Recently, QNet became one of the sponsors for multiple primetime shows on Times Now, Mirror Now and ET Now—all English channels owned by the Times Group. Although there are several firms that sponsor news shows across channels and networks, the QNet-Times Group partnership poses some questions.

QNet, a Hong Kong-based multi-level marketing (MLM) company, has been entangled in alleged criminal and regulatory cases in India for sometime now.

In August 2013, the economic offences wing (EOW) of the Maharashtra police registered a case of cheating against QNet for “selling plastic and glass products to thousands of investors while claiming that these products would cure diseases like cancer”. The company is alleged to have collected over ₹425 crore by using the banned binary pyramid business model.

Interestingly, Times Group-owned The Times of India was among the first newspapers to report on the alleged scam.

In 2013, TOI had reported that nearly two dozen first information reports (FIRs) were filed against the company. Starting August 2013, FIRs against QNet were filed in cities across the country, including Mumbai, Hyderabad, Bangalore and Delhi. Between 2013-2018, TOI published at least 20 QNet-related stories.

The EOW case was registered on the basis of a complaint by 45-year-old Gurupreet Singh Anand, who had alleged that his wife was duped of ₹30,000. According to a 2013 TOI report, people claiming to be independent representatives of QNet had sold a bio-product to Anand’s wife claiming that it could be used to treat their then-12-year-old son’s brain-related disease.

Fast forward to September 11, 2018, when a post on QNet’s official Facebook page stated that between September 3 and September 20, the firm will be powering India UpFront, Newshour and Frankly Speaking on Times Now, The Urban Debate and India Development Debate on Mirror Now, and India Development Debate on ET Now.

On Monday, September 17, The Urban Debate had Indian Oil as co-presenter with QNet co-powering the show.

On Times Now, India UpFront—hosted by Rahul Shivshankar—was co-powered by Elite Matrimony, co-presented by Kohler, presented by Kent and driven by Hyundai. Ad breaks in between the show had advertisements for QNet’s health and wellness products.

QNet is also known by other names such as GoldQuest, QuestNet and QI Limited, and is owned by the QI group. In 2009, both QuestNet and GoldQuest, MLM companies run by QI group, had to halt operations following legal trouble. This included the arrest of Pushpam Appalanaidu, then managing director of QuestNet India, who was facing 21 criminal cases of cheating for duping investors of ₹160 crore. Moneylife reported that the Prize Chits Money Circulation Schemes (Banning) Act, 1978, was also invoked against her.

Vihaan Direct Selling Private Limited is QNet’s sub-franchisee in India. As per 2011 Registrar of Companies filings published by MoneyLife, Michael Ferreira and Malcolm N Desai were its shareholders. While Ferreira owned 80 per cent stake, Desai held the rest. Currently, the company website lists Dilipraj Pukkella and Muhammed Imthiaaz as its directors.

In 2016, the EOW had filed a chargesheet against Ferreira and 30 others in the ₹425-crore alleged scam involving QNet. The accused were booked under various sections of the Indian Penal Code, the Maharashtra Protection of Interest of Depositors (MPID) Act and the Drug and Magic Remedies (Objectionable Advertisements) Act. TOI reported that Ferreira was subsequently arrested on September 30. He was in jail for nearly six months until he was granted bail in March 2017 by the Supreme Court. This was nearly two months after Vihaan Direct Selling, Ferreira and Desai had filed a petition in the top court. The next hearing of the case is likely to be January 16, 2019.

In March 2017, the top court had also granted an interim stay on all further proceedings against QNet and its sub-franchisee, Vihaan Direct Selling. According to The Hindu, “the court [also] ruled that the model adopted by the company [QNet] is not a money circulation scheme and does not fall under the purview of the Prize Chits and Money Circulation (Banning) Act 1978.”

Simply put, the case is sub judice.

But the company powering primetime news shows does raise some issues: What are the ethics of accepting advertisement from a company embroiled in an alleged scam? Should it matter if it hasn’t been convicted? Should a company—against which a large number of people have made allegations—be given a platform to reach more people, especially when the case involved alleged duping common citizens.

Newslaundry reached out to the Times Network for comment on the matter. Their statement is produced in full below:

“Our News Editorial Team and Business Division operate independently and have no direct reference to each other. Our media reports on any scams including the alleged scam of Q-Net is covered basis factual information and in an un-biased manner. The Q-Net matter is with the Supreme Court and subjudice. There is no embargo on Q-Net from advertising its products and services and we have a normal commercial deal with Q-Net like any other advertiser. It is not correct to wrongly label any company only on the ground that the court proceedings are filed and pending against them, in absence of any final conviction order. In this case, like any other advertiser, Q-Net is also promoting its products on various platforms, including ours. If the same is in contravention of the applicable laws and guidelines, the concerned regulatory authority will take the appropriate action.”

The basic problem is identifying whether an MLM scheme is a legitimate business operation or a Ponzi scheme. The difference between the two is the business model through which revenue is generated. In the former model, revenue is generated through the sale of goods and services, while in the latter, revenue is generated by the enrollment of new members or subscribers.

