Easy prey

Last Updated: Sat, Sep 29, 2012 13:41 hrs

M Mahendran, 32, earned Rs 5,000 a month working in a government-run alcohol shop in Kanaivakadu, a village of about 100 houses in southern Tamil Nadu. On this salary, he supported his daughter and wife, who was expecting their second child. One day last year, S K Sabir, an agent representing Everest Emu Farms, approached him and told him that if he deposited Rs 1.50 lakh with the emu farming company, he would earn Rs 6,000 every month, along with an annual bonus of Rs 10,000. And if he paid a Rs 2-lakh deposit, Mahendran’s income would be Rs 8,000 a month, and the bonus Rs 15,000.

The return on investment thus worked out to 54.4 per cent in the first scheme and 55.5 per cent in the second. This was way beyond what he would get in the other investment avenues open to him: fixed deposits (less than 10 per cent), real estate (15 per cent) and gold (30 per cent). Sabir’s offer was too good to refuse.

Unknown to his family, Mahendran took all his savings as well as those of his parents, besides borrowing a large sum to invest Rs 3 lakh in the company which offered no proper documents. For four months, he received the promised amount regularly. And then, the payments stopped. The company representatives proved untraceable. Unable to bear the huge debt he was now straddled with, Mahendran ended his life on August 22. In his suicide note, he held Everest Emu and Sabir responsible for his death.

  • Rs 600 crore — total size of the scam
  • 25,000 — the number of victims
  • 15,000 — number of emus in farms in Erode and Salem (Tamil Nadu)
  • 54.4 per cent-58.8 per cent — returns promised to investors
  • $30,000 — unverified estimates of how much a pair of emus can earn put up on NABARD’s website

In Erode, 394 kilometres from Chennai, lives another victim of what is being called the “emu scam”, 99-year-old P R Kannappan. In April this year, he saw an advertisement by Susi Emu Farm which promised investors Rs 9,300 every month if they deposited ~2 lakh. This was the “VIP scheme”. The returns were an astounding 55.8 per cent. To scrape together Rs 2 lakh, Kannappan sold his house and withdrew all his savings. Impressed by the Rs 9,300 that he was regularly paid for four months, he invested another Rs 1.5 lakh in the name of his wife, Dhanam. The couple reckoned that they would get around Rs 16,300 every month on their investment, compared to the Rs 2,000-3,000 that the banks were offering them.

But, in the by-now familiar sequence of events, the payments stopped in July. The owner of Susi Emu Farm, Guru, was arrested. But that is small consolation for Kannappan and his wife who have been abandoned by their children and are now living with their nephew.

Mahendran and Kannappan are just two of the 25,000 victims of the Rs 600-crore emu scam. The money involved may look paltry when compared to the 2G-spectrum scam or Coalgate, but this is the largest scam to happen in the farm sector. This number is likely to go up, according to officers of the Tamil Nadu government. Complaints against vanishing companies are still pouring in from all quarters. So far, 31 first information reports have been registered with the police.

What attracted investors to the scheme, which centred around the flightless bird native to Australia, was the outrageous returns promised by the various emu companies in Tamil Nadu. This is how it worked: the investor deposited money with an emu farming company, which then gave him at least six pairs of three-month- old emu chicks and constructed a shed with fencing in his backyard. For five years, the investor was promised a fixed amount every month; at the end he was supposed to get his deposit back. In the “VIP scheme”, these birds were also taken care of by the company — it paid the farmers to buy feed, et cetera and also made periodic visits to check on the health of the birds.

At the end of every year, the emu company was supposed to take the one-year-old birds from the farmer, and replace the lot with another batch of 3-month old chicks. The adult birds were supposedly taken to the company’s farm, where more eggs would be collected for more emu chicks.

