Fly on the wall : The 10-day silence in Rs 11400 crores Scam ?

by Harish Gupta, National Editor, Lokmat Group

The 10-day silence in Rs 11400 crores LoU Scam ?

It is no secret that the diamond business of Mama-Bhanja (Nirav Modi and Mehul Choksi) came crashing on January 16 this year when an executive of Nirav Modi went to the Brandy branch of the PNB to clear the LoU. The cat was out of the bag as the handling deputy manager alerted his seniors of something fishy. All hell broke within hours and the top management got in touch with Nirav Modi who was holidaying in New York. His top executives in India including CFO Ambani kept telling the PNB that monies are being arranged. The shaken PNB management kept negotiated fo full ten days and tried hard to persuade Choksi and Modi to to arrange for collateral and matching securities. Finally, the Managing Director Sunil Mehta told the Banking Secretary in the Finance Ministry who conveyed to Finance secretary Hasmukh Adhia who in turn conveyed the biggest scam under the NDA to the Finance Minister. It transpires that Adhia informed the PMO and Jaitley too briefed the PM on the issue separately. Finally, the PNB decided to lodge a formal CBI complaint on January 28 of cheating relating to Rs 280 crores. The CBI started looking into the matter and three days later, it registered the case on January 31. The second complaint amounting to Rs 11400 crores was reported on February 13.

Value of Nirav Modi properties is Just Rs 800 Cr

The Enforcement Directorate bragged within two days of raids on Nirav Modi's establishments across the country that value of seized assets including flats and properties is Rs 5700 crores. However, the valuers and assessors of properties, jewellery and diamonds are still struggling to assess the actual value of seized assets. An informed source in the ED said the total value of immovable assets of Nirav Modi is around RS 800 crores only. The ED is yet to get hold of the actual ownership documents of all the properties if they had not already mortgaged to banks or otherwise. The ED's legal department is still struggling to discover if the properties are free from any collateral for picking up loans. What surprised industry veterans is that speed with which ED assessed the value of diamonds which is an extremely tedious process. In fact, the whole scam of Nirav Modi was to import rough diamonds and export them or sell them in Indian market at a very high price after cutting and polishing them due to his designing skills and high brand value. So far, the ED had conducted searches at over 200 premises of Modi as well as Gitanjali Gems and seized diamonds, gold and precious stones worth Rs 5700 crores based on the “tag value” or the “book Value” of the diamonds and jewelery. The book value cannot be true estimate of the goods recovered. The tag value is highly inflated. In fact, when the banks sanction loans against imported stock of rough diamonds to jewelers, there is no way to assess the true value because most valuers have no knowledge themselves or they look the other way. This is used for over-invoicing and under invoicing. The Income Tax department had also attached and froze 103 bank accounts and 40 properties of the Modi group of firms, but the value of this attachment has not been given by the IT so far.

Having declared the true value of stocks and properties as Rs 5700 crores, the ED is now in a tight spot. It transpires that the value of diamonds, gold & jewelery is in the range of Rs 1400-1500 crores. One of the reasons for this is that Nirav Modi used to import cheap quality rough diamonds and divert them after value additional in the domestic market at a very high price rather than exporting them.

Nirav Modi’s Hyderabad SEZ scam

The ED  detected that Nirav Modi's Hyderabad-based SEZ was overvalued in the books of Punjab National Bank (PNB)  huge variation in actual inventory and their book value. The difference was as huge as Rs 3,500 crore. The SEZ on an area of 250 acres was sanctioned by the UPA government and inaugurated by then Chief Minister Y.S. Rajasekhara Reddy in 2005 and then it was named as Rajiv Gems Park. In 2014, the name was changed to Gitanjali Gems Park which houses all the five firms owned by Nirav Modi and his associates.  The raids at five gems and jewellery units located at a hardware park at Raviryala village in Maheswaram mandal of Ranga Reddy district, about 30 km from the city. The actual value of 100 odd boxes and containers at the Gitanjali Gems Park, was Rs 300 crore, but the book value in the group’s computers is mentioned around Rs 3,800 crore. This SEZ is the biggest processing unit of the Nirav group’s gems and jewellery. The group used to import raw and uncut stones from Hong Kong and other places and processed them at Surat, Pune and other places in Gujarat and exported them to UAE, EU and other destinations. Shockingly, the there were only 400 employees at the SEZ as against the 1,850 shown in the records. The EPF was deposited in the names of 1850 employees. Perhaps to jack up job data and siphon money as well.

