Mehul Choksi, his brother tried to flee with jewellery worth $16 million in February, reveals ED chargesheet

Choksi indulged in fund diversion to fulfil his luxurious needs. In 2013, he purchased a villa from Ziad Khalil Makkawi and Amal Boudhara Makkawi (UAE) and paid Rs 27 crore. To pay the EMI, Rs 15 lakh used to be transferred to Choksi's account from Gitanjali Venture DMCC in the guise of professional fees.

Diamond merchant Mehul Choksi is the bigger crook than nephew Nirav Modi, the recent ED chargesheet has revealed. Soon after Indian investigative agencies registered a criminal complaint against Mehul Choksi in February 2018, his brother Chetan Choksi visited Gitajanli Ventures DMCC office in UAE to "put pressure on staffs to handover the said goods (jewellery) to him", stated a prosecution complaint filed by the Enforcement Directorate against Mehul Choksi in the PNB scam. But the employees refused, as they had come to know by that time that different agencies in India have booked cases against Mehul Choksi and Gitanjali Group of companies under the Prevention of Money Laundering Act and various other acts.

In the statement given to the Enforcement Directorate, Dion Lily White, vice president of Gitanjali Ventures DMCC, Dubai, stated that around $13 million worth of studded jewellery was lying in the locker room of the Gitanjali Ventures DMCC office in Dubai and jewellery worth $3 million was stored in local retail outlets. Apart from these goods, the employees were also having AED 2 million (currency) in the office locker.

Significantly, the ED officials managed to convince the employees and successfully brought the jewellery back to India. "It was kind of a surgical strike for the ED to plan a strategy and attach the studded jewellery lying in Dubai's locker worth Rs 100 crore," an official told Indiatoday.In.

The agency was yet again shocked to see the poor quality of stock maintained by Choksi. The declared value of the goods seized by the ED at Hyderabad SEZ Ltd, owned by Choksi, was Rs 3,840 crore, but after valuation by the government-approved official, the real value turned out to be worth Rs 103 crore only, which is less than 3 per cent of the declared value.

Since February 2018, the agency conducted searches at Choksi's 130 premises and seized goods with book value of Rs 1,280 crore. But after an exhausting valuation process for two months, the value came out to be Rs 597.75 crore, almost a difference of 47 per cent (of total booked value). In case of Nirav Modi, the real value was 27 per cent of the total declared value. These are some crucial findings of a prosecution complaint filed by ED against Mehul Choksi in PNB scam.

India Today has exclusively accessed the complete chargesheet, which is no different than filed against Nirav Modi. The total proceeds of crime against Choksi is Rs 6,097 crore (Rs 3011.39 crore of LOUs plus Rs 3,086.24 crore of Foreign Letters of Credit).

Last week, the agency had filed chargesheet under Section 45 of the PMLA Act, 2002, against 14 accused: Mehul Choksi, Gokulnath Shetty, Nehal Modi, Vipul Chitalia, Dharmesh Bothra, Rakesh Gajera, Sunil Varma, Deepak Kulkarni, Jayesh Shah, and others. As per the chargesheet, Mehul Choksi, owner of Gitanjali Gems, Gili India and Nakshatra Brands was the prime conspirator who devised the entire mode of fraud, conspiring with the other accused to cheat the bank. Like Nirav Modi, the proceeds of crime so generated was siphoned off and laundered by Choksi through various entities for the acquisition of properties and personal gains.

Nehal Modi, brother of Nirav Modi, is found to be involved in receiving the proceeds of crime in the guise of royalty, advances, export or import from the shell companies of Choksi. "Nehal Modi who is the CEO of USA-based Samuels Jewelers INC., and Diamlink Inc was involved in receipt of Proceeds of Crime (PoC) in the guise of royalty agreement with the Dubai-based sale companies of Choksi", the chargesheet stated.

Major funds diversion by Choksi

In 2013, Choksi purchased a villa from Ziad Khalil Makkawi and Amal Boudhara Makkawi (UAE) and paid the consideration of 15 million Dirham (Rs 27 crore). To pay the EMI of this villa, an amount of Rs 15 lakh used to be transferred to Choksi's account from Gitanjali Venture DMCC, in the "guise of professional fees". The maintenance and other charges for the villa were also paid from Gitanjali Ventures DMCC only.

In the second instance, Samuels Jewellers (100 per cent subsidiary of Gitanjali Gems) and Al Arba Jewels, FZE, the shell companies of Choksi, had a royalty agreement from 2014 to 2017 to divert the funds generated from the scam. As per the agreement, Al Arba Jewels agreed to pay annual royalty to Samuels Jewellers to the extent of 7 per cent of the net sales with a guaranteed minimum annual royalty of $68,00,000 that is earned on the first day of each year.

