An examiner appointed by a bankruptcy court in the United States has found that fugitive diamond jeweller Nirav Modi’s firm A Jaffe Inc, along with a “shadow entity” controlled by his sister Purvi Modi Mehta and a British Virgin Islands firm linked to his father Deepak Modi, allegedly routed at least Rs 576 crore obtained fraudulently through Letters of Undertaking (LoUs) in India to Delaware firm Twin Fields Investments Ltd, via layers of shell companies.
Nirav Modi and his maternal uncle Mehul Choksi are being investigated by Indian agencies after state-owned Punjab National Bank (PNB) complained against their companies, saying it had been cheated of Rs 13,600 crore through fraudulent LoUs and Foreign Letters of Credit (FLCs).
Both men left India this January, a few weeks before the scam came to light. Nirav Modi is in the United Kingdom; Choksi has taken citizenship of Antigua and Barbuda and is believed to be currently in the Caribbean country.
Nirav Modi has been accused of diverting over Rs 4,000 crore of the Rs 6,519 crore outstanding fraudulent LoUs issued by PNB to his firms.
The report by US examiner John J Carney has found that at least Rs 300 crore of the money received by Twin Fields Investments was later ploughed into a US-based retail jewellery company, Bailey, Banks and Biddle (BBB Group), which was acquired by Nirav Modi in 2009-10.
According to the report, A Jaffe Inc, which filed for Chapter 11 bankruptcy protection before an American court on February 26, has alone transferred about Rs 150 crore to BBB Group through Twin Fields Investments.
Besides A Jaffe, two other Nirav Modi firms, Firestar Diamond Inc and Fantasy Inc, too, have filed for bankruptcy in the US. The bankruptcy court on April 12 appointed an examiner to see if the three firms “were involved in the alleged criminal conduct in India”.
The examiner has found that A Jaffe, Firestar and Fantasy “were directly involved in the transactions” pertaining to the alleged siphoning of funds gathered through the PNB LoUs.
The report has also alleged that Modi used at least Rs 21 crore from Firestar Diamond Inc to pay for a real estate transaction for the “benefit” of his family. Apart from this, in 2012, at least 80 per cent of A Jaffe sales were to shadow entities or shell companies in loose diamonds, which was “contrary” to the business of the firm. According to Carney’s report, these shadow entities were the primary recipients of the LoU money from PNB.
According to the examiner’s report, at least Rs 28 crore from Firestar Diamond Inc was transferred to Hong Kong based Auragem Company, and UAE based Tri Color Gems FZE and Pacific Diamonds FZE, between September 2015 and March 2016 for repayment of outstanding LoUs taken by the Indian firms of Nirav Modi from PNB. The report also said that Firestar Diamond received at least Rs 15 crore of LoU money from these three firms in 2013.
Carney’s report has also accused Nirav Modi’s three US-based firms of “round-tripping” loose diamonds across India, the UAE and Hong Kong.
“The examiner has identified several specific diamonds that appear to have been round-tripped in 2011-12. The examiner’s investigation has determined that these transactions are consistent with the LoU scheme alleged by the Indian authorities as being used to inflate diamond inventory and accounts receivables artificially, to justify the need for LoU financing, and to create purchases and sales to validate the movement of money obtained through fraudulent LoUs,” Carney said in his report.