Indian police say gold bribes given in $2 billion bank fraud case

Gitanjali Gems

03/03/2018 14:34

By Abhirup Roy and Krishna N. Das
    MUMBAI/NEW DELHI, March 3 (Reuters) - An official of India's
Punjab National Bank  PNBK.NS  received gold and diamond
jewellery from a billionaire jeweller accused of being involved
in a $2 billion bank fraud, the federal police told a court on
Saturday.
    The state lender in January uncovered the alleged fraud in
which several bank officials were suspected of colluding with
jeweller Nirav Modi and his uncle Mehul Choksi to issue
fraudulent letters of undertakings (LoUs), for their companies
to raise loans from overseas branches of mostly Indian banks.
    The Central Bureau of Investigation (CBI), which has
arrested 14 people in the case, on Saturday for the first time
said bribes were paid to at least one Punjab National Bank
(PNB)official by Modi.
    The agency told the court that Yashwant Joshi, who worked as
a manager in the forex department of the Mumbai branch that is
at the centre of the fraud, admitted to having received two gold
coins weighing 60 grams and a pair of gold and diamond earrings
from Modi.
    The articles have been recovered from Joshi's house in the
presence of independent witnesses, the CBI said.
    "This indicates that he was in collusion with the
beneficiary accused persons to cheat the bank," CBI Inspector D.
Damodaran said in a court filing. "He also obtained illegal
gratification from the beneficiary party for continuing issuance
of fraudulent LoUs."
    Joshi, who was committed to judicial custody by the Mumbai
court along with four other PNB officials and an associate of
Modi, could not be contacted for comment.
    Modi and Choksi, who owns Gitanjali Gems Ltd  GTGM.NS , left
India before the fraud came to light, but have said in letters
and statements they were innocent.
    PNB, India's second-biggest state lender, has mainly accused
two low-level employees of the Brady House branch of issuing the
LoUs without making corresponding entries in the bank's main
software, helping the fraud to go undetected for years.
    The CBI, however, has expanded its investigation and
arrested two internal auditors of the branch, among others.
    Separately, Indian TV channels reported that another Mumbai
court on Saturday issued non-bailable warrants against Modi and
Choksi following an appeal by the Enforcement Directorate (ED),
an Indian agency focused on foreign exchange and money
laundering offences.
    "Modi appears to be the prima donna in the whole saga of the
fraud perpetrated on the PNB," the directorate said in a filing
to the court seen by Reuters.
    "The case involves a circuitous web of routes created by the
said Modi and in such circumstances, the fraudulent transactions
appear to be in the personal knowledge and exclusive domain of
Nirav Modi".
    Modi has yet to be tracked by Indian authorities, but the ED
said "reportedly, Modi is presently in Hong Kong".  The agency
has already seized various properties of Modi and Choksi, as
Indian banks assess the hit to them from the fraud.
    State Bank of India  SBI.NS  and two other state-run banks,
Union Bank of India  UNBK.NS  and Allahabad Bank  ALBK.NS , are
lenders who had extended credit based on the LoUs issued by PNB
that were later found to be fraudulent. Allahabad Bank said on
Saturday it had a $366.87 million exposure to the case.

 (Reporting by Abhirup Roy in MUMBAI and Krishna N. Das in NEW
DELHI;
Editing by Stephen Powell)
 ((Krishna.Das@tr.com; +91-98711-18314,  +91 11 4954 8026;
Reuters Messaging: Krishna.Das.thomsonreuters.com@reuters.net,
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