Author: Sreenivas Janyala
Publication: Express India
Date: August 23, 2011
URL: http://www.expressindia.com/latest-news/Jagan-s-jumbo-jump/835497/
Introduction: Welth from Rs 77cr to Rs 365cr
in 2 years, income from Rs 9 lakh to Rs 36cr in 7 years, Jaganmohan is now
being probed by CBI.
When trucks laden with white, pink and green
marble blocks started arriving last July at a construction site in Hyderabad's
upmarket Jubilee Hills, very few knew what was being built, and for whom.
It was a five-storey building, so opulent
that people began calling it Lotus Mahal. And it was for Y S Jaganmohan Reddy,
who has since moved into the bungalow, now Hyderabad's largest at 53,000 sq
ft, and said to be its costliest at an estimated Rs 90 crore.
Just seven years ago, in May 2004, Jaganmohan
had filed tax returns showing an annual income of Rs 9.19 lakh. Y S Rajasekhara
Reddy, too, had declared his son's income in his affidavit for the May 2004
polls. In the May 2011 Lok Sabha bypoll to Kadapa, Jagan, now YSR Congress
Party chief, declared an annual income of Rs 36 crore.
The affidavit declared movable assets totalling
Rs 365 crore and immovable property worth just under Rs 39 crore, making him
one of the richest MPs in the country. Just two years earlier, when he had
contested for the first time from Kadapa, the assets he had declared had been
worth Rs 77.40 crore, say three TDP leaders who have filed a petition in the
High Court seeking an investigation into how Jaganmohan amassed so much wealth.
Charges & Defence
Those close to YSR attribute the accumulation
to Jaganmohan's "business sense". "In anticipation that his
father and the Congress would sweep the polls in 2004, Jaganmohan started
planning his business much ahead. He started floating companies and, as early
as 2002-03, bought shares that would later get him a controlling stake,"
says a friend of the late YSR.
The petitioners, on the other hand, allege
that Jaganmohan's businesses benefited from corporates and industrialists
who "invested" huge amounts in return for benefits in the form of
land, licences and permits from the state government when YSR was chief minister.
After the petition in March by ex-MP K Yerran Naidu and MLAs P Ashok Gajapathi
Raju and Bireddy Rajasekhara Reddy, which followed a letter in October by
Minister Dr P Shankar Rao to the Andhra Pradesh Chief Justice, the High Court
has now ordered a full-fledged CBI probe.
Jaganmohan said the raids on his properties
are part of a Congress move to tarnish his father's image. "They are
targeting a dead person. They have unleashed the CBI and other agencies against
me because I dared to defy the Congress high command, quit the party and launched
my own," he said from Krishna, part of a statewide tour.
Companies & Shares
According to the petitioners, Jaganmohan allegedly
routed money to himself by floating fictitious companies and "selling"
shares to beneficiaries of government favours. They cite the example of Sandur
Power Company Ltd, a Bangalore-based 22.5 MW hydel generation plant with a
total investment of over Rs 150 crore. Jagan bought a controlling stake in
the 1998-established company in June 2001.Till April 2004, the company did
little business in Bangalore but after YSR became chief minister, Jagan allegedly
started pumping money into it.
In 2007-08, the petitioners say, he created
a fictitious transaction, selling 82 lakh shares at Rs 675 each to a host
of companies, allegedly bogus ones that he had raised. All these companies,
they say, later merged with Keelawn Technologies Ltd where Jaganmohan has
a major stake. The takeover was at Rs 4 crore, a paltry amount compared to
the investment of Rs 533 crore it had got, supposedly pumped into Sandur Power
but, the petitioners say, actually bribes that Jaganmohan had got for favours
done by the government to various businesses.
Among the investors named in the petition,
one is entrepreneur Nimmagadda Prasad, owner of Matrix Laboratories. He allegedly
bought 21.42 lakh shares of Rs 10 in Sandur Power, paying a premium of Rs
650 per share, with Jaganmohan receiving Rs 140 crore. The petition says Prasad
was assured an allotment of 15,000 acres for promoting Vanpic Projects Pvt
Ltd, which is executing the Vadarevu and Nizampatnam Port and Industrial Corridor
in Prakasam district. On September 15, 2008, the YSR government issued the
order.
Jaganmohan allegedly sold a 32.7 per cent
stake in Sandur for Rs 124 crore to two Mauritius-based companies. The Rs-10
shares were sold at a premium of Rs 61 each . The total value of the company
was Rs 158 crore but Jaganmohan allegedly got Rs 797 crore from the "sale
of shares" while still retaining the majority stake. Of all the deals
that Jaganmohan allegedly made, this is the biggest one cited.
Benefits
It was around this time that YSR, reportedly
persuaded by Jaganmohan, appointed Ambati Rambabu, a close friend and an MLA,
as the chairman of the Andhra Pradesh Industrial Infrastructure Corporation.
