CBI arrests 3, Nirav remains untraceable
Arrested bankers suspected of steering fraudulent loans to companies linked to Modi and Choksi; Nirav retains lawyer Vijay Aggarwal
NEW DELHI: A Punjab National Bank (PNB) employee arrested in connection with the fraud of ₹11,400 crore in the bank involving diamond merchants Nirav Modi and Mehul Choksi said during questioning that the unauthorised issue of bank guarantees to the duo’s companies was a “regular” occurrence at the firm and that “many other officers” had issued such guarantees, belying claims by senior bank officials that the fraud was perpetrated by a few rogue employees.
Meanwhile, tax officials familiar with the matter said that other companies of Modi and Choksi have borrowed a significant sum of money from banks and that if the issue remains unresolved, the size of the problem could balloon to over ₹20,000 crore.
Interestingly, the officials, who asked not to be identified, say they have documents to show that Modi’s companies were either over-invoicing goods or simply trading in non-existent ones. Over-invoicing refers to fraudulently increasing the price of a product.
The Central Bureau of Investigation (CBI) on Saturday arrested former PNB deputy manager Gokulnath Shetty and single-window operator Manoj Kharat (both worked at the Brady House branch of the PNB in Mumbai; Kharat was suspended by the bank after the fraud came to light) and Hemant Bhatt, who the agency claimed is an accountant of Nirav Modi.
The whereabouts of Nirav Modi aren’t known, and the federal investigation agency is trying to get confirmation from the Interpol about his alleged pres- ence in New York.
Top lawyer Vijay Aggarwal, who represented Shahid Balwa in the 2G case, is believed to have been retained by Modi.
While making a case for their custodial interrogation, the CBI told a Mumbai special court that Shetty was one of the officials at the branch who was using the SWIFT system (a messaging system used for inter-bank transactions) in the capacity of maker/ verifier/authoriser to enter fraudulent SWIFT messages guaranteeing the borrowings of Modi and Choksi’s companies.
“The involvement and connivance of more staff members and outsiders at this stage cannot be ruled out. But he is not cooperating with the investigation and giving evasive answers in respect of the aforesaid issues,” the CBI remand application said.
The agency cited Kharat as saying that “this (fraudulent issuance of letters of undertaking or LoUs) was happening regularly and many other officers have done this before”.
“But he was also not revealing their names, hence their custodial interrogation is necessary,” CBI said in its application. The three arrested have been remanded to police custody for 14 days till 3 March.
A CBI spokesman added that six more PNB officials are being investigated by the agency in Mumbai. Minister of state for finance Shiv Pratap Shukla said on Saturday it is working with the Prime Minister’s Office and the government will try to extradite and punish Modi.
According to PNB’s complaints to CBI, firms of Nirav Modi and Mehul Choksi were issued LoUs to avail buyer’s credit on the basis of import documents presented to the Brady House branch, but none of the transactions were routed through the Core Banking System of the bank. Besides, foreign letters of credit (FLCs) were also issued in a fraudulent manner to Choksi’s companies. In all 293 LOUs worth ₹9,530 crore and more than 220 FLCs worth ₹1,854 crore were issued fraudulently, PNB has told the CBI .
PNB also informed the CBI that it doesn’t have any evidence to prove the import transactions for which LoUs and FLCs were issued were genuine trade trans- actions, raising suspicions of large-scale financial fraud.
The Enforcement Directorate, looking into the money laundering aspect, has so far seized gems, gold and stones worth ₹5,674 crore from the premises of Modi and Choksi. Goods worth ₹25 crore were seized on Saturday.
According to tax officials, the Income Tax department’s preliminary probe showed that till March, 2017 the total loan exposure of Indian banks in just four firms of Modi – Diamonds R US, Solar Exports, Stellar Diamonds and Firestar International Private Limited – was ₹7,817 crore. Tax officials familiar with the matter suspect there are other companies of Modi’s group which also have secured bank loans and therefore the exposure of banks may be bigger.
The official have further found that Choksi’s Gitanjali Group and its subsidiary deal with 32 Indian banks that have direct exposure of around Rs 7500 to the group by way of loans.