CBI ARRESTS THREE MORE IN SCAM

Enforcement Directorate to question five banks as probe widens

The CB I on Monday said it had arrested three more PNB employees working in its Brady House branch in Mumbai in connection with case. SHRIMI CHOUDHARY writes

Central Bureau of Investigation (CBI) officials on Monday said the probe agency had arrested three more Punjab National Bank (PNB) employees working in its Brady House branch in Mumbai in connection with the Nirav Modi case, taking the total number of arrests to six.

PNB chief manager Bechhu Tiwari and manager Yashwant Joshi, both from the foreign exchange department, and Praful Sawant, officer-export, were arrested on Monday. The CBI had arrested PNB’s former manager Gokulnath Shetty and single-window operator Manoj Kharat, and Hemant Bhat, authorised signatory for Nirav Modi’s group of companies, on Saturday.

The Enforcement Directorate (ED) would question five banks that honoured the letters of undertaking (LoUs) issued by PNB in the Nirav Modi scam and would seek an explanation as to whether they verified the LoUs’ credentials before disbursement of money to Nirav Modi’s group companies, said an ED official.

The five banks include the Frankfurt and Mauritius branches of State Bank of India, the Bahrain branch of Canara Bank, the Antwerp branch of Bank of India, and the Hong Kong branches of Axis Bank and Allahabad Bank.

Over 150 fraudulent LoUs worth ~114 billion were issued by PNB to other banks. The ED had registered two investigation reports under the Prevention of Money Laundering Act this month. The reports were based on the CBI’s first information reports pertaining to the fraud.

PNB said it would honour all bona fide commitments made in the LoUs to foreign branches of Indian banks. “We are questioning other banks and employees at various levels, the checks and balances adopted by them,” said ED Director Karnal Singh. Singh is in Mumbai to meet the investigating officers and plan the course of action.

Singh said the alleged scam had been going on since 2011. Since then, PNB had extended credit and rolled over the LoUs, he said. “We have asked PNB to submit an audit report of the last eight years along with the Reserve Bank of India audit report,” he added.

The agency noted that PNB had issued the LoUs without adequate collateral. According to the ED, over 500 LoUs had been issued by PNB since March 2011. The LoUs never showed up in PNB’s core banking system (CBS). “We are looking at the money trail and possible money laundering,” said Singh.

Sources said some senior executives of PNB had been summoned to understand CBS and the possible lapses as it was difficult to believe that the LoUs were issued without the consent of senior executives, said another ED official.

The ED hinted that more seizures would take place in the coming days. So far, the ED had searched more than 200 premises across the country and seized assets worth nearly ~60 billion. Valuation of these assets will be completed in 15 days, clarified the official. The probe agency wants to ensure that the accused parties do not sell their assets.

Subsequently, the enforcement agency also collected data relating to least 200 suspected shell firms from the tax authorities and initiated an enquiry on the information provided. The ED believed shell firms would have a crucial role in identifying the money trail of the LoUs.

The probe agency is confident of bringing back Modi and his family with the help of a foreign authority.

Meanwhile, the income-tax (I-T) department is examining 80 individuals who allegedly purchased diamond jewellery worth ~2.52 billion in cash from Nirav Modi’s group. In January last year, the I-T department had conducted searches at Modi’s and Gitanjali’s group companies. During the search operations, over ~49 billion was detected from various businesses in India and abroad.

In Modi’s retail operations, ~1.59 billion of cash was found to be received by the company. Sources said ~940 million was mapped with the permanent account numbers of these individuals.

According to the tax authorities, a majority of them who transacted in cash are well-known promoters and executives of Corporate India and politicians. “The cash transactions were made during the demonetisation period since buying jewellery was a preferred route by people to offload banned ~500 and ~1,000 notes held as unaccounted cash. All suspected individuals who indulged in the transactions would soon be summoned for questioning,” said an I-T official.

Meanwhile, the core I-T investigation team, including the directorate-general of Mumbai, was in New Delhi to meet Revenue Secretary Hasmukh Adhia and the Central Board of Direct Taxes.

Source said the finance ministry wanted the investigative agencies to bring the accused to book. I-T sources hinted that they would announce major steps to nail the accused in the next few days.

Meanwhile, the CBI questioned Vipul Ambani for the second consecutive day. Ambani is president-finance in Modi’s flagship firm Firestar International since April 2014. The CBI also interrogated 13 former and present employees of PNB, including general managers, on Monday. It also questioned four employees of Modi’s firms.

The CBI team sealed PNB’s Brady House branch, where transactions related to the banking fraud had taken place. The branch has been sealed to ensure none of the records was tampered with till the investigation is completed.

The central agency is said to have made presentations to the Central Vigilance Commission (CVC). It had apprised the CVC of a systemic failure at several levels. Central Vigilance Commissioner K V Chowdary on Monday met senior executives of PNB and the finance ministry.

Tightening the noose, the government on Monday ordered the Serious Fraud Investigation Office to probe around 110 companies and 10 limited-liability partnerships related to diamantaire Nirav Modi and his business associate Mehul Choksi.