Banking Sector Hit Again: Second Scam of Rs 3,695 cr Rotomac promoters being probed

20/02/2018

NEW DELHI, Feb 19: Days after the Nirav Modi-PNB scam, the banking sector took another big hit with Rotomac pen promoter Vikram Kothari allegedly swindling Rs 3,695 crore from a consortium of seven banks, prompting two central probe agencies to register cases against him and carry out searches today at his premises in Kanpur.
The Central Bureau of Investigation (CBI) and the Enforcement Directorate(ED) are already probing two complaints from the Punjab National Bank(PNB) against billionaire diamantaire Nirav Modi and a jewellery company alleging fraudulent transactions worth about 11,400 crore.
The banks involved in Rotomac's case, in which the CBI as well as the ED have registered separate cases, with the defaulted loan amount in brackets were Bank of Baroda (Rs 456.53 core), Bank of India (Rs 754.77 crore), Bank of Maharashtra (Rs 49.82 crore), Allahabad Bank (Rs 330.68 crore), Oriental Bank of Commerce (Rs 97.47 crore), Indian Overseas Bank (Rs 771.07 crore) and Union Bank of India (Rs 458.95 crore), according to CBI.
The CBI alleged that the accused had cheated a consortium of seven banks by siphoning off bank loans to the tune of Rs 2,919 crore without interest and bank charges and total outstanding amount along with liabilities were pegged at Rs 3,695 crore.
The news of the scam rattled the stock markets of these banks as Union Bank shares fell by 8.50 per cent followed by Bank of Baroda which saw a dip of 5.48 per cent in its shares.
Bank of India shares also fell by 4.07 per cent followed by Allahabad Bank (3.45 per cent), Oriental Bank of Commerce (1.80 per cent), Bank of Maharashtra (1.25 per cent) and Indian Overseas Bank (0.60 per cent).
The CBI case, which was registered after receiving a complaint from Bank of Baroda, names Kanpur-based Rotomac Global Pvt Limited, its director Vikram Kothari, his wife Sadhana Kothari, and son Rahul Kothari and unknwon bank officials. They have been booked under various sections of Indian Penal Code(IPC) related to cheating and forgery as well as Prevention of Corruption Act.
Immediately after registering the case, the CBI carried out searches at three locations in Kanpur which included Kothari's residence and office premises.
In a simultaneous action, the ED, a probe unit that functions under finance ministry, also registered a case of alleged money laundering against Rotomac pens' promoters which had the same set of accused as that of the CBI.
The ED, the officials said, would probe if the funds obtained through the alleged fraud were laundered and if the proceeds of the crime were subsequently used by the accused to create illegal assets and black money.
In the scam involving Nirav Modi that surfaced barely a fortnight ago and rocked the banking sector, the crackdown on the diamantaire and his uncle Mehul Choksi continued today with the ED seizing Rs 22 crore worth jewellery, I-T department attaching seven properties, and the CBI grilling four senior executives of his company.
The Central Vigilance Commissioner K V Chowdary also swung into action and met senior officials of Punjab and National Bank (PNB) and Finance Ministry in connection with the Rs 11,400 crore fraud case.
ED Chief Karnal Singh also flew down to Mumbai to review the anti-money laundering investigations related to the PNB fraud, which is being conducted by a special team of the agency.
With the seizure of Rs 22 crore worth jewellery by the ED today, the total amount of seizure of gems and jewellery has gone up to Rs 5,671 crore.
The central probe agency also conducted searches at 38 other locations in various cities, including Mumbai, Pune, Aurangabad, Thane, Kolkata, Delhi, Jammu, Lucknow, Bengaluru and Surat.
As part of the multi-agency probe, the Income Tax department today attached seven properties of the Gitanjali group and its promoter MehulChoksi, uncle of Modi, in Mumbai in connection with the case.
While the ED was unearthing money laundering aspect of the Rs 11,400 crore scam, the CBI continued its focus on unravelling the mystery behind issuance of Letters of Understanding and Letters of Credit escaping PNB's regulatory mechanism.
In order to unearth alleged corrupt practices in availing guarantees worth Rs 11,400 crore from the state-run bank, the agency today questioned VipulAmbani, President (Finance) of Modi's Fire Star Diamonds, Ravi Gupta, its Chief Financial Office besides Saurabh Sharma and Subhash Parab.
