore companies in tax havens and multiple possibilities, which can only be substantiated once they have all the information.
“To establish a money trail, we go through several links and it may not be possible to establish a link between proceeds of crime and offence at that point. This is where the LR (letters rogatory) request gets stuck,” an officer said.
Officials also blamed the poor conviction rate on this factor.
“An investigation that needs to be done in-house gets completed fast, but we get stuck when we do not get information from abroad. In 90 per cent of cases, the money is laundered and stashed in tax havens abroad, and when we do not get information from there, the investigation suffers,” an officer said.
“For some information which involves key evidence, we are completely dependent on the authorities abroad. If they do not respond, the investigation gets stuck. We cannot do anything as it does not fall under our jurisdiction. We are unable to establish a trail and the case lingers on. It becomes an endless wait,” he added.
The officer also said that even if the ED gets a response, authorities abroad do not divulge full information, and they have to file supplementary letters rogatory for further queries, which further delays the process.
Shortage of sleuths
The lack of enough investigators, too, is a major challenge for the ED.
Since the PMLA was enacted, more than 2,500 ECIRs have been filed in the ED, and the investigation is pending in over 1,000 cases.
While the sanctioned staff strength of the ED is 2,300, it has only 1,000 personnel, including investigators, record-keepers and administrators.
(The report has been updated with the current figure of convictions)