Prosecution outlines fraud and money-laundering charges against Nirav Modi in London courts

LONDON: Billionaire jeweller Nirav Modi was accused on Monday, the first day of his five-day extradition hearing, of defrauding Punjab National Bank of more than $1 billion (Rs 7,588 crore) via 1,214 letters of undertaking (LoUs) he obtained by circulating poor-quality jewellery between companies he ultimately controlled that were fronted by dummy directors.
"The papers fall into fraud, money-laundering and the rotation of goods around the Modi empire of companies in a fairly dismal round of exports and imports all linked to companies of which Nirav Modi is ultimately in control," said Helen Malcolm, representing the Crown Prosecution Service, as she outlined the case against the 49-year-old at Westminster magistrates’ court.
From 2011 until 2018 Nirav obtained "eye-watering sums of money" by using "the usual fraud tool kit, a few lies, a few post-dated documents, threats and bribery and the laundering of the proceeds," she told the court.
The directors and owners of all the companies were "ciphers" put in by Modi to hide his connection to the companies. "Goods circulated in a dizzying motion and yet the jewellery circulated was of poor quality. This was a way of getting funds into the Modi family coffers and boost other Modi enterprises. This is evidence of the fraudulent character of Modi," Malcolm said. "In large part it was a circular Ponzi scheme of borrowing," she claimed.
"The diamonds were not studded on the jewellery but glued on for easy rotation. Dubai would, for example, send pearls to four or five Modi companies in Hong Kong; there they would increase their value and then export them again," she said.
"Thirteen companies have been uncovered in the UAE and six in Hong Kong. The evidence is they did no virtually no genuine trade. Instead they were set up to show inflated transactions," she said.
The purpose was to avail funds from PNB by means of LoUs that guaranteed payments. "The chain of instructions began with Nirav and his brother Neeshal," she said.
She said the money from the bank was used either to pay earlier debts or benefit Nirav and his immediate family. She gave, as an example, how between 2011 and 2016, £95 million (Rs 888 crore) was transferred from one of his partnership companies, Diamonds R Us, to Nirav’s personal accounts.
When this was uncovered Nirav and his brother Neehal allegedly started to threaten and intimidate witnesses, Malcolm said. The dummy directors in the UAE were sent to Cairo where their passports were removed and they were kept against their will and asked to file forced statements. Nirav threatened one with death and tried to bribe him with £22,000. Neehal destroyed their mobile phones and server in the UAE to get rid of evidence, she claimed.
She also claimed that Nirav and his brother instructed a team of reputable lawyers in Mumbai and in February 2018 — unsolicited — delivered 60 cartons of original documents to their offices on the very day Nirav’s offices were being searched by the CBI and ED. "He did this to remove documents from the eyes of the investigative agencies," she said.
Nirav, who denies the charges, was dressed in a smart black jacket and pale pink shirt and was sat at a desk with large bound files where he took notes as he appeared via a video link from prison.
"The sums are so huge that it is difficult to see how any bank would take the risk of billion dollars of unsecured debt. This was not authorised and Mr Modi had been challenged to provide a loan agreement and has not," Malcolm said.
She explained how Nirav worked with co-conspirators at the bank, notably Gokulnath Shetty, former deputy manager in the forex department.
She claimed "very large sums of money were paid into Shetty’s accounts in cash" and that in May 2015 Nirav tried to influence a prestigious college to give a place to Shetty’s son, but did not succeed.
The hearing continues.