An ED investigation has found that absconding jeweller Mehul Choksi diverted over Rs 32.50 billion funds, allegedly defrauded from a PNB branch in Mumbai, to foreign shores and he was in business of "highly inflating" prices of precious metals sold from his outlets.
The businessman has rejected the charges as "baseless".
The agency, which is probing the USD 2 billion (about Rs 130 billion) alleged bank fraud that also involved his nephew Nirav Modi, said Choksi was "using several dummy companies" to rotate funds and to divert money for his personal use.
In its chargesheet, the Enforcement Directorate has said Choksi allegedly diverted $56.12 million (about Rs 4 billion) of loan funds to Nirav Modi and about USD 50 million (Rs 3.60 billion approx) to Modi's father Deepak Modi.
"Choksi was using several dummy companies for rotating his transactions. Under this arrangement, origin of the sale transactions and final destination used to be any of the Gitanjali group of companies.
"For in-between transactions, dummy companies were used for layering purpose wherein only sale/purchase bills were created and no movement of goods used to take place. He has been doing this to project inflated turnover to avail higher banking facility," the Enforcement Directorate (ED) has said in its charge sheet filed against the absconding businessman who is stated to be in the Caribbean nation of Antigua now.
Choksi, talking to some media organisations, has termed ED's allegations as "false and baseless". He has also alleged that this properties have been attached by the central probe agency "illegally."
The agency said it has detected that funds to the tune of Rs 32. 57 billion, that were obtained from PNB's Brady House branch in Mumbai, were "diverted" to countries like Thailand, the US, Belgium, UAE, Italy, Japan and Hong Kong and were deposited in "group entity" firms.
These funds, were "fraudulently obtained" by Choksi and his firms from the PNB by way of Letters of Undertaking (LoUs) and Foreign Letters of Credit (FLCs).
It also accused Choksi of grossly over-valuing the gems and jewellery that he sold.
"Choksi used to fix the rate/value of the goods without applying economic rationale. The goods in question were either low value or poor quality and was not commensurate with the price/value fixed by him," the ED said.
The charge sheet further said these charges have been "confirmed" in the statement given to it under the Prevention of Money Laundering Act (PMLA), by Vice President (banking operations) of Choksi's Gitanjali Group, Vipul Chitalia.
"It is further confirmed from the goods seized at Hyderabad whose declared value was found to be highly inflated and in some cases the actual value of these goods is even less than 3 per cent of the declared value," the ED said.
The agency alleged the proceeds of crime of money laundering in this case involving Choksi were "partly remitted back to Gitanjali group of companies" in India in guise of export-import transactions for settling earlier credit liabilities.
"The proceeds of crime has also been used for making payment against the villa booked by Choksi in UAE and for transferring preferential shares of MS Bezel Jewellery (India) Pvt Ltd to Ms Al Burj Diamond and Jewellery FZE, UAE...," the charge sheet said.
It also charged Choski of conducting illegal 'air to air' export using the Gitanjali group, where consignments exported from India to Hong Kong and back were routed to Dubai but were not cleared through customs at the UAE airport and were exported to Hong Kong or India.
The ED report also said that "fraudulent export and import" was being done by Choksi's firms and there was "no manufacturing activity" in any of the overseas companies situated at Hong Kong and the UAE and only bogus business and sale amongst group companies were carried out.
"The export/import was also not genuine and was just rotational transactions. The jewellery exported from India was dismantled and diamonds/pearls were taken out of it," the agency charged.
The ED said, "It is apparent that the funds acquired by fraudulent means were siphoned off within the country as well as to the overseas dummy companies owned and controlled by Mehul Choksi himself."
"The dummy directors and others were mechanically transferring the goods and monies as per the directions of Choksi without any economic rationale and logic," the agency alleged.
The businessman has been also charged by the CBI for alleged corruption in this case and the ED has sought an Interpol arrest warrant against him apart from approaching a Mumbai court to get him declared a fugitive economic offender under a new law by the same name.
India has also recently moved for his extradition from Antigua.