Before PNB fraud: Nirav Modi, Choksi left 18 businessmen, 24 firms bankrupt

Eighteen businessmen and 24 firms who had taken the franchise of Modi and Choksi’s jewellery brand ended up filing criminal complaints of financial bankruptcy

Nirav Modi scam at PNB

The Punjab National Bank (PNB) and other public sector lenders aren’t the only entities that got hit by Nirav Modi and Mehul Choksi, in a Rs 114 billion fraud that was unearthed at PNB recently. Over two dozen firms and 18 businessmen who had taken franchise of Nirav Modi and Mehul Choksi’s jewellery brand between 2013 and 2017 also reportedly found themselves at the receiving end of frauds committed by the duo — with the cases involving amounts upto Rs 200 million (Rs 20 crore). | Today’s Paper

Eighteen businessmen and 24 companies who had taken the franchise of Modi and Choksi’s jewellery brand between 2013 and 2017 ended up filing criminal complaints of financial bankruptcy caused by breach and fraud committed by the duo, the Times of India reported. The concerned businessmen and firms, the report added, had set up franchise showrooms of Choksi-owned Gitanjali Jewellery and Gili across several cities and regions: Delhi, Agra, Meerut, Bengaluru, Mysuru, Karnal, and parts of Gujarat and Rajasthan.

Based on records accessed by it, the national daily reported that the first information reports (FIRs) filed in all the aforementioned cases dealt with criminal conspiracy, fraud, and violation of agreement by Choksi’s firms.

According to the records, even after taking security deposits between Rs 30 million (Rs 3 crore) and Rs 200 million (Rs 20 crore) from the franchisees, Choksi’s firms violated agreements and committed fraud in sending stocks of diamond and precious gems to the former.

How did Choksi’s firms cheat these businessmen?
According to the report, under the three-year contract signed between Choksi’s firms and the franchisees, a fixed minimum guarantee commission at 12 per cent per annum on the security deposit, apart from the rental for the jewellery showroom, was mandated to be paid by Choksi.

ALSO READ: Nirav Modi PNB fraud: CBI seals bank’s Brady House Branch in Mumbai

However, the franchisees soon found violations: That Gitanjali would not replenish the stock, send items that were priced much lower than the market rates, or not pay the agreed upon rental.

Who all got caught up in the fraud?
Vaibhav Khurania, a Delhi-based businessman who had opened a retail store in Rajouri Garden, had to shut shop after Gitanjali allegedly failed to send him stocks worth Rs 30 million (Rs 3 crore) after having taken the payment, the national daily reported. The report quoted one particular FIR as saying: “In fact, they sent those items of which the market price was much less, but the showroom price was 3-4 times more of the actual price.” | Readmore…

 

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PNB Rs 114 bn fraud: How 2 bankers, Nirav Modi & his cohorts pulled it off

PNB cautioned other banks about modus operandi of fraud in a letter that Business Standard has access to

pnb, punjab national bank

Punjab National Bank (PNB) on Wednesday made a startling revelation that it has detected a colossal fraud worth Rs 114 billion (Rs 11,400 crore) in one of its Mumbai branches.

PNB said that it had been defrauded of about Rs 114 billion by jeweller Nirav Modi, his maternal uncle Mehul Chinubhai Choksi, and other relatives through some firms they own with the help of the bank employees. According to TV reports, Nirav Modi said he willing to pay back Rs 50 billion (Rs 5,000 crore).

So what really happened?
How the PNB scam unfolded
Last week, PNB had lodged an FIR with CBI stating that fraudulent LoUs worth Rs 2.8 billion (Rs 280.7 crore) were first issued on 16 January. At the time, PNB had said it was digging into records to examine the magnitude of the fraud, a PTI report said. In the complaint, PNB had named three diamond firms, Diamonds R Us, Solar Exports and Stellar Diamonds.

ALSO READ: PNB fraud to impact other banks, increase their bad loans provisions

In a letter to 30 banks (dated – February 12, 2018) (Business Standard has access to the letter) Punjab National Bank said:

An excerpt of the letter
Modus operandi adopted was as under:
It was found through SWIFT trail that one junior level branch official unauthorisedly and fraudulently issued LoUs on behalf of some companies belonging to Nirav Modi Group viz. Solar Exports, Stellar Diamonds and Diamonds R Us for availing buyers’ credit from overseas branches of Indian Banks.

Who carried out the fraud?
A. Two bankers
Two PNB bankers managed to bypass PNB’s core banking system to raise payment notes to overseas branches of other Indian banks, including Allahabad Bank, Axis Bank, and Union Bank of India. The employees used international financial communication system — SWIFT to raise payment notes to bank branches.

B.Corporates – Diamond, gems dealers
Initially, PNB did not reveal names of those involved in the scam. However, in a BSE filing, the bank has said the transactions were “for the benefit of a few select account holders with their apparent connivance” and that “based on these transactions other banks appear to have advanced money to these customers abroad.”

Now, PNB has revealed that it was defrauded of about Rs 114 billion by jeweller Nirav Modi, his maternal uncle Mehul Chinubhai Choksi, and other relatives through some firms they own.

Three jewellers Gitanjali Gems and its subsidiaries Gili and Nakshatra are under the scanner of investigation agencies.

