Nirav Money

Billionaire diamond trader Nirav Modi (left) shakes hands with Charles, Prince of Wales and Camilla, Duchess of Cornwall. The Enforcement Directorate says the money trail related to Modi’s fraud has led to the state of Delaware in the U.S. (IANS photo)

NEW DELHI — The Enforcement Directorate, in following the money trail related to jeweler-designer Nirav Modi, has found it leads to the U.S. state of Delaware.

"The agency is probing details of the operations of Nirav Modi's firms in Delaware," an ED source told IANS, adding that all of his bank transactions were under the scanner.

Delaware is a tax-free state and attracts a large number of companies from across the country, which register there. The ED source said investigators were trying to find out if Modi had diverted any of the loans raised from Indian banks to the U.S., which was indicated in the documents they were studying. 

They are also looking to see if any shell companies were set up in the U.S. According to the agency, Delaware hosts about 50 percent of the U.S.' quoted firms, with a tally of 6.5 lakh companies, overall.

Earlier in the day Feb. 27, Firestar Diamond, Inc., Indian billionaire diamond trader Modi’s  U.S.-based company, filed for bankruptcy in a New York court under Chapter 11.

According to a Feb. 26 court filing in the Southern District of New York, the firm listed its liabilities in the range of $50 million and $100 million. A Chapter 11 filing under the Bankruptcy Code usually allows a company to reorganize its business.

Modi – who, along with uncle Mehul Choksi of Gitanjali Group, is the main accused in the Punjab National Bank fraud – has been shown as an investor in details filed against his company registered at 5th Avenue in New York. Mihir Bhansali has been shown as the company’s chief executive officer and Ajay Gandhi its chief financial officer.

On Feb. 26, a Mumbai special court permitted the ED to issue Letters Rogatory to six countries to identify and take steps to seize Modi's properties in the Punjab National Bank fraud case.

The ED source official said it is looking for shell companies owned by Modi and Choksi in foreign countries, "especially in tax havens."

The agency officials had earlier said the two had over 120 shell companies in India that were under probe.

The ED action comes in the wake of its ongoing fraud probe – along with the Central Bureau of Investigation’s probe –  against the two and many others, including directors of their companies and bank officials.

The CBI had filed the first first information report in the scam Feb. 14 against Nirav Modi, his wife Ami, brother Nishal, uncle Choksi and his firms Diamond R US, Solar Exports and Stellar Diamond.

Modi, his family and Choksi left India in early January. The FIR mentions fraud of around Rs. 6,400 crore.

The CBI filed the second FIR Feb. 15 for Rs. 4,886.72 crore fraud against the Gitanjali group headed by Choksi. 

The agency source said the CBI had written to the chief vigilance officers of five banks to share details of the money credited to PNB Nostro accounts on receiving letters of undertaking and foreign letters of credit, which were then withdrawn by Nirav and Choksi's group as buyers’ credit.

Modi has been accused, along with Choksi, of defrauding the PNB of Rs. 12,600 crore.

Earlier, the amount stated to have been defrauded by Modi and Choksi companies was Rs. 11,300 crore but the PNB fraud case took a turn for the worse Feb. 27 as the bank reported an additional Rs. 1,300 crore unauthorized transactions, taking the estimated quantum to around Rs. 12,600 crore.

In an 11:22 p.m. filing with the stock exchanges Feb. 26, the bank said: "In continuation to our filing with stock exchanges on Feb. 14, 2018, we have to inform that quantum of reported unauthorized transactions can increase by $204.25 million."

The CBI Feb. 27 said it had questioned former PNB Managing Director Usha Anant Subramanian and ICICI Bank Executive Director N.S. Kanan in connection with the bank fraud case.

"The agency also questioned the ICICI executive director because it was the leader of a consortium of banks that sent money to Mehul Choksi's Gitanjali Group," a CBI official who did not want to be named said.

In the evening, an ICICI statement said it was a working capital lender for the Gitanjali group of companies along with several other banks in the consortium. It said its exposure was not the largest in the consortium and it had not lent any money to the Nirav Modi group, nor did it have any buyers’ credit exposure against LoUs to the two groups.

The CBI also questioned PNB General Managers Nehal Ahad and Vimlesh Kumar, along with two statutory auditors of the PNB. 

Keeping in view the biggest-ever banking fraud in India, the government Feb. 27 set a deadline of 15 days for public sector banks to examine all non-performing assets above Rs. 50 crore for possible fraud and to identify operational and technical gaps.

"PSB MDs directed to detect bank frauds and consequential willful default in time and refer cases to CBI. To examine all NPA accounts > Rs. 50Cr for possible fraud. Involve ED/DRI for PMLA/FEMA/EXIM violations if any," Financial Services Secretary Rajeev Kumar said in a tweet on the Finance Ministry's Twitter handle

He also said executive directors and chief technological officers of the PSBs have to prepare blueprints for combating increasing risks.

With the escalation of the fraud amount, the bank's shares tanked on the bourses. The bank's stocks closed 12.11 percent down Feb. 27 at BSE at Rs. 98.35 per share.

To date, 12 people have been arrested in the case. The ED has attached properties valued by them at Rs. 6,000 crore.

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