CBI is probing a Rakesh Jhunjhunwala on Jagan link

This is the Rakesh Jhunjhunwala you do not know. He isn’t the ace investor of Mumbai. He isn’t even the fake Jhunjhunwala who writes a parody blog called The Secret Journal of Rakesh Jhunjhunwala, which the ace investor found funny and humorous.

But the Central Bureau of Investigation (CBI) has found a link between another Rakesh Jhunjhunwala - apparently a Bangalore-based namesake of the Mumbai investment pro - and YS Jaganmohan Reddy’s alleged scams in Andhra Pradesh. Jagan Reddy, who spent time in CBI custody recently, is the son of the late Andhra CM YS Rajasekhara Reddy (YSR).

[caption id=“attachment_352067” align=“alignleft” width=“380” caption=“The Bangalore Jhunjhunwala may have invested Rs 75 crore in Jagan Reddy’s companies.”]  [/caption]

According to sources in the CBI, the Bangalore Jhunjhunwala may have invested Rs 75 crore in Jagan Reddy’s companies. The agency is checking to see if these investments were linked to any favours that YSR may have shown in return.

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Like anyone else, Firstpost called up the Mumbai Jhunjhunwala as soon as it got a tipoff on the CBI’s investigations. When emailed questionnaires and telephone calls went unanswered, we sent him SMSes. When Jhunjhunwala finally called back, he told Firstpost: “I have never met Jaganmohan Reddy or YSR in my life and I have not invested a penny in his company.''

Flummoxed by his blunt denial, Firstpost went back to its sources - only to discover that there is yet another Jhunjhunwala who is being investigated.

This Rakesh Jhunjhunwala, according to CBI sources, lives in Bangalore and has invested Rs 75 crore in Jagan’s companies. “We are still tracking his investments made in Jagan’s companies. We are yet to establish a criminal intent in those investments.”

The CBI has already filed three charge-sheets in cases involving Jagan Reddy, and it has garnered more than a dozen section 164 statements under the Criminal Procedure Code (CrPC) from witnesses. Some of these statements allegedly link investments in Jagan Reddy companies with favours shown to investors. Section 164 statements are made before a magistrate, and are acceptable as evidence in a court of law even if the person making the statement later withdraws them claiming he was pressured to do so.

Jagan’s companies are now under the CBI’s scanner because he has been accused of exercising “undue influence over his father” when he was chief minister and taking “gratification misusing the public office occupied by his father through corrupt and illegal means.''

“The modus operandi followed by the duo (Jagan and YSR) was to dole out public properties, licences, allotting/granting various projects, SEZs, mining leases, ports, real estate permissions and other benefits to persons of their choice, violating established norms and procedures in the government with a clear understanding of quid pro quo. The beneficiaries, in turn, have given bribes to YS Jagan Mohan Reddy under the guise of purchasing shares in a series of companies floated by him at huge and unsubstantiated premiums,’’ says the CBI’s FIR.

While the CBI believes it has established the quid pro quo elements in deals involving some other businessmen, in the case of Jhunjhunwala (all references are to the Bangalore Jhunjhunwala henceforth) it has only now begun looking into the details. Among other things, it is checking whether Jhunjhunwala’s investments involved the receipt of any favours and whether the money invested was from bona fide sources.

In Jhunjhunwala’s case, the CBI is believed to have recorded at least one statement before a magistrate under section 164 of the CrPC.

According to sources, a Mumbai-based chartered accountant has given a statement before the magistrate under section 164 in the Jhunjhunwala case. The statements apparently purport to show that Jhunjhunwala invested in Jagan’s Jagathi Publications, directly or indirectly, in two instalments.

Jhunjhunwala’s first investment was about Rs 65.5 crore and the second was Rs 9.5 crore, Dilip Mehta’s statement is said to indicate.

Firstpost learns that the CBI is trying to trace the money trail in Jhunjhunwala’s case. So far, according to CBI sources, Rs 35 crore of the Rs 75 crore invested has been confirmed as coming from bona fide sources. Investigations are on to confirm the source of the rest of the investment. The CBI is also investigating whether these investments had any quid pro quo element like some others.

Rakesh Jhunjhunwala is, however, only one of the many investors in Jagan Reddy’s companies. The CBI is in the process of uncovering the truth or “conspiracy” behind every investment made (if any) and then file separate chargesheets. Three chargesheets have been filed in cases involving Jagan in a CBI-designated court in Hyderabad. None of them pertain to Jhunjhunwala.

As reported by Firstpost last month, the section 164 statements the CBI has managed to obtain try to close the circle between alleged government favours shown by YSR to corporates and their investments in his son’s companies, including Jagathi Publications and Bharathi Cements. The Jagathi group of companies runs 23 colour editions of the Telugu Sakshi newspaper (one for each district in Andhra Pradesh) and the Sakshi TV channel.

In one case, four persons associated with a company called Vanpic, owned by Nimmagadda Prasad, who is also named in one of the FIRs, have reportedly given section 164 statements. These statements allegedly link the allotment of 16,000 acres of a coastal corridor to Vanpic by YS Rajasekhara Reddy and a subsequent Rs 800 crore of investment in Jagan’s companies, including Jagathi Publications (Rs 350 crore) and Bharathi Cements (Rs 450 crore), by Nimmagadda Prasad (Read here).

Vanpic was allotted 16,000 acres of land in several installments. CBI sources said there was a pattern whereby Vanpic made investments in Jagathi Publications or Bharathi Cement every time it was allotted some land. The CBI is further investigating the money trail.