The turnover of this shell company was used to inflate by rotating the transactions with the help of companies controlled by Choksi. "In the guise of this agreement, other import-export transactions, advances, loans etc., Al Arba Jewels FZE, Asian Diamond & Jewellery FZE and Eternity Jewels diverted Rs 125 crore from Dubai, during the period of March 2015 to 2017", the chargesheet stated.

In the third instance, funds were diverted through Dubai-based companies. It was revealed that on the lines of domestic rotation of funds in India, identical setup was used by Choksi to inflate the turnover and to layer and divert the acquired funds.

Asian Diamonds & Jewellery FZE, Al Arbaa Jewels FZE, Al Burj Diamond & Jewellery FZE and Eternity Jewels FZE were the shell companies of Choksi being used for the rotation of funds to inflate the turnover and to layer/divert the said funds, through his trusted associated in Dubai. Further, "market operators" in Dubai were also used to rotate the funds and to camouflage the source of fund on commission basis.

In another route, Mauritius-based two companies, Mauli Ventures and Project IOI (Mauritius) Ltd., were also used by Choksi to divert the funds. These two companies are managed by First Island Trust Company Ltd, Port Louis, Mauritius in fiduciary capacity. "Funds were diverted in these two companies in guise of loan and financial support", the chargesheet said.

In 2011, $8,15,000 were given to Mauli Ventures by Gitanjali Ventures DMCC as loan/financial support. In November 2017, another loan amount of $42,50,000 was assigned to one Hong Kong based company Group Asset Limited by Gitanjali Ventures DMCC. Another company Project IOI (Mauritius) Ltd also owns majority of stake in AP Gems in Jewellery Park, Hyderabad.

Besides this, the third party remittance system was also used in Dubai by Choksi to camouflage the criminal origin of funds and for diversion/movement of funds. It came to light that all the companies controlled by Choksi in Dubai have remitted the money on behalf of other importers to several other parties for the import of goods. As per data available with investigators, in year 2014-15 more than Rs 32 crore was remitted in this manner.

In addition, Choksi, indirectly used the funds to invest in his company in India through Rakesh Gajera, a trusted associate. In 2015, an amount of $20,00,500 was transferred to the account of Eternity Jewels, a shell company of Choksi. On the same day, $20,00,000 was given as "loan" to Gajera. The source of this fund was Gitanjali Ventures DMC, a beneficiary of fraudulent LOUs and FLCs.  

In year 2016, this fund was used to purchase the 5.75 per cent equity of Gitanjali Gems Ltd in the name of Gajera. The consideration paid for the purchase of equity was around Rs 50 crore by Gajera to Gitanjali Gems and similar to the above money trail of Rs 12 crore, it is suspected that the rest of the amount was also provided to Gajera by Choksi.

Choksi used Air to Air export

In terms of modus operandi, Choksi was involved in "Air to Air" export using his Gitanjali Group of companies in India and abroad. Under this system, the consignments exported from India to Hong Kong or from Hong Kong to India were routed through Dubai, but were not getting cleared through customs at UAE airport.

Gitanjali Ventures DMCC and Asian Diamonds Jewelery FZE were used for laying purpose. "This akin to transhipment or bond to bond transfer without goods actually being brought to Dubai. Thus, the goods were being routed through UAE to create additional layering in money laundering", the chargesheet said.

To avoid detection of such transaction i.e. Air to Air export, the Mumbai head office of Gitanjali Group had given directions to its overseas entities to split the quantity into more than one consignment on export invoice before it was exported to the next destination.

Accordingly, export documents were prepared in the office of Gitanjali Ventures DMCC and handed over to the clearing and forwarding agents for further export. To avoid suspicion, the transactions pertaining to import/export of jewellery, diamond etc., was shown against inward/outward remittances/transfer of funds, the chargesheet said.

Misuse of third party payment system

Choksi was smart enough to take undue advantage of the RBI guidelines pertaining to "third party payment system against export", and used his overseas entities under tri-party arrangements to defraud banks. "This system was misused to avoid detection of contra sales and purchases with the beneficiaries of LoUs and FLCs and bring back the funds directly into Gitanjali Group of companies in India", the chargesheet stated. Scrutiny by the investigators revealed that the export from Gitanjali Gems Ltd and Gitanjali Export Corporation Ltd were made to Trans Exim Ltd in Hong Kong and Tradewell Enterprises, Hong Kong, respectively.

But the payments to the Trans Exim and Tradewell were made directly by 4C's Diamond Distributors, Hong Kong and Shanyao Gong Si Ltd, Hong Kong, respectively. This had resulted in under reporting of actual exports to the beneficiaries of LOUS and FLCs, whereas over-reporting of exports to the aforesaid companies i.e. Trans Exim and Tradewell Enterprises.