Kerala, said to be the country’s most literate state, is flooded with numerous ‘get-rich-quick’ or ‘earn-huge-return’ schemes offered by money swindlers. While the state director general of police has admitted noticing frauds amounting to over Rs1,000 crore, the worrying factor is that even a few policemen have been found to be involved in these MLM schemes

Moneylife Digital Team

Following the hue and cry from a number of investors, the Kerala police has started investigations into several multi-level marketing (MLM) companies, two prominent names among these being Tycoon Empire International Ltd and Bizarre group of companies, and has arrested some of the promoters. Many of these cases have inter-state ramifications and have been handed over to the Crime Branch in Kerala.

Media reports have quoted Jacob Punnose, director general of police (DGP), Kerala, as saying that these investigations would be completed within five to six months. Chennai-based Tycoon Empire International had collected Rs370 crore from 50,000 investors, while Bizarre group collected Rs55 crore from depositors. Besides these two names, one other MLM company cheated people of around Rs300 crore. It operated 14 accounts in a private bank, using false names and addresses, and the Kerala police will report this to the Reserve Bank of India (RBI), he said.

Earlier this month, the Kerala police arrested Abdul Arshad, managing director of Kochi-based Bizarre group, which has allegedly duped about 1.65 lakh people in Kerala alone. According to reports, Bizarre (which is created from the initial letters of Bold, Intelligent, Zealous, Ambitious, Responsible, Rich and Efficient) collected about Rs55 crore from one lakh investors through a money circulation scheme, and over Rs53 crore from 65,000 people as investment in the company's super market chain. Sulthan Bathery police has so far arrested 15 people associated with Bizzare, including its executive director, PT Kunjumuhammed, and seven business promoters.

Last week, police also registered cases against Bizarre and Tycoon Empire International. They were to find that one of their colleagues, a sub-inspector, was acting as chief executive of the Bizarre group. Police are now searching for KT Gopinath, the sub-inspector from Thrissure Armed Reserve Force who is absconding.

Bizarre would collect Rs14,250-Rs5,500 as membership charges and Rs8,750 for 8,000 shares in the company's super market. It promised to give discount cards worth Rs10,000 for buying goods from its stores. Bizzare officials created an image that the company was doing good business, by claiming that it aimed to enter the real estate and hospitals segments, and that it even planned to list on the Bombay Stock Exchange (BSE). However, the Bizarre management could not keep its promises and investors began to register complaints against it, which led to the arrest of top officials.

According to a blogger, Kerala is flooded with numerous MLM schemes that are duping gullible people across the state. The netizen says, "The interesting fact is that most of these (MLM) companies are headquartered outside Kerala, but the number of agents in those areas is almost nil. Obviously, Kerala is becoming the easy place to trap people in these scams."

Take the example of Tycoon Empire International. The company's owners are from Chennai, but it has promoters from Kerala. According to media reports, the Kozhikode police has intensified investigations into alleged money swindling to the tune of Rs370 crore by Tycoon. Police said the company had collected money under the pretext of products, and that its claims to be an ISO certified company are false.

"The company, in its latest bid to regain the faith of investors, claimed to have ISO certification, but it turned out to be false. The Geneva-based organisation has denied issuing ISO certificate to Tycoon," PP Sadanandan, deputy superintendent of police, was quoted as saying.

Tycoon offered Rs10,000 per month, besides a commission for enrolling new members, to anyone who could invest Rs1 lakh. According to media reports, most of the people duped by Tycoon are from Payyoli and Vadakara regions and Palakkad and Thrissure districts of Kerala. A majority of those duped are police personnel, government employees and teachers.

In other case, police arrested three officials of Verizon Builders, another money circulating company. According to police, they were running an MLM scheme in the name of Verizon Builders and Developers Ltd and Encode Financial Services Pvt Ltd for the past three years. They would collect Rs6,000, including Rs5,000 as membership fee and Rs1000 as share in the business, under the pretext of real estate investment. In addition, the members were promised Rs1,000 for every pair of new joiners they brought with them. Besides real estate investment, Verizon also offered products like insurance and ULIPs.

The MLM companies not only targeted residents from Kerala, but also trapped people from overseas, especially people employed in Gulf countries. In the case of Apple A Day Properties, also an MLM company, after numerous complaints, Kerala chief minister Oommen Chandy conducted a video-conference with victims from Gulf countries. The company has cheated people in the state to the tune of over Rs100 crore, under the pretext of real estate projects and buying flats. Last week, Apple A Day Properties' promoters, Saju Kadavilan and Rajiv Kumar Cheruvara surrendered, and they are in police custody till 30 June 2011.

Other companies who have cheated gullible people in Kerala include names like Nano Excel, UniPay2u, RMP, Visarev. The case of Nano Excel is very interesting. While the company has allegedly looted Keralites of over Rs100 crore, the company has itself complained of cheating by one of its directors. On 16 April 2011, Nano Excel issued a notice informing its distributors to stay away from the director, saying "This is to inform that Patrick Thomas who was director in the company is terminated due to mis-appropriation of funds and management administration. Those distributors still in communication with him, personally or officially, do so at their own risk. We now have our new administration team in our headquarters New Delhi, streamlining all defaults of Patrick Thomas executed so far, and our new administration will be a promising team to service you better from now ,sorry for the inconvenience."

The Kerala police has also warned hotels, restaurants and convention centres across the state, not to allow money-chain companies to hold any meetings on their premises.

Moneylife has consistently warned people about MLM scams, and yet finds the 'get-rich-quick' frauds spreading across the spectrum, from millionaires to the penniless and from the uneducated to the highly qualified. The Kerala example underlines the desperate need to spread financial literacy across the country.