Karnataka’s former minister and mining baron Gali Janardhana Reddy was arrested and jailed for allegedly shielding two suspects in a multi-billion rupee Ponzi scheme, police said yesterday.
“Based on the evidence and statements, Reddy has been arrested and charged with criminal conspiracy,” Additional Commissioner of Police Alok Kumar told reporters here.
Later, Additional City Metropolitan Magistrate Jagdish sent Reddy to a 14-day judicial custody till November 24.
The City Crime Branch (CCB) police CCB police earlier took Reddy to state-run Victoria Hospital in Bengaluru for a check-up.
The CCB charged Reddy with shielding a man and his son, both accused in the Rs9.54bn Ponzi scheme, from being investigated by the Enforcement Directorate (ED) for alleged money laundering in violation of the Foreign Exchange Management Act (FEMA).
Reddy’s arrest comes a day after he drove to the CCB office on Saturday evening in response to a summons.
“Reddy has been lodged in the central jail. We will apply for bail in the same court tomorrow for his release,” his lawyer Chandrashekar told reporters.
Reddy was questioned on Saturday by CCB officials led by Alok Kumar, Deputy Commissioner of Police S Girish and Assistant Commissioner of Police Venkatesh Prasanna.
The CCB also arrested Reddy’s aide Ali Khan, who had allegedly struck a Rs180mn deal with the suspects - Syed Ahmed Fareed and his son Syed Afaq Ahmed of Ambidant Marketing Ltd, a Bengaluru-based company that ran the Ponzi scheme and duped about 15,000 investors by laundering their money from Dubai.
The company promised people 40% returns on their investments.
Many people fell into the trap and invested money but never got any returns. The Enforcement Directorate took over the case as the complaint was registered and a look-out notice was issued for Fareed.
Fareed allegedly told the police that he had given Reddy 57kg of gold worth Rs180mn after the Ballari mining baron promised to help him in the investigation launched by the Enforcement Directorate.
Reddy, 51, a former Bharatiya Janata Party minister in Karnataka (2008-11), however, denied his involvement in the case.
“I have no role in the Ponzi scheme. The police have no evidence to prove my involvement in it. They are misleading the media and the public,” said Reddy in a video clip released to local news channels before his interrogation on Saturday.
Refuting allegations by police that he was on the run, Reddy said he had been in Bengaluru.
One of the three brothers who wield enormous power in Karnataka’s mining district of Ballari, Janardhan Reddy was disowned by BJP chief Amit Shah during campaigning for the assembly elections held in the state in May.
His two brothers, Gali Karunakara Reddy and Gali Somashekhara Reddy were given tickets by the party. Janardhan Reddy had campaigned for them, as well his aide Sriramulu, who won the election from Ballari.
However, after Sriramulu resigned as the Ballari Lok Sabha MP, the Congress won the seat in last week’s by-election.
The police have said there was no political connection to the probe and they were working on the case for the last 20 days, but waited till November 3 for the by-elections to be over for further action, so that it was not politicised.
Reddy had been arrested by the Central Bureau of Investigation in 2011 over alleged multi-billion illegal mining scam and granted bail three years later. He had reigned supreme in what was then infamously called the “Republic” of Ballari.
In a Ponzi scheme, an investment firm fraudulently collects huge amounts of money from depositors promising high interest rate but uses it to pay heavy interest on deposits raised earlier from another set of investors.
“In a Ponzi scheme, investors are made to believe that they earn high interest on their deposits from profits the company makes through lucrative business than from their own deposits, which are recycled,” said an ED official.
Reacting to Reddy’s arrest and imprisonment, former Karnataka chief minister Siddaramaiah said that nobody was above the law.