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Legal battle in UK, recovering assets around world - how ED proceeded in Nirav Modi extradition trial

BusinessToday.In     March 2, 2021

Indian investigative agencies scored a major victory when London's Westminster Magistrates' Court ruled in favour of extraditing Nirav Modi to India. This marked a significant milestone in the long-drawn legal battle that Enforcement Directorate (ED) and Central Bureau of Investigation (CBI) had been fighting since 2018.

The financial probe agency presented its case to extradite Modi in UK courts, through Crown Prosecution Service (CPS). It also continued to identify and attach assets belonging to the fugitive diamantaire and his associates, located in India and abroad, so that the proceeds of crime generating from defrauding Punjab National Bank (PNB) could be recovered. The ED seized assets worth hundreds of crores of rupees under this endeavour.

ED began its investigation in the Punjab National Bank fraud case on February 14, 2018. It moved UK authorities to extradite Modi On July 27, 2018.

The UK courts relied heavily on evidence furnished by the ED. Modi had been charged with money laundering, destruction of evidence and illegal businesses via shell companies.

Nirav Modi's shell companies

Evidence presented by the ED convinced the UK court that Modi, along with his associate Mihir Bhansali and others, arranged for appointment of dummy partners in Diamond R US, Solar Exports and Stellar Diamonds, who were then used to route money generated from defrauding PNB.

"The individuals chosen to be dummy partners were paid a meagre cash sum and did not perform any genuine functions ordinarily associated with legitimate partners. The firms remained under the direct control of Nirav Modi," reads the order copy of the UK court.

The ED also submitted before the court that Modi had set up several companies in Hong Kong and Dubai which received the proceeds of crime from the PNB fraud. Dummy directors, owners, managers were appointed in these companies, although they remained under Modi's direct control.

"The companies were used for the circular rotation of diamonds, pearls, gold and jewellery at highly inflated values to give the impression that the companies in receipt of the Letter of Undertakings (LOUs) issued by Punjab National Bank were engaged in legitimate trade," reads the UK court order.

Diversion of funds across India, abroad

The ED also unearthed how Nirav Modi and his associates diverted proceeds of crime. These transactions included transfer of $50 million to Firestar International Pvt Ltd, India as foreign direct investment, over $50 million to a US-based jewellery rental company called "Bailey Bank and Biddle" owned by Nirav Modi, illegal payments and loads to companies in Hong Kong and Dubai controlled by Modi, purchase of properties using proceeds of crime laundered through multiple companies under his control and accounts of his close family members.

ED also found evidence of proceeds of crime being transferred to various bank accounts in Switzerland, Singapore and other overseas jurisdictions. Some of this amount has been identified and seized by the agency.

Nirav Modi's modus operandi

After a detailed investigation, the ED found that between March 1, 2011, and March 1, 2020, Modi conspired with several individuals and entities to conceal, disguise, convert, transfer or remove criminal property, from the direct or indirect funds obtained through Buyer's Credit guaranteed by 1,214 Letters of Undertaking (LoUs) worth $1,015.35 million issued by the PNB, knowing those funds to represent in whole or in part the proceeds of criminal conduct. Modi's accomplices included Neeshal Modi, Nehal Deepak Modi, Deepak Kumar Modi, Shyamsunder Wadhwa, Gokulnath Shetty, Purvi Maiank Mehta, Maiank Mehta, Saju Poulose Parokaran, Aditya Nanavati, Hemant Bhatt, Subhash Parab, Mihir Bhansali, Dharmesh Bothra, Radashir Jewelery Company Pvt Ltd, Solar Exports, Stellar Diamond, Diamonds R US, Firestar International Pvt Ltd, Firestar Diamond International Pvt Ltd, Nirav Modi Trust, Firestone Trading Pvt Ltd, Mak Business Enterprises Pvt Ltd, Bentley Properties Pvt Ltd, Ami Nirav Modi, Neeshal Merchandizing Private Limited, Belvedere Holdings Group Ltd, Nirav Modi Ltd, Yanike Properties Ltd, Diamond Holdings SA, Central Park Real Estate LLC, Pavilion Point Corporation, Rhythm House Private Limited, Pacific Diamonds FZE, Fine Classic FZE and Firestar Diamond FZE.

