How Nirav Modi amassed wealth using PNB LoUs for own shell companies
Fugitive businessman and main accused in PNB fraud case Nirav Modi created a diamond empire in a very short span of time. But an investigation by India Today has found that his diamond business was a actually a facade created with ill gotten money attained through the fraudulent letters of undertaking (LoUs) he had received from the Punjab National Bank in name of his alleged clients.
It seems to have been a meticulous planning by Nirav Modi, who created a string of shell companies in Hong Kong and other places. India Today visited the shell companies floated in Hong Kong. These were the same companies for which LoUs from the PNB were issued.
These LoUs were worth thousands of crores of rupees and the PNB lost all this money to Nirav Modi's shell companies. The money received by these shell companies was later round-tripped to bank accounts of some other companies floated by Nirav Modi in India.
Most of these companies were located in business districts of Hong Kong. Some of the shell companies are located in Mauritius and Antwerp, Belgium. The Hong Kong-based shell companies of Nirav Modi were paid by means of LoUs issued by the PNB through six branches of other banks. Many of these companies are being probed by the central investigation agencies.
INDIA TODAY IN HONG KONG
One of the shell companies floated by Nirav Modi and his associates is Sino Traders, which has its office in the World Trust Tower on the Stanley Street in Hong Kong. When India Today team visited the address, it found that Sino Traders operated from the same address as was given to the PNB for a client company called, the Eternal Diamond Corporation Limited.
The building management of the World Trust Tower told India Today that the company had shut its office nearly six month ago. The office space is occupied now by a different company, whose officials told that the Eternal Diamond Corporation Limited had another office on the 16th floor of the same building.
Repeated knocks on the doors of the 16th floor office of the Eternal Diamond went unanswered. Later, the building management confirmed that the office was registered in the name of the Eternal Diamond Corporation Limited which was run by a person named Ashish Bagaria.
Now, who is Ashish Bagaria and what is the role of the Eternal Diamond Corporation Limited in PNB fraud?
The names of Ashish Bagaria and the Eternal Diamond Corporation Limited have cropped up in investigation by the Enforcement Directorate. The agency has found that money sent to Sino Traders was routed to the bank account of the Eternal Diamond, which, in turn, sent the money to an Axis Bank account in India. The end beneficiary account was reported to belong to another shell company floated by Nirav Modi.
Documents from the PNB show that the Stellar Diamonds and Solar Exports were beneficiaries of the LoUs issued in the name of Sino Traders. The money was round-tripped by the Eternal Diamond which sent crores of rupees to the accounts of these two companies. So, two companies having the same address shuttled money to each other's bank accounts.
The Eternal Diamond has shifted, India Today team learnt, to another business district at Hung Home Industrial Area. Company's website showed it operating from Hung Home office but the office at the address had shut the shop. Sources said that it seems to have been a fly by night company floated by Nirav Modi and his associates to defraud banks.
Calls were made to Bagaria's Hong Kong number which he answered once and identified himself but later disconnected the call. Later, a few calls were made to the India Today reporters tracking the shell companies in Hong Kong from private numbers which went blank.
What else in the web of shell companies that was used to con PNB?
Sunshine Gems is another shell company which received funds through LoUs. Its address mentioned in the list of LoUs beneficiaries was abandoned at Harbour Center Tower in Hung Home area of Hong Kong. This address is close to the place where Eternal Diamond's office was located.
A woman working in the office, where Sunshine Gems was located, told India Today that the office had shifted to a new address. The new address was also found to be empty and people working on the same floor said that the office was closed for past few months.
Interestingly, the notice stuck on the office entrance said that it was closed due to Chinese New Year and would reopen after the event. This points out that the office was functional in Hong Kong till February, when the PNB scam was unearthed in India.
Solar Exports, Stellar Diamonds and Diamonds R US got inward remittances and money was transferred to Aura Gems, Sino Traders and Sunshine Gems in Hong Kong through the LoUs issued by the PNB. The money was then eventually sent back to Nirav Modi-run companies through Eternal Diamond/Sino Traders, Fancy Creations and Aura Gems in 2014.