Cobblers Scam - Free Essay Example

[pic] THE GREAT COBBLER SCAM The boot may well be on the other foot now. The shoe that pricked A lot of scams are being discovered in India. It looks like the corruptions in India can never come to an end. If one corruption is exposed another one start somewhere. It reminds me one of the biggest multi million dollars scam in Indian history which was nicknamed The Great Cobbler Scam. The people involved in this racket were Saddrudin Daya, former sheriff of Mumbai and owner of Dawood Shoes, Rafique Tejani, owner of Metro Shoes, Kishore Signapurkar, proprietor of Milano Shoes, and Abu Asim Azmi, president of Samajwadi Partys Mumbai unit and partner in Citywalk Shoes, Beside them various officials of banks and financial institutions were also involved in this multi million dollars Cobbler Scam. The Banks whose officials were involved in this scam are: Maharashtra State Finance Corporation, Citibank, Bank of Oman, Dena Bank, Development Credit Bank, Saraswat Co- to eliminate, Cooperative Bank and Bank of Bahrain and Kuwait. This scam cost the Government of India around $600 million US dollars. This was one of the worst scam in India that cheated the poorest people of the society and benefited a lot of rich and elite people. Background of the scam (Episode I) MUMBAI: When Hemlatha Nikshe received a Rs 1 lakh loan recovery notice from Sant Rohidas Leather and Leather Workers Development Corporation addressed to her deceased husband Gautam Traimbak Nikshe, she was perplexed. According to the notice, Gautam had stood guarantee to a loan taken by Bhaskar Sadashiv Jharekar, a complete stranger to her. Hemlathas confusion turned to utter shock when she saw the date on which her schoolteacher husband had stood guarantor—December 13, 2004, a good two years after his untimely death. Little did she know that her family had been ensnared in a scam, very similar to the one that came to be known as the cobbler scam of 1997, where well-known footwear companies used cobblers co-operatives to suck out more than Rs 1,000 crore in loans meant for their members. Hemlatha rushed to her husbands friends for help. When they asked around, they found that many more people had received similar recovery notices from the corporation. Episode II) The citys Civic Authority and Leather Workers Development Corporation have to cobble up an explanation for a scam of Rs 35 lakh. A government scheme launched to give loans to cobblers earning less than Rs 55,000 a year seems to have been pocketed by middlemen who forged and stole documents to get these loans with help from Bombay Municipal Corporation (B MC) employees. Whats worse is that some unsuspecting Mumbaikars woke up to the scam after receiving big loan recovery notices as they had been made guarantors. One such man is Bhondawe Dhyaneshwar. A clerk in the BMCs health department, Bhondawe and his wife are hassled with the stress of an unfamiliar debt. Dhyaneshwar received a letter from the Leather Industries Development Corporation of Maharashtra (LIDCOM) last week, asking him to pay a loan of Rs 1 lakh in the capacity of a guarantor. The loan was taken by one Giriraj Sherkhane in August 2004, as a part of a state government scheme to give funds to impoverished cobblers. Unfortunately for Dhyaneshwar, he never consented to being a guarantor and moreover, hes never ever met Sherkhane. The letter mentioned Giriraj Sherkhanes name stating hes taken a loan of Rs 1 lakh. It also states my name as a guarantor. I read that and was stunned, Dhyaneshwar says. There are 64 people like the Dhyaneshwar who have received notices to repay a loan they never agreed to be guarantors for. Surviving on a meager salary, they wonder how they landed into this mess. To find out more, CNN-IBN tracked down Giriraj Sherkhane the beneficiary of t his loan from a chawl in Dharavi. He confessed not ever having known Bhondawe Dhyaneshwar. He is my witness, but doesnt know that he is one, Sherkhane said. Worse, he also admitted to paying someone in the citys municipal corporation to forge signatures and get the documents needed to process the loan, notarized documents like surety letters and photocopies of ration cards among other things. LIDCOM officials have conceded that the man behind this scam is Nana Shankar Loke, a BMC clerk. Transferred two years ago from this office in Chembur because of suspected mal-practices, nobody knows where he currently works. From the meeting with BMC officials, their employee has managed to get false documentation, U G OAK, Managing Director LIDCOM. Meanwhile, Dhyaneshwar and his family wait in anticipation of some good news. Although theyve been told they wont have to pay a penny, theyre worried about what might come in their next mail. (Episode III) Sohin Daya, son of a former Sheriff of Mumbai, was the main accused in the multi-crore shoes scam. Daya of Dawood Shoes, Rafique Tejani of Metro Shoes, and Kishore Signapurkar of Milano Shoes were arrested for creating several leather co-operative societies which did not exist. They availed loans of crore of rupees on behalf of these fictitious societies. The scam was exposed in 1995. The accused created a fictitious cooperative society of cobblers to take advantage of government loans through various schemes. Officials of the Maharashtra State Finance Corporation, Citibank, Bank of Oman, Dena Bank, Development Credit Bank, Saraswat Co-operative Bank, and Bank of Bahrain and Kuwait were also charge sheeted. Vigilant agencies exposed shoe scam MUMBAI, June 1: The unearthing of the Rs 1600-crore cobblers scam that closed in on bigwigs of the shoe industry was expected, caused as it was by three agencies working towards its exposure. Officials of the Brihanmumbai Municipal Corporations octroi department had lodged complaints about raw materials being brought into the city on