ED probe finds funds were ploughed into group's jewellery, entertainment and hospitality businesses
Rose Valley group "systematically engaged" its various companies to launder legitimate investor funds and ploughed them into purchasing realty assets and fund its own jewellery, entertainment and hospitality businesses, an Enforcement Directorate probe into the alleged multi-crore ponzi scam has found.
Enforcement Directorate, which earlier attached 2,631 bank accounts of the group containing Rs 295 crore (Rs 2.95 billion) in them under the stringent provisions of the Prevention of Money Laundering Act (PMLA), found that of a total of 27 companies of the said conglomerate, only 6-9 were "operative".
"The companies (of RV group) systematically engaged in diverting funds from one account to another of the group companies and also invested in other areas like real estate, jewellery, entertainment, hospitality and hotel business, among others, by depriving the original investors of their legitimate dues.
"By such act of circulation and round-tripping of the money within the group companies, the real motive... Was nothing but concealing the real source of funds circulated and invested in and outside the companies. Few examples of circulating money among the group companies and transferred/ diverted elsewhere and then again refunded to the original source account (were seen)," said a probe report prepared by the agency which has been accessed by PTI.
ED, the report said, found that there existed large-scale cross-holding among the group companies to hide and portray genuine investor funds as the companies' capital.
"After scrutinising the balance sheet of Rose Valley Hotels and Entertainments Ltd and Rose Valley Real Estate Construction Ltd for the year 2012-13, it is observed that Rose Valley Real Estate Construction Ltd has 99.51 per cent shareholding in Rose Valley Hotels and Entertainments Ltd and Rose Valley Hotels and Entertainments Ltd has 99.33 per cent shareholding in Rose Valley Real Estate Construction Ltd.
"From this, it is clear that, to defraud the public, public deposits were shown as the companies' capital by way of credit in capital account through shareholding of its own group company. Examination of all the balance sheets of the group companies, it is seen mostly that shareholding pattern of various companies is by way of cross-holding among the group companies and it is only a fake capital to change the colour of public deposit into the companies' capital," it said.
