A 'fancy vivid yellow orange cushion cut' diamond fueled PNB fraud: Report

bloomberg
August 30, 2018

New Delhi, Aug 30: The price of a large yellow diamond alternately shrank and spiked by about a million dollars as it moved across the globe.

The three-carat gem was shipped at least four times between shadowy companies allegedly controlled by fugitive diamantaire Nirav Modi over about five weeks in 2011, according to a report by a US bankruptcy examiner. The practice of round-tripping--trading a good repeatedly to give the appearance of distinct transactions--was central to the multi-crore Punjab National Bank (PNB) scam - the largest bank fraud in Indian history, according to the report filed August 25.

The rapid-fire sales were described as part of a plan in which Modi and associates “fraudulently borrowed approximately $4 billion over a period of years by manufacturing sham transactions purportedly to ‘import’ diamonds and other gems into India using a web of more than 20 secretly controlled shell entities,” wrote John J Carney, the examiner in the bankruptcy case of three US jewelry companies indirectly owned by Modi.

The firms sought protection from creditors in February in New York as the celebrity jeweler’s empire unraveled. Authorities brought criminal charges against against him and alleged accomplices, and Modi became an international fugitive. He’s denied doing anything wrong.

The “fancy vivid yellow orange cushion cut” diamond was first sold by Firestar Diamond Inc., a US company indirectly owned by Modi, and shipped to Fancy Creations Company Ltd., a foreign shell company in Hong Kong also allegedly controlled by Modi, in August 2011, the report says. The price was almost $1.1 million.

The colorful stone was then shipped out two weeks later by Solar Export, a partnership formed by the Nirav Modi family trust, back to Firestar Diamond in the US, for closer to what it was really worth: $183,000, the examiner wrote.

Less than a week later, Firestar, which has offices on Fifth Avenue in New York City, shipped the diamond back to Fancy Creations in Hong Kong, this time for $1.16 million, the report asserts.

And two weeks after that, A Jaffe, the New York City-based diamond company owned by Modi, sold the diamond to World Diamond Distribution, which the report describes as a Modi shell company in the United Arab Emirates, this time for more than $1.2 million.

Long Journey

The practice of round-tripping, which ultimately totaled $213.8 million between 2011 and 2017, the alleged duration of the fraud, generated shipping invoices that were given to the state-owned PNB to obtain short-term loans using letters of undertaking, according to Carney.

The proceeds were then used to fund Modi’s lifestyle and business entities as well as using the funds from new loans to repay the old ones as they came due, the report states, citing a real-estate trust controlled by Modi that paid $25 million in cash for a luxury apartment in the Ritz Carlton on Central Park South in 2017.

Some of the shipments were so large and high-priced “that the packing slips alone should have raised suspicion,” wrote Carney, a former investigator and prosecutor for the US Securities and Exchange Commission and the Department of Justice.

Fedex Gems

In a break with industry practices, the Modi-owned US companies exported diamonds via FedEx instead of with a bonded courier -- including a 17-carat stone sold for $1.7 million and sent from New York City to Hong Kong -- even though FedEx insures packages only up to $150,000, the report states.

“There is no legitimate business reason to ship diamonds worth millions of dollars without obtaining appropriate insurance,” Carney wrote, citing a gem expert retained by the bankruptcy trustee. The report found “substantial evidence” to back up Indian criminal and civil authorities who say Modi’s US companies and senior officials were involved in transactions related to alleged bank fraud and money laundering.

Modi has previously denied wrongdoing, and a lawyer representing him declined to comment Monday on the examiner’s report. The US companies, Firestar Diamond, A. Jaffe and Fantasy Inc., which all operate out of the same New York offices, filed for Chapter 11 bankruptcy in February. (And the three companies still owe Federal Express about $86,000 in unpaid bills, according to a court filing in their bankruptcy case.)

Gem Cutters

Modi, 47, comes from a family of specialist gem cutters, and he has draped his jewels on Hollywood and Bollywood stars, including Kate Winslet, Naomi Watts and Priyanka Chopra. He bought A. Jaffe, an iconic engagement ring company founded in Manhattan in 1892, to add to his collection of brands in 2007 and opened eponymous boutiques in New York City, Macau, Singapore, Beijing and London. Now, he is reportedly in the U.K. and the Indian government has asked authorities there for his extradition.

The charges against Modi have sent shockwaves through Indian banking and politics as well as the international jewelry industry. The alleged crime undermined the prime minister’s anti-graft image and Punjab National Bank posted India’s biggest-ever quarterly bank loss this year after it took a $2 billion hit.

Punjab National Bank

The US examiner’s report “strengthens PNB’s position as a victim of a complex, multi-year fraud,” and the lender is expected to argue for a share of the sale proceeds once Firestar’s assets are sold and secured creditors are satisfied, said Seth R. Freeman, San Francisco-based senior managing director at financial services advisory firm GlassRatner.

