ABSTRACT:

In this introduction to this special issue of the Journal we broadly

consider the problem of white-collar and corporate crime in India.
Official reports from China show the pervasiveness of current problems
and the inherent dangers underlying continued economic growth and
reforms. We also consider evidence bearing on the idea that Japan’s
remarkably low rate of common crime is likely eclipsed by the level of
white-collar and corporate crime, and briefly discuss the
institutionalization of economic crime in South Korea. Issues related to
the lack of study of white-collar and corporate lawbreaking in India are
also addressed. Finally, we introduce the papers and topics of this
special issue, which include comparative research on cybercrime, the
enforcement of intellectual property violations, accounting fraud,
financial crime, offenses in the mutual fund industry and Panjab
National Bank.

1
CHAPTER:-I
 INTRODUCTION
 MEANING

2
CHAPTER:-I

INTRODUCTION

On Þrst thought, it might appear that there need be little concern

with establishing the precise nature of what is meant by white-collar and
corporate crime, the subjects of this volume. But few, if any, terms in the
realm of criminal activity have evoked more deÞnitional disagreements
than these concepts. Perhaps the most common view is that, if nothing
else, white-collar and corporate crime involve events that are committed
by a pen or computer rather than at the point of a revolver or knife.

Some have argued that white-collar crime is marked by the

absence of violence. But on closer scrutiny, that distinction does not
hold up. Doctors often maim patients by negligent actsÑthe wrong foot
is amputated; a miscalculated drug dosage is administeredÑand miners
are suffocated in a collapsed mine shaft when explo-sions that better
foresight might have prevented take place.

The most controversial consideration in regard to the proper way to

determine what is and what is not white-collar crime concerns the status
of the perpetrator, the position he or she holds, and the relationship
between these considerations and the behavior being considered. It is
evident that a bank president who sells his large holding of stock in his
company when he learns that it is going to take a severe Þnancial hit
during the following monthÑa matter not yet known to the publicÑis

3
committing the white-collar crime of insider trading. But how about the
elevator operator who overhears two indiscreet executives discussing an
impending Þnancial takeover and not only immediately buys shares in
those companies but also tells a millionaire who subsequently rides the
elevator about the forthcoming merger? Should the elevator operator be
considered a white-collar criminal? How about the millionaire who
invests heavily on the basis of this tip?

Persons studying and writing about white-collar crime have taken

differing views on such deÞnitional matters. One position is that the only
reasonable way to label persons or entities as white-collar offenders is to
await the verdict of a judge or jury.

But what about the person who by reasonable standards appears to

be guilty but has hired an eminently talented lawyer who, in underworld
language, is successful in enabling him or her to beat the rap.

Corporate crime by and large has avoided these semantic and

deÞnitional quag-mires, although controversy persists regarding, Þrst,
whether a criminal offense ought to be charged against a nonhuman that
is not capable of acting without the behavior of real persons. In Japan, a
corporation cannot be held criminally liable unless a per-son also is
convicted. Second, there is the question whether civil litigation ought to
be grouped with criminal white-collar and corporate crime data since the

4
civil approach often is primarily an expedient tactic for dealing with a
situation that equally well could have been handled in a criminal court.

This chapter explores aspects of the deÞnitional dilemma, setting

the stage by reproducing parts of the speech by sociologist Edwin H.
Sutherland that introduced the term Òwhite-collar crimeÓ to an
academic and, ultimately, a public audience. Media reaction to
SutherlandÕs talk is examined, as well as the views of those who favor
reformulating SutherlandÕs approach, as exempliÞed in the work of a
research team based at the Yale Law School.

Consideration is then accorded to the doctrine of corporate

criminal liability, followed by a review of the Ford Pinto case in which a
company was charged with manslaughter. The chapter concludes with
an examination of the Supreme CourtÕs 2010 decision in Citizens
United v. FEP, which upheld the principle that corpora-tions must be
guaranteed constitutional protections given to humans.

Abstract In this introduction to this special issue of the Journal we

broadly consider the problem of white-collar and corporate crime in
Asia. Official reports from China show the pervasiveness of current
problems and the inherent dangers underlying continued economic
growth and reforms. We also consider evidence bearing on the idea that
Japan’s remarkably low rate of common crime is likely eclipsed by the
level of white-collar and corporate crime, and briefly discuss the

5
institutionalization of economic crime in South Korea. Issues related to
the lack of study of white-collar and corporate lawbreaking in Asia are
also addressed. Finally, we introduce the papers and topics of this
special issue, which include comparative research on cybercrime, the
enforcement of intellectual property violations, accounting fraud,
financial crime, and offenses in the mutual fund industry.

Keywords White-collar crime . Corporate crime . Financial fraud .

