ED has accused Choksi of diverting Rs 3,257 crore of the Rs 6,000 crore credit accessed by his group companies from PNB.
New Delhi: The Enforcement Directorate (ED) has accused fugitive diamond trader Mehul Choksi of indulging in circular trading through dummy companies, so-called “air to air” exports and split consignments, and inflating stock value to perpetrate, along with his nephew Nirav Modi, a fraud on the state-owned Punjab National Bank (PNB).
ED investigators who asked not to be identified, highlighted these findings from their investigation file after Choksi, in a Sunday interview to Hindustan Times, accused the agency of reducing his brand value to zero. He also claimed that since ED has attached all his properties, he has no money to pay back PNB.
“They (the PNB) can sell off my assets and pay whoever has to be paid. They should take it from the ED, I am in no position to return any money,” Choksi told HT.
On Tuesday, Choksi repeated the same comments in a TV interview.
Also read: I’m no defaulter, being made soft target for 2019 as Modi govt is under pressure: Choksi
The ED’s investigation document, which has been seen by HT, arrives at the same conclusion as the Central Board of Investigation’s (CBI) investigation: that Choksi obtained letters of undertaking and credit from PNB to settle previous obligations. Money generated through letters of undertaking and credit was partly remitted back to Choksi’s Gitanjali group companies in the guise of export-import transactions for settling earlier liabilities, it adds.
“The remittance emanated from the dummy firms in Hong Kong on account of purchases/export transactions were transferred to different banks (accounts) of Mehul Choksi/Gitanjali Group of Companies operating in India. Part of the funds were routed to overseas companies controlled by Mehul Choksi located in USA, UAE, UK, Hong Kong and Thailand in the guise of export-import transactions,” states the documents which is part of the formal charges filed against Choksi.
The only purpose of these companies was to serve as a conduit for these transactions, the probe document claims.
“There was no manufacturing activities in any of the overseas companies (of Mehul Choksi) situated Hong Kong and UAE; only bogus import and export and sale among themselves were carried out. The invoices of export/import were overvalued to a huge extent, so as to inflate the balance sheets and procure higher credit facilities from the bank. The export/import was also not genuine and was just rotational transcation,” states the ED probe document.
ED investigators also allege that directors and partners of these Hong Kong-based dummy companies used to act on the instructions of Choksi and his trusted lieutenants and they didn’t have any authority to take any decision. No board meeting of these companies were held, although fake minutes of non-existent meetings were prepared and directors were also asked to sign them.
Also read: A 2016 affidavit filed in Gujarat HC had warned about Mehul Choksi’s escape from India
“These companies were opened at Choksi’s behest and were controlled by him,” said one of the ED investigators.
ED, which is a nodal agency to probe cases under the Prevention of Money Laundering Act, has moved against Choksi and Modi under the new Economic Fugitive Offenders Bill and a Mumbai special court will hear its applications on September 25 ( Modi) and 26 ( Choksi), say agency officials.
“Since the matter is sub-judice, I would not like to say anything at this juncture,” said Choksi’s lawyer Sanjay Abbot.
ED has accused Choksi of diverting funds to the tune of Rs 3,257 crore out of the around Rs 6000 crores worth of letters of undertaking and credit filed by his group companies. Almost Rs 3000 crore of this was diverted to the US and the UAE, it alleges.
ED says Choksi used several techniques to layer and hide these fake exports/imports.
One of this, it claims in its document, was “air to air exports”.
“Under this system the consignments exported from India to Hong Kong or from Hong Kong to India were routed through Dubai but were not getting cleared through customs at the UAE airport. The same were exported as it is to the next destination in Hong Kong or India, as the case might be,” said the document. Investigators say this created an additional ‘layering’ in money laundering.
Another was a “split consignment” trick, where the Mumbai-based head office of Gitanjali group broke up its fake imports before re-exporting them so as to avoid suspicion.
“Naturally the failure of Modi-nomics and Jaitley-nomics has decimated India’s economy, the banking system and people’s faith in the economy,” he alleged.
The Congress on Tuesday accused the Modi government of leaving “gaping holes” in the process of bringing back Choksi and giving him a “clean chit” that enabled him to escape from the country early this year. Congress spokesperson Randeep Surjewala asked why Choksi was allowed to keep his Indian passport until February.
“The MEA and other authorities had already given him a ‘clean chit’ on May 2017 for securing the citizenship of Antigua and he became a citizen of Antigua in November 2017. It is intriguing that Modi government permitted the Indian passport of Mehul Choksi to remain valid until February 16, 2018, helping him escape on January 4, 2018,” he said.
The Bharatiya Janata Party has consistently denied any collusion and said it is trying to bring Choksi and Nirav Modi to justice.
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