US firms linked to Indian billionaire Nirav Modi ‘directly involved’ in international fraud

Investigation finds evidence to support conclusion by Indian officials that companies and their top officials were involved in criminal activities

PUBLISHED : Monday, 27 August, 2018, 3:25pm
UPDATED : Monday, 27 August, 2018, 10:03pm

Three bankrupt US companies with links to Indian billionaire Nirav Modi were “directly involved” in transactions related to the alleged multibillion-dollar international fraud for which Modi has been charged by Indian authorities, according to an investigation by the court-appointed examiner.

The examiner, John J. Carney, found “substantial evidence” that senior officers and directors at Firestar Diamond Inc, A. Jaffe Inc and Fantasy Inc had knowledge of and involvement in the criminal conduct alleged by Indian officials.

The “intensive” 120-day investigation found substantial evidence to support the conclusion by Indian officials that the companies and their top officials were involved in the activities, according to the report that was filed on Saturday. The examiner has identified tens of millions of dollars of purported diamond sales by the debtors to various shadow entities, where payment can be traced to proceeds from the alleged bank fraud, it said.

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The findings of the examiner in the US court is likely to bolster the Indian government’s case against the fugitive diamond merchant. British authorities have confirmed to India that Modi has been located in Britain and British officials have asked India for documents necessary to make a provisional arrest, India Today TV reported on Thursday.

The US court examiner also determined it is “highly likely” that Firestar and A. Jaffe Chief Executive Officer Mihir Bhansali and Chief Financial Officer Ajay Gandhi were involved in assisting in the transactions necessary to the alleged fraud.

Documentary and witness evidence suggest that Bhansali was a key participant in the alleged fraudulent circumstances and worked closely with Modi to accomplish its execution, the report said. His involvement was not limited to control of the debtors and other US Firestar entities but extended to oversight of the shadow entities, Firestar overseas affiliates and the Modi firms, it added.

A letter by Bhansali’s counsel before the release of the report rejected allegations that he engaged in any criminal wrongdoing. During the investigation, Gandhi provided documents and took part in multiple interviews, admitting that at some point he was told by Firestar India employees that the purpose of the loose diamond transactions was to obtain financing in India, specifically letters of undertakings, a popular import-finance instrument in India, which was used to perpetrate the alleged fraud.

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The trustee in the bankruptcy case, Richard Levin, in a statement on Sunday praised the “hard work” of the examiner and said the report will be reviewed “in depth to determine what action is warranted”.

The three companies sell jewellery to major retailers including Costco Wholesale Corp, J.C. Penny Co, Army/Navy Stores, Macy’s Inc and Zale Corp, among others, it said.

Indian authorities and Punjab National Bank lodged a complaint in January against Modi and entities controlled by him, alleging that he and his co-conspirators fraudulently borrowed US$4 billion over years by creating sham transactions as a way to import diamonds and other gems into India, the report said.

The biggest bank fraud in India also has generated political heat for Prime Minister Narendra Modi, with the opposition pouncing on the issue ahead of the 2019 general elections. It also led to the central bank banning use of the letter of undertaking.