a large scale. These materials had octroi concessions as they were brought in lieu of the cooperative societies. On the basis of the complaints, the police carried out its own investigations, and a diligent officer in the office of the Registrar of Cooperative Societies decided to do a complete survey of registered societies in Mumbai. Immediately after taking charge in 1995, Sudhir Thakre, the joint registrar of the Cooperative Society for Mumbai division, ordered a survey of the registered societies. Our officers, especially auditors of each of these societies complained that most of these societies did not exist at the registered addresses furnished to this office, Thakre said in an exclusive interview to Express Newsline, narrating the process of investigation into the big business way to success through fictitious cobbler societies. Thakre decided to survey all the societies that had been formed. Normally, since most of the cobblers were poor and illiterate, we did not like to harass them with too much inspection. This leniency on the registrars part was misused by the businessmen, he admitted. The BMC, meanwhile, complained to the police about huge consignments of raw materials (used for the purpose of shoe-making) being brought into Mumbai. Worth around two crore, these materials obtained octroi concessions. The police started making their own investigations, and both the agencies got suspicious when all the cobblers societies were found missing. ’ A clearer picture emerged by January 1996 when flying squads with the registrar were given specific orders to follow a society to its very last. A report on prima facie evidence was made for the police by March 1996. My boys worked for five months, sometimes without the societies themselves realizing it, and by August 1996, we got the complete picture, he said. DCP Sanjay Pandey, who had taken over the Economic Offences Wing, then approached him asking for details, since he too was working on the case. By September 9, a report of 80 to 90 pages was ready for the police. Till then, we had completed 19 raids and 51 societies were being investigated. Economic Offences Wing wraps up probe MUMBAI, June 14: The Economic Offences Wing (EOW) of the crime branch has completed its investigations in the multi-crore cobbler scam, the trial of which is scheduled to start soon. Eighty-six persons, including Saddrudin Daya, former sheriff of Mumbai and owner of Dawood Shoes, Rafique Tejani, owner of Metro Shoes, Kishore Signapurkar, proprietor of Milano Shoes, and Abu Asim Azmi, president of Samajwadi Partys Mumbai unit and partner in Citywalk Shoes, have been charged for allegedly siphoning off government funds to the tune of Rs 1000 crore. Various officials of banks and financial institutions have also been named in the charge sheets. In all, five charge sheets have been filed before the metropolitan magistrate. The first one, filed in July, named Daya nd his associates. The second was filed in September, with Signapurkar and his associates as the accused; the third, filed in December, mentioned Tejani and his associates; the fourth one, file in February 1998, mentioned the involvement of the Meredia group and associates; and the fifth and final charge sheet filed on June 9, 1998, mentioned the role played by Abu Asim Azmi and his associates. Officials of the Maharashtra State Finance Corporation, Citibank, Bank of Oman, Dena Bank, Development Credit Bank, Saraswat Co-operative Bank, and Bank of Bahrain and Kuwait were also charge sheeted. The scam broke out in 1995, exposing the racket which had led to the siphoning of huge government funds. The modus operandi of the accused was to float a cooperative society of cobblers to avail of soft government loans through various schemes. One of the schemes was the refinance scheme of Khadi and Village Industries Commission (KVIC), which enabled a cobbler to avail a loan of Rs 25,000 per annum for three years at a low rate of interest, provided he was member of a cooperative society. The loans were issued by commercial banks refinanced by the Small Industries Development Bank of India. The products, manufactured by cobblers who availed of bank loans, were granted sales tax exemption on turnover up to Rs. 50 lakh. The KVIC was authorized to scrutinize loan applications of cobblers and recommend sanctioning of loans. Several bogus societies of cobblers were formed only for the purpose of availing loans. Investigations revealed that most shoe retailers and some construction companies like the Meredia group provided guarantees to individual cobblers for raising loans. Police alleged that most of the retail outlets in the city were instrumental in forming bogus societies of cobblers to avail loans. The scam came to light when Rauf Memon, an employee of Dawood shoes, lodged a complaint with the crime branch in 1995, alleging he was threatened by gangster Ejaz Pathan on behalf of Daya. During interrogation by the police, Memon revealed all he knew about the scam. Finally, the case was handed over to the EOW. Police erred in sealing shop premises: Court Mumbai, Aug 19: The Bombay high court on Tuesday ruled that the police have no power to seize immovable property or to freeze bank accounts under the provisions of section 102 of the Criminal Procedure Code (Cr PC). This uling renders the action of the Mumbai police of sealing the shops, factories and office premises of the accused involved in the multi-crore shoe scam as illegal. The judgment was given by a division bench comprising Justice VP Tipnis and AB Palkar while allowing 14 petitions and applications. Saddrudin Daya (Dawood Shoes), Rafiq Abdul Malik Tejani (Metro Shoes), Kishore Shignapurkar (Milano Shoes) and Abu Asim Az mi (City Walk) who is main accused in the cobbler scam along with others had filed these applications. It was wrong on the part