A Cultural Shift at AICC under Rahul Gandhi

We had already reported in these columns that Congress President Rahul Gandhi will not have a Political Secretary like his mother had for 20 long years. It had also been reported that he will hold Public Darbars at the AICC to meet with the common man and interact with Congress workers. It now transpires that Rahul Gandhi is undertaking a big shift in party's policy. His latest Mantra is to buy peace in his own party first and tell party leaders in states to close ranks. Before stepping up his campaign to talk to like-minded parties, he wants that Congress should regain its lost glory. Gone are the days when he was not available and had virtually become incommunicado. He never responded to SMSes, didn't care for the waiting guests and canceled appointments at will. Now he is playing on the front foot and inviting all those who left the party. He has been telling all PCC chiefs that its their responsibility to keep flocks together and spending hours and hours with leaders of each state. The way Shiela Dixit and Ajay Maken buried the hatchet and Arvind Singh Lovely returned to the party fold in Delhi is an indication of this cultural shift. He is also giving free hand to the Chief Ministers with a clear message that they will have to keep the flocks together. The target is May 2019. He told Karnataka CM Sidhharamaiah to do whatever he likes. But he shouldn't ignore other leaders. His focus is Maharashtra, Rajasthan, Madhya Pradesh, Chhattisgarh, Haryana, Himachal, Punjab and even Bihar where the Congress can stage a big come back in 2019 to take on Modi.

Caution, Chowkidar is asleep

by Harish Gupta, National Editor, Lokmat Group

CAUTION, CHOWKIDAR IS ASLEEP

So, with the Nirav Modi (NiMo) and Mehul Choksi scam hitting Rs 11,400, and still counting, the country seems to have doggedly refused to stray from its path of letting the financial systems open 24X7 for plunder. It might have begun with the Nagarwala case in the high noon of the early Indira Gandhi era. It could have evolved into the Harshad Mehta (early 1990’s) and Ketan Parekh (early 2000’s) saga, in which the two worthies in effect looted banks to fuel stock prices to dizzy heights. And, with the financial system being the platform on which the corporate system rests, the systemic destruction was in public view in 2009, with the brazen fiddling by B. Ramalinga Raju and associates of profit and loss figures of the erstwhile Satyam Computers, in cahoots with PriceWater house Coopers, the world famous auditors.

In fact that was a major reason why voters thought they’d had enough of it, gave an almighty shove to the Congress-led government,and welcomed a regime led by one who proudly promised : na khaunga na khane dunga(“neither will I steal nor will let others steal”) and will be your Chowkidar (Guard) for 24X7.

However, the two diamond traders’ recent escapades, in obvious collusion with a gaggle of officials of Punjab National Bank and their unknown patrons, has turned Prime Minister Narendra Modi’s much-quoted pre-2014 assurance into a bizarre mockery. And the dimension of the theft too is poised to leapfrog over time, as more claims accumulate with PNB due to the fraudulent Letters of Undertaking (LoU) issued to banks abroad in favour of the ‘diamond duo’. Till last year, the duo could easily float below radar as they had a key ‘friend’, Gokul nath Shetty, PNB's Deputy Manager, who had enabled them to “roll over” the credits after the termination of the statutory 90-day period. The trick of the trade lay in circulating the LoU over SWIFT, the secure telecom network that connects banks the world over, without informing the bank’s own Core Banking Solutions (CBS). It is like your partner withdrawing cash from a joint account without informing you.