Comparative criminology The worst global financial crisis in history

serves as a backdrop to this special issue of the Journal. The specter of
white-collar and corporate crime looms large as countries throughout the
world grapple with depressed economic conditions that have their roots
in the home loan industry and the irresponsible and often criminal
behavior of Wall Street financiers. Subprime mortgages were marketed
to less than creditworthy borrowers. Many of these loans were based on
fraudulent financial information regarding purchasers’ income and
assets. They were packaged into complex securities and derivatives, and
were off-loaded throughout the world. Insurance on these securities in
the form of credit default swaps (CDSs) constituted counter bets which
were bought for pennies on the dollar. When the original loans
inevitably went bad, a financial maelstrom reverberated throughout the
global economy. The effects on the Asia–Pacific region included
reduced demand for many of the area’s major exports, particularly
tourism, manufacturing, and commodities.

6
Government revenues were also reduced as demand for migrant labor in
developed and emerging economies slowed down, and overseas workers
were no longer remitting money to families in their homeland.

Corruption, a universal institutional phenomenon, is especially

pervasive in developing and transitional societies (Yu 2008; Zimring and
Johnson 2007). China, the most populous country in the world and a
growing superpower, has experienced both unprecedented economic
development during the past two decades and attendant rampant
corruption at all levels in the government and in the private sector (Yu
2008). Zhang et al. (2008:127) have pointed out that, “White-collar
crime and official corruption in particular have been a serious concern in
China and have attracted wide attention during the course of the nation’s
economic reform.” Campaigns to control corruption are a feature of
Chinese life and often involve draconian penalties. In recent years, there
have been reports that death sentences for commercial fraud have
increased because of a burgeoning trade in body parts that can be
harvested under controlled conditions from offenders who are executed
(Mc Givering 2006).

Olivia Yu (2008) has reviewed theories offered to explain the

causes of Chinese corruption and economic criminality, and suggests
that the escalation in the number of these problems is an unintended
consequence of reform policies. The phenomenon can be interpreted in
terms of a number of prevalent criminological perspectives, including:
7
(1) social control theory which emphasizes the importance of conditions
such as attachment to parental values in preventing individuals from
engaging in illegal activities; (2) anomie theories which view crime as
resulting from normative deregulation, social structural strain, and lack
of legitimate opportunities combined with an overriding cultural ethos
that stresses the need for wealth and its associated acquisitions; (3)
rational choice models which consider the role of criminal opportunities
in motivating and enabling particular forms of crime; and (4) cultural
explanations that focus on traditions or values among persons from
different backgrounds and varying experiences (Yu 2008:167).

Research in China on the subject of financial fraud, as in most

countries, has been sparse due to the lack of large and systematic data
sources and a related political unwillingness to fund major studies. The
occurrence of white-collar crime often remains under a cloak of official
secrecy for at least two reasons: first, governments do not like to
broadcast an image of their country as riddled with upper-class law-
breaking, and second, the very officials themselves may well be
involved in illegal schemes and they do not desire to alert the public to
wrongdoing in other high places.

Nonetheless, some statistics and case reports meant to show

diligent law enforcement and offer lessons in the danger of defying
regulations are sometimes issues. A sampling of offenses reported by the
Chinese government depicts the broad nature of current problems and
8
the inherent dangers underlying continued economic growth and
reforms. In 2007, for example, it was reported that Chinese prosecutors
investigated 43,757 government officials for job-related crimes in the
previous year alone. Over 35,000 of them involved some form of
corruption, bribe-taking or embezzlement of public funds, while just
over 8,700 of them entailed abuse of power. About 31,000 cases were
prosecuted in the same year, with the government retrieving 4.56 billion
yuan (about US$555 million) from purloined funds. The government
also reported that 4,414 state officials were investigated for corruption or
bribe-taking in road construction, urban reconstruction, medicine
purchase and land requisition, and 10,407 employees of state-owned
enterprises (SOE) were suspected of embezzling public funds.
Moreover, 9,476 administrative and judicial personnel were under
investigation for charges of power abuse, dereliction of duties, and
taking bribes, and almost 3,000 high-level officials were reprimanded
for major malpractice and negligence leading to grim traffic, coal mine
and environmental pollution accidents (BBC 2005a).

MEANING

White collar crime refers to non-violent crimes committed through

deceptive practices, for the purpose of financial gain. Typically, white
collar crimes are committed by business people who are able to access
large amounts of money, though the term is sometimes applied to others
who pilfer monies in other circumstances. White collar crimes are non-
9
violent, and are committed by a broad range of activities, such as insider
trading. To explore this concept, consider the following white collar
crime definition.

White collar crimes are financially motivated crimes committed by

individuals, businesses, and government entities. The actual term “white
collar crime” was coined by Edwin Sutherland, Professor of Sociology,
29th President American Sociological Society. Sutherland described
such crimes as “a crime committed by a person of respectability and
high social status in the course of his occupation.”

White collar crimes cover a wide range of activities, but generally,

the crimes are committed by people who are involved in otherwise
lawful businesses. The perpetrators often hold respectable positions in
their communities or businesses, until their illegal activities discovered.
The laws concerning white collar crimes vary, depending on the exact
nature of the crimes committed, though many fall under federal
authority.

