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Nirav Modi, aides forged diamond sales to siphon off huge funds from PNB; HSBC, audit firm questioned fugitive's deals: Probe report

Yatish Yadav

New Delhi: Hundreds of crores of rupees illegally siphoned off from Punjab National Bank (PNB) were being channelised from one account to another by fugitive dimantaire Nirav Modi and his close associates. Moreover, those who questioned such illegal business deals were reportedly silenced using money power, revealed an investigation.

The first bank that raised the issue was HSBC and it was followed by an audit firm namely Manish Modi & Associates which questioned the huge transactions without selling diamonds. The murky details tumbling out of Modi's empire is startling. The probe report reviewed by Firstpost reveals that on queries from HSBC about huge money transfer from one company to another and whether they were related party deals, Modi's close aide and Chief Financial Officer (CFO) of Firestar Diamond Ajay Gandhi allegedly told the bank official not to interfere in the matter.

In 2011, Modi's shadow company Unique allegedly transferred Rs 7.13 crore to his another company namely Synergies. A few days later, Rs 21.39 crore was transferred by Unique to Synergies. Subsequently, yet another shadow company€"Twin Field€"transferred Rs 28 crore to Synergies. Since all these transactions were taking place frequently, the bank had asked him whether these deals were related party transactions. Responding to the banker's query, Gandhi reportedly said, "I am sure there were business reasons. What is the concern for the bank?" No queries were reportedly raised on the matter later.

In 2016, the accountancy firm, Manish Modi & Associates, had raised several queries on money received by Modi from shadow entity without sale of diamond. Gandhi gave vague replies and on questions, he even responded that advance had been received for future sale. "This is surprising because no one pays a huge amount as advance," investigators said.

Another transaction was from Firestar of about Rs 142 crore to Synergies account but there were no business transaction details.

"Why should a company pay the entire amount as an advance without buying the actual product. Such a method was adopted to conceal the money obtained through defrauding the PNB. Under the new law, Modi aides could face jail," the investigators said.

The report reveals that Firestar Diamond raised an invoice of around Rs 2 crore from a shadow entity namely Pacific. An analyst at the accountancy firm raised the red flag saying since there was no business transaction with the company in 2016 then why this amount was raised. Gandhi, the report reveals citing the seized documents, claimed that it was an advance.

About another transaction of Rs 99 crore with shadow entities, the accountancy firm again said, "There were no purchase transactions with parties." Modi's close aide Gandhi vaguely said that there was a sale of Rs 9 crore in August 2015. However, he did not say anything about the remaining amount of the Rs 90 crore in the account. The seized documents revealed that Firestar-affiliate A Jaffe had to pay Rs 50 crore to shadow entities including Pacific, Eternal, Unversal and Tri Color but the audit firm had no proof of transactions with it. Gandhi responded that this amount was meant for future sale.

Modi and his team allegedly falsified records of shadow entities to further channelise the ill-gotten money for personal benefit. An email that was recovered from Modi's office revealed that he had issued a directive to ensure that fabricated sale of diamond in the books by shadow entities should be shown as earning from commission and not from selling the diamonds and jewellery. In March 2014, Firestar borrowed about Rs 100 crore from its shadow entities which were shown as refunds to the company after the sale of diamonds couldn't materialise. This was simply a fraud to siphon off money from PNB.

"These shadow entities only facilitated the bank fraud by showing bogus diamond sales to other shell companies whereupon fraudulent letters of undertakings (LoUs) were raised. More than 99 percent of the sale-purchase shown by Modi in the books are related to shadow entities only. In fact, Modi was not into diamond business at all, he was just conning the banks," investigators said.

Also See: PNB fraud case: Govt to auction rare art belonging to Nirav Modi; MF Husain's work among assets to come under hammer

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