It’s only now that authorities have realised that it was a Ponzi scheme. The emu-farming companies, it is alleged, took deposits, paid some instalments to earlier investors with that money and decamped with the rest. Nobody bothered to enquire what would adult emus be used for. In Erode in Tamil Nadu, where the emu scheme was on in full swing till it was busted by government raids, emu meat was being marketed as the most popular meat in Japan. Farmers were also told that the oil extracted from emu fat sells at Rs 300/100 ml.

But veterans in the mainstream poultry business deny that there is any kind of business model for emu farms. B Soundararajan, chairman of Suguna Chicken, the country's largest poultry company with a turnover of Rs 4,200 crore per annum, says: “I have travelled to over 40 countries and nowhere did I find emu meat being consumed.” Asked whether emu fat can be used as an edible oil, as claimed by emu-farm owners, Soundararajan says animal fat is never used to cook in India.

Agrees R Balakrishnan, an independent adviser based in Chennai: “There is no consumption of emu meat to justify a business model.” “They [investors] thought only about financial returns, but never cross-checked to find out how they could get the returns and now they are paying the price for their mistake,” says a revenue officer who conducted the investigation in Erode.

Unwittingly, the government may have played a hand in perpetuating the scam. Emu farms figure as one of the “bankable model projects” listed on the Nabard website under “animal husbandry”. According to the website, a pair of ostriches (including emus) can earn up to $30,000 (over Rs 16 lakh) in 12 months, a projection based on a paper presented by an executive of a French company at an Indo-French food seminar in Bangalore in 1997.

The projection estimated that a pair of emus is capable of producing 30 offspring in a year which could produce meat of 60 pounds each. At the rate of $10 a pound, the meat alone would fetch $18,000 (Rs 9.72 lakh) every year. In addition to that, it was claimed that emu hides were worth $10,500 (Rs 5.5 lakh) every year, not to mention the plumage value of $1,500 (Rs 81,000). These unverified estimates put on the Nabard website were the basis on which the farms were designed.

Many websites peddling the uses of emus quote the same or similar figures. “It gave newcomers an assurance that since state-owned institutions were involved, there was a legitimate business. Even now, farmers are hoping a Nabard-funded project to produce emu oil will bail them out,” says Anand, a farm owner in Bangalore.

Investors are not the only victims of the scam. There are nearly 250 emu farms in the districts of Salem and Erode, housing over 15,000 emus. With no money to take care of them, the birds are dying and at times kill each other for food. The state government recently stepped in and took over the care of as many as 12,143 emus abandoned by the farms.

The government has allocated Rs 1 crore to the animal husbandry department to provide food to the starving birds. “I have directed the police to return the depositors’ money by confiscating the property of the emu farm owners through court,” Chief Minister J Jayalalithaa said in a statement.

The animal husbandry department will rear the chicks which will be sold later. To whom? Nobody has the answer. Part of the money will be used to cover the fodder expenses incurred by the department and the balance distributed among depositors, the chief minister said. However, selling emus may not be that easy, say farmers. With no proper market for emu meat or other emu products, slaughtering them may not help realise even a fraction of the amount riding on these birds.

Meanwhile, cases have been registered against promoters of Queen Emu Farms, Alma Emu Farm, Susi Emu Farm and TVS Emu Farm under Section 120 (b), 406 and 420 of IPC and Section 5 of Tamil Nadu Protection of Interest of Depositors (TNPID) Act 1997. The biggest of the lot is Susi Emu Farms, which had around 10,000 investors.

Most worrying, perhaps, is that in the absence of intervention by any regulatory authority, the scam has now spread to other parts of the country with the birds being shifted as far as Punjab, Uttar Pradesh and West Bengal. In Punjab alone, over 150,000 birds have been sold in the past six months, say farmers. New farms are also being set up in places such as Bangalore and rural Maharashtra, where emus are not new.

In Erode, the original hub of the scam, too, new investors continue to be drawn in with the same “get rich quick” promises. When this correspondent was in Erode, newspapers were still carrying advertisements of emu schemes.


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