January 15, 2020

ED Arrests LMIPHL Promoter For Rs 1,768-Crore Fraud

[ By Bobby Anthony ]


The Enforcement Directorate (ED) has announced that it has arrested G S Chakravarthi Raju, promoter of Leo Meridian Infrastructure Projects and Hotels Limited (LMIPHL) and his close associate A V Prasad in connection with its probe into a money laundering case worth Rs 1,768 crore.

The ED said that the accused was arrested after it filed three cases on the basis of the Central Bureau of Investigation (CBI) report for fraudulently availing loans by the accused in connivance with others from a consortium of banks and then defaulting on the same which amounted to Rs 1,768 crore.

The ED said that Raju was arrested under the Prevention of Money Laundering Act (PMLA), 2002.

The ED added that the arrested accused produced before court, were sent to seven-day ED custody.

On December 30, 2019, the ED had attached assets to the tune of Rs 250.39 crore belonging to accused LMIPHL, Raju, his family, his ‘benamis’ and directors of LMIPHL, under the PMLA provisions.

During investigation it was revealed that a well- planned conspiracy was executed by Raju along with his LMIPHL associates to defraud banks by creating an illegal layout and selling plots to 315 persons.

“He further mortgaged parts of the already sold lands to the banks to obtain loan for a resort project. Even approach roads were also fraudulently mortgaged to the banks and revenue records were manipulated to cheat the banks and plot owners,” an ED official stated.

The ED stated that loans sanctioned by banks were siphoned off using shell vendors or contractor firms opened in the names of petty employees of LMIPHL.

According to the ED, a part of the diverted funds was found to be diverted back into LMIPHL as ‘investments’ by using Kolkata based 'jama-kharch' companies as conduits.

The ED has stated that during the probe it was found that more than 33 shell companies and bogus share capital and share premium book entries in the balance sheets of LMIPHL were created by Raju with complicity of certain chartered accountants.

Bogus equity was used to fraudulently show margin money and improve the debt-equity ratio of LMIPHL to cheat banks for availing huge loans for which the company was otherwise not eligible.

The ED office further said that Raju had also created large number of fake vendor or contractor firms to siphon off sanctioned loans, under the guise of bogus invoices and bogus provision of material and services.

“As part of the conspiracy, a large portion of diverted loan funds were cyclically rotated back into LMIPHL to create bogus exaggerated capital works in progress and in turn bogus fixed assets,” the ED stated.

The ED stated that it was done in order to cheat banks into giving more loans and to match the asset side of balance sheets with the liability side.

“By using bogus capital equity, bonus shares taken on fake balance sheets, Raju and his family became owner of 95% of the company without any investment,” the ED stated

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