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Black money sting: I-T acts, Bollywood reacts

CNN-IBN
Jul 11, 2012 at 11:19pm IST

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Mumbai: A day after the Bollywood's dirty belly, large-scale presence of black money, was exposed on CNN-IBN through a sting operation by the IBN Network and Cobrapost, the Central Board of Direct Taxes has taken cognizance of the operation.

The transcripts and the CD of the sting have been forwarded to the investigation department in Mumbai for appropriate action. According to sources, the government is aware of rampant use of black money in real estate and the film industry and is promising action.

The Mumbai unit of the CBDT may even look at records of earlier films made by Anubhav Sinha, Anees Bazmi and others caught in the sting. The department is also likely to look at those who financed the projects of these Bollywood biggies.

It has also been assured by the government that it is serious on dealing with the issue.

Union Corporate Affairs Minister Veerappa Moily said, "The government is committed to dealing with the issue of black money."

Others from across the political divide also hailed the operation conducted by the IBN Network and Cobrapost.

Janata Party president Subramanian Swamy said, "I saw the expose. It is an excellently done research, and is very courageous because Bollywood is also partly connected with underworld and mafia. I congratulate CNN-IBN for this expose."

"Black money has the multidimensional effect on the economy, it causes inflation. I would like a comprehensive enquiry setup under sitting judge of Supreme Court into the use of black money in public entertainment," he said.

Similar was the reaction of Janata Dal United chief Sharad Yadav. "He said I congratulate the channel for the sting. They should be exposed more...mafia dons used to run cinema."

Team Anna member and senior Supreme Court lawyer Prashant Bhushan termed the issue as a conflict of interest saying, "The law enforcement agencies aren't acting on this. Either they have taken bribes and there is corruption or the politicians who have invested money in this aren't letting them act."

However, the scene was completely different when it came to the members of the film fraternity, who rejected the sting terming it as blown out of proportion. Bollywood reacted dismissively saying cash payments exist in every sector.

Veteran filmmaker Mukesh Bhatt termed those caught in the sting as stand alone cases.

He said, "It is ridiculous and stupid to be involved in black money issue. There are stand alone cases where people get involved with black money in the industry."

Whereas, a relatively newer entrant to the industry Rohit Shetty said he was no one to give a judgement.

"I don't want to categorise them. And what's the truth, it is better if they answer that. I can't give a judgment as to what they wanted out of the whole white or black money," said Shetty.

He further said, "Just because of one or two actors, you can't say that the whole industry is like this. We should not just sit and give judgment on it, that's not right, so it is better that they come out and clarify things."

Superstar and producer Saif Ali Khan ruled out the presence of black money in the industry, saying, "Mostly now producers do business by cheque not cash, so no chance of black money."

Meanwhile, those featured in the sting operation defended their action saying they were trying to war.

Actor Payal Rohatgi, who along with her boyfriend Sangram Singh was caught in the sting asking for part of her fee in cash, said she wanted to nab the undercover report who had been posing as a producer.

Asserting that she was not obliged to give a clarification to CNN-IBN, Rohatgi said, "We were trying to catch the fraud who was pestering us for many days."

Although her boyfriend admitted that it was a mistake, he also said that he wanted to "hand him over".

Rohatgi further said that she was a law abiding citizen, saying, "I have always accounted for my money and maintained files. I have been taught to maintain and account for money. Even if I have taken cash, it is accounted for. I have paid my taxes."

So were these individuals simply egging on an undercover reporter, or does this blow the lid off Bollywood's worst kept secret?

Exposed: What black money buys in Bollywood

This sting was carried by Syed Masroor of Cobrapost.

Mumbai: Top Bollywood producers and directors reveal on camera how black money funds their films and how they launder it for their investors. Vashu Bhagnani, Anubhav Sinha and Anees Bazmee reveal Bollywood's worst kept secret on camera. It's a Cobrapost-IBN Network Expose of Bollywood's Black Money Business Model. It's the Really Dirty Picture.

Anubhav Sinha

First up, the story of the man who is counted amongst the biggest success stories of Bollywood. From being called the king of music videos to one of foremost film makers in the country, Anubhav Sinha is a revered man in the tinsel town.