SEZs were then rapidly coming up and APIIC was the nodal agency. Industrialists,
businessmen and entrepreneurs lined up to buy shares in Jaganmohan's companies
and were promptly allotted land in SEZs, the petition says.
"During the period May 2004 to 2009,
Jaganmohan exercised undue influence over his father and took gratification
misusing the public office occupied by his father through corrupt and illegal
means," the petition says. "The modus operandi followed by the duo
was to dole out various public works contracts, infrastructure projects -
SEZs, mining leases, ports, real estate permissions and other benefits against
the existing rules and laws, to the persons of their choice with a clear understanding
of quid pro quo. The beneficiaries, in turn, have given kickbacks to Y S Jaganmohan
Reddy under the guise of purchasing shares in a series of companies floated
by him at huge and unsubstantiated premiums," it says.
It cites the example of Dubai-based Emaar
Properties Ltd, which got nearly 500 acres for a township and golf course
at Manikonda, opposite the Indian School of Business. It allegedly paid Rs
29 lakh per acre against a market rate of Rs 1 crore; Jagan allegedly received
plots now registered in the names of his relatives and companies.
Jaganmohan then shifted base to Bangalore
where he bought property that is said to be worth Rs 200 crore, with a mansion
that includes a helipad.
Media Arm
The petition says of the bogus companies where
money had been parked, many invested finally in Jagan's flagship company,
Jagathi Publications Pvt Ltd.
"It was Jaganmohan's idea that the YSR
family should have a media house of its own to counter Eenadu which was slamming
YSR for corruption, and Andhra Jyoti which is considered attached to the Telugu
Desam Party,'' says a friend of the late chief minister.
YSR was reportedly reluctant at first but
Jagan went on to found Jagathi - the name derived from his own and that of
his wife Bharathi.
To raise money for this, he is said to have
relied on Bharathi Cements, renamed from Kadapa-based Raghuram Cements, a
company he had taken over in 2007. The petition says Jagan influenced ministers
and officials and got mining leases allotted for vast tracts, the procedures
allegedly bypassed.
Within a month, though the company had not
yet reached full production capacity, cement companies like Dalmia Cements
and India Cements purchased shares at a premium of Rs 1,450 each, the petition
says. The money was allegedly routed into companies like Carmel Asia Holdings,
which invested in Jagathi Publications that publishes the Sakshi newspaper,
and Indira Television Ltd that promotes the Sakshi news channel.
On 1,500 acres at Chinnakomerla village in
Kadapa - the land includes limestone quarries - Dalmia Cements began commercial
production at a Rs-800-crore, 2.5-million-tonne plant in March 2010. India
Cements expanded in Chilamakur in March 2007.
Even before Jagathi Publications started publishing,
at least 12 companies and individuals bought shares, Rs 10 at face value,
paying a premium of Rs 350, according to the findings of an investigation
by the Income-Tax department.
The I-T probe found that at least eight companies
that had invested did not even exist. The promoters of Jagathi Publications
(Jaganmohan) retained 90 per cent of the shares though he had put in just
Rs 73.57 crore when others had invested Rs 300.49 crores for the remaining
10 per cent, paying a premium 35 times the face value.
Father & Son
An official with the General Administration
Department says that YSR had been advised by aides to go slow on favours.
Such suggestions reportedly came from then adviser to the government K V P
Ramachandra Rao and then finance minister K Rosaiah, but what they said was
apparently overruled on Jagan's insistence. "When he was made chief minister
after YSR's death, Rosaiah may have dealt with a rebellious Jaganmohan better
had he not developed a dislike for him,'' the official said.
The Congress had a majority but YSR was reportedly
concerned as he sensed anti-incumbency brewing. The TDP had won only 47 seats
in the 2004 elections but doubled that in 2009. Jagan was, however, unstoppable,
the official said.
YSR was cordial with but kept a distance from
the Gali brothers of Bellary; in contrast, Jagan allegedly ensured that their
Obulapuram Mining Company was given licences in Anantapur in violation of
government norms. The petition states Brahmani Steels Ltd, promoted by OMC,
was also allotted 10,760 acres of government land at a throwaway price on
the premise that the company intended to build a steel plant and a private
airport.
"The gratification amounts payable for
exercising such influence were routed through several benami companies to
Jaganmohan Reddy. Red Gold Enterprises, one such bogus company of Jaganmohan
Reddy, was given 50 per cent of iron ore from OMC mines at cost price and
5 per cent margin, and the huge profit thereby earned is again invested in
Jagathi Publications,'' the petition alleges.
It says that except for those who got alleged
benefits, no one else bought shares in Jagathi at premium rates. "Under
the guise of buying shares in Jaganmohan's companies, especially Jagathi Publications
and Bharathi Cements, they have paid bribes and kickbacks to Jaganmohan,"
alleges petitioner Yerran Naidu.
"It is clear that this is the result
of illegal gains from the office of the Chief Minister and other persons who
are holding important positions in government. This will come to light only
when the entire investments are investigated by an independent investigating
agency," the petition says.
