Security & Fraud

Gold Was The Bribe Of Choice In India's Diamond Heist Scandal

An official of India’s Punjab National Bank received gold and diamond jewelry as bribes for his involvement in a scandal that defrauded the lender of nearly $2 billion.

So far, the police in India have arrested 13 people, seven from Punjab National Bank (PNB) and six from companies owned by billionaire jeweler Nirav Modi and his uncle Mehul Choksi, owner of Gitanjali Gems, who are at the center of the scandal that resulted in $1.8 billion in fraudulent activity at one of its branches.

Law enforcement officials allege that the two schemed with bank officials to issue fraudulent letters of undertakings (LoUs) for their companies in order to raise loans from overseas branches of mostly Indian banks. Both men left the country before the fraud was discovered and have denied any wrongdoing via letters and statements.

State Bank of India, Union Bank of India and Allahabad Bank are all lenders who had extended credit based on the fraudulent LoUs. Allahabad Bank also revealed it had a $366.87 million exposure to the case.

According to Reuters, the Central Bureau of Investigation (CBI) said that the bribes were paid to Yashwant Joshi, who worked as a manager in the Forex department of PNB’s Mumbai branch. He admitted to receiving two gold coins weighing 60 grams and a pair of gold and diamond earrings from Modi, and the articles have already been taken from his house.

“This indicates that he was in collusion with the beneficiary accused persons to cheat the bank,” CBI Inspector D. Damodaran said in a court filing. “He also obtained illegal gratification from the beneficiary party for continuing issuance of fraudulent LoUs.”

While Modi hasn't been found by Indian authorities, there are reports that he is in Hong Kong. In the meantime, various properties of Modi and Choksi have been seized as a result of the investigation.



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