How Bollywood turns black money into white

Originally posted by: B-TEX

People like Ponty Chadda invest money on weird films like Revolver Rani or Balwinder Singh Famous Ho Gaya and promote them on TV like crazy. Why?

Common practice

According to the report's findings, a film is produced and supplied through a complex channel of studios, distributors, exhibitors and artists, organised around star value and fame. The process of accumulating ill-gotten funds starts with production. The producer lines up ad hoc unaccounted funds in the guise of loans under bogus names. All the bogus credits and hawala entries are offset by bogus debits and factious expenses (report)'.

"The core issue is really of financing: unless a star' signs the film, banks stay away from funding. Funding in an ad-hoc manner, from property dealers and other business sources, leaving clear room for grey transactions carried out of books," says Jagdish, a sought-after production assistant. Jagdish has worked in 50 TV soaps and over a dozen films including Zid, a film that was produced by director Anubhav Sinha, who was caught in the Cobrapost sting allegedly agreeing to launder money. "The black-to-white ratio in medium-budget films not financed by banks but by multiple, small financier ranges in 60:40 ratio, even much higher in some cases," says Jagdish.

In this context, the legend surrounding the Kumar Sanu produced film Utthaan is unique. The entire movie was allegedly made using only cash. "At the end of each day," a production assistant said, "a vehicle filled with bags of cash would deliver per diem to not only workers and technicians, but also senior artists. Not much has changed since as some transactions are still done in cash."

A senior filmmaker said: "In my previous film (a sex thriller), we paid our DOP (director of photography) nearly Rs 25 lakh in cash to avoid dual taxation issues as he lived in the United States."

Some major production houses have registered their companies overseas, thereby arousing suspicion among taxmen. The Hindu is not naming few production houses documented in the report for their overseas funding as the report does not provide solid data, and this publication was unable to independently verify these allegations.

The report finds significant funding from hawala and hot-money routes, portending a grave threat to tax mobilisation, and even to general law and order. "The movie industry is operating in a volatile environment that is threatening its traditional sources of revenue," the report says. "It is highly exposed to the black economy and poses myriad challenges to the tax administration."

In 2011, a leaked cable released by Wikileaks had spoken of the film industry's underworld connections, and that "it welcomed funds from gangsters and politicians looking for ways to launder their ill-gotten gains, known in India as black money'". In 2012, a sting operation by news website Cobrapost had caught leading producers and directors allegedly admitting on camera how the industry is being used to convert "black" money into "white".

Further verification and investigation by The Hindu into these dodgy tax practices stood validated from the personal account of scores of technicians, line producers, distributors, confirming the practices as commonplace on film sets.