After Saradha, mega Rose Valley scam hits West Bengal

Enforcement Directorate (ED) officials admit both in public and private that the Rose Valley scam is much bigger than the one perpetrated by Saradha Group’s Sudipto Sen.

Although details of how much money Rose Valley Group raised from unsuspecting investors still remains sketchy, according to the ED’s estimate, it would be in the tune of Rs 15,000 crore, around six times that of Saradha. Also, Rose Valley has been in action much longer, working its way through West Bengal and other parts of the country, silently.

Right now, both Gautam Kundu of Rose Valley and Suditpto Sen of Saradha are behind bars. The similarities do not end here. Both raised money under various schemes that seem legal on the surface, both of them ventured into the media and both maintained a low profile.

There is, however, a crucial difference between Kundu and Sen. While investigators are still working to trace the money Sen collected, Kundu created an empire of assets on the ground, particularly through his hotels and resorts business, setting up some 23 properties across India, which are said to be valued at Rs 2,500 crore. 

There are also other differences between the two. While Sen’s flamboyance was limited to wearing shiny suits to office meetings, Kundu revelled in the money he made. If Sen’s ride was a white Mahindra Scorpio, Kundu was the proud owner of a Rolls Royce Phantom, one of the most desired cars in the world that can be possessed only by invitation.

Sen’s fleet of cars included Tata Sumo, Mahindra Scorpio, Tata Indigo and Tata Indica cars, most of which were used for official purposes, barring an odd Audi his family used. Kundu had a large fleet of cars as personal rides, including an eight-door customised limousine. 

Kundu scored over Sen because unlike the latter, his political indulgence was completely under the radar. If Sen regaled in his political connections and even appointed a state minister president of the employees’ union of his media ventures and made occasional appearances with politicos, Kundu stayed far away from them in public. 

What happened behind closed doors mostly remains unknown. Names of the Trinamool Congress leaders of various hues came tumbling out soon after Sen’s arrest, even weeks after Kundu’s arrest, only a few names are being bandied around with no specifics available for opposition parties to take mileage from.

Even Kundu seems to believe himself to be smarter than Sen. Soon after his arrest, while responding to questions from reporters whether he too had to face political pressure like Sen, he retorted, “I’m not a fool like Sudipto Sen.” Despite the rather ego-laced claim, his words might have a ring of truth.

While ED officials believe Rose Valley to be the biggest money pooling business in India after Sahara, the All India Small Depositors Association sets the amount Kundu’s company collected to be close to Rs 40,000 crore, around 16 times the size of Saradha scam. Kundu tried and tested various models before he zeroed in on selling a time share holiday scheme, which he realised was an easy cover to hoodwink regulatory bodies such as SEBI and RBI. 

With hotels and resorts across India, Rose Valley’s time share scheme would have been a legal way of raising money, something which Club Mahindra and Sterling Resorts have been doing for years. Unlike the two leading time-share companies, Rose Valley collected the money under the cover of the scheme and offered high returns in cash. In the case of Club Mahindra or Sterling Resorts, the time share was never redeemable by cash but only with vacations. 

Kundu discovered a loophole and designed his money-pooling scheme around it. A senior ED official admitted to the brilliance of the plan and pointed out that if not for the unravelling of Saradha, Rose Valley would have continued unabated for a long time. The idea for the scheme is said to have come from Kundu’s elder brother Kajal, who set up Rose Valley Hotels & Entertainment around 18 years ago, besides Rose Valley Real Estate & Construction. 

Veneer of legitimacy

Initially, the scale of operations of the two companies was of hardly any consequence but in 2001, Kajal launched Rose Valley Chain Marketing, which became a corporate agent for India’s largest insurer, LIC. Although Kajal died when his car plunged into a lake at Shillong in 2003 and the mantle was passed on to Gautam, the brilliance of the plan survived. 

Under the younger brother, the group, with as many as 30 companies registered under its banner, became flusher as ventures into Bengali filmdom and media provided a veneer of legitimacy. The company also launched Adrija, a chain of branded gold jewellery stores, couple of years ago as yet another step towards legitimate cover but its accounts are also under scrutiny. 

Earlier this year, the ED froze around 2,500 bank accounts of Rose Valley, making a seizure of Rs 296 crore, one of its biggest cash hauls in history. As the agency keeps digging for political patronage, investigators are yet to come across any direct high-profile links with Kundu. A senior official, however, pointed out that the group could not have flourished for almost two decades and collected so much money without political patronage. 

While moves are now being made to find more about the extent of the Rose Valley scam, officials admit that there had been significant delay in hauling up Kundu.

When Saradha came tumbling down in April 2013, no move was made soon after to look into Kundu or other such groups flourishing in the market. As reports suggest that Rose Valley agents are still collecting money from the market, the agency has a tough task ahead, one that could leave it drained of all energy.