The opening of Nirav Modi’s jewellery store on New York’s Madison Avenue in the autumn of 2015 attracted A-listers from actress Naomi Watts to Donald Trump Jnr. 

It also celebrated the expansion of an Indian business that is now near ruin amid an investigation into an alleged US$2 billion fraud.

Seeing the environment here [in India] today – political, personal, social factors and security factors – I am myself not in a position to advise my client to return
Vijay Aggarwal, Nirav Modi’s lawyer

With boutique stores also in London’s Mayfair, Hong Kong, Macau, New Delhi and Mumbai, Modi achieved the global reach his relatives only dreamed of – bolstered by a necklace featuring a 12.29-carat “Golconda” diamond, which was part of the largest jewellery sale in Asia by Christie’s International in 2010.

As investigators probe Modi’s alleged use of fake guarantees from the Punjab National Bank to solicit loans, his past decade’s business dealings are also coming under scrutiny by India’s US$60 billion jewellery industry, which now faces tighter access to credit and more stringent auditing.

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Modi’s company Firestar Diamond and another headed by his uncle, Mehul Choksi, who is also under investigation for alleged fraud, received about a quarter of the loans made to the nation’s gems and jewellery sector. 

Modi, 47, and Choksi, 58, both deny any wrongdoing. Both are out of the country.

The fallout over the scandal threatens to hit the borrowing firepower of the nation’s jewellers, who are involved in cutting or polishing 12 out of every 14 diamonds sold in the world. 

If Firestar and Choksi’s Gitanjali Group fail, then sales will drop by 16 per cent across India’s jewellery industry – putting in jeopardy as many as 11,000 jobs, Care Ratings said on February 27.

Diamond-dealing family

Modi’s father and grandfather were, like him, “diamantaires”  a French term for specialist gem-cutters and members of an established diamond-dealing family. 

Modi grew up in Antwerp, the Flemish-speaking Belgian city where the majority of the world’s mined diamonds are traded and where about 400 Indian families, mostly from the state of Gujarat, have settled since the 1960s.

A once aspiring musical conductor, Modi is reported to have attended the Wharton School of the University of Pennsylvania before dropping out and moving to India at 19 to train at his uncle’s jewellery company. 

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He worked almost every day to train in every aspect of jewellery production, from sourcing stones and raw materials to quality control, he told the South China Morning Post in 2016.

While Choksi wanted to create a luxury goods brand rivalling Cartier and Louis Vuitton, it was his nephew’s gem-encrusted designs that adorned celebrities from actress Kate Winslet to Priyanka Chopra, a Miss World 2000 pageant winner and actress.

Although both men harboured lofty ambitions, Choksi and Modi chartered different paths. 

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Modi looked abroad, while his uncle focused more on the domestic market, where his business thrived on franchisee partnerships with newcomers to the industry, according to interviews with a dozen diamond traders in India and Belgium.

The traders, who declined to be identified because of the sensitivity of the matter, characterised Modi as an ambitious playboy with a penchant for paintings ,who was keen to impress with ostentatious displays of wealth.

India’s Enforcement Directorate, an investigation agency under the Finance Ministry, has seized a trove of assets as part of its investigation into Modi and Choksi, according to posts last month on the agency’s official Twitter account. 

Seized items include a Rolls-Royce Ghost, a Porsche Panamera, two Mercedes-Benz vehicles, dozens of imported watches, a farm, and residential and office properties in Mumbai and Pune.

Away on business

Allegations by the Central Bureau of Investigation were without merit and would not stand up to the court’s scrutiny, Modi’s lawyer Vijay Aggarwal said, adding that he would apply to the court for the release of the seized assets.

Modi is overseas for business reasons and, as per his communications with the bureau, had expressed concerns over his security and safety if he returned, Aggarwal said in an interview on Tuesday.

“Seeing the environment here today – political, personal, social factors and security factors – I am myself not in a position to advise my client to return,” Aggarwal said. 