A representative for Macy’s, which had previously bought jewelry from Firestar Diamond Inc., said in an email Monday, “We canceled all purchase activity with the company as soon as we became aware of the situation earlier this year.” Costco Wholesale Corp. and Zale Corp. declined to comment and J.C. Penney’s didn’t answer a message.

Other Modi associates were involved, according to Carney’s report, including Mihir Bhansali, chief executive at two of the Modi-owned US companies. Bhansali went to the office of Firestar Diamond in Dubai shortly after those companies filed for bankruptcy in February, according to an account given by the general manager of the Dubai office to Indian authorities and described in Carney’s report.

Speaking before employees in Dubai, Bhansali folded his hands and bowed, then asked them not to return to India or mention his name to any government authorities, according to the report. Bhansali then took hundreds of thousands of dollars in cash and 50 kilograms of gold and left town, the report asserts.

Bhansali’s lawyer, Thomas McCormack, declined to comment, but said in a letter to the examiner that his client denied any wrongdoing.

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News Network
April 20,2024

Union Finance Minister Nirmala Sitharaman, on Friday, said that the Bharatiya Janata Party (BJP) plans to reintroduce electoral bonds in some capacity following extensive consultations with all stakeholders, should it come back to power in the 2024 general elections, according to a report in the Hindustan Times (HT).

HT cited Nirmala Sitharam as saying, “We still have to do a lot of consultation with stakeholders and see what is it that we have to do to make or bring in a framework which will be acceptable to all, primarily retain the level of transparency and completely remove the possibility of black money entering into this.”

However, the Centre has not yet decided whether to seek a review of the ruling made by the Supreme Court (SC), she said.

She further added, “What the scheme, which has been just thrown out by the Supreme Court, brought in was transparency. What prevailed earlier was just free-for-all.”

Launched in 2018, electoral bonds were accessible for acquisition at any State Bank of India (SBI) branch. Contributions made through this programme by corporations and even foreign entities via Indian subsidiaries received full tax exemption, while the identities of the donors remained confidential, safeguarded by both the bank and the recipient political parties.

On February 15, a five-judge Constitution Bench struck down the scheme, deeming it ‘unconstitutional’ due to its complete anonymisation of contributions to political parties. Additionally, the Bench stated that the articulated objectives of curbing black money or illegal election financing did not warrant disproportionately infringing upon voters’ right to information.

FM Sitharaman said, some aspects of the scheme need improvement and they will be brought back following consultations.

She also lashed out at the Opposition’s claims that the BJP disregarded criminal charges against leaders who switched from other parties to join the ruling party.

The HT quoted her as saying, “The BJP can’t sit here and say, you come to my party today, and the case will be closed tomorrow. The case has to go through the courts that have to take a call; they will not just say, “Oh, he’s come to your party, close the case.” Doesn’t happen that way. So is this washing machine a term they want to use for the courts?”

She further said that the Union government plans to simplify the process of taxation and make it easy for investments to come through into the country.

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News Network
April 11,2024

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Bengaluru: With six children of Karnataka Ministers in the Lok Sabha poll arena, the campaign scene is getting spiced up in the high-stakes elections for the ruling Congress in the state. Prabha Mallikarjun, wife of Minister S S Mallikarjun, is also in the poll fray.

The grand old party tried its best to make several ministers enter the Lok Sabha election fray but none of them agreed and, instead, they proposed the candidature of their family members.

'Now, deliver' is the stern message of the Congress leadership to the ministers, putting the onus on them to ensure the victory of their kin, according to party sources.

The Congress secured only one seat in Karnataka in the 2019 general elections, and has now set an ambitious target of winning in 15 to 20 constituencies in the coming polls.

Elections in 28 constituencies in the State will be held in two phases on April 26 and May 7.

Sons of Laxmi Hebbalkar, Eshwar Khandre and H C Mahadevappa— Mrinal Ravindra Hebbalkar, Sagar Khandre and Sunil Bose— have been fielded from Belagavi (Belgaum), Bidar and Chamarajanagar, respectively.

Daughters of Satish Jarkiholi, Shivanand Patil and Ramalinga Reddy— Priyanka Jarkiholi, Samyukta Patil and Sowmya Reddy— are in contention in Chikkodi, Bagalkot and Bangalore South respectively.

Prabha Mallikarjun, wife of Minister S S Mallikarjun and daughter-in-law of veteran party leader Shamanur Shivashankarappa, is the party's nominee from Davangere.

"In this 'do or die' situation, the ministers have found the Lok Sabha election a launch pad for their children and relatives. We have to see how these ministers succeed in their mission," a Congress insider said.

Barring Sowmya Reddy, who is a former MLA, none of them have any legislative experience in elections. Stakes are high for some other ministers as well.

