Till now it was thought that the victims of the Rs 230-crore scam that gutted the BSNL Engineers' Cooperative Society, the biggest ever cooperative scam in Kerala's history, were hundreds of BSNL pensioners and some individuals outside the BSNL fold like middle and lower middle class Brahmin families in the Fort area of Thiruvananthapuram.
It has now been revealed that among the victims are a cooperative society -- Thiruvananthapuram District Central Government Pensioners' Cooperative Society -- and a reputed foundation -- the CPI-led C Achutha Menon Foundation that has as its founders stalwarts like economist K N Raj, architect Laurie Baker and politicians C K Chandrappan and K V Surendranath.
The office-bearers of the Achutha Menon Foundation refused to make a public comment but reliable sources in the office of the Registrar of Cooperative Societies said nearly Rs 50 lakh of the Foundation was deposited in the BSNL Society.
The Central Government Pensioners' Cooperative Society had deposited nearly Rs 3.80 crore, or 52 per cent, of its total deposits of Rs 6.37 crore in the BSNL Society. The society has 457 members. Irony is, most of the members are former audit officers in the Accountant General's Office.
Read More: Kerala's own Money Heist: Former BSNL engineer, aide swindle pensioners of Rs 230 cr
Looters' trick
The modus operandi of the scamsters who ran the BSNL Society was to offer higher interest rates as a bait and then sweet-talk depositors into holding the money in the society for longer periods. The accumulated funds they then pumped into real estate and money lending.
The accused managed to keep the scam on track for two decades. The prompt payment of the promised higher interest rate and hassle-free service had effectively anaesthetised depositors. The plunder looked sustainable as long as there was no mass withdrawal of deposits.
The plan came unstuck first during demonetisation and later in a big way during COVID, when the real estate sector came to a halt. It was difficult to buy or sell property and by October 2022 cheques started to bounce. By December, when panic withdrawals began, the BSNL Society was fully emptied of funds.
In search of extra income
The Central Government Pensioners' Cooperative Society was also lured by the high interest rate on offer. The BSNL Society paid an interest of 9.5 per cent, nearly 3 per cent more than what other avenues offered.
The Pensioners' Society cannot be blamed for investing their money in interest-earning mechanisms. "We were all retirees and so the requirement for loans was almost nil. Without any interest from loans how was the society to pay interest to our depositors? So to earn additional income, the society had no choice but to invest in places where it could earn interest," said Sugathan, a former official of the AG's Office and a member of the new Executive Committee of the Society.
Besides BSNL Society, the Pensioners' Society had invested its funds in two more societies: Bank Employees' Union Society (Rs 1.56 crore) and Secretariat Employees' Society (Rs 96.48 lakh). These two offered the society an interest of 7.45 per cent. The Pensioners' Society was paying its depositors an interest of Rs 7.25 per cent.
Invisible 2.5 per cent
The problem with BSNL Engineers' Society was its lack of transparency. "On the deposit receipt, the interest was stated as 7.5 per cent. Unofficially, it paid 9.5 per cent. The earlier executive committee did not ask from where the BSNL Society paid the additional but unaccounted two per cent," Sugathan said.
Had the cooperative inspectors checked the account books, as they should have, this additional but illegal income could have been detected. Evidently, this was not done.
Link between Achutha Menon and pensioners
Most of the funds were shifted to the BSNL Society at the behest of N Shanmugham Pillai, a member of the former executive committee and the president of All India Organisation of Pensioners (AIOP) under which the Central Government Pensioners' Cooperative Society was formed. "Shanmugham Pillai called the shots. The other office-bearers, including the secretary, were mere rubber stamps. Executive committee meetings lasted less than 10 minutes," Sugathan said.
Interestingly, Shanmugham Pillai is also the secretary of Achutha Menon Foundation. It is said that Pillai's close association with A R Gopinathan Nair, the former president of the BSNL Engineers' Cooperative Society and the prime accused in the scam, had led the society to the crisis. At this stage, it is not clear whether Shanmugham Pillai is complicit in the crime or, like other depositors, is just a victim who got carried away by the promise of higher returns.
Good sense that did not last
However, there are records that show that the society had smelled something fishy way back in 2021.
On July 2, 2021, the then executive committee of the society closed its deal with the Secretariat Employees' Society and shifted Rs 96.48 lakh deposited there to the BSNL Society.
However, in what looked like a swift change of mind, the executive committee met within 15 days on July 17, 2021, and decided to shift the funds back to the Secretariat Employees' Society when the agreement period was over. "Why would they want to transfer the money back to a lower earning society if not for the realisation that something was wrong in the BSNL Society," Sugathan said.
Nonetheless, the decision was not implemented. "If it was done, not just the Rs 96.48 lakh that was deposited later but also the entire amount could have been withdrawn and the deposits salvaged," Sugathan said.
As it turned out, instead of withdrawing the money, the Society deposited an additional Rs 41.5 lakh in the BSNL Society. "We questioned the former members of the executive committee about these decisions and they had no answers," Sugathan said.
This suggests that the funds were deliberately transferred even after fraud was sensed in the BSNL Society.
Thwarted bail-out plan
The AIOP, the apex body under which the Pensioners' Society functions, also hatched a plan last December to bail out the depositors before they knew what had hit them. At that point, the scam was just uncovered and the depositors were still paid their monthly interest.
The plan was to mobilise at least Rs 2 crore so that depositors who wanted their money back could be paid as if there was no crisis. As part of this each AIOP committee member was asked to contribute at least Rs 2 lakh. Only two members were willing.
Eventually, given the huge loss suffered by the society, the AIOP has come to the conclusion that only 30 per cent of the principal amount can be returned to the depositors at the moment.
Pillai denies role
When contacted, N Shanmugham Pillai said that nearly Rs 3.80 crore of the Central Government Pensioners' Cooperative Society was indeed deposited in the BSNL Engineers Cooperative Society. "But all the deposit-related deals of the Pensioners' Society were only with the BSNL Society ever since it started functioning in 1998," Pillai said.
He said he was just a member of the nine-member executive committee of the society. "It was on the basis of a collective decision taken by the Executive Committee that from 2015-16 the society's funds were gradually transferred from the BSNL Society to the cooperative societies run by secretariat employees and bank employees. This was based on the realisation that it was not wise to park all the deposits in one place," he said.
Nonetheless, Pillai conceded that funds were transferred back to the BSNL Society from the Secretariat Employees Society on July 2, 2021. However, Pillai said it was the higher interest rate on offer that prompted the society to park its funds once again in the BSNL Society. He said while the Secretariat Employees Society offered rates of 6.25 per cent and 6.75 per cent, the BSNL Society paid between 7.50 and 9.50 per cent. "Moreover, there were no problems at the BSNL Society at that time. The troubles came to light 14 months later," Pillai said.
Pillai also said that Rs 45 lakh was transferred to the BSNL Society when the Executive Committee's decision to pull out the society's funds from the BSNL Society was still in force. "This Rs 45 lakh that was reinvested in BSNL Society is only the interest we secured from the BSNL Society," Pillai said.
Pillai stressed that as just a member he had no role whatsoever in the decisions related to deposits. "This is because for any investment, the application is forwarded only by the society's secretary and president/vice-president," he said. "This being the case, to allege that I was behind all this (investing in the BSNL Society) and other members were mere rubber stamps and the Executive Committee meetings were held for just 10 minutes is a complete misrepresentation of facts and intended clearly to defame me," Pillai said.
(This story, published on May 18, 2023, was updated on May 29, 2023, to add N Shanmugham Pillai's version.)