Sinha, the director of Bollywood's most expensive film 'Ra.One', is a big name in Bollywood. But how do big budget directors like Sinha fund their films? Or does black money play a role? Cobrapost's under cover reporter met Anubhav Sinha in his Mumbai office posing as an investor who wants to launder his black money.

Sinha: I can assure you that if you put 5 rupees in say two films…then I'll definitely make 6 of the 5 in one year.

Reporter: ok, ok

Sinha: And after the success of the film - you get a profit of 10 per cent or 11 per cent

Reporter: Profit sharing - Yes, yes that's what I want.

Sinha: Yes but it mostly happens that people invest but their name doesn't come even on the posters of the film so in your case also we should do something like that since you are so secretive.

Reporter: It's better to be safe

Sinha: Yes if anyone asks me from where it's come…I won't tell anyone. I meet a lot of people who want to invest in my company…they never lose money.

Sinha: Now tell me how much amount are you comfortable with to invest

Reporter: You tell me sir…I think I want to start with 15…and in that how much of black or cash do you want and how much white?

Sinha: Can you give 50 per cent by check

Reporter: No sir, we can't give more than 25 per cent by check

Sinha: Hmmm....

So, the deal would involve only 25 per cent white money… the rest all black. And as emphasized by Sinha himself, the investor would be a 'ghost investor' with no mention of his name either on film posters or even hoardings. The deal now goes to the next level where our undercover reporter is taken to meet Sinha's chartered account.

Sinha: You can ask him all the questions - (points to the CA)

Middleman: I am the coordinator - I'll just explain… these people mostly have cash and want to do a contract that is 80 per cent by cash and 20 per cent by check.

Reporter: Or 25 per cent 75 per cent

CA: There are lots of expenses in films where we need cash…so we can put the money there and return it by cheque

Sinha and his associates make it clear – it's easy to exploit the film industry to convert black money into white. The black money is used to cover unaccounted production costs, even under-the-table actor fees. The investor later paid back in check from the film's profits. And top directors like Sinha who aid this process take their cut from the investor's profits.

Anubhav Sinha was contacted by CNN-IBN but chose not to react.

Vashu Bhagnani

Vashu Bhagnani is a well known producer in the Hindi film industry with films like Coolie No 1, Bade Miyan Chhote Miyan, Do Knot Disturb and Faltu to his credit. But who's investing in his films and what is he promising them in return? Our undercover reporter meets Bhagnani in his office to expose how he attracts investors by promising to convert their black money into white.

The conversation between Bhagnani and our undercover reporter (writing in English translations)

Bhagnani: I have many ways to make black money white...but the person needs to be genuine. We should not get caught by income tax officials.

Reporter: So if I have to give you 10 crores, how much in check and how much in cash?

Bhagnani: 8 crores cash and 2 crores check…the paper work will be there only for 2 crores.

Bhagnani: For the case we'll give you distribution rights of the film for 3 states.

Reporter: So we'll start a company to deal with you

Bhagnani: Then we'll do an agreement with you that is similar to what's going on for the past 50-60 years, after you recover your initial investment…whatever profit comes we'll take 50-50…PATCH and you'll get your money in check.

Bhagnani: So on release when you get your money…you can give me cash…no need for any paper work and you're also the distributor of the film.

The deal Vashu Bhagnani offers is simple – the investor buys the distribution rights of a film, paying mainly in cash or black money. On paper, these distribution rights are sold for a much lower amount. After the film's release, the investor claims the box office returns as 'clean' or white money. Bhagnani benefits from the deal by getting a 50 per cent share of any profit that is made.

Vashu Bhagnani in fact made a direct offer to our undercover reporter – saying he could buy the all India distribution rights of his upcoming films for a sum of 100 crore rupees.

Bhagnani: On 13th I'm starting a film 'Ajab Gajab Aur Love' – there is Jackie, Kiron Kher, Sanjay Arshad Warsi and Arjun Rampal

Bhagnani: For 100 crores I'll give you rights for 18 films.

Bhagnani: I won't take the money now…I'll tell you the right stage…in installments for the different films

Reporter: Is this a safe way?

Bhagnani: Not just safe…but you'll automatically also become popular. You'll also work with other filmmakers. I think by this method your money becomes white and you also get the perfect value.

As Bhagnani has revealed - it's a deal that benefits both sides – the investor launders his black money easily through the film distribution route, while the film's producer gets finance for his film and a share of any profit made by the investor.