10
11
 CHAPTER:-II

 REVIEW OF LITERATURE
 OBJECTIVES

12
CHAPTER:-II

REVIEW OF LITERATURE

Bank fraud is a criminal act that occurs when a person uses illegal
means to receive money or assets from a bank or other financial
institution. Bank fraud is considered to be a white-collar crime.
Recently, a major scam in the banking sector sent shock-waves across
the nation. It was none other than the Nirav Modi PNB Fraud Story.
Read the article, to know in detail about the types of Bank Frauds, who
is Nirav Modi, What happened in the PNB Scam along with other facts
& ideas. Knowing the details of this Bank Fraud Case might help you
in your preparation for various Bank Exams.

Before, you read all the details of the PNB Fraud Story, it is
essential that you know the various types of Bank Frauds!

PNB Fraud Story - Types of Bank Fraud

The major bank frauds are as described below:

• Bank Impersonation
 one or more individuals act as a financial institution, often by
setting up fake companies, or creating websites, in order to lure
people into depositing funds.
• Stolen Checks

13
  fraudsters may obtain jobs that provide access to mail, such as
the post office, mailbox stores, a tax authority, or corporate
payroll company.
• Forgery
 forgery occurs when a person alters a check by changing the
name or some other information on the face.
• Fraudulent loans
 an individual who takes out a loan, knowing that he will
immediately file bankruptcy, has committed bank fraud.
• Internet Fraud
 as it relates to bank fraud, internet fraud occurs when
someone creates a website for the purpose of posing as a
bank or other financial institution, to fraudulently obtain
money deposited by other people.
OBJECTIVES

In law, fraud is deliberate deception to secure unfair or unlawful

gain, or to deprive a victim of a legal right. Fraud itself can be a civil
wrong (i.e., a fraud victim may sue the fraud perpetrator to avoid the
fraud or recover monetary compensation), a criminal wrong (i.e., a fraud
perpetrator may be prosecuted and imprisoned by governmental
authorities) or it may cause no loss of money, property or legal right but
still be an element of another civil or criminal wrong. The purpose of
fraud may be monetary gain or other benefits, such as obtaining a

14
passport or travel document, driver's license or qualifying for a mortgage
by way of false statements.

A hoax is a distinct concept that involves deliberate deception

without the intention of gain or of materially damaging or depriving a
victim.
As a civil wrong In common law jurisdictions, as a civil wrong,
fraud is a tort. While the precise.
Definitions and requirements of proof vary among jurisdictions,
the requisite elements of fraud as a tort generally are the intentional
misrepresentation or concealment of an important fact upon which the
victim is meant to rely, and in fact does rely, to the harm of the victim. [3]
Proving fraud in a court of law is often said to be difficult. That
difficulty is found, for instance, in that each and every one of the
elements of fraud must be proven, that the elements include proving the
states of mind of the perpetrator and the victim, and that some
jurisdictions require the victim to prove fraud by clear and convincing
evidence.

The remedies for fraud may include rescission (i.e., reversal) of a

fraudulently obtained agreement or transaction, the recovery of a
monetary award to compensate for the harm caused, punitive damages to
punish or deter the misconduct, and possibly others.

15
 In cases of a fraudulently induced contract, fraud may serve as a
defense in a civil action for breach of contract or specific performance of
contract.
Fraud may serve as a basis for a court to invoke its equitable
jurisdiction.

In common law jurisdictions, as a criminal offence, fraud takes

many different forms, some general (e.g., theft by false pretense) and
some specific to particular categories of victims or misconduct (e.g.,
bank fraud, insurance fraud, forgery). The elements of fraud as a crime
similarly vary. The requisite elements of perhaps most general form of
criminal fraud, theft by false pretense, are the intentional deception of a
victim by false representation or pretense with the intent of persuading
the victim to part with property and with the victim parting with
property in reliance on the representation or pretense and with the
perpetrator intending to keep the property from the victim.

In addition to the penalties outlined above, the court can also issue
a prohibition order under s. 380.2 (preventing a person from "seeking,
obtaining or continuing any employment, or becoming or being a
volunteer in any capacity, that involves having authority over the real
property, money or valuable security of another person"). It can also
make a restitution order under s.

16
CHAPTER:-III
 RESEARCH METHODOLOGY
(SECONDARY DATA)

 OUR WHITE COLLAR

CRIME AND FRAUD
INVESTIGATIONS PRACTICE
INCLUDES:

 DATA INTREPRETATION

17
CHAPTER:-III

RESEARCH METHODOLOGY

(SECONDARY DATA)

NEW DELHI: Punjab National Bank "in view of fraudulent

activities" has asked Gitanjali Group companies to pay "outstanding"
dues amounting to Rs 1,045.88 crore, the jewellery firm said in a
regulatory filing. Gitanjali Gems also released resignation letter of
Independent Director S Krishnan.

The firm, a key entity involved in Rs 11,400-crore scam at PNB,

said this in reply to clarifications sought by the stock exchanges.

The company has annexed four letters written by PNB to Gitanjali

Gems, Gili India, Asmi Jewellery India and Nakshatra Brands on
February 8.