Or something even more serious! Because the rogue partner can cheat you only to the extent of your own net worth. But a PSU bank is owned by none other than the President of India. No government so far has agreed to bring its stake down to below 50 per cent. So it remains a ‘sovereign risk’ which, if left unchecked, has the potential to recoil on the exchequer. 

The question is: why did a government wedded to the promise of “na khane dunga” look the other way when NiMo’s companies were splurging on unexplained and undeclared bank credit for over seven years? How did Shetty continue in the forex department of PNB despite a Central Vigilance Commission rule that the incumbent in sensitive post should be transferred after three years? Why Shetty's three transfer orders were canceled? What were the bank’s army of external auditors doing? And where were RBI’s team of hundreds of inspectors who have the powers to inspect any branch, anytime and any account ? Why was the Modi administration so oblivious of  daylight robbery in its own banks?

Well, it can be attributed to the typical Indian lethargy to fight corruption. But there is yet another explanation why Nirav Modi's shenanigans went unnoticed under the NDA for almost four years. How will the ‘bigger Modi’ assuage his critics who point at his group photo with the ‘little M’ at the WEF conclave in Davos, taken days after the CBI had filed an FIR against the businessman? Besides, Nirav Modi is the brother of Nishal, who is son-in-law of the Salgaokar family of Goa, closely related to the Ambanis, the country’s richest clan. The CFO of Nirav’s holding company being grilled by CBI is nephew of the late Dhirubhai Ambani, the Reliance founder.

In the past, the likes of Harshad Mehta and Ketan Parekh defrauded the  nationalised banks and played havoc in the share market because of systemic inadequacies. Some of these flaws were indeed fixed, which is why the capital market today is fully screen-based, with adequate disclosure norms in place. The corruption-prone badla system was replaced by a mature derivatives market. But the banking sector remained largely untouched, except that Raghuram Rajan, as RBI Governor, initiated the diagnostic steps. These showed how deep the rot had gone. The bad loans of public sector banks were 4.4 per cent in March 2014 against 2.09 per cent in 2008-09. After the change in government, as Rajan was forcing the banks to own up their losses and today the figure of NPA is over 14%. Rajan didn't have a cordial relationship with the Modi government is too well known. He went, and even the disclosures stopped. Choking under bad loans, the PSU banks began putting squeeze on total advances last year, for the first time in two decades. The banking sector’s bad loans, together with loans being rolled over and under restructuring, have hit a dizzying Rs 10 lakh crore, which is 3X the country’s tax revenues. If one looks at only PNB, its NPA has shot up three times between 2014 and 2016, from Rs 18,800 crore to Rs 55,818 crore. And roll overs are tubmling out of the closet of one bank after the other.

It is clear that somewhere someone is involved and guilty of connivance, ignorance or humungous lapse. Narendra Modi handles all appointments, transfers, postings in government & banks. He reads every complaint and mail sent to him and responds as well. His Man Ki Baat is a testimony to his actions. He gave a dressing down to the jewelers at a huge conference in 2015 and imposed taxes on them which no PM could dare in the past. But did he measure up to the job of chowkidar (sentry) when it came to guarding banks' coffers ? Pollsters say his ratings remain high. But as another election draws near, the chinks in Modi's armory are clearly showing.

(The author is National Editor, Lokmat group)

Nirav Modi offers Rs 50 crores a month repayment plan

by Harish Gupta, National Editor, Lokmat Group

A deafening silence; Is something cooking ?

Nirav Modi offers Rs 50 crores a month repayment plan 

Harish Gupta

New Delhi, Feb 18

The Modi government seems to have decided not to directly comment on the Rs 11400 crores PNB’s LoU scam. In a tactical move, the government decided to distance itself from the most embarrassing mega scam of  its regime and allow the banks and investigation agencies to deal with it.

Highly placed sources in the finance ministry disclosed here today that the PNB and all those connected with the banking industry are burning mid-night oil over the latest offer made by wanted diamond king Nirav Modi to the government. It transpires that Modi has made a latest offer to the PNB, Income Tax and ED that he is willing to repay every legitimate penny due towards him . In separate emails received by the PNB and IT and ED, Modi has said he will pay Rs 50 crores a month provided he is allowed to continue his business activities as usual. He had done no crime as made out to be and followed normal banking practices.