Vashu Bhagnani was contacted by CNN-IBN but chose not to react.

Anees Bazmi and Rajeev Kaul

Our hidden camera has exposed the rot that still lies in Bollywood, greater corporatisation may have now reduced the involvement of cash in films, but it's still a dominant factor. See now how another much-celebrated director Aneez Bazmee and writer Rajiv Kaul react when faced with the mouth watering prospect of accepting cash for films.

Location: Juhu hotel, Mumbai

Time: 2 pm

A secret meeting is underway. On the agenda – how to convert crores of black money into white using the Bollywood route. Those present at this meeting are two of commercial cinema's biggest names.

Anees Bazmee, director of mega hits - No Entry, Singh is King and Ready and Rajeev Kaul, veteran writer and the man who scripted big hits like Dil, Beta, Welcome and Ready.

Also present – Cobrapost's undercover reporter posing as an Investor wanting to launder his black money.

Reporter: Sir our problem is that we have more cash available – more black money – so that's what we want to adjust

Anees: No problem, give as much cash as you want and as much cheque

Rajeev: I've told him (reporter) that you can give some cash now…and the cheque later

Reporter: What's important for us is that the money we are putting through the film business we will be able to convert it to white.

Rajeev: I've told you that we'll get in a corporate to join us and that way it will be easy for you

Reporter: Anees saab what will your advance be?

Anees: 5 crores - 4 crores - I crore by cheque

Reporter: So for all the cash we are paying…will we get something in written?

Anees: How is that possible?

Reporter: No something - some authenticity

Anees: When we buy a flat – if its 10000 per square ft we give cash 4000 and on agreement it's just 6000 per sq ft.

Reporter: Yah but that's property

Anees: It's exactly similar to the property business.

Anees Bazmee explains that black money plays the same role in the film industry and in real estate. He says up to 60 per cent of the money invested in a film is black money. Just 40 per cent is legal white money. Bazmee also hints at how in spite of corporate money now coming in, black money continues to play a big role in financing films… as writer Rajeev Kaul explains in detail.

Reporter: 30-35 crores of our will be in black

Rajeev: Yes, you can keep investing both black and white together. With both the black and white we'll have about 40

Reporter: hmmm

Rajeev: For the rest of the 20 we'll rope in a corporate and the corporate will give us the payment through white…so our money will get white also and we'll get profit as well.

Reporter: Okay

Rajeev: So the advantage will be that the corporate will release it…and also get the white funding.

Reporter: So no tension

Popular director Anees Bazmee and writer Rajeev Kaul have exposed how corporate firms too are used by film makers to launder black money. First, incomplete films are sold to these corporate firms, who then pay the film-maker by cheque. The film-maker shares these cheque payments with his black money investor, thereby laundering their black money for them.

Anees Bazmee's reaction to CNN-IBN after the sting operation:

"After the entry of corporates all our transactions happens through cheque, we pay income tax in crores. Even if I would have been offered money I would not have taken money. I am in the film industry for the last 30 years. I have only worked with big banners. I have not got anything to do with the issue, I only met the person because we were being constantly pressurised. I will not talk about black money in the first meeting. This is a small issue, lot of people want to meet us. We work with corporates, there is no question of black money's involvement in the film industry," Bazmee said.

Sandeep Marwah

Sandeep Marwah runs a film institute and studio in Noida's Film City. He assured Cobrapost's undercover reporter that using his family relations with Boney Kapoor and Anil Kapoor he could finalise a film project with them in which black money could easily be put to use.

Marwah: I can speak to Boney this evening itself… he is the one who handles all the production but you need to tell me a bit about yourself

Reporter: I'll do one thing sir…I'll tell my CA to register a company…and we can use that company name to work with you.

Reporter: We don't know much about movies…we will do as you advise…but in terms of the payment…we will do 90 per cent in black and only 10 per cent in cheque…

Marwah: No problem… But to begin with – you must pay off 5-10 lakhs asap…so we can proceed with the project

Reporter: ok ok

Sandeep Marwah, veteran producer of around 70 films, confirms on camera that black money is common currency in the film business. Our next stop – a hotel in Juhu, Mumbai.

Marwah reacts to the sting operation: "Corporatisation has ensured that black money is not involved in films."

