No ponzi is more equal than others
Two arrests last week have evoked strong reactions. They happened in two opposite corners of the country. First was in south-west, in Kerala, the other in the Northeast. In one, the subject was an American, in the other, a Russian. Yet, these seemingly unconnected arrests had a thread in common. It was the Prize Chits and Money Circulation Schemes (Banning) Act, 1978. Both the accused were booked under the provisions of this Act. Amway India Chairman Willaim S Pinckney and Russian ponzi king Sergey Mavrodi's India representative Alexei Muratov, both went behind bars for allegedly running money circulation schemes. Supporters of both have vehemently opposed the charges. How come the police have suddenly rediscovered a 35-year-old law? Is there some kind of unofficial directive (or even a direct one) from the highest level to administer the provisions of this law more closely following the post-Saradha upheavals?
Without it, such strict application of the sparsely-used law on high-profile targets would be an eighth wonder, that too within a matter of days, in geographically opposite locations. Do you remember the last time Indian police made such coordinated action for similar offences across different states?
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But, then are we reading too much in to these actions? Are we trying to make a trend out of two isolated, unconnected events? Is it pure coincidence? Our collective wish should be that it is not because the threat the country's economy faces from such shadow banking activities is highly understated. These activities are the breeding ground for the country's black economy, which is in turn slowly killing the India growth story. Some unofficial estimates put the size of these schemes at a whopping Rs 50,000 crore.
Even as national television wastes its time in a corrupt sports body and its old, adamant bosses, serious issues such as this get decided without much debate.
Even where there is some discussion, strong lobbies are at work to confuse public discourse and get away citing foreign laws and apocalypse theories. These organisations should be told that while in India one should follow all the existing laws. If one wanted some change that should have been negotiated before entry like the retail giants are now up to. Businesses can't first violate a law and then argue that it doesn't apply to them. They certainly can't demand a new framework to legitimise their activity found illegal under other legislation.
Financial sector regulators are often getting away by passing the buck or sweeping elephants under the carpet. The multitude of financial sector regulators should be individually and collectively held responsible for this proliferation of shadow banking and illegal investment activities.
Regulators are often seen complaining about lack of knowledge of courts and lack of powers. It is their job to educate everyone including the courts by bringing to book more and more cases and building case laws. We should take the lead from the Americans. Liberty Reserve, a Costa Rica-based virtual currency scheme suspected to be an money-laundering operation, was shut down using the provisions of the draconian post-9/11 legislation-USA PATRIOT Act. The born-again Prize Chits law could be India's PATRIOT Act. The police are better placed to perform where the financial regulators failed.
Having said this, the cops should ensure that it is applied on all violators without fear or favour. The provisions should uniformly apply to all the money circulation schemes irrespective of which political party they are connected to and which bureaucrat's ill-gotten money is invested in it.
All ponzis, whether dressed as real estate, mutual help, retail, plantation, animal or gold schemes, should be brought to book. There are many states between Assam and Kerala. Let us wait for more arrests to confirm the trend.
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