I was recently watching on TV one of the lesser known movie sequences of the celebrated Tamil cinema comedy pair Vadivelu-Parthiban. Vadivelu, playing vagabond ‘Cell’appa asks the latter, a mechanic, for an idea to become a kodeeswaran (millionaire) overnight.
Parthiban asks him to put up wall posters across the town saying “Cellappa will give an idea to become millionaire overnight” and that interested parties can attend the seminar by sending a money order for Rs 100. On the appointed day, scores of people gather to understand the millionaire idea. Cellappa becomes nervous, as he has no such idea. He begs the mechanic to bail him out. The mechanic says, “Ask all of them to put up posters of the ‘kodeeswaran in a day’ in their respective areas and collect Rs 100.” Needless, to say, Cellappa is sent out of the coverage area by wannabe millionaires.
Jokes apart, it is sad that ponzi schemes are so common in the countryside that they have become a popular joke. Much of the blame has to go to the government’s typically reactionary approach. Every time there is a big fraud, noises are made about bringing ‘comprehensive’ regulations. There was a full-fledged commission set up by the finance ministry, which gave proposals to unify regulators and reduce regulatory arbitrage. There are other ministries, such as corporate affairs and home ministry, whose turfs are utilised by ponzi entrepreneurs. There have been reports of each of these agencies bringing rules to register, regulate and restrict these schemes.
A common feature of these proposed frameworks floating around is requiring schemes to register with some authority or other. Once they register, the authority would clamp it numerous rules and regulations, so that the ponzi is unviable and untenable.
The problem with this method is, the perpetrator typically avoids registration. By the time it is detected, it is too big to fail, as it would hurt thousands for years.
As I was basking in the late morning winter sun in the Supreme Court lobby last week, one of the black-and-white eagles told me how ponzi companies facing action are making an example out of the Golden Forest case. Golden Forest was a plantation scheme that raised crores in the 1990s. The Securities and Exchange Board of India found it to be a collective investment scheme and asked it to register. The promoters refused. The scheme was ordered to be shut. The promoter was jailed and a Supreme Court panel appointed to liquidate the assets and refund the money to investors. All this happened in 1998. Investors are still waiting.
Which is why just registering or rules requiring to register are not an appropriate response. There should be some kind of a CCTV on the financial world. Authorities should be aware of what is happening on television channels, newspapers and internet and in social media. When the targets are dynamic, the regulatory framework intended to capture these cannot afford to be static or predetermined. Lawmakers dealing with moving targets can do with Max Kennard’s advice to protege Navidad Ramirez in the star-studded blockbuster Gangster Squad: “Don’t shoot where it is. Shoot where it’s gonna be.”