Through the letters, PNB has informed these companies that "in
view of fraudulent activities by the group companies Gitanjali Gems,
Nakshatra Brands and Gili India, it has been decided by the bank to
recall facilities being enjoyed by the company with our bank with
immediate effect".

The scam-hit state-owned bank had asked the four group

companies to pay the "outstanding dues" amounting to Rs 1045.88
crore "within days".

18
 PNB has demanded Rs 645.12 crore from Gitanjali Gems, Rs
187.52 from Gili India, Rs 110 from Nakshatra Brands, and Rs 103.24
crore from Asmi Jewellery.

Investigating agencies, including Enforcement Directorate,

Central Bureau of Investigation and Income Tax Department, has
launched probe into the alleged fraud.

The Central Bureau of Investigation pasted an official notice

outside the branch in Fort -- the bank's flagship lending window in
Mumbai and its second largest national outlet.

All have been barred from opening or entering inside this branch
without prior permission of the CBI or the CBI Special Court or the
CBI Competent Authority. (IANS had first named and identified on
February 14 the involvement of this crucial Branch that deals with
some of its biggest accounts).

Accordingly, all operations at the Brady House Branch came to a

grinding halt and several bewildered staffers were seen waiting outside
it for further orders from their bosses.

The action came two days after the Special CBI Court here
remanded to police custody till March 3, three accused in the PNB
fraud, including two former staffers.

The accused includes retired PNB Deputy Manager Gokulnath

Shetty, Single Window Operator Manoj Kharat and authorized

19
signatory of the prime accused Nirav Modi's group companies, Hemant
Bhatt.

The three were the very first arrests to be in the sensational case
so far by the CBI from different parts of Mumbai and Raigad. More
arrests were expected soon, officials have indicated.

Besides these, the CBI earlier named 10 other directors and

officials as accused in the scam which has created a nationwide furore.

They are: Krishnan Sangameshwaran, Nazura Yashjaney, Gopal

Das Bhatia, Aniyath Shivraman, Dhanesh Vrajlal Sheth, Jyoti Bharat
Vora, Anil Umesh Haldipur, Chandrakant Kanu Karkare, Pankhuri
Abhijeet Varange and Mihir Bhaskar Joshi.

The prime accused, diamond trader Nirav Modi and other

associates fled the country in early January, before the massive PNB
fraud came to light.

The multi-pronged action by the CBI, Enforcement Directorate

and others comes five days after PNB admitted to unearthing a fraud of
Rs 11,515 crore involving Modi's companies and certain other
accounts in the Brady House Branch.

The fraud, which includes money-laundering among others,

concerns the Firestar Diamonds group in which the CBI last week
booked Modi, his wife Ami, brother Nishal Modi and their uncle
Mehul Choksi.

20
 The rapid advance of technology and the modernization of the
Indian economy has led to a steep rise in white collar crimes. DSK
Legal’s white collar practice has kept pace with the evolving legal and
regulatory regime in India and abroad. The strength of our white collar
practice is bolstered by the skills of our related teams, in particular, our
banking and finance, corporate, dispute resolution and tax teams.

As foreign investments come into the country, Indian companies

tied to corporations in the U.S and the U.K are increasingly exposed to
investigations under the Foreign Corrupt Practices Act, 1977 and UK
Bribery Act, 2010. Additionally, as anti-corruption laws have become
more stringent in India, it has become incumbent on the directors of
companies to put in place a mechanism to prevent fraud and corruption.
Our team ensures that our clients are compliant with Indian and foreign
law at every step of a transaction, while also putting in place a safety net
in a post-transaction scenario. Our solutions cover fraud or breach of
security incidents, including incidents concerning kickbacks, bribery and
intellectual property theft.

Our white collar crime and fraud investigations practice includes:

 Corporate Finance.

 Collecting, preserving, certifying and analysing evidence to help

uncover facts and identify persons involved.

21
 Examining and establishing compliance policies.

 Assisting Indian companies to customize their anti-corruption and

bribery policy to suit Indian and International law.

 Conducting training and awareness programs.

 Detection, incident management and risk mitigation.

 Liaising with internal and external agencies to provide end to end

management of breach of security and fraud incidents.

 Liaising with internal and external agencies to strategically mitigate

damage to reputation and unwarranted publicity.

 Structuring an organisation’s response to an incident.

 Implementing processes to handle future incidents in-house.

 Litigation support in criminal and civil proceedings.

 Representing in internal investigations and criminal and enforcement

matters initiated by the government.
DSK Legal also provides legal advice on issues relating to
Corporate & Commercial, Dispute Resolution, Employment,
Infrastructure & Project Finance, IT & Intellectual Property, Media &
Entertainment, Real Estate, Shipping, Tax and Transaction Support.