Meet Shailesh R Singh, producer of films like 'Tanu Weds Manu' and 'Bas Ek Pal' – right now finalizing a black money deal with our undercover reporter.

Reporter: How much cash and how much by check? How much of black will you take?

Shailesh: Even 80 per cent cash will do?

Reporter: How much will we have to give Irfaan?

Shailesh: We'll have to give him 25 lakhs at least as the signed amount – white

After claiming that he would sign Irfaan Khan for his film, he goes on to tell our reporter that actors too, prefer to be paid more in black money than white, also confirming the terms of their money laundering deal.

Reporter: But how much will he take by cash?

Shailesh: At least 1.5 crores…that you can give full cash - no tension

Reporter: No problem

Shailesh: He prefers cash…

Reporter: So the money that we invest say – 15 crores – how will we get it in return?

Shailesh: You want a cheque right? We'll give you a check…and you can register profit and pay tax.

Reporter: And how much profit per cent will I get

Shailesh: Whatever I get – you'll get 1/3rd of it – 35 per cent

Shailesh Singh also claims that liquor Baron Ponty Chadha – recently under the scanner of the Income Tax Department had invested in his previous film – Tanu Weds Manu - as a distributor.

Reporter: Is that what happened in Tanu Weds Manu as well?

Shailesh: Ponty Chadha had invested in the Delhi, UP theatres.

Shailesh: got bonus (profit im guessing)

Reporter: So Ponty Chadha got the profits by cheque…that must be white money…

Film Producer Shailesh Singh confirming on camera yet again... that film financing is indeed a safe route for money laundering... the transaction benefiting the investor… and the film producer.

Shailesh Singh chose not to respond to the allegations.

Payal Rohatgi, Sangram Singh and Arti Chhabria's parents

Payal Rohtagi has done bit roles in films such as Corporate, Heyy Baby and 36 China Town. She figured more prominently as eye candy in the reality show Big Boss, along with current boyfriend Sangram Singh, a former professional wrestler. Cobrapost's undercover reporter met them posing as a film financier, looking to sign the couple as lead actors. When the discussion for payments begin, Payal is clear that she expects to be paid mainly in black!

Reporter: We've spoken about 30 lakhs as payment – how do you want it? – How much in black i.e. cash?

Payal: We just want 5 lakhs in check

Reporter: So 5 lakhs in check and 25 lakhs cash?

Reporter: But last night you mentioned something about 25 per cent?

Payal: No what I meant is 25 lakhs cash and just 5 lakhs in cheque.

Sangram and Payal expect to be paid 30 lakhs each, but only 5 lakh each on paper. Payments in black seem routine in Bollywood.

Reacting to the sting operation, Rohatgi said: "There is nothing called black money in the industry today."

It's the same story at the residence of actor Aarti Chabbaria – seen in films such as 'Shootout at Lokhandwala', 'Partner' and 'Shaadi No 1'. Our undercover reporter is there to offer her a role in a film… he is met by her parents Dr Ashok and Sunita Chabbaria.

Sunita: We mostly take Aarti's payments half white – half black

Reporter: Increase the ratio (of white?) a bit?

Sunita: Ok we can do 60-40

The Chabbaria's also explain how the cash or black money deals are conducted…

Dr Ashok C: The agreement will be in white only

Reporter: So what about the black? What is the guarantee on that…

Dr AC: That will be a temporary agreement once the money is received and the deal is done…we'll tear it up

Reporter: Tear it up? Ok

It's an illegal but mutually beneficial deal. In what remains a largely unorganized business unaccounted or black money is clearly the preferred currency in which to do business in Bollywood!

Aarti Chabbaria chose not to respond to the sting operation. While lawyer Mahesh Jethmalani said: "It's a wonderful expose. Film industry should not be singled out. Black money is so endemic that nobody turns away anybody."

WikiLeaks cable on Bollywood and black money

On February 2, 2010, a US Consulate Cable stated: In recent decades, the Bollywood film industry has been associated with the notorious Mumbai underworld, at the nexus of gangsters, money, and politics. Bollywood films were financed by ad hoc collections of investors, many of whom were from the construction and trade industries, who charged interest rates as high as 60-100 per cent. The industry also welcomed funds from gangsters and politicians.

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