Threat to kill witness, destroying evidence

Apart from the financial crimes, another grave allegation against Nirav Modi was that he threatened to kill Ashish Lad - a witness in the case. In the third supplementary request to the UK court, ED submitted evidence on conspiracy to prevent the course of justice and threats to kill Lad.

The UK court noted that Modi and others, between September 2008 and June 2018, "conspired together, committed acts tending and intended to prevent the course of justice by causing evidence relevant to a criminal investigation into a fraud committed upon the Punjab National Bank, to be removed from the premises of Bank's Brady House Branch, Mumbai and concealing in the law firm Cyril Amarchand Mangaldas to prevent that evidence being discovered by investigators." The court also ruled that Modi was "involved in interfering with witnesses relevant to the investigation by arranging for them to travel to, and remain in, Cairo, Egypt, where they were pressured to sign false statements."

The court also took in consideration ED evidence establishing destruction of a server in Dubai, as well as mobile phones and electronic devices which were taken away from the witness in Dubai and Hong Kong.

On July 27, 2018, and June 10, 2019, Lad gave detailed accounts of "round-tripping transactions" which were used to create turnover for Nirav Modi's Firestar Group. He also revealed how transactions were communicated through a private communications system "panmail" or "crickinfo" within Firestar Group as well as the Dubai- and Hong Kong-based companies.

Lad said in his statement that after investigation started in March 2018, Modi's accomplice Mihir Bhansali instructed all the dummy directors to withdraw money from the Dubai-based accounts.

"They were told the cash would be handed over to Nirav Modi's brother Nehal Modi. Thereafter in March 2018, Nehal Modi and Mihir Bhansali instructed them to go to Cairo and threatened that police would arrest them if they remained in Dubai. Flights were arranged by Nehal Modi. In the meeting with the dummy directors, Mihir Bhansali told them that there is a hostile scenario in India right now, and if we go to India, we will be arrested by the investigating agencies. He also told us that if we cooperate with them, they will provide shelter and legal help," India Today quoted Ashish Lad as saying.

Lad further said that Mihir Bhansali conveyed Modi's instructions about the terms of the sale and purchase transactions by Dubai-based firms with Nirav Modi's firms. He revealed that witnesses were told "to not disclose his [Nirav Modi] name before any authority". Lad also explained that Nehal Modi on his visit to Dubai took their mobile phones back with him and issued new ones.

"There was a server in the office of World Diamond Distribution FZE in which all the data related to accounting and operations in respect of all the companies of Nirav Modi in Dubai was stored. The server was connected to all the branch/head offices of the supplier dummy companies of Nirav Modi. As I recollect, somewhere at the end of March or April 2018, the office premises of World Diamond Distribution FZE situated in Dafza was vacated and returned to the authority. Similarly, the other branch/head offices of certain dummy companies were also vacated and returned to the respective authorities. Prior to vacating the office of World Diamond Distribution FZE, the server was also removed. As per my knowledge, Nehal Modi handed over the server hard disc to the firm of Pakistani nationals for destroying the same," Ashish Lad said in his statement.

Lad and others were taken to Cairo and their phones were taken again. Nehal Modi organised this trip.

The ED also presented a video recording before the court where Modi's associates described themselves as "owners" of various companies. They revealed that they were made to sign documents stating that the Modi-controlled companies in Dubai belonged to them, for their safety, India Today reported. The documents stated that they have been carrying on business with Firestar and Nirav Modi and after his financial crises, their businesses faced difficulties and to avoid creditor claims, they have all come to Cairo.

Based on this evidence, the court ruled, "The conversations show how Nehal Modi placed pressure on individuals to make untruthful statements, tell them what to say in statements. In a conversation between Nehal Modi and Ashish Lad, Nehal Modi is instructing Ashish Lad about how he should return to India via Calcutta to evade the authorities. He explains a lawyer will visit him and he will sign documents and make the same statements as Divyesh Ghandi. He also tells Ashish Lad he will need to go to Europe to make a statement in return for 20 lakh. In another transcribed call with Rushabh Jethwa, Nehal Modi instructs him to make a statement in which he states he travelled to Cairo because he was scared and that he does not work with Nirav Modi."

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