22
 CHAPTER:-IV

BACKGROUND OF THE PNB FRAUD

EARLY LIFE
HISTORY
INSPIRATION
THE PUNJAB NATIONAL BANK FRAUD
CASE.
REFORMS

23
CHAPTER:-IV

BACKGROUND OF THE PNB FRAUD

Nirav Modi (born 1970/71) is a businessman, and the founder of

Nirav Modi global diamond jewellery house established in 2010. He
absconded in early 2018 when the CBI started investigating a $2 billion
fraud case involving him and Indian banks. Interpol, the world's largest
police organisation, issued a diffusion notice against Nirav Modi in
February billion fraud case at Punjab National Bank (PNB). Bollywood
actress Priyanka Chopra is seeking legal opinion with respect to
terminating her contract with the brand in light of allegations of financial
fraud against Nirav Modi. Nirav Modi was the first Indian jeweler to
have been featured on the covers of Christie’s and Sotheby’s Catalogues.
The company has its headquarters in Mumbai, India. In March 2018,
Modi applied for bankruptcy protection in Manhattan, New York.

24
 Nirav Modi
Born 1970/1971 (age 46–47) Jamnagar, Gujarat, India
Residence Mumbai, India
Nationality Indian
Occupation Jeweller and businessman
Net worth US$1.8 billion (As of 10/04/2017)
Spouse(s) Ami Modi
Children 3
Parent(s) Deepak Modi
Relatives Mehul Choksi (uncle)
Website http://www.niravmodi.com

EARLY LIFE
Nirav Modi was born in Jamnagar, Gujarat, but grew up in
Antwerp, Belgium His family has been in the diamond business for
several generations. His grandfather Keshavlal Modi lived in Chennai
and in Singapore, when he was 19, he and his father Deepak Modi
moved to Mumbai to work in his uncle's business. His uncle is Mehul
Choksi, the head of Gitanjali Group, a retail jewellery company with
4,000 stores in India.

25
 He studied at the Wharton School at the University of
Pennsylvania. While studying, he met his future wife, the daughter of a
diamond businessman.

His younger brother Neeshal is married to the niece of Mukesh and

Anil Ambani He is not related to Narendra Modi, Indian's prime
minister, who was born in a different community. CBI records show that
Neeshal Modi, too, was involved in his brother's approximately $2
billion fraud.

HISTORY
His interest in art and design was developed at a young age by
visiting various museums in Europe. After moving to India in 1989, and
training in all aspects of the diamond trading business, in 1999 he
founded Firestar (Formerly known as Firestone), a diamond sourcing
and trading company. Firestar is the exclusive distributor of Rio Tinto’s
Argyle pink diamonds in India.

In 2002, his company starting manufacturing jewellery on a

contract basis. He acquired Frederick Goldman in 2005, and Sandberg &
Sikorski and A. Jaffe in 2007 in USA. In 2010 he started designer
diamond stores bearing his name in New Delhi's Defence Colony,
followed by one in Mumbai's Kala Ghoda. They were followed by 17
stores across the world in prime locations. He had a vision of having 200
stores by 2025. It had been reported that he was planning to sell some of
26
his business to a well-known foreign brand and was also planning to
raise funds through an initial public offering (IPO).

INSPIRATION

In 2008, a close friend asked Nirav Modi to make a pair of

earrings, after which he created the brand. He became well known after
he designed his "Golconda Lotus Necklace" with an old, 12-carat, pear-
shaped diamond as a centerpiece in 2010. The diamond was earlier sold
in the 1960s; it was repolished. It featured a lattie of white and pink
diamonds. It was included on the cover of Christie’s catalogue in Hong
Kong, and was auctioned for US$3.6 million in 2010. Many of his
designs feature the use of pink diamonds. He developed new diamond
cuts: Ainra cut, Endless Cut and the Moghul Cut.

He is sometimes compared with Laurence Graff who also created a

brand name in the high end diamond market.

In February 2018, the Indian government's Central Bureau of

Investigation launched an investigation into Modi. The CBI is acting on
a complaint from the Punjab National Bank, a state banking institution,
that alleges Modi and his partners defrauded the bank for ₹280 Crore
(approximately USD 40 million) by conspiring with bank officials to

27
fraudulently obtain Letters of Undertaking for making payments to
overseas suppliers. While ₹280 Crore is the fraud that has devolved to
date, the potential liability of loss to Punjab National Bank goes up to
₹11000 crore. The bank has alleged that Modi and his business partners
were involved in fraudulently issuing Letters of Undertakings – or bank
guarantees – at the bank’s Mid Corporate Branch in Mumbai’s Brady
House. The enforcement directorate (ED) is looking into the case of
fraud that the CBI has registered against Nirav Modi and his associates
for cheating over ₹280 crore as cited by Punjab National Bank (PNB).
Although the case is still under investigation but Nirav Modi's stores
will remain open and business is as usual at his stores around the globe
including the one at Marina Bay Sands in Singapore.

On 7th March 2018, Bloomberg news reported that Modi's firm

Firestar Diamond Inc. had applied for bankruptcy protection at a
Manhattan bankruptcy court, in order to protect its assets in the United
States and their revolving credit facility with Israel Discount Bank.
Nirav Modi bought a Rs 900 crore sea-facing property in Mumbai's
coveted Samudra Mahal properties with his wife Ami Modi.

