Representative image of a probe
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Bengaluru: The Directorate of Enforcement (ED) on Sunday announced the arrest of B K Nagarajappa, a former general manager of the Karnataka Bhovi Development Corporation (KBDC), for his alleged involvement in funds misappropriation.
In 2021–22, when the BJP was in power in the state, bureaucrats and middlemen allegedly swindled large chunks of loans marked for a jobs scheme for Bhovi community members. While the corporation was supposed to lend up to Rs 10 lakh per person, no beneficiary received more than Rs 30,000. The scam came to light when banks asked beneficiaries to repay the original amount.
A total of Rs 97 crore is believed to have been embezzled from the corporation.
According to the ED, Nagarajappa was the general manager of the corporation when the scam occurred. He was “instrumental” in diverting funds from the KBDC by using bank accounts of fake beneficiaries provided by agents from the Bhovi community.
“In connivance with other suspects/accused, he further layered and laundered funds through entities incorporated in the names of his accomplices. They managed to divert funds from the accounts of KBDC to the accounts of fake entities/beneficiaries, which were further transferred to friends and family members of Nagarajappa and other suspects,” the ED noted. “Several bank accounts were opened, and many beneficiaries/intended beneficiaries were cheated by adopting a very well-designed and foolproof modus operandi by Nagarajappa and other co-accused.”
The ED further stated that Nagarajappa “laundered money, generated the Proceeds of Crime (POC), layered the money using fake accounts, and integrated the funds into the bank accounts of their friends and family members through bogus entities created for swindling the money”.
According to the central agency, Nagarajappa was arrested under Section 19 of the Prevention of Money Laundering Act (PMLA), 2002. A special court in Bengaluru has remanded him in the ED custody for 14 days.
Nagarajappa’s arrest came after the ED raided over five places in Bengaluru, including the KDBC office in VV Towers, on April 4. During the search operation, the ED said, it seized “incriminating” documents, digital records and details of properties acquired out of POC generated from the commission of offence of money laundering.
The ED entered the probe after the Criminal Investigation Department (CID) investigated four FIRs filed in different police stations in Bengaluru and Kalaburagi.
The CID began investigating the cases in 2023 and has seen four Investigating Officers (IOs). Two of them were suspended over sluggish probe while the third IO was arrested for mistreating a suspect, who later died by suicide.