Nirav Modi
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Biographical highlights
Hollywood stars glittered in his gems on red carpet, February 15, 2018: The Times of India
the Punjab National Bank fraud case
From: Hollywood stars glittered in his gems on red carpet, February 15, 2018: The Times of India
His PR Machine Ensured Global Media Adulation
Diamonds always draw attention but it’s rare when the diamantaire seems to shine brighter than the stones he sets.
Despite making a late entry into the retail business in 2010, Nirav Modi quickly gained a reputation as India’s jeweller to the stars as Hollywood A-listers from Kate Winslet and Dakota Johnson to Taraji P Henson walked the red carpet in diamonds from his eponymous brand.
Late last year, Priyanka Chopra was roped in as brand ambassador. By 2013, he had made it to the Forbes’ billionaires list.
The allegations of bank fraud that have emerged against Modi tarnished a brand that had been as carefully crafted as his signature stretchable bracelets. His public relations team made sure he got his share of flattering profiles in the media.
One luxury writer from Los Angeles was clearly floored after Modi closed his entire Delhi store “just for me” so that the journalist could “experience the luxury that most wealthy buyers have”, and drove him to the airport afterwards.
Though Modi, 48, comes from a family of diamond brokers in Antwerp, Belgium, and grew up in the trade, he’s often told journalists that he didn’t plan to join the business. He got into Wharton, studied finance for a year, dropped out and decided to get into diamond trading after all. As a 19-year-old, he was sent to Mumbai to learn the ropes from his maternal uncle Mehul Choksi, chairman of Gitanjali Gems.
In 1999, he set up Firestar Diamond to source rare diamonds, and acquired a string of international companies that helped him build his network and get into contract manufacturing.
Apart from India, it has manufacturing units in Russia, Armenia and South Africa. It was in 2008 that a request from a friend for a rare piece of jewellery got Modi interested in retail.
Modi opened his first flagship boutique in New Delhi’s Defence Colony in 2014; a store in Mumbai’s Kala Ghoda followed the next year. At the glittering opening of his Madison Avenue store in New York in 2015, actors Naomi Watts, Nimrat Kaur and Lisa Haydon, and model Coco Rocha were among the celebrities who showed up. He also has boutiques in London, Singapore, Beijing and Macau.
Last year, he purchased Rhythm House, the iconic Mumbai music shop, for a reported Rs 32 crore with plans to turn it into a retail space.
Modi, who is often described as soft-spoken and unassuming, is reported to have strategically picked up rare diamonds at bargain prices during the slowdown in 2009. The move paid dividends. In November 2010, Christie’s auctioned his Golconda Lotus Necklace with a flawless 12-carat Golconda diamond for over Rs 16 crore—and put it on the cover of its auction catalogue, the first for an Indian jeweller without a 100-year history.
Modi can’t draw, but explains his ideas to his craftspersons, who go back and forth with the designs and prototypes until they match the vision in his head, he’s told the media. For now at least, his vision of building a high-end global brand and taking his company public through an IPO may have to be shelved.
Why Surat traders stopped dealing with Nirav
March 1, 2018: The Times of India
HIGHLIGHTS
Surat traders said the two jewellers had acquired a reputation for not following the industry's unwritten code of business ethics
"That's why many merchants stopped dealing with Gitanjali or Nirav Modi's company long back," said Dinesh Navadiya, ex-president of Surat Diamond Association
Some diamond merchants in India's biggest centre for trading the precious gemstones say they had stopped dealing with Nirav Modi and his uncle Mehul Choksi - two billionaire jewellers accused of PNB fraud - because they were often slow to pay dues.
The financial sector was stunned when Punjab National Bank said in mid-February it was the victim of a $1.77 billion fraud - a figure that has since risen to nearly $2 billion. The second-largest state bank blamed Nirav Modi and Choksi, accusing them of conspiring with bank employees to obtain fraudulent credit overseas. Both deny any involvement.