28
THE PUNJAB NATIONAL BANK FRAUD CASE.

Relates to fraudulent letter of undertaking worth ₹11,600 crore

(US$1.77 billion) that took place at its branch in Brady House, Mumbai,
making Punjab National Bank potentially liable for the amount. The
fraudulent transactions are allegedly linked to designer and jeweler
Nirav Modi of Gitanjali Group,against whom a complaint has been filed
with the Central Bureau of Investigation. The transactions were first
noticed by a new employee in the bank. the bank then complained to the
CBI which is currently investigating the scam apart from ED The bank
said that two of its employees at the branch were involved in the scam,
when the bank's core banking system was bypassed when the corrupt
employees issued LOUs to overseas branches of other Indian banks,
including Allahabad Bank, Axis Bank, and Union Bank of India, using
the international financial communication system, SWIFT. Three
Jewellers - Gitanjali Gems Ltd and its subsidiaries Gili and Nakshatra
are also under the scanner of investigation agencies.

REFORMS

On 1 March 2018, Modi government approved Fugitive Economic

Offenders Bill to deter economic offenders from evading the process of
Indian law by giving powers to the government to confiscate assets of a
fugitive, including Benami assets of absconding loan defaulters. The bill

29
covers a wide range of economic offenders which include: loan
defaulters, fraudsters, individuals who violate laws governing taxes,
black money, benami properties, financial sector and corruption. On 12
March, the government introduced the bill in the Lok Sabha.

In March 2018, the Reserve Bank of India scrapped banking

instruments such as the Letter of Undertaking (LoU) and Letter of
Comfort (LoC) that in an attempt to plug a loophole and improve banks’
due diligence in trade credit. Some bankers said that LoUs and LoCs led
to receiving banks depending completely on the issuing bank on
creditworthiness.

30
 CHAPTER:-V

 ANALYSIS
 LIMITATION

 LIST OF SCANDALS IN INDIA

31
CHAPTER:-V
ANALYSIS
Analysis: Nirav Modi firms may not have financials to match PNB
fraud magnitude An analysis of the nine firms where Nirav Modi is
director shows that most of them don’t have financials that match the
magnitude of the Punjab National Bank fraud Apart from directors, more
than 40 firms linked to Nirav Modi share other things in common—
office addresses and even official emails, to name a few, according to
data submitted by these companies to the ministry of corporate affairs
(MCA). (Aniruddha Chowdhury/Mint) .

A Mint analysis of the nine firms where Nirav Modi, the man at
the centre of an alleged $1.8 billion fraud, is director, shows that most of
them don’t have financials that match the magnitude of the fraud.

According to regulatory filings, Modi is on the board of five

companies—Jewelry Solutions International Pvt. Ltd (which is now
amalgamated), Radashir Jewelry Co. Pvt. Ltd, Firestar International Ltd,
Firestar Diamond Pvt. Ltd and Firestar International Pvt. Ltd. He is also
on the board of four limited liability partnership (LLP) firms including
Neeshal Enterprises, Paragon Jewellery, Paragon Merchandising and
Panchjanya Diamonds.

The four LLPs incorporated in 2014 are maintaining a bare

minimum of Rs1 lakh of authorized capital and no paid-up capital.

32
 Neeshal Enterprises, which is now an LLP, has long-term
borrowings of Rs1.93 crore as of 2013 and no revenue is reported out of
sales or manufacturing or services.

Radashir Jewelry, which is in the business of cutting and polishing

gems and jewellery, is making a modest profit of Rs34 lakh as of March
2017 and has revenues of Rs26 crore. It has trade payables at Rs137
crore but no debt on its books.

Firestar Diamond Pvt. Ltd has a positive networth at Rs1.73 crore

as of March 2016. But the manufacturing company is making losses of
Rs28,772 with trade payables of Rs17,502.

Firestar International and Firestar Diamond International Pvt. Ltd

are the companies which show a corporate structure and commercial
activity. But even here the numbers suggest that a full recovery of the
debt may not be easy.

Firestar International as of March 2016 has a net worth of Rs2,688

crore, making a profit of Rs185 crore, has trade payables of Rs4,104
crore and Rs3,509 crore of debt on its books.

Modi is a promoter director in these firms. In his letter to PNB,

Modi sought to sell off Firestar group and its assets.

33
 Firestar Diamond International, in the business of retail as of
March 2016, has a net worth of Rs595 crore, a borrowing of Rs431
crore, profits of Rs97 crore and trade payables of Rs1,087 crore.

At least six of the firms are part of the 114 companies being
probed by the Serious Fraud Investigation Office (SFIO) for possible
fund diversion and fraud in connection with Modi and his uncle Mehul
Choksi’s case. On Friday, the MCA approached the National Company
Law Tribunal to attach the properties connected to these 114 firms to
prevent them from disposing of assets.

He shares the directorship in six of these firms with Hemant D.

Bhatt, the first Modi employee to be arrested by the Central Bureau of
Investigation (CBI) after the fraud unravelled. Bhatt is a director on 19
companies and four LLPs in the network of Modi connected firms.

