Bangalore: For five years, they controlled the administration in impoverished Bellary, even flattened state boundary markers to excavate iron ore—while insisting they had no mining interests in Karnataka.
Now, the reign of the rulers of the “Republic of Bellary”—as the unofficial influence of two Bharatiya Janata Party (BJP) ministers and a milk federation chief, collectively called the Reddy brothers—appears to be at an end.
As the Supreme Court on Friday banned all mining in Bellary, the 25,228-page report of the Karnataka Lokayukta detailed a web of deceit, including violation of mining and environmental laws, tax evasion and money laundering in international tax havens by the powerful brothers—tourism minister G. Janardhana Reddy, revenue minister G. Karunakara Reddy and Karnataka Milk Federation chairman Somasekhar Reddy.
The indictment of the sons of a former police constable, along with associate and health minister B. Sriramulu, indicates the BJP’s next challenge after removing chief minister B.S. Yeddyurappa: how to keep them out of his successor’s government.
The three brothers—who route money through companies half a world away, from Singapore to the British Virgin Islands in the Caribbean, according to the report—have stayed away from Yeddyurappa since he was indicted, but Karunakara surfaced on Friday, saying he was considering legal options against Lokayukta justice Santosh Hegde.
“It has hurt me, his false, baseless (sic) report where he has mentioned my name as director of Obulapuram Mining Co. (OMC) and defamed my name in the state and the country,” said the revenue minister.
“I recommend to the competent authority that (Janardhana) Reddy be removed from the cabinet,” justice Hegde said in the report, making no specific recommendation against the other two. He has called for the prosecution of everyone named in the report and recovery of Rs 16,085 crore in lost revenue from the nearly 800 politicians and officials named.
“They claimed they were doing no mining in Karnataka,” Hegde said of the Bellary brothers. “We have enough documents to the contrary.”
The brothers are also accused of threatening chief Lokayukta investigator Uday Veer Singh.
The report says that “over hundreds of illegal entries and transaction (sic) done in the export business in mining districts show how crores reached Sri G.J. Reddy sir”.
In the course of sifting through 500,000 records, Lokayukta investigators tracked the flow of iron ore profits from a variety of companies into accounts controlled by Janardhana and from local banks to companies (for instance, a company called GJR Holdings, named after the initials of the tourism minister) in various tax havens, such as the Isle of Man, a self-governing dependency of the British Crown in the Irish Sea, during 2009.
“They were clever, but sometimes not clever enough,” one of the investigators said on condition of anonymity, explaining how one payment made by one of the brothers ended up going back to himself through a circuit of banks and companies.
“A pool of illegalities” is how the Lokayukta report describes the eastern district of Bellary, one of Karnataka’s poorest. In a chapter called “The Republic of Bellary”, the report says Janardhana, Karunakara and Sriramulu are directors of OMC—they deny this—which got favours from government departments such as forests, police, revenue, mines and geology.
The Reddys have often claimed OMC works only in Andhra Pradesh, but the Lokayukta report points out that OMC exported 7.1 million tonnes (mt) of iron ore from Karnataka between 2006 and 2011. Yet, the company had no permit to do so, meaning it was illegal. “If they did not mine ore in Karnataka, how did they export it?” asked the investigator.
Of the 21 mt of OMC iron ore exported from Chennai Port, no more than 217,000 tonnes of OMC iron ore was exported from Andhra Pradesh, the report said.