PNB names Nirav Modi and Gitanjali Gems in the mega Rs 114-bn fraud

Core banking system bypassed to issue unauthorised and fraudulent guarantees

PNB

In what may turn out to be one of the biggest scams in the country’s corporate history, Delhi-based Punjab National Bank (PNB) said on Wednesday it had been defrauded of about Rs 114 billion by jeweller Nirav Modi, his maternal uncle Mehul Chinubhai Choksi, and other relatives through a clutch of companies they own.

The country’s second-largest public sector bank (PSB) said two of its employees were involved in the scam, where the bank’s core banking system was bypassed to raise payment notes to overseas branches of other Indian banks, including Allahabad Bank, Axis Bank, and Union Bank of India, using the international financial communication system, SWIFT.

ALSO READ: PNB fraud: Sebi likely to probe disclosure lapses by banks, jewellery firms

Three jewellers Gitanjali Gems and its subsidiaries Gili and Nakshatra are also under the scanner of investigation agencies.

Executives in other banks said they were insulated against the fraud, as the payment request was raised by PNB (irrespective of who raised that in the bank), and therefore, the payment would have to be met by the Delhi-based bank.

PNB had overdues slated to be paid on January 25 and subsequently on February 5, which were in default, said Usha Ananthasubramanian, chief executive officer (CEO), Allahabad Bank.

“We do have exposure to PNB, but it is on the bank, and not on the client. The exposure is roughly in the range of Rs 20-22 billion,” Ananthasubramanian said.

However, PNB in a letter to banks, indicated clearly that it was in no mood to pay back and alleged connivance of employees at the foreign branches of other Indian banks.

In a letter to the chiefs of several banks, a general manager of PNB said the letters of undertakings (LoUs) are were opened in favour of branches of Indian banks for import of pearls for a period of one year, for which the Reserve Bank of India (RBI) guidelines stipulate a total time period of 90 days from the date of shipment.

“This stipulation was overlooked by overseas branches of Indian banks that are also required to follow the RBI guidelines. There is clear criminal connivance of group companies of Nirav Modi and Gitanjali Gems with our branch official and also, apparently, with officials of overseas branches of Indian banks,” the letter said. “None of the overseas branches of India based banks has shared with us any document/information made available to them by these Indian companies at the time of availing buyers’ credit from them,” it added. The banking system is heading towards a protracted legal battle as other banks will start suing PNB over non-payment of dues and refusal to honour commitments. Besides, other banks also have separate exposure to companies owned by Modi, who has shot a mail to the lenders, assuring them that he will return all dues and that his brand, Firestone Diamond, valued at Rs 105 billion, was up for sale. | Readmore

Scam worth Rs 110 bn: PNB detects fraud transactions; stock price drops 7%

The scam could turn out to be the biggest scam in Indian corporate history

 PNB, punjab national bank, pnb news

In what may turn out to be one of the biggest scams in Indian corporate history, Punjab National Bank has detected fraudulent transactions worth around Rs 110 billion from one of its Mumbai branch allegedly by diamond merchant Nirav Modi, his relatives and business partner Mehul Choksi during this year. | Today’s Paper

PNB share prices fell around 7% in the early trade on Wednesday morning after the bank reported fraudulent transactions worth $1.77 billion to Bombay Stock Exchange.

“The bank has detected some fraudulent and unauthorised transactions (messages) in one of its branch in Mumbai for the benefit of a few select account holders with their apparent connivance. Based on these transactions other banks appear to have advanced money to these customers abroad,” Delhi-based public sector bank said in its BSE filing.

The bank said that the transactions are contingent in nature and liability arising out of these on the bank will be decided based on the law and genuineness of underlying transactions. “The matter was already referred to law enforcement agencies to examine and book the culprits as per law of the land. The bank is committed to clean and transparent banking,” PNB said.

On February 5, the PNB had said in a statement that its preliminary investigations showed that it had come across suspected fraud amounting to Rs 2.8 billion.
“Punjab National Bank has come across certain fraudulent Letter of Undertakings issued by two of its employees namely Gokulnath Shetty and Manoj Hanument Kharat at Brady House Branch Mumbai in connivance with firm belonging to Nirav Modi, Nishal Modi, Ami Nirav Modi and Mehul Chinubhai Choksi partners of M/S Diamond R US, M/S Solar Exports and M/S Stellar Diamond,” the bank had said in a statement.

The bank immediately referred the case to Central Bureau of Investigation. “On unearthing these fraudulent activities, the bank rejected the request for roll-over and decided to inform the regulator and CBI for investigation,” the bank had said.
Acting on the complaint, the CBI filed an FIR against businessmen Nirav Modi, his wife Ami, his brother Nishal and Mehul Choksi.

“The public servants committed abuse of official position to cause pecuniary advantage to Diamond R US, Solar Exports, Stellar Diamonds and wrongful loss of Rs 2.8 billion to Punjab National Bank during 2017,” the FIR by CBI has alleged.

The CBI registered the FIR under the Indian Penal Code (IPC) sections related to criminal conspiracy, cheating and provisions of Prevention of Corruption Act against the four.
The firms, however, contested this saying that they availed this facility in the past also, the complaint, now a part of the FIR, has alleged. However, branch records did not reveal details of any such facility granted to the said firm, it said. Mehul Choksi had said in a statement said he retired from Diamond R US as partner in 1999.