Bhatt was arrested by CBI on last Friday and is on the board of

companies including Firestar Diamond, Moola Consultants, Neeshal
Merchandising, NDM Enterprises, Camelot Trading Pvt. Ltd, Ghazalah
Investments Pvt. Ltd and Neeshal Trading Pvt. Ltd, among others.

Apart from directors, more than 40 firms linked to Nirav Modi

share other things in common—office addresses and even official
emails, to name a few, according to data submitted by these companies
to the ministry of corporate affairs (MCA).

34
 About half of these companies controlled by jeweller Modi share a
common email address, companysecretary@firestardiamond.com, for
regulatory purposes. Mails to this email ID bounced.

A fourth of them operate out of a small office in south Mumbai; a

third have common directors on their boards; at least six of them had
high debt levels; a 10th of them shut shop in past three years and half a
dozen others changed their status from being a company to an LLP.

“As such calling them shell structures at this stage may not be
absolutely correct but these are red flags. Red flags which we typically
look at to make a case against companies for suspected fund diversion,”
said a senior official with the corporate affairs ministry, requesting
anonymity.

Read: PNB fraud: 200 shell firms, benami assets under ED, I-T
dept scanner

There is no set definition for shell companies under the Companies

Act 2013. A shell company is usually a legal entity without significant
assets, independent business or operations, and is owned or controlled
by another company and is often used for illicit purposes.

Experts and lawyers say that there is nothing illegal in creating

several companies and being a director on multiple companies because
such companies become important when the parent company expands. It

35
is also not uncommon for subsidiary firms to share the same premises
and email IDs with parent companies.

“In the present case, the investigating agencies will look at each
and every company, its directors, their accounts as well as every
transaction that companies have conducted. Currently, the case is at a
very nascent stage and what details are in public domain is just a tip of
an iceberg,” said Zulfiqar Memon, managing partner of law firm MZM
Legal. “CBI is investigating the violations of the Prevention of
Corruption act and ED (Enforcement Directorate) violations of money
laundering activities and other agencies such as SFIO also closely
observing the case.”

Neeshal Modi, a co-accused in the scam and a director in 11

companies in the network of firms, said all the companies stand to shut
down due to “no commercial activity and not generating any revenue”.

When contacted, Modi’s lawyer Vijay Agarwal did not comment

on the particulars of the firms named in our report. But on the allegation
that the bank funds have been diverted or siphoned off, he said that the
investigating “agencies are moving forward without any facts or
figures”.

36
LIMITATION

 Securities fraud, also known as stock fraud and investment

fraud, is a deceptive practice in the stock or commodities markets
that induces investors to make purchase or sale decisions on the
basis of false information, frequently resulting in losses, in
violation of securities laws. Offers of risky investment
opportunities to unsophisticated investors who are unable to
evaluate risk adequately and cannot afford loss of capital is a
central problem.

 Securities fraud can also include outright theft from investors

(embezzlement by stockbrokers), stock manipulation,
misstatements on a public company's financial reports, and lying to
corporate auditors. The term encompasses a wide range of other
actions, including insider trading, front running and other illegal
acts on the trading floor of a stock or commodity exchange.

 Fraud by high level corporate officials became a subject of wide

national attention during the early 2000s, as exemplified by
corporate officer misconduct at Enron. It became a problem of
such scope that the Bush Administration announced what it
described as an "aggressive agenda" against corporate fraud.[7]
Less widely publicized manifestations continue, such as the
securities fraud conviction of Charles E. Johnson Jr., founder of

37
 PurchasePro in May 2008.[8] FBI Director Robert Mueller
predicted in April 2008 that corporate fraud cases will increase
because of the subprime mortgage crisis.
 Dummy corporations may be created by fraudsters to create the
illusion of being an existing corporation with a similar name.
Fraudsters then sell securities in the dummy corporation by
misleading the investor into thinking that they are buying shares in
the real corporation.
 The Securities and Exchange Commission, criminals engage in
pump-and-dump schemes, in which false and/or fraudulent
information is disseminated in chat rooms, forums, internet boards
and via email (spamming), with the purpose of causing a dramatic
price increase in thinly traded stocks or stocks of shell companies
(the "pump").
 Online investment newsletters that offer seemingly unbiased
information free of charge about featured companies or
recommending "stock picks of the month." These newsletter
writers then sell shares, previously acquired at lower prices, when
hype-generated buying drives the stock price up. This practice is
known as scalping. Conflict of interest disclosures incorporated
into a newsletter article may not be sufficient.
 The other type of insider trading is the purchase or sale of a
security based on material non-public information. This type of

38
 trading is illegal in most instances. In illegal insider trading, an
insider or a related party trades based on material non-public
information obtained during the performance of the insider's duties
at the corporation, or otherwise misappropriated.
 When the price reaches a certain level, criminals immediately sell
off their holdings of those stocks (the "dump").

LIST OF SCANDALS IN INDIA

The following is a list of alleged scams and scandals in India
since independence. include political, financial, corporate and others.
Entries are arranged in reverse chronological order by year. The year is
the one in which the alleged scam was first reported or came into
knowledge of public.