It was incorrect to refer to his client as a fugitive as he had been responding to all queries from the federal investigating agency, the Enforcement Directorate, and the Punjab National Bank, and had been conducting his business overseas, he said.

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Modi established his company in 1999 and took it abroad five years later. 

With Nirav Modi boutiques in at least six cities, he was eyeing 30 more outlets in 12 countries by 2020, he told the South China Morning Post, appealing to a clientele that was typically female, young, monied and sophisticated.

Modi’s plans were ambitious and set a frenetic pace of expansion, the Business Standard newspaper said in a February 23 report, citing Vipul Ambani, president of finance at Modi’s Firestar International Group, who was arrested by India’s Central Bureau of Investigation last month in connection with the fraud case. 

Investigators had detained Ambani until March 19, citing an “active role in cheating Punjab National Bank in conspiracy with Nirav Modi”, the Economic Times reported on March 6.

Amit Desai, a lawyer for Ambani, said he had a policy of not commenting on continuing cases and would not say whether or not Ambani was admitting any wrongdoing.

Mukesh Ambani

Vipul Ambani is a cousin of Mukesh Ambani, India’s richest person. 

Mukesh Ambani’s niece is married to Modi’s brother Nishal. 

Nishal, whose name has also been spelled Neeshal in a government document, was named by Punjab National Bank as a suspect in the alleged fraud. 

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A lawyer for Nishal could not be immediately reached for comment.

The bank “wrongly named” Nishal, Modi’s wife, and his uncle Choksi in the complaint, the jeweller is reported to have told Punjab National Bank in a letter last month. 

Text from the document was published online on February 20 by the Economic Times, which did not say how it obtained a copy of the letter.

Modi was in a constant rush, and it gave Vipul Ambani “palpitations” thinking of how the jeweller wanted to open 100 stores “when just opening five or 10 was an uphill journey,” Vipul Ambani was quoted in the Business Standard report as saying.

Turnover at Firestar International totaled 52 billion rupees (US$800 million) in the year ended March 2017 – more than double the 21.8 billion rupees reported in 2010-11, according to data from the Ministry of Corporate Affairs. 

Choksi’s Gitanjali Gems, founded in 1966 by his grandfather in the western city of Surat, also experienced a meteoric rise.

From a market capitalisation of 9.9 billion rupees on its Mumbai stock exchange debut in 2006, Gitanjali had a value of 58 billion rupees, 70 brands, and more than 4,000 retail outlets worldwide at its peak seven years later. 

Now, it is worth only 1.46 billion rupees following an almost nine-week share-price slide.

Ranked 85th on ‘Rich List’

The need to drum up favourable media coverage may have been evident as early as last year, when Modi, who was ranked 85th on Forbes’ 2017 Indian Billionaires List, made the rounds of major news organisations in India.

Seeking to bolster his corporate profile and promote Firestar as more than a lifestyle company, Modi’s uncharacteristic engagement with journalists prompted speculation of a possible public listing, which he brushed off in an interview with Bloomberg News in October, saying that the company would continue to grow using its own means.

Around the same time, Modi’s wife withdrew their three children from a Mumbai school and moved them to New York, citing her father’s poor health, the Mumbai Mirror reported, citing identified friends of the couple.

Having left the country, Modi and Choksi have raised the ire of an Indian government determined to prevent alleged fugitive economic offenders from selling their assets while legal proceedings are underway.

The sale of Firestar Group or its assets to recover money that may be owed was proposed by Modi, according to the jeweller’s letter published by the Economic Times.

The business had been valued at 65 billion rupees, which could have either reduced or discharged any bank debt, the letter said, however “erroneous” media reports of more than 110 billion rupees of liability led to the immediate seizure of operations that resulted in the Firestar businesses “ceasing to be going concerns”.

This month, the government introduced a bill to impound assets of those who have left the country as it tries to shore up finances of state-run banks already struggling with soured loans. 

Finance Minister Arun Jaitley told reporters on March 1 that the law would be effective retrospectively, so that may offer Modi another shot at fame: as a test case for the proposed Fugitive Economic Offenders Act.

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