PNB Fraud: Enforcement Directorate Raids Shell Firms

New Delhi, February 21: The Enforcement Directorate (ED) continued its raids on the seventh day today as it visited 17 locations across the country, including four shell companies in Mumbai, in connection with its money laundering probe in the alleged Rs 11,400-crore Punjab National Bank (PNB) fraud. The agency sleuths today stepped up their action against the suspected shell or bogus firms linked to the operations of billionaire diamond jewellery designer Nirav Modi, his uncle and Gitanjali Gems promoter Mehul Choksi and others.

ED teams raided four locations of such firms in the Opera House, Peddar road, Goregaon (East) and Powai areas of the Maharashtra capital, they said, adding a total of 17 locations pan-India are being raided today. The Income Tax Department, which is also probing these instances, had yesterday launched action against the shell firms that are reported to have been used by the accused to allegedly launder huge money and evade taxes.

"Few more shell firms will be covered in the coming days," a senior official said. It was first reported on February 18 that at least 200 shell firms and "benami" assets had come under the scanner of the investigative agencies probing the Rs 11,400-crore alleged fraud at the PNB. The agency has so far seized diamonds, gold jewellery and other precious stones worth Rs 5,726 crore in the case and summoned Modi and Choksi to appear before it this week at its Mumbai zonal office.

The agency has said it is also carrying out an "independent valuation" of these seized assets. It is also expected to attach about three dozen properties in this case under the provisions of the Prevention of Money Laundering Act (PMLA) in the coming days. ED sources had said that the agency is talking to senior PNB officials and recording their versions to ascertain how Letters of Understanding (LoUs) are issued and other bank operations done. It also obtained information from the whistleblower in the case who had said he had raised flags against Choksis' loan in 2013.

"We are looking at securing the proceeds of crime. The ED will probe how much illicit wealth was created by the accused in the alleged fraud," a senior official had said recently. It has also sought PNB's audit reports since 2011 from the RBI. The sources said the ED was looking at collecting all financial documents -- personal and official -- of Modi, Choksi and their businesses to take the probe forward. The ED and the Income Tax department have zeroed in on the dummy or shell companies in India and abroad that were being used to route or receive funds as part of the alleged fraud. It is suspected that the shell firms were being used by the accused to launder money and create “benami” assets in the form of land, gold and precious stones, which is now being probed by the agencies.

Modi, Choksi and others are being investigated by multiple probe agencies after it recently came to light, following a complaint by the PNB, that they allegedly cheated the nationalised bank to the tune of Rs 11,400 crore, with the purported involvement of a few employees of the bank. The CBI and the ED have registered two FIRs each to probe the case. Shell companies are defined as those firms which are set up by nominal paid-up capital, high reserves and surplus on account of receipt of high share premium, investment in unlisted companies, no dividend income, high cash in hand, private companies as majority shareholders, low turnover and operating income, nominal expenses, nominal statutory payments and stock in trade and minimum fixed asset.