Amount

Scam Year (in Place Scammers Notes

crores)

Punjab National Bank

Fraud Case

relates to alleged fraudulent

Letter

of Undertaking worth
₹11,600 crore

39
 (USD 1.77 billion
dollars)that took

place at its branch in Brady

House,

Mumbai, making Punjab

National

Bank potentially liable for

the

[1]
amount. The fraudulent

transactions are allegedly

linked to

designer and jeweler Nirav

Modi of

[[firestar diamonds], against

whom a

complaint has been filed

with the

Central Bureau of
Investigation.The

transactions were first

noticed by a
Punjab ₹116
Brady Nirav Modi, Ami new employee in the bank. [2]

40
National 2011- billion

House, Modi, Neeshal Modi, The bank said that two of its
Bank
2018 (₹11,600 Mumbai Mehul C Choksi
employees at the branch
Scam crores) were

involved in the scam, when

the

bank's core banking system

was

bypassed to raise to
overseas

branches of other Indian

banks,

including Allahabad Bank,

Axis Bank,

and Union Bank of India,

using the

international financial

communication system,

SWIFT.Three Jewellers -
Gitanjali

41
 Gems Ltd and its subsidiaries
Gili

and Nakshatra are also under

the

scanner of investigation

[3][4][5]
agencies.

Saradha 2013 2,500 West Kunal Ghosh, Financial scam caused by the

collapse of a Ponzi scheme run

Group Bengal Sudipto Sen, Madan by

 Haryana Teachers' recruitment scam- Ex Haryana CM Om Prakash

Chautala (Indian National Lok Dal) and his son Ajay Singh
Chautala (Indian National Lok Dal) have been convicted for 10
years in teacher recruitment.

 Fodder scam – ₹9.5 billion (US$150 million)- Bihar ex CMs Lalu

Prasad Yadav (Rashtriya Janata Dal), Jagannath Mishra (ex-Indian
National Congress) and Lok Sabha MP Jagdish Sharma (Janata
Dal (United)) have been convicted in fodder scam. Lalu Prasad

42
 Yadav and Jagdish Sharma have also been disqualified from the
parliament.

 MBBS seats scam- Rajya Sabha MP Rasheed Masood (ex-Indian

National Congress) is convicted for 4 years in MBBS seats scam.
He is also disqualified from the parliament for corruption.

43
CHAPTER:-VI
 CONCLUSIONS
 BIBLIOGRAPHY

44
CHAPTER:-VI

CONCLUSIONS

Organized crime is a category of transnational, national, or local

groupings of highly centralized enterprises run by criminals who intend
to engage in illegal activity, most commonly for money and profit. Some
criminal organizations, such as terrorist groups, are politically
motivated. Sometimes criminal organizations force people to do
business with them, such as when a gang extorts money from
shopkeepers for so-called "protection".Gangs may become disciplined
enough to be considered organized. A criminal organization or gang
can also be referred to as a mafia, mob, or crime syndicate; the
network, subculture and community of criminals may be referred to as
the underworld. European sociologists (e.g. Diego Gambetta) define the
mafia as a type of organized crime group that specializes in the supply of
extra-legal protection and quasi law enforcement. Gambetta's classic
work on the Sicilian Mafia generates an economic study of the mafia,
which exerts great influence on studies of the Russian Mafia, the
Chinese Mafia, Hong Kong Triads and the Japanese Yakuza.

Other organizations—including states, militaries, police forces,

and corporations —may sometimes use organized-crime methods to
conduct their activities, but their powers derive from their status as
formal social institutions. There is a tendency to distinguish organized

45
crime from other forms of crime, such as white-collar crime, financial
crimes, political crimes, war crime, state crimes, and treason. This
distinction is not always apparent and academics continue to debate the
matter. For example, in failed states that can no longer perform basic
functions such as education, security, or governance (usually due to
fractious violence or to extreme poverty), organised crime, governance
and war sometimes complement each other. The term "Oligarchy" has
been used to describe democratic countries whose political, social and
economic institutions come under the control of a few families and
business oligarchs.

In the United States, the Organized Crime Control Act (1970)

defines organized crime as "the unlawful activities of a highly
organized, disciplined association Criminal activity as a structured
process is referred to as racketeering. In the UK, police estimate that
organized crime involves up to 38,000 people operating in 6,000 various
groups. Due to the escalating violence of Mexico's drug war, a report
issued by the United States Department of Justice characterizes the
Mexican drug cartels as the "greatest organized crime threat to the
United States".

46
BIBLIOGRAPHY

 "TAKE A LOOK-India's biggest bank fraud at state-run lender

PNB" . Reuters.
 "The Nirav Modi Case: How The $1.8
 Billion Fraud Detected At PNB Unfolded" . Bloomberg Quint.
Retrieved 2018-02-15.
 "A freshly appointed official first noticed the fraud at Punjab
National Bank" . Moneycontrol. Retrieved 2018-02-15.
 Current Megazine.
 News Paper.
 Youtube.
 Google.
 Wikipedia.
 Books.

47