The party has fielded Radhakrishna Doddamani, son-in-law of Congress President M Mallikarjun Kharge in the family's home turf of Kalaburagi (Gulbarga), a seat held by the BJP.

Kharge's son and Minister Priyank Kharge has taken charge of spearheading the campaign in this segment, where his father had lost in the 2019 general elections.

"Priyank has taken this election as a prestige issue given the fact that the Congress president hails from here and had represented this constituency in the past in the Lok Sabha," a Congress leader said.

Prime Minister Narendra Modi had last month launched the BJP's formal campaign in Kalaburagi in what was seen as an aggressive message to the Congress.

Karnataka Deputy Chief Minister and State Congress chief D K Shivakumar's brother D K Suresh is seeking reelection in Bangalore Rural, where the BJP and JD(S) have fielded noted cardiologist and son-in-law of former Prime Minister H D Deve Gowda.

The Congress which came to power in the state in May last year is seeking to ride on its five guarantee schemes of the government.

Sowmya Reddy, who is contesting from Bangalore South asked the women voters during a recent roadshow - "Do you travel in the buses? Which places have you visited in the recent past? Do you pay or travel for free?".

She was referring to 'Shakti' guarantee that offers free rides to Karnataka women in non-luxury government buses within the state. Reddy explained to the people about the four other guarantees— 'Gruha Lakshmi', 'Gruha Jyoti', 'Yuva Nidhi' and 'Anna Bhagya'.

"Who brought 'Achchhe Din'? Is it Congress or the BJP? Which 'Achchhe Din' you will vote for?" Reddy asked the women voters.

In Belagavi, Mrinal Ravindra Hebbalkar, is taking on BJP candidate and former Chief Minister Jagadish Shettar.

In campaign meetings, Minister Laxmi Hebbalkar reminded the crowd how Shettar had joined Congress when the BJP denied him a ticket in the 2023 Assembly election, only to return to the saffron party a few months later.

"Shettar is from Hubballi and we are from Belagavi. We know the problems prevailing here better than any 'outsider'. Today, BJP people are saying that they vote for Shettar keeping Prime Minister Narendra Modi in mind, but I want to know why he joined Congress and abused the BJP, Modi and former Chief Minister B S Yediyurappa," the minister asked.

The BJP swept the 2019 general elections in Karnataka winning 25 out of the 28 seats, while an independent backed by the party also won. The Congress and JD(S) which fought the elections together, secured one seat each.

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News Network
April 17,2024

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Russian President Vladimir Putin says Iran’s “tactful and wise” response to Israeli aggression on its consulate in Syria was the best way to punish the aggressor.

Putin made the remarks in a phone conversation with President Ebrahim Raeisi on Tuesday.

“What the Islamic Republic of Iran did in response to what happened criminally and in the light of the inaction of the [UN] Security Council, was the best way to punish the aggressor and represented the tactfulness and rationality of Iran's politicians,” Putin said.

The Russian president said the Israeli regime’s “terrorist act” against the Iranian consulate in Damascus was against all international standards and rules.

He also strongly criticized the United States and certain Western countries for creating tension in the region. “We believe that the Islamic Republic of Iran is one of the main pillars of stability and security in the region.”

“We firmly declare that we will respond to any action against Iran's interests with greater force and broader and more painful than the previous [response],” President Raeisi said in the phone call.

The Iranian president also said Tehran's response to the Israeli regime was within the framework of international law, saying Israel’s terrorist act was a clear violation of international law and a serious threat to global peace.

“The destructive role of the US and some western countries and the inaction and inefficiency of international institutions, including the United Nations and the Security Council, in dealing with the aggressive action of the Zionist regime in attacking the Iranian consulate in Syria caused the Islamic Republic of Iran to exercise its right to self-defense.”

Raeisi further thanked Moscow for its “principled and constructive” stance against the Israeli aggression in Damascus. 

He appreciated the diplomatic efforts of the Russian government to thwart the conspiracies of the United States and certain Western countries in the UN Security Council.

“To those countries that have adopted double standards in the face of the crimes of the Zionist regime and express concerns about escalating tensions in the region, we advise them to rather stop supporting the Zionists genocide and crimes against the oppressed Palestinian people to preserve peace and stability in the region,” Raeisi said.

Iran’s Islamic Revolution Guards Corps (IRGC) launched extensive missile and drone strikes against the occupied territories late on April 13 in response to Israel’s missile attack on the consular section of the Iranian embassy in Damascus.

Operation True Promise has inflicted damage on Israeli military bases across the occupied territories. The extent of damage is yet to be specified. 

Brigadier General Mohammad Reza Zahedi, a commander of the IRGC Quds Force, his deputy, General Mohammad Hadi Haji Rahimi, and five of their accompanying officers were assassinated in the Israeli attack on Iran’s diplomatic mission.

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