Factcheck: Did a whistle-blower really alert the PMO about the PNB-Nirav Modi scam in 2016?

While the modus operandi of the scam itself has been well talked about, the game has now shifted to the political angle. Congress and BJP are trading allegations over the responsibility of the scam. Now some sections of the media have also joined in.

Yesterday, some media houses and other social sites made a claim that a whistle-blower had alerted the PMO about the PNB-Nirav Modi scam and that the PMO ignored the same. A site called AsiaTimes in an article written by Saikat Datta makes the below claim:

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Similarly, TheLogicalIndian has this post:

The reports are exactly in line with what the Congress has alleged and are based on the statements of a businessman, Hari Prasad who had entered into a business with Nirav Modi and Mehul Chokshi as a franchisee of their jewellery business in 2012. He claims that he had written to the PMO warning them in 2016 about a “scam and fraud done by the person/company based in Mumbai involving loss of Rs 1000s of crores of Indian public money”.

Hari Prasad did indeed write such letters, which have been put out by an official Congress handle itself. The letters speak of various alleged financial irregularities. They say that a scam which can cause “losses of Rs 1000s of crores” is being orchestrated by Mehul Chowksi of Gitanjali Gems. They claim that various franchisees have lodged complains against his companies. They claim the Chowksi and his companies have syphoned off 1000s of crores via subsidiaries.

Then, the letters speak of various “deficiencies” in the balance sheet of the accused. Hari Prasad states that 31 banks have extended loans of almost Rs 9872.0 crores against assets of merely Rs 25-30 crores, Tax liabilities are increasing and are remaining unpaid and that Tangible assets are “very very small”.

Hari Prasad also claims that a large number of inventories and receivables are “manipulated and inflated” figures and that there is something “fishy” about the company. He also states that while Indian companies are in loss, foreign subsidiaries and in profit, hence it is “assumable that Chowksi has syphoned out India money abroad”.

The letters also claim that Chowksi has various cases filed against him, and there are several “victims” of his fraud all over India. The letters also say that Chowksi is also a partner of Times Group hence Times group has refused to cover the same.

While the letters which have been put in public domain speak of all the above, there is no mention of :

1. Nirav Modi

2. PNB bank

3. Letters of Undertaking/Credit

4. Collusion between 2 bank employees

5. unauthorised SWIFT messages etc.

All these points are the essence of the current Rs 11000 crore scam being discussed. Instead, the letters by Hari Prasad speak generally of “Rs 1000s of crores being syphoned off” that too by Chowksi and his companies.

The letters by Hari Prasad instead speak of how franchisees have been allegedly duped by Chowksi, and how his companies have huge loans as compared to fixed assets. The current PNB-Nirav Modi scam has nothing to do with franchisees. Neither does it have anything to do with huge loans on the balance sheet of any company, since the current scam deals with off-balance sheet items. In fact, the current scam went undetected for too long because Letters of Undertakings were not fund based credit facilities and were off the balance sheet of both PNB and the accused companies.

Thus, based on the letters of Hari Prasad presently in public domain, it is incorrect and misleading to say that he had informed PMO about the current PNB scam in 2016 itself. He had alluded to general financial irregularity since he was aggrieved as a franchise. If there are any other letters in which Hari Prasad has specified the key issues surrounding the current scam, then that letter should be made public.

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