Nirav Modi, who runs eponymously branded high-end jewellery stores that stretch from New York to Hong Kong, and Choksi, who heads Gitanjali Gems and operates stores under banners including Gili, Nakshatra and Asmi, both belong to the Jain community from Gujarat.
The Jain and Patel communities dominate the diamond cutting and polishing business centred on the Gujarati city of Surat. Traders there who spoke to Reuters said the two jewellers had acquired a reputation for not following the industry's unwritten code of business ethics.
"Nirav Modi and Gitanjali's business model wasn't convincing to us," says Seventilal Shah, chairman of Venus Jewel, who said he had stopped dealing with either business some years ago.
"If they take goods on two months credit, and there is one month's delay it is fine. But if it is regular episodes of delays, then there is something wrong. That was the case with these guys."
Representatives for both Nirav Modi and Mehul Choksi did not respond to multiple requests for comment. Indian authorities say both men left the country in early January and their whereabouts are unknown.
In the tight-knit Jain and Patel gem trading fraternities, where many struggle to get bank credit, most business is done informally, with cash lent and goods advanced without collateral or paperwork.
"Mehul didn't understand the importance of trust," said one Surat-based diamond exporter, who has been in the business for nearly five decades and asked not to be named.
"Once we sold him polished diamonds and we had to chase him for payment almost every month for six months. Every time he used to give some excuse, then we decided to stop doing business with him altogether."
Eight traders in Surat, where roughly 80 per cent of the world's diamonds are cut and polished, complained of similar issues in their dealings with both Nirav Modi and Mehul Choksi.
"That's why many merchants stopped dealing with Gitanjali or Nirav Modi's company long back," said Dinesh Navadiya, former president of Surat Diamond Association, who runs a small diamond business in the city.
Gitanjali, in a stock exchange filing, has denied any involvement in the alleged fraud. Choksi, in an open letter to employees on Feb. 23, protested his innocence but advised them to look for other jobs, as his assets had been seized and he was unable to pay their salaries.
In a letter to Punjab National Bank (PNB), which says it discovered the alleged fraud at one of its Mumbai branches, Nirav Modi disputed the bank's allegations, arguing the sums he owes PNB are far smaller than those outlined by the bank. Nirav Modi's lawyer has also denied the allegations.
Franchise model
Both men have had minor brushes with authorities in the past.
In 2015, Nirav was fined Rs 480 million for exporting and importing the same diamonds through Surat's Special Economic Zone to inflate export numbers, an official with the Directorate of Revenue Intelligence said.
In July 2013 market regulator SEBI had barred Choksi from trading for six months for manipulating Gitanjali's share price.
Neither case drew much attention at the time and both men continued to expand their businesses, tapping Bollywood stars to promote their brands.
Choksi's Gitanjali adopted a franchise model to open new retail stores, but two franchisees who spoke to Reuters said it failed to deliver on promises made.
Hari Prasad said he invested roughly Rs 100 million ($1.5 million) to set up a Gitanjali store in Bengaluru in 2012. Gitanjali promised to manage operations including inventory, staff recruitment, salaries, rent and electricity bills, he said.
But he alleges Gitanjali charged him inflated prices for old or inferior stock he could not sell for a profit, and he closed the store in 2014.
Choksi and officials of Gitanjali Gems were not reachable for comment.
In 2016, Prasad and six other franchisees jointly wrote a letter to Prime Minister Narendra Modi's office accusing Choksi of fraud.
The prime minister's office (PMO) forwarded his complaint to the Registrar of Companies, which closed the case, said Prasad, who showed Reuters copies of the correspondence.
The PMO and the Registrar of Companies did not respond to requests for comment.
"I had to believe him (Choksi) as he was managing director and chairman of such a big group, which is publicly-listed and has a brand image," said Prasad. "If you go to do business with such types of people, you will believe them."
Round-tripping of diamonds
Source: Bloomberg
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.
