Hyderabad: Enforcement Directorate ( ED) on Wednesday arrested Leonia Resorts MD r G S Chakravarthy Raju and A V Prasad under Prevention of Money Laundering Act in a Bank Loan fraud case. The key allegation against the accused is that they had siphoned off hundreds of crores of loan funds sanctioned by a consortium of banks to Leo Meridian Infrastructure Projects & Hotels Limited (LMIPHL). Earlier on December 12, 2019, ED attached assets worth Rs 250 crore of the accused under PMLA.
ED initiated an investigation under PMLA based on the FIR registered by CBI Bangalore Banking Securities and Fraud Cell. CBI had registered FIR on the complaint of Bank of Baroda, Hyderabad against G S C Raju, LMIPHL and Others for Bank Fraud. It is alleged that LMIPHL and G S C Raju had fraudulently taken a principal loan amount of approximately Rs 700 crore from a consortium of Banks and then defaulted on the same. Subsequently, CBI registered two more FIRs against G S C Raju, LMIPHL and Others. CBI has already filed two charge sheets against them, and CBI arrested G S C Raju earlier in 2018. The total outstanding amount payable to all the Banks as of today is Rs 1768 Crore. ED has been investigating the entire loan fraud of Rs 1768 Crore.
ED unearths Leonia Conspiracy
During the ED Investigation, ED collected documents from CBI, IT Department, GST Department, ROC, SRO, Banks, Forensic Auditors and has conducted an extensive investigation into the affairs of the company from its inception. ED has found credible evidence that a well-planned conspiracy was executed by Mr G S C Raju along with his associates at LMIPHL to defraud the Banks.
“He first created an illegal layout and sold plots to 315 people. Then he mortgaged parts of the already sold lands to the Banks to obtain loan for a resort project. Even approach roads were fraudulently mortgaged to the Banks. Revenue records were manipulated to cheat the Banks and Plot owners. Subsequently, the loans sanctioned by the Banks were siphoned off using SHELL vendor and contractor firms opened in the names of petty employees of LMIPHL. Part of the diverted funds were channelled back into LMIPHL as investments using Kolkata based jama-kharch companies.,” said ED.
Leonia MD created shell companies: ED
ED alleged that G S C Raju created more than 33 SHELL Companies and created bogus share capital & share premium book entries in the balance sheets of LMIPHL with the help of complicit Chartered Accountants. He allegedly used this bogus equity to show margin money fraudulently and to improve the debt-equity ratio of LMIPHL to cheat the Banks into giving huge loans for which he was otherwise not eligible. After this, again he created large number of fake vendor and contractor firms to siphon off the sanctioned loans, under the guise of bogus invoices and bogus provision of material and services. ED has conducted fund trail investigation and found that large portions of these diverted loan funds were cyclically rotated back into LMIPHL to create bogus exaggerated Capital Works in Progress and in turn bogus fixed assets. This was done to again cheat the Banks into giving more loans and to match the asset side of Balance sheets with the Liability side. This was cyclically done till Banks stopped sanctioning loans.
Modes Operandi of the Leonia scam
ED that arrested leonia MD in loan fraud case unearthed the modus operandi. By using bogus capital equity, bonus shares taken on fake balance sheets, G S C Raju and his family came to own 95 percent of the company without investing any real personal money. The entire hotel project, though grossly over-valued in the balance sheets, was built from only a portion of the sanctioned loan – which in turn were illegally obtained and which he was not eligible to get – and the rest of the loan amount was siphoned off.
LMIPHL never maintained any cash ledger, invoices for construction activities, fixed asset registers and did not provide the same for investigation. G S C Raju created another front company and even siphoned off the cash revenue of the resort and did not repay the Banks turning the loans into NPAs causing a massive loss of Rs 1768 Crore to the financial creditors. Banks could not enforce the mortgaged securities due to multiple title defects, fabrication of documents by Mr G S C Raju in the loan applications. Over the years many lands have been transferred to benami names and suspect tenancy rights have been created by the accused persons by using strong local influence. ED has so far unearthed 33 SHELL companies and more than 40 SHELL vendor and contractors and so far, identified diversion of loan funds up to Rs 250.39 Crore. ED has so far identified and attached 3,43,17,948 shares of the promoters, 76,62,434 benami shares, 11 immovable properties of Mr G S C Raju & his family, 38 immovable properties in the names of benamis and the assets of LMIPHL up to a total extent of Rs 250.39 Crore.
The investigation into the remaining proceeds of crime is going on to identify more benami assets. Search operations were conducted at multiple locations in Hyderabad and after the conclusion of the searches in which many incriminating documents have been seized, the main kingpin of the offence of money laundering, Mr G S C Raju, has been arrested along with his main associate, A V Prasad. The accused have been remanded to the custody of the Enforcement Directorate. Further investigation is going on.
Leonia fraud: List of 33 SHELL Investing companies
Gaurav Investments Pvt Ltd, Haritha Digitel Pvt Ltd, Innovative Information Solutions Pvt Ltd, MJM Medica Pvt Ltd, Sai MSR Chit Funds Pvt Ltd, Wave Infosoft Pvt Ltd, Diamond Silicon Materials Pvt Ltd, Gaurav Investments Pvt Ltd, Global Ways Consulting Pvt Ltd, Haritha Digitel Pvt Ltd, Imachines Private Limited, Innovative Information Solutions Pvt Ltd, MITR Dairy Pvt Ltd, MJM Medica Pvt Ltd, Oscorp Information Systems Pvt Ltd, Sah Tours Private Limited, Sai MSR Chit Funds Pvt Ltd, Tech Planet Solutions Pvt Ltd, Top News Network Pvt Ltd, Unitech CNC Systems (India) Pvt Ltd, Wave Infosoft Pvt Ltd, Arjun’s Virtual Studio Pvt Ltd, Harini Institute of Safety Management P Ltd, Jatro Biomatrix India Pvt Ltd, Madison Securities Pvt Ltd, Melamesa Internet Services PVt LTd, Raju Callinfo Private Limited, RSP IT Services Pvt Ltd, Sah International Private Ltd, Scorpio Tech Solutions Pvt Ltd, Siva Excavations & Contracts Pvt Ltd, Vaksh Soft-Tech Private Limited, Vandana Infotech Private Ltd, VII Online Commodity Trading Pvt Ltd, Vlink Consultancy Services Pvt Ltd, Diamond Silicon Materials Pvt Ltd, Imachines Private Limited, Jatro Biomatrix India Pvt Ltd, Logitrak Consultancy Services Pvt Ltd, Madison Securities Pvt Ltd, Oscorp Information Systems Pvt Ltd, S4 Solutions Launchpad Private Limited, Sah International Private Ltd, Scorpio Tech Solutions Pvt Ltd, Sri Pragna Farms Private Limited, Tech Planet Solutions Pvt Ltd,Top News Network Pvt Ltd and V8CD Ads Private Limited