IT could turn out to be the most shocking fallout of the Rs 1,336-crore Indian Bank scam—even shutting out the Congress and TMC links temporarily. The CBI, probing the multi-crore bungle, is now engaged in following strong leads suggesting that a significant chunk of the finances arbitrarily released by the bank under former CMD M. Gopalakrishnan may have been used to fund the Liberation Tigers of Tamil Eelam (LTTE).
Specific "information" currently in the process of being verified by the CBI indicate that Indian Bank's leading overseas defaulter, Singapore-based NRI and cashew nut exporter Muthukrishna Varatha Raja (MVR), whose total liability to the bank totals Rs 375 crore, diverted money received from the bank to certain front companies allegedly belonging to the LTTE. What is significant here is that not only did Indian Bank blatantly violate set norms in sanctioning advances to MVR's benami companies—as brought out in the 10 cases that the CBI has so far registered against the MVR Group—but that it also did not monitor the manner in which these funds were misutilised.
For the CBI, the probe centres not so much around commercial losses incurred by the bank but in establishing criminal liability. The agency is verifying source information, backed up by intelligence records, to sharpen its focus of inquiry on the end-use of funds sanctioned by the bank to MVR. Leads under investigation by the CBI, which are available to
Outlook, show that MVR extended fina-ncial support to individuals and companies belonging to the LTTE.
While MVR vehemently denies the charge ( see interview ), CBI insiders are confident of nailing the nexus. What has heightened suspicions is MVR's own background. His father, N.P. Muthukrishna Naidu—a former Thanjavur district Congress president—controlled an extensive textile trade in Sri Lanka. And as leads currently being probed by the CBI show, the links continue. The CBI has in its records information which shows that MVR owns five benami companies in Rotterdam: Hamilton Ventures Pvt Ltd; Nutworld Trading; Globenut; Richardson & Rogers Ltd; and Dutch Flag Ltd. All transactions from these companies are conducted through Bank Mees Pierson, Rotterdam, and the CBI has received information that certain remittances from Dutch Flag, a shipping company registered in Rotter-dam, have been made to an outfit called Marine Shipping & Trading Ltd. The investigating agency is trying to verify this information. It is in this context that the information received from various intelligence agencies puts the CBI on the Tigers' trail. For, Marine Shipping & Trading Ltd is believed to be a front company of the LTTE. Records with the intelligence agencies show that Kumaran Padmanabha (KP) is a director of this company. KP, a Switzerland-based relative of LTTE supremo V. Prabhakaran who is the chief arms procurer for the Tigers, was also suspected of having supplied explosives to Chennai from Singapore for Rajiv Gandhi's assassination. The company, incidentally, is registered at Le Pollet St, Peter Port, Guernsey, Channel Islands, and intelligence information shows that this company financed the purchase of various ships used for smuggling activities by the LTTE. Mystifyingly, Indian Bank continued to extend credit facilities to Mountemount—which is yet another of MVR's benami companies in Singapore. In fact, in an affidavit filed before the Madras High Court recently, the Enforcement Directorate pointed out: "The quality claims made by MVR's company Mountemount were raised only during January and February 1996 for shipments made between 1991 and 1995. This was to enable fraudulent declarations so that the amounts due to be paid in settlement of quality claims were adjusted against export proceeds receivable by the Indian companies." Further, information with the CBI shows that an overdraft of $28 million was released by Indian Bank to Mountemount for business payments to be made to the five benami companies. Curiously, the bank did not conduct any scrutiny on these companies in Rotterdam to establish whether the transactions were genuine or not. What appears as a complex maze of transactions could have actually worked quite simply: MVR drew heavy loans from Indian Bank's Singapore branch, allegedly for payments to his own bena-mi companies in Rotterdam. The bank released the funds without any verification. Money from one of these companies then found its way to an LTTE front company. But given the manner in which Indian Bank conducted its business under Gopalakrishnan, such violations are hardly surprising. A recent report submitted by the Reserve Bank of India (RBI) to the Banks Securities and Fraud Cell of the CBI shows how the chairman made arbitrary donations to the tune of Rs 10 crore during 1991-96 alone. ANOTHER aspect of the CBI's inquiry relates to MVR's association and alleged transactions with P.V. Rajendran, a TMC MP who won the last Lok Sabha election from Mayiladuthurai. As per the agency's FIR, MVR's Chennai-based company, MVR Exports, illegally received credit and overdraft facilities to the tune of Rs 71 crore from Indian Bank's Singapore and Chennai branches. The CBI is verifying the source information that MVR Exports actually diverted funds to certain front companies maintained by Rajendran. While MVR says he knows Rajendran since both belong to Thanjavur, he denies any financial