Indian billionaire jeweler Nirav Modi – who is believed to have defrauded Punjab National Bank out of at least $44 million – was likely tipped off about an investigation into his financial dealings, leading him to flee India sometime in January with his Indian American wife Ami and their children, according to a prominent New York lawyer.
Indian American attorney Ravi Batra, who is not affiliated with this case, but has represented the Indian government and Congress Party leader Sonia Gandhi in several high-profile cases, told India-West: “Generally, people do not commit a crime of this magnitude without inside help. He probably paid to get tipped off,” said Batra, adding: “He would not be the first. And he won’t be the last.”
The attorney labeled Modi’s fraud “one of the largest Ponzi schemes I have ever seen. Every loan was paid off with an even bigger loan. He is the Bernie Madoff of Indian banking.”
Madoff was sentenced in 2009 for operating the biggest-ever Ponzi scheme in U.S. history, defrauding his clients out of almost $65 billion.
The Punjab National Bank, which has been decimated by Modi’s alleged fraud, estimates it has lost $1.8 billion (see earlier India-West story here: http://bit.ly/2EGDk5e). According to court documents filed by the CBI, a PNB deputy branch manager in South Mumbai, Gokulnath Shetty, issued a series of fraudulent Letters of Undertaking sent to other banks to guarantee loans for Modi – high-profile jeweler to several Bollywood and Hollywood stars – and his uncle Mehul Choksi of Gitanjali Jewellers. Shetty started writing the letters for Modi around 2011, the documents said, adding that Shetty used the Society of Worldwide Interbank Financial Telecommunication – SWIFT – system to send instant messages to other Indian banks to immediately disburse loan funds to Modi and Choksi.
Shetty – and sometimes a junior manager – sent 150 LoUs over seven years, according to CBI documents. He did not record the transactions in PNB’s internal system. Moreover, Shetty is believed to have shared the SWIFT password with Modi’s senior employees, so that they could theoretically write their own LoUs.
Shetty issued fresh LoUs to cover previous loans, resulting in a Ponzi-like scheme, CBI said.
After Shetty retired, Modi asked PNB for a new LoU, similar to the ones he had been receiving. PNB directors took notice, and on Jan. 29, the bank filed an initial criminal complaint with the CBI, accusing Modi and Choksi of defrauding the bank to the tune of 2.8 billion Indian rupees, about $44 million.
But as more details surfaced, PNB officials now say the alleged fraud is closer to $1.8 billion.
“This really required a lot of people to look the other way,” Batra told India-West, adding with his characteristic dry wit: “Nirav has violated more laws than people have time to write.”
Modi and Choksi’s Indian passports were frozen shortly after the CBI registered PNB’s complaint. But Modi and his family had already left India: the jeweler was photographed with Prime Minister Narendra Modi Jan. 23 at the World Economic Forum in Davos, Switzerland.
As the scandal erupted Feb. 15, the Indian media have been on a hunt for the Modis. NDTV ran a story Feb. 17 saying the jeweler and his family, including his three children, were in a residence on the 36th floor of the Essex House Marriott Hotel in New York, a tony hotel overlooking Central Park. The Indian news station ran footage showing camera crews allegedly going to the 36th floor and knocking on the door, asking to see the Modis. A person answering the door, allegedly a staff member of the Modi family, whose face was blurred out, reportedly said that the Modis were not there, but the children were home.
The children did not appear on camera.
Shawn Devin, a manager at the Essex House Marriott Hotel, told India-West the Modis were not residing there currently, nor had they ever resided there. “Somebody has put this up as a publicity stunt,” said Devin, speculating that the family was staying at the Trump Tower.
A receptionist at the Trump Tower hotel entered Modi’s name into her computer system, and told India-West no one by that name had checked into the hotel. She tried the first names of Modi’s three children, but none were in the system.
Batra told India-West that Modi will now face the long process of extradition back to India. Criminal arrest warrants have already been filed in India, which must now collaborate with the Indian Embassy in the U.S., which will turn the matter over to the State Department.
Regarding Ami Modi, who is an American citizen, if she is believed to have conspired in the fraud, she could conceivably receive extra protection from the U.S. government, but is still liable for extradition, Batra noted.
Several Indian media have compared Modi’s flight to that of liquor baron Vijay Mallya, who is living in London while facing extradition to India. But Batra said the two cases were dis-similar. “Vijay is simply guilty of overspending, of paying his employees too much,” he said.
If Modi’s case is improperly handled, it could be discouraging to foreign investors, speculated Batra. “This is a perfect opportunity for India to prove how quickly it can stand up to corruption. It has to show that Nirav Modi will be brought to India to face criminal charges,” he said.