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Billionaire jeweler denies huge Indian bank fraud

Officials escort Gokulnath Shetty, former deputy manager of the Punjab National Bank into a court in Mumbai. (AFP)
NEW DELHI: Indian billionaire jeweler Nirav Modi, one of the prime accused in the country’s largest ever bank fraud, denies allegations leveled against him by Punjab National Bank (PNB), his lawyer said on Tuesday.
“There is nothing, there is nothing in it,” Vijay Aggarwal, a lawyer representing Modi told Reuters, referring to a police complaint filed by the state-run bank that said companies linked to the jeweler and his relatives received credit worth close to $1.8 billion between 2011 and 2017 using false guarantees supplied by two bank officials.
Aggarwal, speaking by telephone, declined to comment on Modi’s whereabouts. Indian officials are on the lookout for Modi and his family, who police said left India in January prior to the case being filed.
“Everything is documented,” Aggarwal said of Modi’s dealings with PNB, adding that the bank had regularly levied fees on its dealings with the jeweler’s firms.
According to the police complaint, the two officials at a Mumbai branch of PNB fraudulently steered credit to firms linked to Modi and entities tied to jewelry retailer Gitanjali Gems, led by Modi’s uncle, Mehul Choksi.
“They’re covering themselves up,” Aggarwal said referring to the PNB complaint. “They want to avoid liability ... that is why they are cooking up this story.”
Asked about his legal strategy, Aggarwal said: “While there’s no chargesheet, there’s no strategy. When there’s a chargesheet, there will be a strategy.”
Choksi, who has also left the country, has not commented on the matter. Gitanjali, in a regulatory filing, denied Choksi’s involvement in the alleged fraud.
PNB did not immediately respond to the lawyer’s comments.
Separately, in a letter to PNB officials, Modi stated that his companies owe the bank under 50 billion rupees ($775.25 million), much lower than the amount alleged by the bank. He also said PNB has jeopardized its chances of recovering the sums owed by going public with its allegations.
“The erroneously cited liability resulted in a media frenzy which led to immediate search and seizure of operations, and which in turn resulted in Firestar International and Firestar Diamond International effectively ceasing to be going-concerns,” he wrote in a letter seen by Reuters. “This jeopardized our ability to discharge the dues of the group to the banks.”
Both companies are controlled by Modi. The fraud allegedly involves at least three firms controlled by Modi and other firms owned by Choksi.
“Your actions have destroyed my brand and the business and have now restricted your ability to recover all the dues,” said Modi in the letter, accusing PNB of acting in haste and noting that his firm had always been current on paying its dues.
Five bank officials, including the two at the Mumbai branch, have been arrested so far.
The alleged fraud occurred as one PNB deputy manager, with the assistance of one or more colleagues, issued more than 100 fraudulent Letters of Undertaking, guarantees sent to other banks so that they would provide loans to a customer.
After entering the transactions on the SWIFT messaging system, the official, who worked at the same branch from 2010 to 2017 despite normal bank practices of regular rotations — did not record them on PNB’s internal system, according to the bank’s complaint.
A PNB source said on Tuesday that all its branches have now been asked to reconcile SWIFT messages with entries in their core banking system going back eight or nine years.
The bank has also asked branches to ensure no clerical staff stay in one office for more than five years, and officers no more than three years, the source said.
The fraud case has stunned financial markets and sent PNB shares tumbling for a fifth straight trading day, losing more than a quarter of its market value since disclosing the fraud.
Ratings agency Fitch placed the bank on negative watch. Later, Moody’s also placed PNB’s ratings under review for a downgrade.
“PNB’s capital position would deteriorate markedly, and fall below minimum regulatory requirements, if the bank is required to provide for the entire (fraud) exposure,” Moody’s said in a note on Tuesday.

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