Tuesday, September 6, 2011

India Charges Mining Baron With Fraud (New York Times)

NEW DELHI — One of India’s most powerful mining barons, whose political clout and wealth have made him a controversial national figure, was arrested Monday as investigators raided his offices and seized about $1 million in cash and more than 66 pounds of gold.

Until recently, the mining baron, Janardhana Reddy, was a kingmaker in the southern state of Karnataka, where his family and allies once dominated important ministries. From his base in the Bellary district, home to some of India’s richest reserves of iron ore, Mr. Reddy controlled a mining empire in Karnataka and the neighboring state of Andhra Pradesh and made untold millions of dollars exporting ore to China and elsewhere.

Mr. Reddy was charged with illegal mining in Andhra Pradesh, after a Monday morning raid at his headquarters in Bellary. According to India’s Central Bureau of Investigation, “several incriminating documents” were confiscated, as well as the cash and gold, itself worth more than $1 million. He was also charged with fraud and criminal conspiracy.

“It was a mafia-like system,” said N. Santosh Hegde, a former justice on India’s Supreme Court who spent more than two years investigating illegal mining in Karnataka as an independent state-level ombudsman. “That district had become the Republic of Bellary. It is not part of India.”

Mr. Reddy’s arrest comes as public disgust over official corruption has boiled over in India. Hundreds of thousands of protesters took to the streets last month to support a hunger strike by the anticorruption campaigner Anna Hazare, a pressure campaign that forced Indian leaders to capitulate to many of Mr. Hazare’s demands over the shape of a proposed independent anticorruption agency.

Mr. Reddy and his brothers were once political organizers who traveled on scooters to work on behalf of the Bharatiya Janata Party, or B.J.P. Their political work and the money they raised for campaigns helped the party win control of the state government, while entrenching the family as the political kingpins of Bellary. Rivals complained that Mr. Reddy used his political power for his own competitive advantage in dominating the mining and transport of iron ore.

Mr. Hegde, who recently stepped down from his ombudsman role in Karnataka, released a scathing report in July that concluded that illegal mining had cost the state treasury more than $3.5 billion in tax revenues. In his report, Mr. Hegde said the Reddy brothers had created a system to avoid paying royalties to the government, while also taking a cut from any ore shipped, illegally or legally, out of Karnataka.

Mr. Reddy has consistently denied any wrongdoing. But his power was so vast that his political allies once nearly brought down the state government — run by his own party — to protest a plan to increase taxes on ore shipments. Eventually, though, Mr. Reddy became an embarrassment for national B.J.P. leaders. And in Karnataka, the mining scandals forced the resignation of the former B.J.P. chief minister, B. S. Yeddyurappa.

Even today, Mr. Reddy’s political influence is potent inside Karnataka. The state authorities have yet to take any legal action against any of the people named in Mr. Hegde’s report.