According to the Direct Selling Guidelines, 2016, issued by the Ministry of Consumer Affairs, Food & Public Distribution, an MLM model (pyramid scheme) where revenue is generated simply on the basis of recruiting new subscribers/distributors is prohibited. In addition, under the Prize Chits And Money Circulation Schemes (Banning) Act, 1978, enticing new subscribers to join a quick-money-making scheme where revenue is generated by the enrolment of new members is a cognisable offence.

Several companies have used an apparently legitimate or legal purpose as a facade to run a Ponzi scheme. SpeakAsia was in the magazine and survey business. Then there were the PACL and Saradha scams.

QNet’s fate is in the hands of the courts, even while its advertisements imply more reach, more credibility, and the chance of more people perhaps at risk of losing their savings.

“The problem is the line is very thin,” says senior business journalist Vivek Kaul. He says that often in a lot of MLM schemes, the product is just a facade to get around from being labelled as a Ponzi scheme. About the ethical quandary, Kaul says, “Media, Ponzi schemes and MLMs work very, very closely. How else do you build credibility and reach a large number of people? It is a huge ethical problem.”

He adds: “The fact that there is an ad is so disturbing. But then that’s the way it is. It’s a credibility thing for the MLM [scheme] and media houses need money. It is basically quid pro quo.”

Talking about brand building by Ponzi schemes, Kaul says some have even sponsored the Indian cricket team, while others like the Saradha Group themselves owned TV channels, newspapers and a magazine.

QNet has also engaged in brand building, as indicated on its website. Apart from sponsoring several sport series/teams, QNet also signed on former women’s world number one tennis champion Martina Hingis as Brand Ambassador in India.

Speaking to Newslaundry, R Jagannathan, editorial director, Swarajya, says, “There’s certainly an ethical question about media houses taking ads from such companies, but as long as there hasn’t been a conviction, it is a grey area. In this case, the decision is yet to come. But there are others like the Sahara Group, where the Supreme Court has passed an order but it is yet to be fully complied with. But the group continues to give ads, and media companies continue to accept them.”

Jagannathan adds, “The problem is that in these MLM schemes there are too many stakeholders, including the media. And some media houses obviously don’t want to do stories on them because they are a source of ad revenues.” Jagannathan says the ethical dilemma created by such transactions between companies under the scanner and media isn’t just limited to just these institutions. “Dubious educational institutions like IIPM, where something is promised and something else is delivered, also have also been sources of large ad revenues till they went belly up.”

Jagannathan thinks the news media’s business model is a problem. “The old media has an ad-led model. But the new media has a reader-led model. Both are difficult to sustain, but old media houses with large circulations—where the reader is heavily subsidised—cannot do well without a heavy dependence on ad revenues. This makes them more willing to accept advertisements from companies with an ethical deficit.”

Vivek Kaul says solutions to screen dubious financial schemes have to come from the Reserve Bank of India and SEBI. “They have left the issue largely unaddressed. The only way these schemes can be stopped from propping up is if they are brought to book quickly.”

Jagannathan agrees. He says, “There is a need for coordination and sharing of information between regulators—RBI as well as SEBI—rather than working in silos.” At the same time, he adds, the loopholes in the regulations and laws need to be closed. “A unified regulatory regime may help prevent companies that take advantage of the gaps in regulation from taking investors for a ride.”

Newslaundry reached out QNet to get their side of the story. The questions and responses of Raj Vasudevan, Chief Legal Officer, QNet Ltd, are produced below:

We vehemently deny any and all such allegations of wrongdoing. QNet is a legitimate direct selling company that offers a number of products and services in the area of health, wellness, and lifestyle. Direct selling is a billion dollar industry in India as confirmed by various independent research reports.

Despite the continued growth of the industry, there is no clear legislation to govern this industry, which has led to many misconceptions about the business of QNET.

In March 2017, the Hon’ble Supreme Court of India has stayed all pending FIRs and investigations into the company. You may read the news report about it here.

On a similar matter, please note that the Karnataka High Court has also passed an order quashing the FIR against the company and its executives. In the order, the court states that the business of QNet does not constitute offences under the Prize Chits and Money Circulation (banning) Act, or the charge of cheating under IPC. In fact, the order goes on to refer to the advisory from the central government on the guidelines for the direct selling industry that specifies that all activities of such business must be guided by the provisions of the Consumer Protection Act, 1986.

QNet’s business model is sound and fair and we stand by it. We are confident that with more states adopting the direct selling guidelines, further awareness about the business will be created and it will become clear that QNet has been instrumental in creating a number of micro-entrepreneurs in the country.

2. QNet recently became one of the sponsors for multiple primetime shows across three Times Network-owned channels. Times of India was among the first publications to report on the alleged QNet scam.
a. What was the reason for approaching the Times network?
b. Your comments on the QNet-Times commercial relationship.