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How many more frauds needed to awake the govt?

Nirav Modi, the billionaire in the middle of this controversy, is a luxury diamond jewellery designer who was ranked 57th in the Forbes list of India’s billionaires in 2017. He is the founder and creative director of the Nirav Modi chain of diamond jewellery retail stores, and is the Chairman of Firestar International, the parent of the Nirav Modi chain, which has stores in key markets across the globe. His designs have been worn by globally famous personalities. Since 2014, a year after he first appeared on the Forbes billionaire list, he has been under the scanner, chased by various law enforcement authorities — CBI, the ED, even the Tax Department for illegal transactions and frauds.

Nirav Modi comes from a family of diamond merchants from Gujarat and grew up in Antwerp, Belgium, a hub for the global diamond trade and as a youngster, he dreamed of becoming a music artist. At the age of 49, he dropped out after a year in Wharton Business School. He returned to India and got trained in diamond trading mentored by his uncle Mehul Choksi, who heads Gitanjali Gems. In 1999, Nirav Modi set up a diamond sourcing and trading company called Firestar Diamond. The company is worth $2.3 billion today.

Brand Nirav Modi debuted with a pair of earrings that the billionaire designed for his friend in 2008. After months of designing and sourcing diamonds, he discovered that jewellery making was his passion and something he wished to do for the rest of his life. He has a long list of star clients — Kate Winslet,  Steven Spielberg, Sharon Stone and Aishwarya Rai Bachchan to name a few.

Donald Trump, now US President, inaugurated his first store in New York’s Madison Avenue in 2015. Last year, Priyanka Chopra, who scored Hollywood success with her hit series Quantico, was roped in as the brand’s global ambassador. Nirav Modi is known for his love for Bentley cars and expensive Italian suits. One of his many career highlights was when one of his Golconda diamond necklaces was sold for $3 million at a Christie’s auction. Modi has jewellery boutiques across three continents — in London, New York, Las Vegas, Hawai, Singapore, Beijing and Macau. In India, Modi owns stores in Mumbai and Delhi.

He is married to Ami Modi and has three children. His maternal uncle Mehul Choksi is the managing director of the Gitanjali group, one of India’s largest diamond companies. A set of partnership firms — Diamond R US, Solar Exports and Stellar Diamonds — approached the bank on January 16 with a set of import documents and requested for Buyer’s Credit for making payments to overseas suppliers. The firms have Nirav Modi, his brother Nishal Modi, Nirav’s wife Ami Nirav Modi, and Mehul Chinubhai Choksi as partners.

Buyers Credit is, typically, a short-term loan facility extended to an importer by a bank to finance goods and services. It is a common mode of transaction in international trade where a bank extends credit to the importer and a finance agency based in the exporter’s country guarantees the loan. As there was no sanctioned limit in the name of the firms, the branch officials requested the firms to furnish 100 per cent cash margin for issuing the LoU for raising the Buyer’s Credit. At this, the firms contested that they have been availing this facility in the past; but the branch records do not corroborate this.

On digging further, the bank officials discovered that two of its employees had fraudulently issued LoUs in the past without following prescribed procedures and approvals. The employees had then transmitted SWIFT instructions to the overseas branches of Indian banks for raising Buyer’s Credit without making entries in banking system to avoid detection. The complaint also said that the funds so raised for the payment of the Import Bills have not been utilised for such purposes in many cases.

In 2014, the Directorate of Revenue Intelligence (DRI) called him out for diversion of imported, duty-free, cut and polished diamonds and pearls to the domestic market. The DRI called it a violation of import-export norms. The ED has registered a case against him for money laundering. All of these were from 2014, though the scam started in 2011 as reported by PNB MD. So, from 2011 to 2014, nothing was done by the then UPA government and later on by the BJP government. According to the complaint filed by PNB with the CBI on January 28, the fraudulent issuance of Letters of Undertakings (LoU) was detected at the Mid Corporate Branch, Brady House in Mumbai.

However, the Rs 11,400 crore scam comes at a time when the Central government is attempting to provide a breather to ailing PSBs, having announced a Rs 2.11 lakh crore capital infusion to the sector in October 2017.

One of the worrying aspects of the scam is that in its statement, PNB says that based on the fraudulent transactions, other banks appear to have advanced money to the customers abroad. It goes on to add that these transactions are contingent in nature and any liability arising out of these on the bank will have to be decided based on the law and genuineness of underlying transactions. Punjab National Bank (PNB), the country’s second-largest public sector lender, is now in the middle of a Rs 11,400 crore-transaction fraud case.

Meanwhile, the Central Bureau of Investigation (CBI) received two complaints from PNB against billionaire Modi and a jewellery company alleging fraudulent transactions worth about Rs 11,400 crore. This is in addition to the Rs 280 crore fraud case that he is already under investigation for, again filed by PNB.

This is yet another scandal in the public sector banks. How much more of these would be needed to wake the govt up from its slumber? It won’t be a surprise if these culprits escape due to loopholes prevailing in the present banking law system. The problem is that, rich and the famous people, who are frauds, get the monies at their will since they grease the palm of the bank officials. Even though it had happened during the UPA regime, this fraud was not detected by NDA even after almost four years of their rule; somewhere both are functioning in the similar style.

(Any suggestions, comments or dispute with regards to this article send us on [email protected])

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Dr Vaidehi Taman
Dr Vaidehi an Accredited Journalist from Maharashtra is bestowed with Honourary Doctorate in Journalism, Investigative Journalist, Editor, Ethical Hacker, Philanthropist, and Author. She is Editor-in-Chief of Newsmakers Broadcasting and Communications Pvt. Ltd. for 14 years, which features an English daily tabloid – Afternoon Voice, a Marathi web portal – Mumbai Manoos, monthly magazine Beyond The News (international). She is also an EC Council Certified Ethical Hacker, Certified Security Analyst and is also a Licensed Penetration Tester which caters to her freelance jobs.

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