Indian police target PNB Mumbai branch auditors in $2bn fraud probe

People wait in a queue outside a Punjab National Bank ATM in New Delhi, India, Feb. 16, 2018. (Reuters)
Updated 01 March 2018
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Indian police target PNB Mumbai branch auditors in $2bn fraud probe

MUMBAI: Federal police in India on Thursday told a court an internal auditor at a Mumbai branch of Punjab National Bank conspired with other officials to carry out a $2 billion fraud at the country’s second-biggest state lender.
The Central Bureau of Investigation (CBI) on Wednesday arrested auditor Mohinder Kumar Sharma, widening its probe into the biggest bank fraud in India’s history. On Thursday it accused Sharma of conspiracy in a filing to a Mumbai court, which committed him to police custody until Mar. 13.
CBI also arrested a former PNB manager, Bishnubrata Mishra, who it said was responsible for audits at the same branch between 2011 and 2015. Mishra could not immediately be contacted for comment.
CBI has so far arrested at least 14 people, eight from the bank and six from companies owned by billionaire jeweller Nirav Modi and his uncle, Mehul Choksi, who owns Gitanjali Gems Ltd. .
Modi and Choksi have been accused of colluding with Punjab National Bank (PNB) officials to secure unauthorized loans between 2011 and 2017, mostly from the overseas branches of Indian state banks. They left India in January before the fraud was unearthed, but have denied the charges through letters and statements.
Sharma was the internal chief auditor at the Brady House branch “who was supposed to verify the daily transactions, report the irregularities and ensure that the same are rectified to protect the interest of the bank,” CBI Inspector D. Damodaran said in the court filing.
But he, “in conspiracy with other co-accused persons, deliberately ignored to point out the issuance of illegal” letters of undertaking (LOUs) for companies owned by Modi and Choksi to raise loans from other banks, the inspector added.
Sharma’s lawyer Apoorv Vijay Singh told the court his client “had no opportunity to know about the messages” sent on international payments platform SWIFT by other bank officials as he did not have access to SWIFT.
PNB has accused two low-level employees of the Brady House branch — where Sharma also worked — of issuing the LOUs without making corresponding entries in the bank’s main software, helping the fraud go undetected for years.
Finance Minister Arun Jaitley told reporters on Thursday evening the cabinet has approved the establishment of an independent regulator for auditors in the country. The cabinet also decided to present a bill in parliament aimed at making it easier to seize properties of “fugitive economic offenders.”
“We can’t allow people to make a mockery of the law,” Jaitley said.
Buyers for Modi firm
A bankruptcy court filing in New York on Wednesday showed interest from potential buyers of a US firm of Modi’s that filed for creditor protection in the United States on Feb. 26, after the CBI seized assets of other companies owned by the jeweller.
“Early expressions of interest in purchasing some or all of the debtors’ business operations have been strong,” Modi’s Firestar Diamond Inc. said in the filing.
It has also told secured lenders it was in discussions with lenders for debtor-in-possession financing as it weighed options.
Firestar Diamond and its affiliates had annual sales of around $90 million, it said, adding that the assets seized included factories in India that produced fine jewelry.
The company is a wholly owned subsidiary of Firestar Group, which in turn is wholly owned by Synergies Corp. Both are Delaware incorporated.
Synergies is in turn wholly owned by Firestar Holdings Ltd, a Hong Kong corporation itself wholly owned by Modi’s Indian company Firestar International Ltd, according to the court filing.
Separately, an Indian agency that targets offenses involving foreign exchange and money laundering said on Thursday it had seized 41 properties, worth about 12 billion rupees ($184 million) belonging to Choksi and companies he controls.
Bank consolidation
Stung by criticism of a slippage in the government’s management of state-run banks, the finance ministry has announced a series of measures, including setting banks a 15-day deadline to kick off action to improve risk oversight.
On Thursday the ministry said state-run banks would consolidate 35 overseas operations, with another 69 being considered for consolidation. The term operations covers bank branches, joint ventures, subsidiaries, remittance centers and representative offices.
Following the discovery of the alleged fraud, several bankers told Reuters there was a need to prune the overseas branches of state-run banks and rein in competition that sometimes leads to lax monitoring of transactions.
“PSBs to consolidate 35 overseas operations without affecting international presence of PSBs in these countries,” finance ministry official Rajeev Kumar said in a Twitter message, using an acronym for public-sector banks, as India describes its state-run banks.
“Sixty-nine operations identified for further examination,” he added, without naming the banks or the affected operations.


OPEC will balance oil markets, but spare capacity limited — Nigerian official

Updated 26 September 2018
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OPEC will balance oil markets, but spare capacity limited — Nigerian official

  • ‘OPEC will do everything to stabilize, to balance the market’
  • Nigeria’s current crude oil production is about 1.7 million bpd

SINGAPORE: The Organization of the Petroleum Exporting Countries (OPEC) will act to balance the market after oil prices hit their highest in four years, but its options may be limited by available spare capacity, a Nigerian oil industry official said on Wednesday.
“It’s obvious that if you have high prices it’ll affect demand, so you have to do some market balance,” Malam Mele Kyari, head of crude oil marketing at Nigeria’s state oil firm NNPC and also the country’s OPEC representative, said.
“OPEC will do everything to stabilize, to balance the market but I’m sure you’re also aware that there’s a limit to what they can do. You must have the spare capacity,” Kyari said.
Oil prices surged this week on uncertainty over the global supply outlook following US sanctions on Iran’s oil exports and also as Saudi Arabia and Russia ruled out any immediate boost to output.
Kyari said Nigeria planned to increase its crude oil, condensate output by 100,000 barrels per day by the end of the year, up from about 2 million bpd currently.
The country’s current crude oil production is about 1.7 million bpd, he said.
In 2019, the African producer is aiming for an average output of 2.3 million bpd by boosting output from existing fields as well as starting new production from an ultra-deepwater field, Kyari said.
Located some 130 kilometers off Nigeria’s coast at water depths of more than 1,500 meters, the Egina oilfield is expected to start production in December and its output could peak at 200,000 bpd.
Kyari was in Singapore to launch the new Egina crude grade with field operator French oil major Total at APPEC.
The crude has an API gravity of 27.3 degrees and has a sulfur content of 0.165 percent, a provisional crude assay from Total showed.
The grade has a higher yield of gasoil and vacuum distillates compared with other products, according to the assay.