The Full Alpha Files Investigation Into The Business Dealings Of Nirav Modi's Uncle Mehul Choksi — India's Biggest Fraudster

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The Rs 11,400 crore Letters of Undertaking (LoU) aspect is only the tip of the iceberg. Here is the full nature, size, scope and scale of the alleged fraud, as well as its real perpetrator

Written By Ankit Prasad | Mumbai | Updated On:

In the days following the Nirav Modi-Mehul Choksi bank fraud coming to light, Republic TV launched an investigation to dig deeper into the dealings of the twin billionaire diamond tycoons. The investigation turned up what became the Alpha Files -- an account of the true nature, size, scale and scope of the scam, as well as the mega role of Mehul Choksi.

While the Alpha Files investigations is ongoing at Republic TV, here are the key highlights of what has been exposed this far:

Part 1: Scam bigger than the Rs 11,400 crore LoU aspect

In part 1, a deep source, who is the deep throat of the Alpha files, disclosed to Republic that what had come to light, i.e. the Letters of Undertaking (LoUs) aspect was merely the tip of the iceberg. While the figure of Rs 11,400 crore already makes it the biggest fraud of its kind in the history of India, the true size of the scam is actually far larger, potentially in excess of Rs 25,000 crore.

The real scam involved the alleged round-tripping of diamond stock assigned against loans. The stocks would be round-tripped through Mauritius, Dubai and Hong Kong to scam Indian banks. Three top international banks were also defrauded in the scam which began around 2004, about the time that the UPA government came into power. While Choksi was the alleged anchor, setting up shadowy firms to lure banks, Nirav Modi allegedly 'handled' politicians in Delhi and also bribed and entertained hundreds of banking officials in Thailand and Dubai. For its part, the UPA 2 allegedly gave Choksi insider information before I-T raids.

Part 2: Did Bengaluru Police 'go slow' on Mehul Choksi?

In part 2 of the Alpha Files, Republic TV accessed a court order showing that in 2015, the Bengaluru police under the Siddaramaiah government was supposed to impound the passport of Mehul Choksi in a case of alleged duping of a franchise owner. Additionally, Choksi was mandated to appear at the Police station of every second Sunday of every month for the then-ongoing investigation process against him in the case. However, the Bengaluru police allegedly didn't act on the Civil court's order to impound Choksi's passport raising questions over whether there was any political interference.

Part 3: Mehul Choksi's alleged fake diamond operation exposed

In part 3, Republic TV's Prema Sridevi spoke to Santosh Srivastav who is a former Gitanjali Gems President and Managing Director. Mr Srivastav, who possessed an inside knowledge of Choksi's operations, laid bare the alleged fake diamond scam that the latter had run for a number of years and the sheer number of unsuspected people who were affected.

Mr Srivastav alleged that fake unnatural diamonds were grown in labs and mixed with real stock to be sold to customers as real diamonds. Over ten-thousand persons were buying fake diamonds each month, he alleged, adding that even top celebrities were scammed in the process. Furthermore, Choksi also allegedly left the franchises helpless using overpriced diamonds and asked for fake audit reports to be prepared to justify the duping of franchise owners.

Part 4: Choksi's alleged global diamond tripping operation laid bare

In part 4, Mr Srivastav shed light on the massive international diamond round-tripping operation run by Mehul Choksi. He shared details of how the same diamonds were allegedly moved across global capitals through shell firms to secure massive loans. Essentially, one diamond went from country to country so that Choksi gathered the inflated and fabricated bills before it was bought back by him in India. Mr Srivastav also alleged that tags were changed and fake bills were secured to ensure that Choksi’s books looked clean. As per the claims, Mehul Choksi could have been using fake bills to the tune of a staggering Rs. 1200 crores for diamonds worth Rs. 300 crores.

Part 5: PNB auditors come forth

In part 5, for the first time since the scam came to light, the auditors of Punjab National Bank (PNB) came forth and made their statement. Speaking to Republic TV's Editor-in-Chief Arnab Goswami, the auditors BM Agarwal and Devang revealed that they had warned PNB about fraud diamond czars as far back as 2011-12 during the UPA regime.  The auditors, who had also probed the Harshad Mehta scam, disclosed that one of the Big-4 global auditing firms had probed the diamond trade fraud and come to an ‘inconclusive’ conclusion.

The auditors cited various events, including the Winsome Diamond Group scam involving the company's promoter Jatin Mehta, in which PNB was among the banks defrauded by an exposure of over Rs. 1,700 crores. They had warned PNB against giving Mehta loans as early as 2011-12.

