The opposition BJP has demanded an investigation, while JD(S) state president HD Kumaraswamy alleged that the misappropriation of funds was based on directions from the Congress high command.

How did the alleged scam become known?

Established under the Indian Companies Act of 1956, the KMVSTDC is a part of Karnataka’s Ministry of Scheduled Tribes Welfare. It extends subsidies and loans under self-employment schemes and provides skill training for the economic development of the tribal community.

The alleged scam came to light when KMVSTDC superintendent P Chandrashekaran, a resident of Shivamogga, was reported to have died by suicide. He wrote a six-page letter where he mentioned some irregularities in the corporation. He added that he was under severe pressure not to reveal the corruption within the organization.

Shivamogga police then registered a case of unnatural death under the IPC section for abetment to suicide. Shivamogga’s BJP MLA SN Channabasappa later showed the letter at a press conference, asking the government to investigate the case.

Channabasappa claimed that the corporation had received a total grant of Rs 187.3 crore in its various accounts, of which Rs 85 crore had been transferred to other accounts and was suspected to have been siphoned off.

What is the alleged scam?

On May 29, A Rajashekar, Managing Director of the KMVSTDC, had filed a complaint saying Rs 94.73 crore money was siphoned off from the corporation’s account in the Union Bank of India (UBI). He said fake signatures on board resolutions were made to illegally transfer Rs 94,73,08,500 to various accounts.

Rajashekar said he had informed the Chief Manager of the bank’s MG road branch on May 23. After this, Rs 5 crores were immediately transferred to the corporation. He also said in the FIR that they sought CCTV visuals, but the bank had not provided them thus far. The corporation then wrote a letter to Union Bank of India Deputy General Manager (East) on May 27 to deposit the full amount.

The police then registered a case against some UBI officials at the High Grounds police station in Bengaluru on May 28. Among others, IPC sections 149 (unlawful assembly with common object), 409 (criminal breach of trust by public servants, bankers etc), 420 (cheating), and 467 (forgery) were invoked.

The state government also formed a Special Investigation Team (SIT) headed by Manish Kharbikar, Additional Director General of Police, Economic Offences, at the Criminal Investigation Department (CID).

What does the investigation say?

Documents accessed by The Indian Express show that on March 31, the money was transferred to fictitious accounts opened in RBL Bank (formerly Ratnakar Bank), Hyderabad, under the names of some organizations.

According to the SIT investigation, with the financial year ending on March 31, Rs 50 crore was transferred from the state treasury to the corporation’s primary account with the UBI. The account held Rs 187.33 crore at the time.

At a board meeting on the same day, it was decided that Rs 50 crore would be saved as a fixed deposit for 12 months. Also that day, a Rs 45 crore loan was availed by showing the Rs 50 crore fixed deposit as security.

“All these transactions happened in a single day. Besides bank officials, there were a lot of people within the corporation who have been involved,” a police officer said.

Further investigation revealed that of the 15 accounts to which the money was transferred, nine were opened on March 31 at the RBL bank in Hyderabad. The SIT police then arrested former KMVSTDC MD JJ Padmanabh, accounts officer Parashuram G Durugannavar and Satyanarayana, the chairman of First Finance Credit Co-Operative Society Limited from Hyderabad. The police suspect Satyanarayana had a larger role to play in creating fictitious accounts.

On June 3, the Central Bureau of Investigation (CBI) registered a case based on the complaint filed by Mahesha J, Deputy General Manager of UBI and Regional Head of Bengaluru East. In the FIR, Suchismita Raul, then MG Road branch head of Union Bank of India, Deepa D, then deputy branch head of the same branch, as well as some private individuals and public servants were named.

What did the opposition and the government say?

The BJP threatened to launch a campaign against the Karnataka government if Nagendra was not sacked. It also submitted a letter to the government demanding his resignation. BJP state unit president BY Vijayendra told the media that the corruption case could not have happened without the approval of the finance ministry. Karnataka Chief Minister Siddaramaiah holds the portfolio.

JD(S) leader HD Kumaraswamy alleged that the illegal transfer of funds to 14 accounts in Telangana was done at the behest of the Congress high command. “This shows that the Congress has sent money from Karnataka for elections in various states,” he said.

With pressure mounting, Nagendra on Thursday submitted his resignation to CM Siddaramaiah. Asked if he had known about the alleged irregularities, Nagendra said, “I was totally unaware and when the incident came to light, from this very office of mine, I had suspended the Managing Director. There is no way that the government will protect anyone who is involved in the scam.”

When asked about an audio clip which has been widely circulated, where a suspect is heard referring to a “minister” who was aware of transactions, the four-time MLA said, “He has not taken my name and just uttering the word minister doesn’t ‘t mean it is about me.” “SIT is probing the case… If I’m in the minister post during the probe it may cause problems. Considering this, I have come to this decision (to resign),” he said, calling the allegations against him baseless.