Officials said Ambani had been holding the position for over three years and is believed to have been aware of the financial transactions carried out by the company of the jeweller-businessman, who fled the country before PNB reported the Rs 11,384-crore fraud.
Ambani is understood to be a relative of the late industrialist, Dhirubhai Ambani.
A CBI spokesperson said PNB's Brady road branch was briefly sealed early this morning to prevent any "possible tampering" which was desealed later in the day.
The probe agency has also started interrogating 13 other officials of the PNB, including general manager-level officers, they said.
CBI officials said the agency is still questioning arrested bank officials Gokulnath Shetty, who has retired, and Manoj Kharat, single window operator of the bank and Hemant Bhat, the signatory of Nirav Modi's company to ascertain the exact magnitude of the alleged scam that involved thousands of documents and digital records.
The continued searches in this case has seen the Punjab National Bank shares falling drastically from Rs 197 to Rs 113 in the last few days.
However, the crackdown on billionaire diamantaire Nirav Modi and his uncle Mehul Choksi intensified today with the ED seizing jewellery worth Rs 22 crore, the I-T department attaching seven properties, and the CBI grilling four senior executives of his company.
Central Vigilance Commissioner KV Chowdary met senior PNB and finance ministry officials in connection with the Rs 11,400-crore fraud case.
Enforcement Directorate (ED) Chief Karnal Singh also flew down to Mumbai to review the PNB fraud-related anti-money laundering investigations which are being conducted by a special team of the agency.
The total value of gems and jewellery seized so far stands at Rs 5,671 crore.
As part of the multi-agency probe in the case, the Income Tax department today attached seven properties of the Gitanjali group and its promoter Mehul Choksi, uncle of Modi, in Mumbai.
Official sources said ED sleuths searched Modi's flat in the posh SamudraMahal apartments in upmarket Worli in south Mumbai.
The central probe agency also conducted searches at 38 other locations in several cities, including Mumbai, Pune, Aurangabad, Thane, Kolkata, Delhi, Jammu, Lucknow, Bengaluru and Surat.
While the ED is looking into the money laundering aspect of the Rs 11,400-crore scam, the CBI continued to focus on unravelling the mystery behind issuance of Letters of Understanding and Letters of Credit bypassing the bank's regulatory mechanism.
The agency today questioned Vipul Ambani, president (finance) of Modi's Fire Star Diamond, its Chief Financial Officer Ravi Gupta, and executives Saurabh Sharma and Subhash Parab.
It also intensified its search operation at the Brady Road branch of the PNB in Mumbai from where all the LOUs and LCs were issued, officials said.
They said Ambani had been holding the position for over three years. It is believed he was aware of the financial transactions carried out by the company of the jeweller-businessman, who fled the country before the PNB reported the fraud.
Ambani is understood to be a relative of late industrialist Dhirubhai Ambani.
A CBI spokesperson said the PNB branch was briefly sealed early this morning to prevent any "possible tampering".
He said the seal and the notice were removed during the day.
The CBI had yesterday started a search operation at the PNB branch, which is at the centre of the colossal banking fraud involving Modi and Choksi.
The agency continued to question two arrested PNB officials and an authorised signatory of NiravModi's company, the officials said.
The probe agency has also started interrogating 13 other officials of the PNB, including general manager-level officers, they said.
CBI officials said the agency is still questioning arrested bank officials Gokulnath Shetty (retired) and Single Window Operator Manoj Kharat, and HemantBhat, the signatory of Nirav Modi's company.
On the money laundering part, the ED obtained information from the whistle-blower in the case who had said he had raised flags against Choksi's loan in 2013.
It has also sought PNB's audit reports since 2011 from the RBI, they said.
The ED is also moving to attach at least two dozen immovable properties of Modi, Choksi and their concerns under the Prevention of Money Laundering Act (PMLA).
The ED and the Income Tax department have zeroed in on about 200 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 are now being probed by the tax department.
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.

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