dealings with him. For his part, Rajendran told Outlook : "I received Rs 15 lakh for an aquaculture business from Indian Bank in 1993, which I am repaying. But I have had no financial dealings with MVR." Incidentally, intelligence dossiers provide reasons to suspect Rajendran of having links with the LTTE. The Special Investigation Team (SIT) handling the Rajiv Gandhi assassination case had listed him among the sus pects. Reason: his reported closeness with Shanmu gham, a resident of Vedaranayam, Tamil Nadu, kingpin of the LTTE's smuggling operations who committed suicide soon after he was arrested the SIT in November 1991. Intelligence reports also give precise details of Rajendran's associates in Thanjavur district who are suspected to be LTTE members. Prominent among these are Sabapathy alias Chokkan, a suspect in the Rajiv case who thrived on the smuggling routes from Vedarana-yam to the northern Sri Lankan coast. Rajendran, however, denies the allegation but does admit: "I did support the LTTE when Indira Gandhi and Rajiv Gandhi were doing so. Not anymore." The CBI is trying to obtain details of the MVR's precise financial transactions with other companies in India and abroad. But insiders in the agency suspect that such transactions were largely conducted through hawala channels and would not be represented in company records. Besides, the trail got murky well before the Rajiv assassination. Source information with the CBI indicates that in 1990 Rajendran received Rs 5 crore as a loan from Indian Bank to start a nuts-and-bolts factory. The charge, currently being probed, is that no company was started and that Rajendran could have used the funds to purchase ships for the LTTE. Rajendran, as said earlier, denies any linkages now. The Bank Securities and Fraud Cell is verifying information that a Mumbai-based hawala operator has been diverting money belonging to MVR (received largely from Indian Bank), Adnan Khashoggi and Chandraswami to various accounts abroad. It has, in fact, verified the charge that Chandraswami was closely linked to the Singapore businessman and stayed at his penthouse at Peace Mansion, off Sarangoon, on at least two occasions during his visits to Singapore in 1992 and 1994. Proximity to the powers that be is something MVR does not deny. It is perhaps to these factors that he owes his rise. In 1962, as a graduate from Pachaiyappa College in Chennai, he wound up his father's textile business to start a cashew export venture. The plans were grandiose: import raw cashews, process them in India and export the finished products to the same companies in South Africa, Europe and US. But it was only in 1985 that he got his first big break when Indian Bank sanctioned a Rs 123-crore loan to his company, MVR Exports. This despite the fact that he had earlier defaulted on the repayment of two car loans from the same bank. The get-rich-quick streak continued. For MVR, public sector banks became a convenient dipping pool. In '86, he touched the Bank of Baroda (Mumbai main branch), the Indian Overseas Bank (Janpath branch, New Delhi) and Canara Bank (Ambuchetty branch, Chennai) for a loan of Rs 2.86 crore—by pledging the same stock. The loans (now declared non-performing assets by the RBI ) were granted without even a basic verification of the stock. Funds continued to be raised by the MVR Group through its benami companies in blatant violation of banking rules and despite the fact that MVR had continued to default on repayment, not just from Indian Bank but from banks across the world. Strangely, these loans were advanced on specific recommendations made by Indian Bank's Singapore branch. Consider this. On September 29, 1995, Indian Bank wrote to Mountemount asking for its audited accounts, securities and clearance of overdue bills. Exactly two months later, on November 29, Vijayaraghavan Parikasami, a director at Mountemount, wrote to Indian Bank's Singapore branch, asking them to furnish a letter of recommendation for the Project Funding Group, Dubai, which the MVR Group had approached for a loan. The bank obliged. The very same day, the bank's assistant credit manager, M. Nachiappan, wrote back forwarding a flattering letter of recommendation. In an intriguing sequence of events, the Dubai bank did not extend the facility, but Indian Bank's Chennai branch extended a loan of Rs 5 crore to Anderson Industries International Ltd, a benami company MVR set up in Chennai, on the basis of the same letter. Insiders in banking circles link MVR's closeness to TMC leader G.K. Moopanar and Gopalakrishnan as the reasons behind his long financial reach. Recent investigations by the CBI too have brought the complicity of at least two cabinet ministers—both belonging to the TMC—to light ( see box above ). But what cannot be overlooked is the fact that Indian Bank's largesse cut across party lines. A report examining the reasons behind the eight extensions granted to Gopalakrishnan during 1993-95 is being prepared by a committee of secretaries under the chairmanship of the cabinet secretary. The initial findings show that neither the then finance minister, Manmohan Singh, nor the then cabinet secretary, Zafar Saifullah, were in favour of the extensions. Yet he got them. The orders on all occasions had come from the PMO. Which begs the question: will MVR's friends in high places be able to bail him out?