Reddy firm broke many laws
Illegal money transfers and under-invoicing detected
Benami transactions, under-invoicing and tax evasion are among the findings by the Lokayukta against the Reddy brothers.
The State-appointed ombudsman has recommended the removal of three Ministers - G Janardhana Reddy, G Karunakar Reddy, and B Sriramulu - from the Cabinet as they were on the board of Obulapuram Mining Company(OMC) that was guilty of several illegalities.
The company is accused of exporting iron ore at far below market rates to a Singapore-based firm, GLA Trading. Officers of the Income Tax department discovered that Janardhan Reddy was a Director of GLA at the time. (GLA is said to refer to Gali Laxmi Aruna, wife of G Janardhana Reddy).
In the years 2007-08 and 2008-09, OMC exported 8.5 lakh MT of iron ore to GLA Trading International Limited, Dubai. According to records obtained from Kakinada, Krishnapatnam, and Vishakapatnam ports, OMC was found to have exported ore originating from Karnataka. This busts the Reddys claim that they have not been involved in mining in Karnataka.
According to the I/T department, the total under invoicing has been pegged at 52 million US dollars, or Rs 215 crore. "It should be noted that this under-invoicing has caused loss to the Government from export made to GLA by OMC for two years," says the report.
It also notes that the Union Government had lost foreign exchange due to it, and observes that the money may be parked in tax havens.
This conclusion has been arrived at as GLA Trading has a dubious history.
The company, earlier Man-Go Pub Pvt Ltd, was a company registered in Singapore. One share of this company was transferred in favour of GJR Holdings with its address at Isle of Man. "Again it should be noted that the letter GJR in this company refers to Gali Janardhana Reddy and the company is registered in Isle of Man, which is (an) internationally known 'tax heaven'," the report notes.
The share was then transferred to another firm Interlink Services Group Limited in British Virgin Islands in June 2009, another tax haven. The Lokayukta also notes that after it began investigation into the illegal exports, Janardhan Reddy ceased to be a Director of GLA Trading with effect from December 12, 2009.
The Lokayukta has also found benami transactions involving Associated Mining Company (AMC) - owned by Janardhan Reddy and his wife Aruna - and Sri Bhakta Markandeshwara Minerals (SBMM).
The Lokayukta has concluded that bank accounts operated by SBMM are benami accounts operated by proxy. Other payments to “G J Reddy Sir” from SBMM have also been found, as payments for risk protection.
* Removal of Janardhana Reddy, Karunakara Reddy, and Sriramulu from the Cabinet
* Recovery of Rs 215 crore from OMC for under-invoicing
* RBI should take action against OMC for parking money abroad
* Recovery of illegal payments to “GJ Reddy sir” and AMC
* Filing of cases for benami transactions.