How AP Liquor Scam accused earned Rs 100 crore per month, hide money in Hyderabad

Hyderabad: Sleuths of the Enforcement Directorate, Hyderabad, have attached properties worth Rs 441.63 crore belonging to Kesireddy Rajasekhara Reddy, Booneti Chanakya and DonthiReddy Vasudeva Reddy under the PMLA Act.

All three are accused in the Andhra Pradesh Liquor Scam. The properties attached include bank balances, fixed deposits and land parcels.

What did ED find in the probe?

The ED took up the investigation based on the FIR registered by the Principal Secretary, Andhra Pradesh Government. It is alleged that the liquor scam cost the government exchequer a loss of Rs 4,000 crore.

Before 2019, the liquor trade in Andhra Pradesh was regulated through an automated software system, which ensured end-to-end digital tracking of procurement, supply and sales of liquor.

This software resulted in a verifiable electronic audit trail.

After the 2019 Assembly elections, the YS Jagan Mohan Reddy-led YSRCP State government allegedly monopolised retail liquor outlets through Government Retail Outlets (GROs) operated by the Andhra Pradesh State Beverages Corporation Limited (APSBCL).

What was the hidden Modus Operandi?

There was a hidden criminal conspiracy in the monopoly. The automated system was deliberately disabled and replaced with a manual system, thereby giving unfettered discretionary powers to APSBCL officials in the issuance of Orders for Supply (OFS).

The manual OFS regime was misused to discriminate against established liquor brands, which were deliberately marginalised or removed from the market.

Basic prices were artificially inflated

Simultaneously, preferential and irregular allocations were extended to select ‘favoured’ brands on receipt of kickbacks.

As part of the scheme, the syndicate promoted the introduction of ‘similar-sounding brands’ (SSBs) with artificially inflated basic prices. This pricing manipulation enabled the distilleries manufacturing such brands to generate surplus margins, which were utilised to meet the illegal monetary demands of the cartel.

The probe also found that the distilleries were coerced into paying illegal kickbacks ranging from 15 to 20 per cent of the basic price per case as a precondition for receiving OFS approvals.

The manufacturers who refused to comply were subjected to coercive measures, including withholding legitimate payments and rejection of supply orders.

Communications relating to the demand and collection of kickbacks were carried out through encrypted VOIP calls and applications such as Signal, to conceal the identities and roles of key operatives, including Booneti Chanakya (alias Prakash), Muppidi Avinash alias Sumeeth and Mohammed Saif.

The ED investigation revealed that Kesireddy Rajasekhara Reddy, alongwith other members of the liquor syndicate, orchestrated a multi-crore scam in the liquor procurement and distribution system in Andhra Pradesh.

The scam primarily involved control and manipulation of the procurement process of APSBCL, leading to an estimated wrongful loss of over Rs 3,500 crores to the State exchequer.

Where did the crime money go?

The Proceeds of Crime (POC) generated from this scam were laundered and distributed among the members of the syndicate for personal gains. Kesireddy, in collusion with Booneti Chanakya, Avinash Reddy, Tukekula Eswar Kiran Kumar Reddy, Paila Dileep, Saif Ahmad and others collected kickbacks to the tune of Rs 3,500 crores (approx.).

Control over distilleries

The investigation has also brought to light that the accused established and/or acquired control over several distilleries, which were utilised as Special Purpose Vehicles for the generation of proceeds of crime.

Entities such as Adan Distillery Pvt. Ltd., Leela Distilleries Pvt. Ltd. and U.V. Distilleries were operated under the effective control of the syndicate and were granted disproportionately high business volumes by abusing political and administrative influence to acquire Proceeds of Crime in the form of financial gains arising out of the operations of such distilleries.

Manipulation of liquor transportation contracts

Another identified source of illicit revenue generation was the manipulation of liquor transportation contracts awarded through tender by APSBCL.

The investigation revealed that a centralised transportation tender was awarded to Sigma Supply Chain Solutions Pvt. Ltd. at rates significantly higher than the earlier depot-wise transportation costs. Though the contract was awarded in the name of SSCSPL, operational control was exercised by members of the liquor syndicate, primarily T Eswar Kiran Kumar Reddy, Saif Ahmad and others.

It has been established that a substantial part of the contract receipts were diverted to entities such as TEKKR, Arroyo & Ezyload, which were used as conduits for laundering the Proceeds of Crime.

The investigation has revealed that several distilleries engaged vendors and fictitious entities for the purported supply of raw materials and packaging items.

These vendors facilitated the conversion of banking funds into unaccounted cash through inflated and fictitious invoicing for goods that were never actually supplied.

Further, the Proceeds of Crime were laundered into the real estate sector and for the acquisition of personal assets. It has been established that tainted funds were routed through entities such as Eshanvi Infra Projects Pvt. Ltd. (EIPPL), ED Entertainment, Uni Corporate Solutions Pvt. Ltd., Tag Developers and other related entities to acquire land parcels and undertake residential development projects. The investigation also revealed the use of fabricated and back-dated agreements to falsely project such illicit funds as legitimate business receipts.

It has further emerged that, to conceal and project the criminal origin of the POC as legitimate, the syndicate used a platform of bank accounts of a complex network of shell and front entities, including entities such as Olwick, Kripati, Nysna Multiventures, Arroyo, Ezyload, D-Cart and others.

Earning Rs 100 crore per month illegally

These entities were used to layer funds through a complex web of transactions executed without any legitimate purpose, thereby concealing the illicit source and nature of proceeds, thereby projecting the Proceeds of Crime as untainted.

The ED investigation revealed that through manipulation of procurement and supply mechanisms, the syndicate generated illegal revenues estimated at approximately Rs 100 crore per month.

The investigation has revealed that physical cash kickbacks were collected and stored at multiple locations in Hyderabad, from where they were subsequently moved, distributed, or disposed of by designated cash handlers of the syndicate.

The investigation has so far revealed a money trail of Rs 1,048.45 crore in the form of kickbacks, which several distilleries were compelled to pay in the form of cash, gold, etc., as well as in the form of control and operation of some distilleries by the liquor syndicate and also in the form of financial gains derived from transport of liquor.

The PMLA investigation has revealed that the proceeds of crime were used for the purchase of immovable properties and personal gains of the members of the liquor syndicate and their associates.