A US investigation filed in a New York Bankruptcy Court has unveiled a bizarre instance of a diamond worth $1,88,000 transacted 4 times between various Nirav Modi companies to work up a transaction value of $3.6 million-nearly 20 times the original cost. This was to inflate the sales value in these firms to give the impression of a lot of business being transacted in the companies.
The investigation notes at least 4 such instances of round-tripping of diamonds to give the impression of high sales worth $213 million between Modi's entities and his shell companies.
The 165-page dossier submitted to the United States Bankruptcy Court Southern District of New York is prepared by John J. Carney, an examiner appointed by US bankruptcy court for the three US-based jewellery companies owned by PNB fraud accused Nirav Modi.
The 3.27 Carat diamond 'Fancy Vivid Yellow Orange Cushion Cut SI1' was exported thrice and imported once between August 8 and September 13, 2011.
Surprisingly, diamond experts confirmed that only 1 diamond of this characteristic was sold in public auction during the period for $188,000.
According to the dossier submitted in the New York court, on August 8, 2011, Firestar Diamond Inc (FDI, previously Firestone Inc.) sold the stone to Fancy Creations Company Ltd. for $1,098,802.
Approximately three weeks later, Solar Exports, reportedly a partnership formed by the Nirav Modi family trust, exported the diamond back to FDI for a much lower $183,087 - although closer to its actual value.
Six days later, FDI again exported the diamond to Fancy Creations Company, Ltd for $1,156,043.
Finally, two weeks later, Modi-owned A. Jaffe sold the gem to Sandeep Mistry's (an employee of Firestar India) company, World Diamond, for $1,218,991.
Incidentally, the reviewed records also show that FDI got instructions on moving the diamond from Mistry.
The investigation has concluded that Modi's companies indulged in round-tripping of the same funds and via various global entities to give the impression of higher business to secure more and more LoUs.
It says his entities in India 'shipped stones back and forth among themselves and other Modi controlled entities around the world, generating shipping invoices that were provided to PNB to secure LOUs.
More than 20 Firestar-controlled shell firms which were pretending to be independent third parties were used for round-tripping transactions across India, UAE and Hong Kong. These shipments were only intended to create customs records for securing more LoUs to pay previous LoUs
Some of the shadow entities mentioned in the report are:
Auragem Company Ltd,
Brilliant Diamonds Ltd,
Empire Gems FZE
Eternal Diamonds Corporation Ltd,
Fancy Creations Company Ltd,
Pacific Diamonds FZE,
Tri Color Gems FZE,
Unique Diamond and Jewelry FZC,
Universal Fine Jewelry FZE and
Vista Jewelry RJE, World Diamond Distribution FZE
While the investigations related to Nirav Modi scam are still ongoing in the country, the new report submitted in the US court may bolster India's efforts to attach assets and properties of Nirav Modi and his associates in the US.
On April 13, the court appointed the examiner to determine if the three US corporations indirectly owned by Nirav Modi and their officers and directors were involved in the criminal conduct alleged in India. The examiner was assisted by Alvarez & Marsal Disputes and Investigations, led by retired FBI special agent William B. Waldie. Indian forensic auditors BDO India, hired by PNB for internal audit after Nirav Modi scam, had later joined the investigation.
The investigators interviewed 45 people and analysed 1.8 Terabytes of data recovered from various sources. It concluded that Nirav Modi linked firms (including those in US) were involved in running shell companies, overpricing, round-tripping of diamonds and were beneficiaries of illegal LoUs.