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Breakthrough in PNB fraud case, international business head of Gitanjali Gems traced to US

ED begins process to extradite Sunil Varma, who fled days before PNB scam broke last year, involving diamond merchants Mehul Choksi & Nirav Modi.

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New Delhi: In a major development in the Punjab National Bank (PNB) fraud case, the Enforcement Directorate (ED) has traced the location of the international business head of Gitanjali Gems, Sunil Varma, to the US and started the process of extraditing him.

According to a source in the agency, Varma had fled the country just days before the nearly Rs 14,000-crore PNB scam broke last year in January, involving diamond merchants Mehul Choksi and Nirav Modi. Choksi is the owner of Gitanjali Gems.

The same ED source said that extradition of Varma will be a big step as he had played a “crucial role” in executing the letters of undertaking (LoUs) that were fraudulently obtained. Varma was also named in the ED chargesheet filed in a Mumbai court last year in July.

An LoU is not a loan but a guarantee given by a bank in India to an overseas bank, stating that it would meet the liability if the firm borrowing from it (foreign bank) defaults. Diamond firms use LoUs for securing cheap, low-interest “buyer’s credit” in dollars overseas, mostly to purchase rough diamonds. Banks are always supposed to cover their LoUs against collaterals, which allegedly wasn’t done in this fraud case.

A Foreign Letter of Credit, on the other hand, is given to banks overseas to ensure that payment can be made to foreign suppliers.

“He (Varma) was even summoned in the case after his role in the fraud was ascertained. He, however, fled the country by then,” an ED source said.

The ED has also requested Interpol to issue a Red Corner Notice (RCN) against Varma, which is still pending.


Also read: CBI sent most requests for Interpol red corner notices the year Nirav Modi, Choksi fled


Choksi, his aides bigger defaulters than Nirav Modi

According to the ED’s chargesheet, Choksi, who is also the owner of Gili India and Nakshatra, is the key conspirator who devised the entire mode of fraud in connivance with other accused to cheat Punjab National Bank.

Investigation revealed that PNB issued 143 LoUs and 225 Foreign Letters of Credit, amounting to Rs 4,886.72 crore, to three of Choksi’s companies between March and May 2017.

While 143 LoUs were worth Rs 3,008.72 crore, the 225 Foreign Letters of Credit amounted to Rs 1,798 crore.

This would, in effect, make Choksi the bigger defaulter than his nephew and high-profile diamantaire Nirav Modi, a CBI source said.

The three companies to which these LoUs and Foreign Letters of Credit were issued were Gitanjali Gems, Gili India and Nakshatra.

According to ED, just like in the Nirav Modi case, the proceeds generated from the fraud were siphoned off and laundered by Choksi through various entities for personal gains.

Varma’s role

Varma was the chief financial officer (CFO) of Gitanjali Gems and in-charge of the company’s day-to-day operations along with administrative affairs.

According to a source in the agency, his primary role was to coordinate and look after all international operations and deals overseas. He also looked into the accounts, audits, tax-related matters, business strategies of the company, the source added.

“Since he was dealing with business overseas, he was also dealing with issuance of LoUs of the company and the banks abroad too. His role is extremely crucial in the case,” the same source said.

A commerce graduate from Mumbai University (earlier known as University of Bombay), Varma also holds a management degree from the University of Chicago.

According to an agency official, Varma joined Gitanjali Gems in December 2009 as its CFO and went on to become the company’s director in 2012. He was again promoted after a year and made in-charge of all international operations and deals overseas.


Also read: Mehul Choksi says extradition talk is fake news, have faith in Antigua


 

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