This Article is From Sep 05, 2011

Janardhana Reddy sent to jail for 14 days; Rs. 3 cr, 30 kg gold found in CBI raids

Hyderabad: "The truth will prevail," said G Janardhana Reddy in Telugu, as he was sent to jail for 14 days. Till last month, Mr Reddy was Tourism Minister for Karnataka. This morning, he was arrested by the Central Bureau of Investigation (CBI) from his home in Bellary, and brought to Hyderabad, along with his brother-in-law Srinivas Reddy. (Read: Who is Janardhana Reddy? | Watch)

Both men have been accused of illegal mining via their infamous company, Obalapuram Mining Company (OMC). Srinivas is Managing Director; Janardhana is a Director on its board. The CBI reportedly found Rs. 3 crore in cash and 30 kilos of gold from the former minister's palatial mansion. (Read: Reddy's arrest makes foreign headlines)

OMC operates in Andhra Pradesh, but is headquartered just across the border at Bellary in Karnataka, where Janardhana and his two brothers, Somasekhara and Karunakara are hailed as masters of their universe. Their politics and mining empire have spurred each other's growth so carefully that it is hard, critics say, to tell them apart. (Read: Bellary - Mined over and over by Karnataka politicians) 

A series of cases accuse the Reddys of mining in reserved forest areas, illegally exporting huge amounts of iron ore, and of coercing other mining companies to serve as a front. A report on illegal mining delivered last month by Justice Santosh Hegde during his term as ombudsman or Lokayukta of Karnataka indicted the Reddys and then Chief Minister BS Yeddyurappa. (Read: Justice Hegde's report on illegal mining in Karnataka) While the latter had to quit office, the Reddys were not included in the new cabinet of Sadananda Gowda, who now heads the BJP government in Karnataka.

BJP spokesperson Nirmala Sitharaman reacted to the arrest, saying though there are several cases being investigated by the CBI, it gets activated only on certain cases. "A pattern is emerging in all this. CBI becomes hyper active in some cases, like all those who stood with Anna Hazare, or in the case of Amit Shah. These seem to be politically motivated and CBI is
being used against political opponents," Sitharaman said.

The BJP has tried to play down today's arrest as a likely part of a  routine investigation. "It has been in public knowledge for a long time that Janardhana Reddy has been carrying on mining activity. He has been making claim that he's not done anything illegal...I don't see anything special in this. It's natural course of investigation. I am sure Mr Reddy will come out clean after proving to authorities that he is innocent and he has not violated any rules," senior BJP leader Dhananjay Kumar said.

OMC has shown the sort of growth curve that would have most entrepreneurs salivating. It was set up in 2001 by Gali Janardhana, then 34 years old, with an initial capital of Rs. 10 lakh. By 2003-2004, OMC had taken over several mining leases directly or indirectly and had reported a turnover of Rs. 35 crore. In just five years, by March 2009, the turnover was Rs. 3,000 crore.

The Reddys' political graph followed a similar path. In 1999, when senior BJP leader Sushma Swaraj contested the Lok Sabha election from Bellary, the Reddys were widely acknowledged as powering her campaign. She lost the election, but the Reddys had acquired a new prominence. In 2008, Karunakara became the Revenue Minister; Janardhana had the Tourism portfolio. (Read: Sushma vs Digvijaya on troublesome Reddy brothers)

The first dark clouds for the Reddys' wildy-successful mining operations appeared in September 2009, when the Chief Minister of Andhra Pradesh YSR Reddy died in a helicopter crash. YSR, as he was known, was a Congress man, who allegedly helped pave the way for many of the violations that the Reddys indulged in. They seemed to have close business links. The Reddys got vast amounts of land in YSR's constituency of Kadapa to set up their Brahmani Steel Plant. YSR's son, Jagan Mohan, was a stakeholder in this business but later sold his share.

After YSR's death, the Andhra Pradesh government seemed to turn on the Reddys. It had little choice. A committee set up by the Supreme Court to examine illegal mining in Andhra Pradesh reported a mafia-like empire. It also said a mining lease to OMC extended from 2004 till 2017 by the YSR government was illegal.

In December 2009, K Rosaiah who took over as Chief Minister after YSR died, suspended OMC's operations and asked for a CBI inquiry. The Reddy brothers tried to challenge that but failed. Mr Rosaiah and the Congress, sources say, also used the accusations against the Reddys and YSR to curb Jagan Mohan, who was furious about not being named his father's successor as Chief Minister. If that was the Congress' strategy, it was miscalculated. Jagan eventually quit the party and launched the YSR Congress. "Ask the BJP...what do I have to do with it?" he snapped today when reporters asked him about Janardhana's arrest. (Read: Qs about Janardhana's arrest provoke Jagan)