Part 6: Franchise owners duped by Choksi speak

In part 6, Republic TV spoke to a pair of franchise owners who had invested in Mehul Choksi's business and were allegedly duped. They also claimed Mehul Choksi was using an alleged franchisee scam to undertake an alleged mega Ponzi Scheme.  

One of them, Vaibhav Khurania, said that he had invested Rs 5 crore in securing a franchise of Gitanjali Gems. However, inventory would arrive sporadically and not be of the requisite quality. When Khurania confronted Choksi about this and sought a refund of his investment, Choksi, citing his connections, allegedly threatened him.

Part 7: Man who invested 106 kg Gold with Choksi

In part 7, Republic TV spoke to another man who had invested in Mehul Choksi's business, in the form of 106 kgs Gold. Digvijaya C Jadeja had invested Gold worth Rs 35 crore at the time based on the overtures of Mehul Choksi's business development team in 2010. The owner of multiple outlets, Mr Jadeja was allegedly promised an annual interest at a rate of 12% on the gold he had invested, to be paid on a monthly basis, but was only paid in the initial months.

He said he repeatedly requested Choksi over the next year, receiving "sugar-coated" treatment, and got several promises that he would get his returns. He claims he was introduced to Nirav Modi over a lunch with Mehul Choksi. However, despite everything, the returns he was promised never materialised, leading him to believe he was being cheated. As per Mr Jadeja, in August 2014, he initiated legal proceedings against Mehul Choksi, whom he says has "cheated" in a number of ways, not limited to the bank fraud. Furthermore, Mr Jadeja says many, many more people were similarly 'duped'. Mr Jadeja also alleged Choksi threatened to entrap him in a false case if he made any further demands for a return of his gold bars.

Part 8: Choksi's team contacted

In part I of Republic TV’s ‘Operation Gitanjali’, the real fraudsters who resigned in the eleventh hour ahead of the crackdown on Choksi’s firms were contacted. The top management of Choksi’s company admit that they had resigned just weeks and months ahead of the Government’s crackdown, which raises questions on whether they had prior knowledge of the same.

In Operation Gitanjali (Part I), franchise owners who claimed to have been duped by Choksi's schemes called up members of the latter's business development teams to inquire about stock and the ongoing situation with regards to their money. In reply, the franchise owners got a number of virtual non-responses, as all those who were called had allegedly exited the company, mostly in the last few months and declined to furnish new information. The ones who are still employed by Mehul Choksi claimed to have no additional knowledge beyond what was on the news.

The phone calls throw into sharp relief what franchise owners and investors in Mehul Choksi's business are likely facing at this time, with their funds stuck and future business uncertain.

Part 9: Shubhalaxmi Panse, who was the CMD at Allahabad Bank who allegedly helped Choksi, had been promoted under NDA

In part 9, Republic TV brought to light that former CMD of Allahabad Bank who whistleblower Dinesh Dubey claimed had allegedly helped Choksi in the clearance of loans had been unexplainably promoted by the NDA in 2017 to be a member of Banks Board Bureau (BBB).

Part 10: Dubai developments for Nirav Modi

In Part 10 of the Alpha Files investigation, the Republic TV team tracked and traced key accused Nirav Modi’s Dubai residence at a high rise. At the residence, a package was waiting for Nirav Modi raising speculations of whether the alleged bank fraud or his associates were in Dubai.

In a parallel development, sources tell Republic TV that Nirav Modi’s legal conference will be held in Dubai on 20th February 2018-- whether Nirav Modi will be personally present or join via video-conference is yet to be ascertained. Meanwhile, sources state that Nirav Modi’s legal team led Vijay Aggarwal will be travelling to Dubai for the legal conference.

Part 11: Fake Directors of Gitanjali Gems

In part 2 of 'Operation Gitanjali', Republic TV's reporters approached directors of Gitanjali Gems who had been named in the CBI's FIR. In the first case, the director wasn't to be found at her residence and the person who answered the door was unwilling to divulge where said person was. The second person who Republic TV spoke to claimed to have no information about the fact that they were a director in the company or that they had been named in the chargesheet.

Part 12: Choksi does a Mallya

Republic TV ascertained that Gitanjali Gems has asked its employees to leave with immediate effect as it intends to shut down. Relieving letters were issued even as the salary for February was unpaid. The status of the employees' full and final settlements also remains uncertain. 

Watch each of the Alpha Files in the links above.

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