Enforcement Directorate closes in on Lalit Modi, BCCI in Rs 450-crore IPL scam

The Enforcement Directorate (ED) is closing in on Board of Control for Cricket in India (BCCI) officials, former IPL commissioner Lalit Modi, Multi Screen Media (MSM), a division of Sony Entertainment, and World Sports Group (WSG) in the Rs 425-crore facilitation fee scam.

The scam revolves around the 10-year media rights of IPL matches awarded to WSG, starting 2009. The total contract value was Rs 4,792 crore.

An interim investigation report shows that Lalit Modi, BCCI and WSG fraudulently created an asset of Rs 425 crore outside India under the guise of a facilitation fee.

dna has accessed the interim report of ED.

The report said that there was no agreement at all, and it was all meant to put pressure on MSM to fork out a huge amount as consideration over and above the fee that was to be paid under media rights agreement.
"We have done our interim investigation under the Foreign Exchange Management Act (FEMA). On its basis, we will send show-cause notice to all four," a top ED official told dna.

When contacted, Ratnakar Shetty, head of operation, BCCI, replied, "no reaction". An e-mail sent to MSM went unanswered.

Despite repeated summons, Modi has not presented himself at the ED, said one of the officials.

What exactly is the scam?
At first, BCCI said it had awarded IPL media rights to WSG. Later, when the rights were awarded to MSM was made to pay Rs 425 crore to WSG for relinquishing its rights. In reality, there was no agreement between BCCI and WSG and WSG had no rights to relinquish either. Lalit Modi might be a beneficiary of the Rs 125 crore already paid by MSM to World Sports Group, Mauritius (WSGM), the ED report said.

How did the scam play out?
A new firm called WSG Mauritius was brought into play just to park rights with them. Then, Modi sent certain e-mails to various broadcasters and sponsors, including MSM, saying that BCCI was was barred from signing any new agreement till a certain court verdict was pronounced. Later, in another mail, he said the verdict was been pronounced and BCCI was free to enter into any agreement for media rights. The e-mail also said BCCI just signed a new agreement with WSG.

What purpose did the mails serve?
The mails were meant to force MSM fork out a huge amount. Left with no option, MSM agreed to pay a consideration to acquire the rights, which were secured through a legally enforceable agreement, executed as the deed for provision of facilitation services dated March 25, 2009, between WSG and MSM.

What was the BCCI-WSG agreement ?
According to the ED, WSG had no rights with it to be relinquished after the lapse of the agreement dated March 15, 2009. "As a matter of fact, WSG never had any rights. The agreement dated March 15, 2009, under which the media rights were purportedly sold to WSG never took effect," the ED report said.

So, how did this agreement help Lalit Modi?
"It appears BCCI and Modi manipulated the terms of the contracts between BCCI-MSM and BCCI-WSG, so that the asset of Rs 425 crore created under the deed for provision of facilitation services dated March 25, 2009, could be transferred to WSG and the contract could be made legally enforceable," the ED report said.

What does the ED say about the agreement?
"It prima facie appears that the mention of the admittedly non-existent agreement of March 25, 2009, in the deed was to create an impression that IPL media rights were already assigned to WSG and the facilitation fee was the consideration for WSG to relinquish its rights.

How did FEMA violation occur?
"The payment made under media rights agreement between BCCI and MSM are 'financial transaction' under Section 3 (d) of FEMA and the financial transaction was entered into for creation of an asset, consisting of Rs 425 crore as facilitation fee. But this agreement was executed outside India. Therefore, Lalit Modi, BCCI and WSG appear to have contravened the Section 3(d) of FEMA." the report said.

What was the agreement with MSM?
A fresh agreement was executed between BCCI and MSM on March 25, 2009, and the rights were restored to MSM. On the same date, an agreement was signed between MSM and WSG for the payment of Rs 425 crore by MSM to WSG as a consideration for assistance by WSG to MSM in finalising the BCCI-MSM agreement. As per the agreement, the fee was to be paid in US dollars by MSM, Singapore, to a designated account of WSG in Mauritius.

Did WSG receive the money?
Statement by Venu Parmeshwaran Nair, director of WSG, recorded on August 19, 2010, said "WSG has received an amount of Rs 125 crore from MSM in an account maintained with Standard Chartered Bank, Mauritius, bearing an account number -- 01-201-10640-00. A small portion of this fund was transferred to wholly owned group companies in Hong Kong and Singapore, which are the main operating entities of the group." Money was paid by MSM in installments till June 2009. "No amount was received in 2010 and MSM is in breach of contract," Nair had stated.

What's BCCI saying?
Statement of N Srinivasan, then secretary of BCCI, recorded on July 7-8, 2010, has stated that the detailed terms and conditions of the agreement with MSM were negotiated only by Lalit Modi. He (Srinivasan) never saw the agreement and was not aware of the existence of any other agreement between MSM-WSG, MSM-WSG Mauritius, it says.