One bank guarantee issued every two days for about seven years; a web of 35 companies in at least three nations; and Rs 24,000 crore worth of loans.
That’s how India’s biggest banking fraud unfolded, according to the Enforcement Directorate’s chargesheet against jeweller Nirav Modi. BloombergQuint has a copy of the document.
Punjab National Bank informed exchanges in February that firms related to Modi and his uncle Mehul Choksi, founder of the public listed Gitanjali Gems Ltd., borrowed funds overseas based on allegedly fraudulent guarantees issued by some employees at a Mumbai branch of the lender. They still owe India’s second-largest state-run bank about Rs 13,000 crore, it said. By the time of PNB’s disclosure, both Modi and Choksi had left the country.
The ED is expected to file a separate chargesheet against Choksi.
The chargesheet against Modi, his relatives and others outlines a complex web of transactions and companies allegedly used to route the loans from Hong Kong and Dubai to India and other parts of the world. The ED alleges that Modi’s sister Purvi Mehta was instrumental in diverting funds and routing them back to her brother’s firms as FDI.
BloombergQuint awaits responses for queries emailed to Modi, his lawyer and to Punjab National Bank. Mehta and others also named in the chargesheet couldn’t be reached.
1,206 LoUs In Seven Years
- PNB allegedly issued 1,206 letters of undertaking, or guarantees used by importers to borrow money overseas, between 2011 and 2017, according the chargesheet.
- Modi and his firms borrowed $3.7 billion (Rs 23,934 crore) in all.
- They repaid nearly Rs 18,000 crore—Rs 12,655 crore through Indian companies and another $976.48 million directly to PNB.
- The outstanding amount in Modi’s case alone stands at about $1 billion (more than Rs 6,500 crore at current exchange rate).
35 Firms In Three Countries
Modi’s three companies in India—Diamonds R US, Solar Exports and Stellar Diamond – received the LoUs to borrow funds in Dubai and Hong Kong. The ED alleged that he used 12 companies in India and 15 dummy companies overseas—nine in Dubai and six in Hong Kong – to create a complex web of transactions.
The companies in Hong Kong were used to dismount diamonds, pearls and precious stones from jewellery and necklaces imported from India and Dubai, and export them back to these destinations. In addition, it exported gold and silver bars from Dubai to India.
The catch: the same set of stones and jewellery was circulated, according to the ED.
Nirav Modi’s India Firms
- Diamonds R US
- Solar Exports
- Stellar Diamond
- Radhashir Jewelery
- Firestar International
- Firestar Diamond International
- Nirav Modi Trust
- Firestone Trading
- Mac Business Enterprises
- Bentley Properties
Dummy Firms
Dubai
- Diagems FZC, UAE
- Pacific Diamonds, UAE
- Tri Color Gems, UAE
- Universal Fine Jeweller, UAE
- Unique Diamond and Jewellery FZC, Ajman, UAE
- Vista Jewellery RZE, Fujairah, UAE
- Unity Trading Company, UAE
- Hamilton Precious Traders, UAE
- Himalayan Traders FZE, Ajman, UAE
Hong Kong
- Fancy Creations Company
- Eternal Diamonds Corporation
- Auragem Company
- Brilliant Diamonds
- Sino Traders
- Sunshine Gems
Suppliers & Affiliates
The chargesheet alleges Modi used five suppliers and affiliate dummy companies to launder money. These are:
- DG Brother FZE, UAE
- World Diamond Distribution FZE, UAE
- Fine Classic FZE, UAE
- Jade Bridge Holdings, Cyprus
- Forecom Worldwide Investments
People Named And Their Role
ED has named Modi and 13 individuals, including his relatives, employees and PNB officials. These also include his brother-in-law Maiank Mehta, father Deepak Modi, brother Neeshal Modi and Nehal Modi, whom multiple media reports have identified as his half-brother.
Role of alleged accused:
- Nirav Modi: Partner at Diamonds R US, Solar Exports and Stellar Diamond, the three firms that allegedly defrauded PNB.
- Neeshal Modi (brother): Partner at Diamonds R US, Solar Exports and Stellar Diamond.
- Nehal Modi (Half-brother): Knowingly helped in concealing money laundering and destroying evidence.
- Deepak Modi (Father): A beneficiary of two companies in which funds of approximately $50-55 million were transferred from Nirav Modi’s dummy firms.
- Purvi Mehta (Sister): Huge sums of money were allegedly diverted from Modi's Dubai-based companies.
- Maiank Mehta (Brother-in-law): Knowingly indulged in alleged layering of the funds diverted to Purvi Mehta.
- Shyamsunder Wadhwa: (Confidant): Allegedly involved in money laundering with Modi; also set up dummy companies in Hong Kong.
- Gokulnath Shetty (PNB employee): Sanctioned LoUs to Diamonds R US, Solar Exports and Stellar Diamond.
- Saju Poulose Parokaran (Modi’s employee): Instrumental in setting up alleged dummy directors in Diamonds R US, Solar Exports and Stellar Diamond.
- Aditya Nanavati (Modi’s employee): Allegedly managed business transactions of six dummy companies in Hong Kong; was in charge of the Hong Kong business of the Firestar Group.
- Hemant Bhatt (Modi’s employee): Signed LoU applications in question while working as an accountant at Diamonds R US.
- Subhash Parab (Modi’s employee): Allegedly looking at operations of dummy companies in Dubai and India; directly dealt with Shetty at PNB.
- Mihir Bhansali (Modi’s employee): Allegedly helped in creating dummy companies in Dubai and appointing dummy directors.
- Dharmesh Bothra: Through his companies, assisted in layering and rotating sale/purchase of Gitanjali Gems and Firestar Group.
(The article was first published on the BloombergQuint and has been republished with permission.)
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