PNB Roundup: Fraud may cross $2 billion, ‘mastermind’ VP arrested

The CBI on Tuesday arrested Vipul Chitalia, the vice president of Gitanjali Group of Companies, in the USD 2 billion PNB scam, who had escaped to Dubai before the fraud was reported by the public sector bank.

He was detained by the agency at the Mumbai airport when he returned to India and questioned at the CBI office before his arrest.

Chitalia was produced before a special CBI court in the afternoon, following which Judge S R Tamboli remanded him in CBI custody till March 17.

Chitalia had left the country for Dubai in the first week of January, as did the prime accused Mehul Choksi and Nirav Modi.

“There was a look-out notice against him, hence the immigration officials detained him at the airport as soon as he arrived from Bangkok,” an agency official said.

Special prosecutor A Limosin told the court that Chitalia reported directly to Choksi.

“Chitalia was instrumental in preparing applications for putting through the fraudulent transactions of the LoUs (Letters of Undertaking) and FLCs (Foreign Letters of Credit) with the active connivance of key accused Gokulnath Shetty,” Limosin told the court.

He was also the authorised signatory of Choksi’s Gitanjali Group for issuance of applications for LoUs and FLCs, he said.

“He is the mastermind for putting through fraudulent transactions along with Choksi. He was also privy to the modalities for putting through the transactions,” the agency said in the remand plea.

The probe agencies have accused two jewellery groups – one controlled by diamond tycoon Nirav Modi and the other by his uncle Mehul Choksi – of colluding with bank employees to get credit from overseas banks using fraudulent guarantees.

Fraud amount likely to exceed USD 2 billion

The extent of the unravelling fraud could rise beyond the nearly USD 2 billion mark, according to a source involved in the probe and court documents reviewed by Reuters.

The unnamed source told the agency that investigators had not yet recovered all the papers and loan guarantees allegedly issued by rogue employees of the bank, and consequently believed the bank’s exposure could be greater than revealed so far.

According to court filings, the exposure to three companies controlled by Modi has been estimated at Rs 6,498 crore, while firms controlled by Choksi have been accused of defrauding the bank of Rs 6,138 crore.

The CBI has told a Mumbai court that the amount involving Modi’s companies was likely to go up, according to the source and court filings, copies of which have been reviewed by Reuters.

In papers filed on Monday, the CBI also said PNB did not have all the documents related to the LoUs, since those were returned to the borrower.

“Most of these documents are not yet recovered. The size of the fraud has now gone (up)… and the same is likely to go even higher,” the CBI said in the court filing.

The bank initially reported to authorities on Jan 29 that the jewellery groups had defrauded it. On February 14, it said the fraud sum had reached Rs 11,400 crore after a detailed investigation.

It raised the amount further to nearly Rs 2,600 crore last week, saying it had discovered some Rs 1,300 crore more in fraudulent letters of credit, another form of credit guarantee, issued to Choksi’s Gitanjali group.

PNB head Sunil Mehta appears before SFIO

PNB Managing Director and CEO Sunil Mehta appeared before the Serious Fraud Investigation Office (SFIO) in Mumbai on Wednesday after being summoned for recording his statement in connection with the fraud at the bank.

The fraudulent transactions were carried out from PNB’s Brady House branch in Mumbai.

Yesterday, officials from Axis Bank and ICICI Bank had also appeared before SFIO, which is the investigating arm of the ministry of corporate affairs.

SFIO is also expected to call officials of nearly 31 banks which have an exposure to the companies of accused diamond traders Nirav Modi and Mehul Choksi.