It transpires that the PNB management had termed the offer of Nirav Modi as “Vague” when its MD & CEO Sunil Mehta held his press conference three days ago. However, in the latest submission sent through email, Nirav Modi has offered Rs 50 crores a month to settle all his dues.

The PNB and other banks are busy fixing the financial liabilities of the Nirav Modi group companies and busy segregating the liabilities of Mehul Choksi of Gitanjali group companies. Roughly, Nirav’s liabilities are of Rs 5000 crores only if penalties, interest, etc are not included. But it is for the  PNB management to first vet the offer of Nirav Modi on merit and convey to the concerned authorities. The government says it has no role to play in what is happening between Modi and PNB. Even the Income Tax and ED are doing their work as per law and Modi will have to deal with them directly.

Yet, the government wants the resolution of the Nirav Modi issue if its within the realm of possibility. But the Rs 50 crore a month repayment offer is unlikely to be accepted as its too meager an amount.

Its largely because of this very reason that the government is moving with caution and has not declared Nirav Modi a fugitive and suspended his passport for a month. He has been issued with a show cause notice and no arrest warrants have been issued against him either.  

The deafening silence of top two functionaries of the government indicates that something is cooking and forces are at work to get at Nirav Modi back through intermediaries.

The Prime Minister addressed two functions today;  inaugurated new BJP headquarters in the morning and Magnetic Maharashtra Summit in the evening. But he did not even remotely touch upon the Rs 11400 crores PNB scam. Union Finance Minister Arun Jaitley also chose to stay away from any public glare and maintained a studied silence on the issue. Though five Union Ministers including Defence Minister Nirmala Sitharaman, Law Minister Ravi Shankar Prasad and HRD Minister Prakash Javadekar were fielded by the party to rebut Opposition charges. But the silence of PM and Jaitly is an indication that the government is keeping itself at arms length from the scam.

Fly on the wall : The 10-day silence in Rs 11400 crores LoU Scam ?

by Harish Gupta, National Editor, Lokmat Group

The 10-day silence in Rs 11400 crores LoU Scam ?

It is no secret that the diamond business of Mama-Bhanja (Nirav Modi and Mehul Choksi) came crashing on January 16 this year when an executive of Nirav Modi went to the Brandy branch of the PNB to clear the LoU. The cat was out of the bag as the handling deputy manager alerted his seniors of something fishy. All hell broke within hours and the top management got in touch with Nirav Modi who was holidaying in New York. His top executives in India including CFO Ambani kept telling the PNB that monies are being arranged. The shaken PNB management kept negotiated fo full ten days and tried hard to persuade Choksi and Modi to to arrange for collateral and matching securities. Finally, the Managing Director Sunil Mehta told the Banking Secretary in the Finance Ministry who conveyed to Finance secretary Hasmukh Adhia who in turn conveyed the biggest scam under the NDA to the Finance Minister. It transpires that Adhia informed the PMO and Jaitley too briefed the PM on the issue separately. Finally, the PNB decided to lodge a formal CBI complaint on January 28 of cheating relating to Rs 280 crores. The CBI started looking into the matter and three days later, it registered the case on January 31. The second complaint amounting to Rs 11400 crores was reported on February 13.

