The massive report of the Lokayukta on illegal mining makes copious references to the Reddy brothers, and how their writ ran in Bellary, leading to a complete “collapse of administration” in the district that he calls the “Republic of Bellary”.

Several chapters describe how the Reddy brothers used political muscle power, manipulation and corrupt practices to make phenomenal profits out of iron ore. Lokayukta N. Santosh Hegde writes that the Minister in-charge of Bellary district (Janardhan Reddy) had “manipulated his power” and indulged in illegal mining, through companies and firms of which he was director or partner.

“The system and officials were used by the Minister to the personal advantage of himself and his family.”

An entire chapter is devoted to the illegalities committed by the Associated Mining Company (AMC), in which Mr. Janardhan Reddy and his family had a stake.

The Lokayukta described the company as “a pool of irregularities”. Elsewhere, there is a description of the various methods adopted by the Obulapuram Mining Company: under-invoicing, evasion of taxes and other duties, and the links of Mr. Janardhan Reddy's companies in tax havens such as Virgin Islands and the Isle of Man.

Transactions

Uncovering the layers of the bank transactions relating to a Hospet-based company, Sri Bhaktha Markandeshwara Minerals, the Lokayukta found that it acted as a benami entity that had bank transactions with many companies that were engaged in illegal mining.

The investigation found that the money trail led to the accounts of “G.J. Reddy Sir” (Bellary Risk Amount)”.

Elsewhere in the report, the Lokayukta uses the term “risk amount” as a thinly-veiled description of extortion in the mining business.

The Lokayukta also discovered that the AMC supplied 3.04 lakh tonnes of “illegally” extracted ore to JSW, even though its lease had expired.

Mr. Janardhan Reddy also perfected what came to be called “zero risk system”, an elaborate profit sharing mechanism that involved government officials and other mine owners, but which posed no risk to him.

Those who did not oblige, were refused transport permits. The Lokayukta notes that no official dared question him, often obliging him out of fear.

U.V. Singh threatened

Illustrating how the intimidation tactic of the Reddy brothers did not spare the top-most officials, the Lokayukta narrates an incident involving his chief investigating officer U.V. Singh and Somashekhara Reddy, MLA and brother of Mr. Janardhan Reddy.

When Mr. Singh went to Bellary in September 2009 for an investigation, he was asked by Mr. Somashekhara “whether he had taken permission of the Minister in-charge of Bellary” to enter the district. Mr. Singh replied that “as a citizen of India, he does not require anybody's permission to visit Bellary”.

“The facts narrated herein above clearly shows that the administration in Bellary has totally collapsed. Sadly, the person in the helm of affairs of administration in Karnataka reportedly pleaded helpless,” says the report.

Lokayukta recommends that “in view of the misconduct”, Mr. Janardhan Reddy be removed from the Cabinet.