Funds swindled by Nirav Modi could be much higher than earlier estimates

File photo of Nirav Modi
The total amount borrowed by diamantaire Nirav Modi — who was declared a fugitive economic offender by a special court here on Thursday — is much higher than the earlier estimates, said people aware of the forensic examination of the multi-billion-dollar fraud that hit Punjab National Bank (PNB) last year. He is the second Indian to be declared a fugitive economic offender, after liquor baron Vijay Mallya. 

PNB officials declined to specify the exact numbers of letters of undertaking (LoUs) issued to Modi, if all related records in their possession were shared with BDO India (which is conducting the forensic audit in the case), and the exact value of loans taken by him over nearly a decade.

According to a person familiar with the forensic probe, “Only 40 per cent of the forensic information required was made available by PNB and as such, there is no way that one can put a cap on the total value of LoUs issued.” He said the probable value is far greater than any public or private estimate shared, so far.

The LoUs were not issued just from PNB’s Brady Road branch, but also other PNB locations and by a nexus of closely knit individuals working together for quite a while. “This was a well-thought and complicated exercise. It was not the work of one man,” he said.

There is no way to determine exact amount Modi and his crew had borrowed over the last decade because the LoU copies and data, made available by PNB to the forensics auditing firm, did not cover the entire duration of the fraud, which began in 2011. BDO India did not respond to queries at the time of going to press. 

The economic fugitive declaration will lead to all of Modi’s assets in India that include luxury cars, art, jewellery, and real estate be confiscated by the central government.

Modi, who was hoping to float an IPO for his luxury jewellery business last year, started taking LoUs from lenders using a “trial and error” method that began with borrowing smaller amounts, which were actually paid back the first few times. Out-of-turn loans became progressively larger and before he fled, Modi took out one final LoU worth close to Rs 6,800 crore or nearly $ 1 billion.

Legal documents filed by PNB with the Debts Recovery Tribunal in Mumbai show he took at least 150 LoUs through illegal means. Those were taken in an almost equal ratio by his firms Stellar Diamond, Solar Export, and Diamond R US. These firms are related to other group companies that include Firestar Diamonds and Firestar Diamonds International Private, which are also linked with two family trusts run by him.

The final forensic report was submitted later last year.

However, those tracking the matter say that if the bank chooses, further investigations could be undertaken out to achieve an accurate picture.

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