On Valentine’s Day 2018, at three minutes past 9 a.m., as the Indian stock markets opened trading, Punjab National Bank (PNB) informed the exchanges that it had detected a $1.8 billion fraud, plunging its shares by 9.81 per cent with the effect snowballing into dropping share prices of other state-owned lenders and affecting the Sensex, Bombay Stock Exchange’s benchmark.
The CBI and ED probing the fraud found two unscrupulous employees of India’s second-largest lending bank PNB’s Brady House branch in south Mumbai were in cahoots with Modi to pull off what is now termed as one of the biggest banking frauds. Gokulnath Shetty, a deputy manager in its foreign exchange department, now retired, and Manoj Kharat, who operated the financial messaging system SWIFT, were arrested by the CBI.
The bank officers issued over a hundred letters of undertakings (LoUs) or letters of credit which were basically unauthorized bank guarantees to Modi and his uncle without any requisite collateral or documents for import. Once the LoUs were issued, Modi and Choksi would present them to overseas branches of Indian banks like Allahabad Bank, Axis Bank, Canara Bank and the SBI in Antwerp, Bahrain, Frankfurt, Hong Kong and Mauritius and get money in local currency to pay their ‘suppliers’. Effectively what this meant was that Modi and Choksi would avail of bank credit without any security. This was not a normal loan transaction, but under the mirage of paying foreign suppliers, the Indian banks were happy to extend credit to a globally renowned diamond merchant, whom they wrongly assumed was already vetted by PNB for trade finance guarantees.
While huge funds were transferred through this mechanism over several years, the top brass of PNB remained ignorant of these transactions as these unsecured guarantees were not recorded in the core banking system. Hence, the top management was unaware of the obligations mounting in the bank’s name by extending credit to Modi without any securities.
However in mid-January 2018, when an employee from Modi’s company made a visit to the bank to ask them for further credit in a similar fashion, he was met by a new bank employee who was rather taken aback by such a request. When the official insisted that the bank had done a similar thing on several occasions in the past and should do so once again, the bank employee began probing into past transactions and thus uncovered the biggest banking fraud in the history of independent India amounting to $1.8 billion.
The biggest fraudsters according to the bank’s complaint to the CBI were Nirav Modi and his uncle Mehul Choksi, with the bank losing over Rs 13,700 crore. Both, however, had left the country in early January, long before any warrant was issued in their name. The authorities believe that of the total fraud money, Modi channelled Rs 560 crore to his account, Rs 220 crore to wife Ami’s account and another Rs 174 crore to his father Deepak’s account. Apart from foreign accounts, funds were also transferred to Pacific Diamonds, his new firm and other companies floated for the purpose of money laundering.
The CBI arrested over twenty people, including directors and senior management, accountants and auditors associated with Modi/Choksi businesses. They raided Modi’s boutiques in India, seized the jewellery and gems, froze his Indian bank accounts and attached a property lien that states that the creditor is owed money, so until the debt is repaid, the title will be unclear. The CBI also impounded his art collection and luxury cars that included a Porsche and Rolls-Royce.
From his luxury sea-facing apartment in Samudra Mahal in Worli, Mumbai, the authorities recovered antique jewellery worth over Rs 15 crore which included a lone diamond ring valued at Rs 10 crore, luxury watches costing Rs 1.4 crore and paintings by Amrita Sher-Gil, M.F. Husain and K.K. Hebbar valued at Rs 10 crore. Besides these, Modi also had artwork by F.N. Souza, V.S. Gaitonde, S.H. Raza and Akbar Padamsee. He also collected Chinese artwork and masterpieces by Zeng Xiaojun and Xu Lei and sculptures from Italy and the United States.
The ED conducted 251 country-wide searches and the value of the total seized assets was Rs 7664 crore, of which the twentyone immovable properties were worth Rs 524 crore and included a farmhouse in Alibaug, a solar power plant, 135 acres of land in Ahmednagar, and residential and office properties in Mumbai and Pune.
The agency had also attached the diamantaire’s two apartments at New York’s iconic Central Park valued at $29.99 million (Rs 217 crore). The investigators released photographs of his apartments which ooze luxury. The properties were bought in the name of The Ithaca Trust for $25 million and $4.99 million. In London, the ED seized a property in the heart of the bustling metropolis valued at £6.25 million or Rs 57 crore. Flat number 103, Marathon House on 200 Marylebone Road, was owned by Purvi (Modi’s sister) and was bought in 2017 in the name of Belvedere Holdings Group Limited which is managed by Trident Trust in Singapore, which has been established by Monte Cristo Trust and has Purvi Modi as settlor and beneficiary.
The diamantaire’s eleven properties in Dubai worth over Rs 56 crore were also attached by ED. In Hong Kong, after the Union Bank of India filed a writ at the high court in September 2018 demanding Modi pay more than $5.49 million plus interest, after his firms allegedly defaulted on repayments, the ED, in October, attached Modi’s properties in Hong Kong worth Rs 255 crore. In total, the ED has attached Nirav Modi’s properties in four countries worth over Rs 637 crore.
