ED’S dossier on Choksi reveals ‘tricks of trade’

The ED’S investigation document, which has been seen by HT, arrives at the same conclusion as the Central Board of Investigation’s (CBI) investigation: that Choksi obtained letters of undertaking and credit from PNB to settle previous obligations. Money generated through letters of undertaking and credit was partly remitted back to Choksi’s Gitanjali group companies in the guise of export-import transactions for settling earlier liabilities, it adds.

“The remittance emanated from the dummy firms in Hong Kong on account of purchases/ export transactions were transferred to different banks (accounts) of Mehul Choksi/ Gitanjali Group of Companies operating in India. Part of the funds were routed to overseas companies controlled by Mehul Choksi located in USA, UAE, UK, Hong Kong and Thailand in the guise of export-import transactions,” states the documents which is part of the formal charges filed against Choksi.

The only purpose of these companies was to serve as a conduit for these transactions, the probe document claims.

“There was no manufacturing activities in any of the overseas companies (of Mehul Choksi) situated Hong Kong and UAE; only bogus import and export and sale among themselves were carried out. The invoices of export/ import were overvalued to a huge extent, so as to inflate the balance sheets and procure higher credit facilities from the bank. The export/import was also not genuine and was just rotational transcation,” states the ED probe document.

ED investigators also allege that directors and partners of these Hong Kong-based dummy companies used to act on the instructions of Choksi and his trusted lieutenants and they didn’t have any authority to take any decision. No board meeting of these companies were held, although fake minutes of non-existent meetings were prepared and directors were also asked to sign them.

“These companies were opened at Choksi’s behest and were controlled by him,” said one of the ED investigators.

ED, which is a nodal agency to probe cases under the Prevention of Money Laundering Act, has moved against Choksi and Modi under the new Economic Fugitive Offenders Bill and a Mumbai special court will hear its applications on September 25 ( Modi) and 26 (Choksi), say agency officials.

“Since the matter is sub-judice, I would not like to say anything at this juncture,” said Choksi’s lawyer Sanjay Abbot.

ED has accused Choksi of diverting funds to the tune of R3,257 crore out of the around R6000 crores worth of letters of undertaking and credit filed by his group companies. Almost R3000 crore of this was diverted to the US and the UAE, it alleges.

ED says Choksi used several techniques to layer and hide these fake exports/imports.

One of this, it claims in its document, was “air to air exports”

“Under this system the consignments exported from India to Hong Kong or from Hong Kong to India were routed through Dubai but were not getting cleared through customs at the UAE airport. The same were exported as it is to the next destination in Hong Kong or India, as the case might be,” said the document. Investigators say this created an additional ‘layering’ in money laundering.

Another was a “split consignment” trick, where the Mumbaibased head office of Gitanjali group broke up its fake imports before re-exporting them so as to avoid suspicion.

“Naturally the failure of Modinomics and Jaitley-nomics has decimated India’s economy, the banking system and people’s faith in the economy,” he alleged.

The Congress on Tuesday accused the Modi government of leaving “gaping holes” in the process of bringing back Choksi and giving him a “clean chit” that enabled him to escape from the country early this year. Congress spokesperson Randeep Surjewala asked why Choksi was allowed to keep his Indian passport until February.

“The MEA and other authorities had already given him a ‘clean chit’ on May 2017 for securing the citizenship of Antigua and he became a citizen of Antigua in November 2017. It is intriguing that Modi government permitted the Indian passport of Mehul Choksi to remain valid until February 16, 2018, helping him escape on January 4, 2018,” he said.

The Bharatiya Janata Party has consistently denied any collusion and said it is trying to bring Choksi and Nirav Modi to justice. of the US and India, the private sector as well as the people,” she said.

At a rally on Friday, President Donald Trump said India wants to discuss a trade deal. “Frankly, I’ll tell you, India called us the other day. They said they would like to start doing a trade deal, first time. They wouldn’t talk about it with previous administrations,” he said, without revealing who called and when.

Despite growing bilateral trade – up from $20 billion in 2000 to $126 billion in 2017 – differences on trade-related issues such as intellectual property rights protection, market access and nontariff barriers have persisted, and been exacerbated by President Donald Trump’s focus on fair and reciprocal trade. The US has a trade deficit of $27.3 billion with India.

This is in marked contrast to robust progress on strategic issues. In August, India became the third Asian country, after Japan and South Korea, to get Strategic Trade Authorisation-1 (STA-1) status from the US, paving the way for hi-tech product sales, including in the defence sectors.

During the 2+2 talks, India and the US signed the landmark Communications Compatibility and Security Agreement (COMCASA) that will allow India’s armed forces to obtain critical defence technologies and gain access to the communications network of the US military.

Apart from tariffs on steel and aluminium, Trump has railed against perceived high duties on US exports to India such as Harley-davidson motorcycles. He has raged about subsidies the US pays to India.

“You know, like India, like China…we say ‘Oh they are growing’. So I say I want to put us in that category too, we are growing…they call themselves developing nations…we are a developing nation too,” he told supporters at a political rally.

The conversation with the Trump administration picked up speed after a recent visit by commerce minister Suresh Prabhu, who stressed the importance of discussing all pending trade issues.

There has been movement on key issues. In medical devices, India is veering around to the US view of capping trade margins for some products, instead of outright price controls. In early 2017, India had capped prices of products such as stents, affecting large US multinationals.

In dairy, there is unlikely to be much progress because the US dairy industry uses bone-meal in cattle feed and American milk and milk products are classified as “non-vegetarian”.

In the case of IT products, India has insisted that US products meet Indian standards as laid down in the Compulsory Registration Scheme for such products. The US argument is that its products already meet much more stringent US standards and India’s insistence introduces more bureaucracy and complexity into the matter.