of the police to seal the premises. As a matter of fact, there is hardly any justification for the police to seal several offices, factory and shop premises even assuming that what the police wanted to do was to seize the movable articles inside the premises. The action of sealing premises is not justified, the HC ruling said. The bench further stated that the way in which the properties have been sealed, and in some cases the properties have been sealed without preparing the list of goods, shows that the police have acted in casual, improper and careless manner. Several shops have been closed since last November and hundreds of employees are rendered jobless. Against this background the judges said they see no justification for the police action and the manner in which it has been taken. The judgment sets aside all previous orders passed by the additional chief metropolitan magistrate, SN Chimdade, and observes that much inconvenience could have been avoided if the magistrate had dealt with the matter in accordance with the law. The bench also expressed surprise that the state did not file any affidavit in reply to all the applications and petitions made for reasons best known to them. Chimade had dismissed the petitions made by the accused and others, holding that the police have unfettered and unlimited powers under section 102 of CrPC to attach properties suspected to have been connected with the alleged crime. Although the high court has proved the police action illegal, it will not lead to the release of immovable properties as the bench said that they had only laid down the law with regard to the scope of section 102 and the power o f the police hereunder. The bench refused to go into the merits of each case. The persons concerned will have to make a formal application to the competent court and the magistrate will pass appropriate orders in each case in view of the law laid down. In case of movable property, the bench said the accused can be permitted to sell their goods or a public auction can be held and proceeds can be deposited with the court. The high court has directed the petitioners to make applications before the magistrate before August 28. The applications will be disposed of by October 15. Court orders stay on shoe auction Mumbai, December 11: The proposed auction to dispose off nearly 78,900 pairs of shoes belonging to two shoe companies owned by former sheriff of Mumbai and main accused in the multi-crore rupee cobbler scam, Saddrudin Daya, scheduled for tomorrow has been postponed following an application filed before the court by bankers of the shoe companies. Chief Metropolitan Magistrate M L Gilani, issued a stay on the auction after the bankers to Big Deal and Dawood Shoes owned by Daya, Saraswat Co-operative Bank on Wednesday, and Bombay Mercantile Co-operative Bank on Thursday, raised a number of issues before the court today. Accordingly, the court ruled that the auction be postponed till the issues were resolved. According to Dayas counsel, Majeed Memon and Abbas Kazmi, the shops owned were hypothecated to the two banks that had moved the co-operative court the order of which was in their (banks) favor. According to Memon, Dayas properties were seized by the police, before the banks moved the co-operative court and in their petition before the co-operative court, they did not make the State of Maharashtra a party, therefore the application of the banks stands vacated. Memon said that he would file a written say tomorrow challenging the stay. The auction was decided as all parties felt that prolonged storage would damage the shoes, after an order was passed by Justice Vaidyanatha of the Bombay High court. The money raised from the auction would be put in the fixed deposit of a nationalized bank while the receipts would be retained by the court. Present scenario Perhaps the silence around the scam today has something to do with the fact that close associates of Maharashtra chief minister Sushilkumar Shinde were also involved in the scandal. One of them is now personal assistant to Shinde. Files on the multiple cases of the shoe scam, sources say, are gathering dust on court shelves. Ask Majid Memon, one of the defense lawyers for main accused Sadruddin Hasan Daya (former city sheriff and socialite) and Abu Asim Azmi (now a Rajya Sabha MP and Samajwadi Party leader), he agrees. ‘‘Yes, the files are gathering dust. We do not know when the process of recording of evidence in the case will commence although crore are involved in the scam. ’’ At present, the shoe scam is in a queue of cases waiting to be taken up by the court of the 19th additional chief metropolitan magistrate. All the accused are out on bail. It wasn’t always this unsung. Detected in 1995, this Rs 1,600 crore case involved over 40 persons and was investigated for almost two years. Investigations revealed that bogus records and documents were prepared. The signatures of government officers in the co-operative department and sales tax were found to be forged. The charge sheet says: ‘‘It is also revealed that the leather societies were initially registered with 10 to 15 members (cobblers) with authentic documentation. Later the chief promoter and promoters of the societies would get interested parties to admit 1000 to 5000 bogus members. Through the society these ‘members’ would apply to banks for loans to purchase leather and equipment. ’’ Officials of Bank of Baroda, Saraswat Co-operative Bank and the Bombay Mercentile Co-operative Bank are also facing charges for fraudulent manipulation of government funds. After the inquiry, Dawood, Metro, Milano, Citywalk and a host of other shoe shops were sealed. They opened only after a long battle. Today, fighting multiple cases with various government departments Daya has shut down Dawood Shoes. The others shoe shops are doing brisk business.