The Real Roy: Man behind the myth

Even after he became super rich with loads of political connections and celebrity friends Subrata Roy always kept his old trusty Lambretta He never got rid of that Lambretta even after he amassed several palatial homes and acquired luxury cars The story goes that it was the scooter he used in his initial years to go from house to house in small villages asking people to deposit money in his chit fundThe Roving BusinessmanThat is how Roy began his business journeymdashby goading the poorest of the poor from the lower classes to save at least one rupee a day and invest in his scheme He would tell daily wagers to save Rs 10 a week or say Rs 100 a month He would offer them good interest rates He slowly expanded by covering more villages and districts The financial deposit schemes were the bedrock of his empireIn some respect this was a typical Ponzi scheme He would take money from newer investors and offer good returns to the earlier depositors It was built on the premise that the number of depositors would keep increasing And in his case while there were a few complaints that he did not pay on time it should be said that most of his depositors in the early days were pretty happyOnce he got the financial scheme going he diversified into other fields He did come good on his promise But thatrsquos how these Ponzi schemes work He was always very careful that his image or his story was never tarnished That is how he brought in newer depositors There was no bad word of mouth or media coverage of failed payments etcOnce his financial business became big he started diversifying into other sectors And as with any Indian or global big business he got into real estate and construction He started buying huge banks of land Because if you are going to have to pay out interests either you park the money in the stock markets which he was doing to some extent or you use the money to give loans to corporates Or you buy cheap real estate and sell at market rates At the end of the day he had to generate more interest than he was payinghis depositorsStayed in financeOne area he never got into was manufacturing All his businesses revolved around financial real estate or media industries In financial sectors it is easy to multiply your money Whereas in manufacturing money comes slow and it is a lot of hard work He was more into cashrelated businesses where rotating money was easierAlong the way he acquired in spades what I call CQmdashcelebrity quotient He used every single bit of this CQ to advance his empire be it from Bollywood Hollywood the global music scene tennis stars Indian cricketers or international celebrities That was his way of showing off his cultural power Everybody knew he had hard power These connections had a bigger impact on his target audiencemdashthe very poor from the lower classes who saw these associations as endorsement of RoySEBI ushers the fallOnce he became too big he started hobnobbing with politicians He was close to Samajwadi Party but he also helped the BJP in certain aspects Because he was close to a lot of political middlemen who anyway were close to several parties in their wheeling and dealing he had friends across parties And because of his political and celebrity connections he started facing a certain amount of jealousy and animosity from rivals That is how the complaints went out to various regulators and government agenciesHis biggest problem came when he raised huge money via a suspect financial instrument which was not defined very clearly by the regulators It involved complicated convertible debenturesThen SEBI got stuck into him saying lsquoYou are raising tens of thousands of crores using these instruments which are not even clearly defined by usrsquo He defended the move saying lsquoIf you have not defined it you cannot be the regulatory authority for my instrumentsrsquo But SEBI put its foot down and came down hard on him telling Sahara they canrsquot sell it to retail investors That is how the whole thing went to courts and his downfall startedGenuine investors or benamiHowever what could never be clearly identified was how much of the investors were real and how much was benami money Even SEBI couldnrsquot clearly find outWhen the courts ruled that Sahara has to return money to depositors Roy said he would return it to them but SEBI claimed a lot of it was benami investments so the courts asked him to deposit the money But it could never be established who the real investors wereThere is a fair bit of circumstantial evidence that a lot of tainted money came in from powerful people who wanted to hide their money and that is what these debentures were used for But SEBI couldnrsquot ever muster any concrete proofThis was when the court asked him to deposit Rs 50000 or Rs 60000 crore which was dubbed as the most expensive bail bond in the world while not actually being a bail bond And when all his assets were frozen his financial empire crumbled because he couldnrsquot access any of his wealth to get out of the hole he found himself inIn the end the most curious aspect of this business is that whatever money could be paid has been paid and no large groups of investors have come out to complain against him Even in the Jet Airways scandal thousands of employees hit the streets But in Sahararsquos case there was no group of investorsmdashactual peoplemdashcome out in the open And with his passing the chances that any of them will come out is also very low nowAs told to Krishnakumar PadmanabhanAlam Srinivas is a journalist and bestselling business author