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Amway India chief, 2 directors arrested

The three Amway executives were arrested in connection with a case filed in 2011 for alleged violation of the Prize Chits and Money Circulation Schemes (Banning) Act

BS Reporters  |  Kochi/New Delhi 

The crime branch of Kerala Police today arrested Amway India MD & CEO William S Pinckney and two other directors of the company — Sanjay Malhothra and Anshu Budhraja.

The three representatives of Amway, a multi-level marketing company, were arrested in connection with a case filed in 2011 in Wayanad, for an alleged violation of the Prize Chits and Money Circulation Schemes (Banning) Act.

The Act, in its present form, imposes curbs on various money-circulation schemes that help make quick or easy money and prize chit schemes. But the government has now decided to amend some of its provisions to make it more stringent and wider, given the multiplicity of forms in which businesses flourish today.

The three Amway officials are likely to be produced before the local court on Tuesday, according to P A Valsan, superintendent of police, crime branch.

Pinckney and the other two Amway executives were in Kozhikode in connection with a different case, filed in 2012 by one Visalakshi of Kozhikode, who claimed she incurred losses through the network. However, the executives had earlier secured anticipatory bail from the Kerala High Court in this particular case.

Visalakshi had bought Amway products worth Rs 3 lakh and was asked to sell the products through multi-level marketing.

There were three cases filed against Amway last year in Wayanad district.

“William S Pinckney, MD & CEO of Amway India and two directors, Anshu Budhraja and Sanjay Malhotra — who had on May 3 been granted anticipatory bail by the Kerala High Court over a case filed in Kozhikode in 2012 — have been taken into custody by the Wayanad Police for another case filed in 2011,” Amway India said in a statement today.

“We would like to clarify that with respect to the 2011 case, the company or its officials were not issued any summon to join the investigation, nor was any information sought by the police. The company management would have cooperated with respect to the 2011 matter as well, as we always have,” said the company statement.

According to Valsan, the crime branch of Kerala Police had filed a suo motu case on the Amway issue about five months back.

Last year, the crime branch (economic offences wing) of Kerala Police had conducted searches at Amway’s offices in Thrissur, Kozhikode and Kannur, as part of its crackdown on money-chain activities. Amway godowns at these centres had also been closed and goods produced seized.

“Till date, Amway has furnished all information and documents sought by the police. Amway has great confidence in the judicial processes and legal system and it hopes to secure a favourable outcome soon,” the company said in its statement. Over the past 12 years, Amway has earned revenues of about Rs 550 crore, including taxes, according to a source. In 2012, Police had arrested Sajiv Nair Monavie, a distributor of Amway products in Kerala. But, Amway says, he had been asked to stop distributing the company’s products in 2011.

Last year, it was proposed multi-level marketing firms would follow the Amway model and come under the Foreign Investment Promotion Board scrutiny. According to the officials in the know, for amendment to the Prize, Chits and Money Circulation Schemes (Banning) Act, 1978, the department of financial services has proposed to make inducement to persons for joining multi-level marketing, pyramid, Ponzi or collective investment schemes an offence. The department has proposed to insert a new Section 3A in the Act through an amendment Bill for this purpose. The existing provisions of the Act ban various fraudulent schemes and any person violating the provision is liable to be prosecuted and punished. However, it is possible that promoters of a fraudulent fund take up a stand that the scheme is of a business entity and that they are mere employees and not responsible for the acts of the entity.

To plug this loophole, the new section will ensure that persons who are promoters in such schemes are individually prosecuted and punished if they fraudulently or dishonestly induce persons to subscribe to or participate in such schemes. The quantum of punishment, too, has been proposed to be enhanced. The amendments have been given after an extensive discussion by a high-level panel constituted in the aftermath of recurring incidents of scams relating to money circulation, multi-level marketing and pyramid-marketing firms.

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First Published: Tue, May 28 2013. 00:58 IST