Value of Nirav Modi properties is Just Rs 800 Cr

The Enforcement Directorate bragged within two days of raids on Nirav Modi's establishments across the country that value of seized assets including flats and properties is Rs 5700 crores. However, the valuers and assessors of properties, jewellery and diamonds are still struggling to assess the actual value of seized assets. An informed source in the ED said the total value of immovable assets of Nirav Modi is around RS 800 crores only. The ED is yet to get hold of the actual ownership documents of all the properties if they had not already mortgaged to banks or otherwise. The ED's legal department is still struggling to discover if the properties are free from any collateral for picking up loans. What surprised industry veterans is that speed with which ED assessed the value of diamonds which is an extremely tedious process. In fact, the whole scam of Nirav Modi was to import rough diamonds and export them or sell them in Indian market at a very high price after cutting and polishing them due to his designing skills and high brand value. So far, the ED had conducted searches at over 200 premises of Modi as well as Gitanjali Gems and seized diamonds, gold and precious stones worth Rs 5700 crores based on the “tag value” or the “book Value” of the diamonds and jewelery. The book value cannot be true estimate of the goods recovered. The tag value is highly inflated. In fact, when the banks sanction loans against imported stock of rough diamonds to jewelers, there is no way to assess the true value because most valuers have no knowledge themselves or they look the other way. This is used for over-invoicing and under invoicing. The Income Tax department had also attached and froze 103 bank accounts and 40 properties of the Modi group of firms, but the value of this attachment has not been given by the IT so far.

Having declared the true value of stocks and properties as Rs 5700 crores, the ED is now in a tight spot. It transpires that the value of diamonds, gold & jewelery is in the range of Rs 1400-1500 crores. One of the reasons for this is that Nirav Modi used to import cheap quality rough diamonds and divert them after value additional in the domestic market at a very high price rather than exporting them.

Nirav Modi’s Hyderabad SEZ scam

The ED  detected that Nirav Modi's Hyderabad-based SEZ was overvalued in the books of Punjab National Bank (PNB)  huge variation in actual inventory and their book value. The difference was as huge as Rs 3,500 crore. The SEZ on an area of 250 acres was sanctioned by the UPA government and inaugurated by then Chief Minister Y.S. Rajasekhara Reddy in 2005 and then it was named as Rajiv Gems Park. In 2014, the name was changed to Gitanjali Gems Park which houses all the five firms owned by Nirav Modi and his associates.  The raids at five gems and jewellery units located at a hardware park at Raviryala village in Maheswaram mandal of Ranga Reddy district, about 30 km from the city. The actual value of 100 odd boxes and containers at the Gitanjali Gems Park, was Rs 300 crore, but the book value in the group’s computers is mentioned around Rs 3,800 crore. This SEZ is the biggest processing unit of the Nirav group’s gems and jewellery. The group used to import raw and uncut stones from Hong Kong and other places and processed them at Surat, Pune and other places in Gujarat and exported them to UAE, EU and other destinations. Shockingly, the there were only 400 employees at the SEZ as against the 1,850 shown in the records. The EPF was deposited in the names of 1850 employees. Perhaps to jack up job data and siphon money as well.

A Cultural Shift at AICC under Rahul Gandhi

We had already reported in these columns that Congress President Rahul Gandhi will not have a Political Secretary like his mother had for 20 long years. It had also been reported that he will hold Public Darbars at the AICC to meet with the common man and interact with Congress workers. It now transpires that Rahul Gandhi is undertaking a big shift in party's policy. His latest Mantra is to buy peace in his own party first and tell party leaders in states to close ranks. Before stepping up his campaign to talk to like-minded parties, he wants that Congress should regain its lost glory. Gone are the days when he was not available and had virtually become incommunicado. He never responded to SMSes, didn't care for the waiting guests and canceled appointments at will. Now he is playing on the front foot and inviting all those who left the party. He has been telling all PCC chiefs that its their responsibility to keep flocks together and spending hours and hours with leaders of each state. The way Shiela Dixit and Ajay Maken buried the hatchet and Arvind Singh Lovely returned to the party fold in Delhi is an indication of this cultural shift. He is also giving free hand to the Chief Ministers with a clear message that they will have to keep the flocks together. The target is May 2019. He told Karnataka CM Sidhharamaiah to do whatever he likes. But he shouldn't ignore other leaders. His focus is Maharashtra, Rajasthan, Madhya Pradesh, Chhattisgarh, Haryana, Himachal, Punjab and even Bihar where the Congress can stage a big come back in 2019 to take on Modi.