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PNB Fraud Case: How Nirav Modi's employees colluded with bank officials to create fake LoU

New Delhi: For hours on Wednesday, sleuths from the Central Bureau of Investigation (CBI) were frustrated as they were trying to find out how fake Letter of Undertakings (LoUs) and Foreign Letter of Credits (FLCs) running into thousands of crores was drafted and subsequently sanctioned by the Punjab National Bank (PNB) officials. The two executives of Nirav Modi admitted to preparing and signing the applications made to PNB but they refused to disclose details how and where such applications were finalised.

The agency, which is in the process of unraveling of what is believed to be one of the biggest bank fraud case in recent history has claimed that it has seized copies of fraudulent LoUs which were found during the searches at the office of Nirav Modi owned Firestar Group of companies at Peninsula Business Park, Lower Parel. These applications, CBI claimed were prepared in the name of three firms –Diamond R US, Solar Exports and Stellar Diamonds and submitted to PNB’s Brady branch. The agency has alleged that Vipul Ambani, President (Finance) of Firestar group from May 2013 to November 2017 was fully aware of the fraudulent and illegal LoUs which were being issued by Gokulnath Shetty, retired Deputy Manager of PNB, in conspiracy and guidance of Nirav Modi.

"Vipul Ambani in his aforesaid capacity as President (Finance) was also visiting and meeting not only the officials of PNB, Brady House, Mumbai in the branch but also the officials of PNB, Circle and Zonal office at Mumbai and Head Office, New Delhi. In respect of question that who was preparing and maintaining the books of accounts of the aforesaid these firms, Vipul Ambani failed to give any answer or denial that he was not looking into the affairs of these firms. These documents (seized LoUs) and circumstances prove his knowledge of the fraudulent applications for LoUs being made in the same premises of Firestar Group of Companies and deliberate acts of omission by him by not protesting the issuance of such fraudulent LoUs, led to the continuance of concealment and large scale fraud in this case on PNB and loss and diversion of thousands of Crores of public funds. The aforesaid facts prove his part in this sinister conspiracy to cheat PNB," CBI has alleged.

 PNB Fraud Case: How Nirav Modis employees colluded with bank officials to create fake LoU

In its note, the agency has made a startling revelation that even top officials of the PNB beginning with the zonal to head office was aware of the business dealing with Nirav Modi's companies and the assertion that top officials were ignorant has been neutralised by the probe agency.

The fugitive diamond merchant had made his executive assistant Kavita Mankikar authorised signatory of all three companies — Diamond R US, Solar Exports, Stellar Diamonds — which have fraudulently obtained LoUs from PNB for issuance of buyers credit.

The probe agency said: "Kavita Mankikar had fraudulently signed the applications for issuance of the LoUs. During examination, she has not revealed the modus operandi of the scam and involvement of other persons from the firm as well as the Bank. Similarly it transpired that Arjun Patil, Senior Executive in Firestar International Private Limited had prepared the applications submitted to PNB, Brady house branch in the name of three companies. On examination, he has also not disclosed how and where such applications were fraudulently prepared."

Kavita has however, told the investigators that she was signing as authorized signatory of Diamond R US, Solar Exports, Stellar Diamonds as per the instructions and assurance of Nirav Modi without knowing the facts or ramifications of her actions.

Even Rajesh Jindal, the then branch manager, of the PNB branch under the scanner, was grilled for hours. He was questioned about the LoUs issued during his tenure in 2010-11, as he allowed Gokulnath Shetty to continue issuing LoUs without following existing banking procedure and Reserve Bank of India guidelines. Jindal, however, denied his involvement in issuance of LoUs. The CBI said all three employees of Nirav Modi and PNB’s Jindal are not coming out with the truth and stating that they are not aware of what was happening in PNB Brady house branch, at all.

“They have not been able to give any reasonable explanation for their aforementioned acts in not blowing the lid off the whole scam as mentioned above, as, if they had done so without being hand in glove with Nirav Modi and other co-accused, the scam would have been detected and stopped. But their act allowed it to flourish by turning a blind eye to the fraudulent events going on in the office premises of Firestar Group of Companies,” the CBI further said.

The agency, which is seeking 14-day police custody remand of officials for sustained interrogation has clarified that top officials of PNB will also be examined soon. The investigators are perplexed over the seamless flow of FLCs through SWIFT to overseas branch of various Indian Banks. The CBI officials said generally LCs needs to be authorized by three persons- first the person who is feeding it, second the officer who is verifying it and thirdly the person who is authorizing it.

“It seems, Shetty was playing the twin role of verifying and authorizing the LCs and had roped in someone to feed it in the system,” officials said.

But, the mystery is not over yet. Once the LCs are made, report is generated in a particular server. The CBI is trying to find out how Shetty manipulated the entire system and even compromised the report that was generated on the server beyond his jurisdiction.

“It could be possible that he was not passing on the voucher to be recorded in CBS of the PNB but surprisingly, the LCs sent abroad would be credited to PNB Nostro account. The account is reconciled if not every day then at least once in a week because funds are transferred in foreign currency. Why no one at PNB checked it for several years is the big mystery needs to be unraveled,” the CBI officials further added.

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Updated Date: Feb 22, 2018 17:47:00 IST

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