A special Prevention of Money Laundering Act (PMLA) court had on 20 March 2019 allowed the CBI to sell 173 paintings and the luxury vehicles owned by Modi to raise funds to pay those he owed money to. The art collection was sold at a professional auction through an auction house, Saffronart, the first for India’s premier investigating agency. The CBI put up sixty-eight pieces of art and the bidding lasted over two hours with eight agents frantically working over phone bids and some more over online bids that came from the United States, Canada and Belgium.
Camelot Enterprises, a firm owned by Modi, had sent a legal notice through its law firm India Law Alliance to the department in a bid to stop the auction, terming it unlawful as ‘only 19 of the artworks from the 68 belongs to the company’. Nevertheless, the auction went through. The tax department had found the paintings in a climate-controlled room on Modi’s property and had linked it to Camelot and other companies of Modi to recover tax of Rs 95.91 crore. The department recovered a net of Rs 54.84 crore, after taking away the commission to the auction house and the buyers’ premium. V.S. Gaitonde’s untitled abstract artwork fetched Rs 25.24 crore, making it the most expensive bid for artwork from India.
A phone bid of Rs 16.1 crore secured Raja Ravi Varma’s 1881 artwork depicting the ‘Maharaja of Travancore and his brother welcoming Richard Temple-Grenville, 3rd duke of Birmingham and Chandos, Governor-General of Madras (1875-80) on his official visit to Trivandrum in 1880’. F.N. Souza’s ‘Cityscape’ and ‘Golly-wog’ went for over Rs 1 crore each, while Akbar Padamsee’s ‘Grey Nude’ fetched Rs 1.72 crore.
Modi’s fleet of thirteen luxury cars was sold through an online auction in April 2019 conducted by the Metal Scrap Trade Corporation (MSTC). The Rolls-Royce Ghost, Modi’s most expensive car, rumoured to ferry his three lap dogs, still had the steering wheel wrapped in plastic and the driver’s seat pushed behind. While his car was parked in his duplex home in south Mumbai, nine other cars were at Samudra Mahal, a luxury residential tower in Worli, Mumbai. Interested parties were allowed a look at the cars from 21–23 April, but there were no car keys provided to check out the interior of the car or test-drive it.
Yet, this did not deter enthusiasts from picking up a luxury ride at the auctions.
The Ghost pegged at Rs 1.33 crore sold for Rs 10,000 more. The Porsche Panamera sold for Rs 54.6 lakh, while his Mercedes-Benz 4Matic GL 350 CDI pegged at Rs 37.8 lakh sold for Rs 53.76 lakh. Modi’s Mercedes-Benz CLS 350 and Honda CR-V went under the hammer for Rs 16 lakh and Rs 10.26 lakh, while the highest bids for Choksi’s BMW X1 and Toyota Innova Crysta were Rs 11.75 lakh and Rs 18.06 lakh, respectively. In total, the ED raised Rs 3.29 crore, 9 per cent higher than the total base price set at Rs 3.01 crore.
During this time, reports of how Modi and Choksi cheated many also emerged. Paul Alfonso, a Canadian businessman, had met Modi at the Beverly Hills hotel during its centennial celebrations in 2012. The duo then ran into each other at events and clubs in Malibu and New York where Modi, the older of the two, seems to not just have shared a drink or two with the young Alfonso but also imparted wisdom to the moon-eyed entrepreneur. An impressed Alfonso stayed in touch with Modi and when he decided to pop the question to his girlfriend, it was Modi he first thought of to make for him the perfect engagement ring.
Unaware that Modi was a wanted man in India, Alfonso discussed in detail the design he wanted for the $100,000 engagement ring he had in mind. Modi offered him the ‘perfect’ 3.2-carat diamond at the wholesale rate of $120,000. But Alfonso’s girlfriend hinted she liked another ring featured in a magazine and so the enamoured beau contacted Modi to get that ring which included a 2.5-carat diamond for $80,000. Alfonso wired $200K to a Hong Kong account of the jeweller and received the delivery of the rings a fortnight later in Vancouver but without the authenticity certificates.
When the promised certificates failed to come even after Modi repeatedly assured him that he would send them, Alfonso’s suspicions grew. The couple took the rings to a valuer to get them insured, only to discover that they were fake. The stress of this tore the couple apart. The jilted fiancé has sued Modi for forgery and emotional distress to the tune of $4.2 million in a court in California.
Diamond experts like Hardik Hundiya and former employees like Santosh Srivastava, who was the managing director in Choksi’s company, too revealed how Modi and his uncle sold substandard diamonds and issued fake certificates.
But it wasn’t just jewellery that turned out to be fake.
Modi’s famous art collection was also found to include many fakes and investigators are also probing if Modi was involved in proliferating the art market with fakes as he often gifted his international clients and the crème-de-la-crème of Indian society paintings done by famous artists. Nirav Modi wanted to create an impression that he was a connoisseur of art with an eye to spot priceless artwork and upcoming talent. He was photographed often with several contemporary paintings donning the walls of his offices and homes. Like his paintings, he too was what met the eye.
Excerpted with permission from Escaped: True Stories of Indian Fugitives in London, by Danish Khan and Ruhi Khan; published by Ebury Press, an imprint of Penguin Random House.