In India, emu scheme leaves behind distraught investors, birds

PERUNDURAI, India — When visitors approach, the flightless birds with the large eyes and jerky necks kick their neighbors and peck at their sores as they crowd against the fence, desperate for food and a bit of attention after being all but abandoned last month.

In this part of southern India known for scams that vary from teak plantations and gold to real estate and foreign exchange, this was a con with a difference. Rather than dangling the usual bling to attract investors to their get-rich-quick scheme, these “entrepreneurs” used emus.

So when the house of cards inevitably collapsed a few weeks ago and the scamsters fled, it left not only thousands of distraught victims collectively owed millions of dollars. It also left tens of thousands of stranded emus, many sick, stressed and hungry from neglect. Now no one can figure out what to do with these gangly birds, which eat 3 pounds of expensive feed a day, stand 5 feet tall, grow to more than 150 pounds and live 30 years.

“It makes me angry and sad,” said Don Williams, general manager of Blue Cross, one of India’s oldest animal shelters. “Animal groups can take a few, but we can’t afford to take many and they need lots of space. Now there’s talk of euthanasia.”

It all started about seven years ago, when daily wage earner M.S. Guru reportedly bought a few emus and began enticing investors. In return for a large deposit, a minimum of $3,000, his Susi Emu Farms promised to pay investors $120 a month to raise emu chicks.

There was no viable underlying business model — for the birds’ meat, oil or skin — but rather it was a way to garner huge sums of people’s money, financial experts charge. To make things more enticing, Susi promised to take back the birds and replace them with chicks after two years, when they grew bigger and more demanding, which is probably why so many mature birds are now stranded and hungry.

Later, to bring in more money, Susi also set up a VIP program so investors living in apartments could participate without even raising the birds. And to prevent people from pulling out their money after two years, those who reinvested received a bonus. “No electricity needed, no manpower needed, just 20 minutes of your time,” reads a breathless Susi brochure.

Instead, it appears the emu business was a classic Ponzi scheme, a type of con named after Charles Ponzi in the 1920s in which early investors are offered unrealistic returns paid with money contributed by new investors. Because the pyramid relies on ever more new investors to pay the early players, it virtually always ends in collapse.

Tamil Nadu state is hardly exceptional in its role as the unwitting host to such schemes. By some estimates, 1,000 Ponzi schemes operate at any given time in each of India’s 28 states, fueled by weak regulation, overlapping agencies and corrupt officials.

Most lure the poorest, who are desperate to live the Indian dream.

“They want to earn quick money to buy TVs, vehicles, see the latest movies and visit the shining malls,” said E.A.S. Sarma, a member of the Visakhapatnam-based Forum for Better Visakha, a civic group. “Now greed’s replaced need.”

Potato-chip maker Yuvaraj first heard about how you could turn emus into nice fat fortunes on TV. What’s not to like about doubling your money in two years, he thought, handing over $6,000 — his life savings, meant for his daughter’s education and dowry, plus money he borrowed — to Susi Emu Farms.

All went well for seven months as his $120 monthly dividends rolled in. But a few weeks ago, Susi managers and others at competing farms ran off, leaving investors stranded and workers unpaid. Losses by tens of thousands of investors in four states could exceed $100 million.

“I still pray I’ll get my money back,” said Yuvaraj, 38, who, like many southern Indians, uses one name. “I’m terrified my dreams are ruined.”

Yuvaraj said the prospect of easy wealth overcame him, and the emus had personality. “When you whistle, they dance,” he said. “And they peck at your jewelry. They like gold, like most Indians.”

As word spread, people started mortgaging their farms, using money meant for healthcare, borrowing from usurious money lenders. Their now-shattered hopes are recorded in stacked receipt books — designed to suggest respectability and opportunity — in Susi’s now-empty office. Framed honorary degrees and awards for “helping the poor” line the walls above a glass case filled with emu purses, shoes, oils and badly decorated eggs, a child-like version of Faberge’s namesake.

For seven years, the money flowed in, fueled by advertising, publicity stunts, actor testimonials and claims that emu oil was a panacea for bone disease, burns and hair loss. Few questioned why no one seemed to be using the products or meat, why there wasn’t even an abattoir or tanning factory around.

“The word was, it tasted like Styrofoam,” said Williams, the animal advocate. “It didn’t make sense.”

Early this month, Guru was arrested about 40 miles from his farm and charged with conspiracy, cheating and criminal breach of trust. He’s reportedly admitted distributing 160,000 emu chicks and making false advertising claims. Police say Susi may have defrauded 10,000 people of $50 million. Others remain on the lam.

Guna Sekar, the region’s deputy superintendent of police, said authorities never investigated during the last seven years because no one complained.

But the culprits may not have it too bad, if history is any judge. Often after Ponzi schemes implode, said Sucheta Dalal, author and member of a foundation promoting financial literacy, there’s a lengthy investigation, charges are watered down once culprits pay bribes, then there’s a quiet acquittal as public outrage fades.

“It’s tragic,” she said. “And it’s only getting worse.”

Meanwhile, the fate of up to 100,000 emus is in limbo. When the scamsters fled, they abandoned the birds at their respective farms in a hurry. Thousands more remain with individual investors. Eventually, as photos spread of pens filled with carcasses, the state government organized emergency rations. But these amount to one-third of an emu’s required calories, say unpaid workers.

Tamil Nadu’s chief minister recently allocated $200,000 to buy feed for the birds and directed the state’s animal husbandry department to oversee their care, although some question whether the government will follow through for the decades the birds are expected to live.

The scandal has also resulted in a collapse of emu meat prices to $1 a pound from $6 or more as birds are sold to butcher shops. “Cheated investors sell emu meat for a song,” read a recent Times of India headline

In a corner of Susi Emu Farms, workers show off a butcher shed, whose small size suggests it was only for show, dragging out pieces of tanned emu skin and frozen meat with feather bristles attached. Nearby, several hundred stressed birds in adjoining pens race around attacking each other.

“The emu are fast runners,” Williams said. “But not as fast as the absconders.”

mark.magnier@latimes.com