Corporate Corruption Case Study

So is it possible that Nirav Modi was paying off most senior management at PNB for turning a blind eye to this scam he was executing...

The Central Bureau of Investigation (CBI) has claimed that former MD and CEO of the Punjab National Bank Usha Ananthasubramanian was aware of the fraudulent transactions worth Rs 14,000 crore involving diamond merchant Nirav Modi. Ananthasubramanian headed the PNB from August 2015 to May 2017.

In its chargesheet, the probe agency said that the former PNB chief and other accused bank officials were aware of this fraud involving PNB Dubai and the Indian Overseas Bank Chandigarh and yet they did not take any corrective action and remained silent spectators. "This facilitated continuance of the fraud resulting in wrongful loss to the PNB," it said.

The agency said: "Inspite of her knowledge about the modus operandi in these frauds, she (Ananthasubramanian) did not take any meaningful corrective measures in her capacity as the executive head of the bank and had unauthorizedly delegated the RBI guidelines work to her subordinates without any follow up action."

The CBI has further claimed that senior officers from the Nirav Modi Group including accused Vipul Ambani were constantly meeting Ananthasubramanian in order to continue with the credit facilities to the group. "This indicated clearly that she (Ananthasubramanian) was aware of the facilities extended to the various group entities of Modi," it said.

This year in February, the PNB had disclosed that it had detected fraudulent and unauthorised transactions of worth Rs 11,390 crore - which later turned out to be Rs 14,000 crore scam - in Brady House branch of Mumbai. Diamantaire Nirav Modi and his uncle Mehul Choksi came under scanner for committing this fraud by raising Letters of Credit from overseas branches of other Indian banks using fake guarantees issued by rouge PNB officials.

These officials bypassed the bank's core banking system and issued the credits by using a messaging system called- SWIFT.

The investigating agency has also accused the former top PNB executive of misleading the Reserve Bank of India. It said that since October 2016, the apex bank sent several questionnaires to the PNB to know what procedures the bank follows before issuing Letters of Understandings and Letters of Credit.

These questionnaires were 'duly dealt by accused Ananthasubramanian and the banks Executive Directors - K V Brahmaji Rao, Sanjiv Sharan and Nehal Ahad and instead of replying to the queries in true spirit and facts, Ahad and the general manager of the International Banking Division of the banks headquarters prepared a misleading reply and sent it to the RBI after getting the same approved from Sharan'.

The RBI had sent those circulars to all the banks after a similar fraud - misuse of the SWIFT system - was detected in Bangladesh.

"The fact that bank official Gokulnath Shetty continued to issue fraudulent LOUs with impunity despite issuance of several RBI circulars indicates an environment of protection he enjoyed in the form of lack of reconciliation and absence of bank visits by seniors," the CBI said.

Gokulnath Shetty is one among two PNB officials at Brady House branch who issued fake letters to Nirav Modi and Mehul Choksi-run companies. more