A 165-page dossier submitted to the United States Bankruptcy Court Southern District of New York may have finally blown the lid off biggest banking fraud in Indian history. The report is prepared by John J. Carney, an examiner appointed by US bankruptcy court for the three US-based jewellery companies owned by PNB fraud accused Nirav Modi.
While the investigations related to Nirav Modi scam are still ongoing in the country, the new report submitted in the US court may bolster India's efforts to attach assets and properties of Nirav Modi and his associates in the US.
After conducting an intensive 120-day investigation, the examiner has found substantial evidence to support the knowledge and involvement by the Nirav Modi's US-based aides namely Mihir Bhansali (CEO of Firestar Diamond International and Fantasy Inc.) and Ajay Gandhi (CFO of all Firestar U.S. entities, including FDI, FI and A. Jaffe) in the PNB fraud.
In February, soon after India's biggest banking scam was unearthed at PNB's Brady House branch in Mumbai, Nirav Modi controlled Firestar Diamond, Inc., Fantasy Inc., A. Jaffe Inc. had filed for bankruptcy in the US.
On April 13, the court appointed the examiner to determine if the three US corporations indirectly owned by Nirav Modi and their officers and directors were involved in the criminal conduct alleged in India. The examiner was assisted by Alvarez & Marsal Disputes and Investigations, led by retired FBI special agent William B. Waldie. Indian forensic auditors BDO India, hired by PNB for internal audit after Nirav Modi scam, had later joined the investigation.
Nirav Modi's US-based companies were in the business of selling finished jewellery to major retailers, including Costco, J.C. Penny, Army/Navy Stores, Macy's and Zales, among others.
The examiner identified tens of millions of dollars of purported diamond sales by the Nirav Modi's US companies to various shadow entities, where payment can be traced to proceeds from the PNB fraud, the report said.
The examiner's investigation further confirmed that criminally derived proceeds from these sales flowed from India into the US and in numerous instances were returned to India or used to fund US operations, including making payments on loans made by banks, it added.
The investigation has also indicated that a large chunk of money was diverted in real estate in US after Nirav Modi left India. The dossier stated that money from shell companies was used to purchase an approximately $6 million apartment on Central Park South for the sole use of Modi and his family in the US.
The investigators interviewed 45 people and analysed 1.8 Terabytes of data recovered from various sources. It concluded that Nirav Modi linked firms (including those in US) were involved in running shell companies, overpricing, round-tripping of diamonds and were beneficiaries of illegal LoUs.
The US investigators have identified more than 20 shadow entities belonging to fugitive Nirav Modi. The report said that "diamonds sold to or purchased from shadow entities were routinely shipped out the same day or within days after arrival, without ever being opened or inspected by employees to ascertain the contents of the packets, in contrast to shipments that were made to or received from non-Shadow Entities."