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Abu Dhabi, UAEThursday 13 December 2018

Indian police arrest six as inquiry widens into bank fraud

Central Bureau of Investigation is looking into allegations that billionaire jeweller Nirav Modi was involved in scam

Nirav Modi  and Mehul Choksi, a diamond merchant, have been accused by investigators of defrauding the Punjab National Bank of Dhs158.7 million. Francis Mascarenhas / Reuters
Nirav Modi and Mehul Choksi, a diamond merchant, have been accused by investigators of defrauding the Punjab National Bank of Dhs158.7 million. Francis Mascarenhas / Reuters

India's federal police have arrested six people, including employees of a billionaire jeweller, as an inquiry into one of the country's biggest bank scams widens, investigators said on Wednesday.

The Central Bureau of Investigation is looking into allegations that Nirav Modi, a jeweller to Hollywood stars including Kate Winslet and Naomi Watts, was involved in scamming India's second-largest state bank of almost $1.8 billion (Dhs6.7bn).

Mr Modi and his uncle and business partner Mehul Choksi, a diamond merchant, have been accused by investigators of defrauding the Punjab National Bank of 2.8 billion rupees (Dhs158.7 million), part of the total losses.

The CBI has carried out raids on luxury diamond sellers and properties connected to the pair and has contacted Interpol to track down Mr Modi, who is believed to be abroad.

Investigators said senior associates from Mr Modi's Firestar Diamond company and Choksi's Gitanjali group were among those detained in the latest arrests on Tuesday evening.

"We have arrested five people connected to both Nirav Modi and Mehul Choksi's companies, and they will be produced in CBI court today," CBI spokesman Abhishek Dayal told AFP.

He said the manager of the bank's branch in Mumbai where the alleged fraud occurred was also detained and is due to be in court on Wednesday.

"We will intensify our investigations," Mr Dayal said.

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The CBI has arrested a dozen bank officials and employees linked to the high-profile jewellers since the PNB announced last week it had detected fraud of almost $1.8bn at the Mumbai branch.

Several of those arrested are suspected of facilitating fraudulent lines of credit to companies linked to Mr Modi and Mr Choksi, investigators have stated.

Mr Modi, the third generation of his family to go into the diamond trade, is worth $1.73bn according to Forbes, placing him 85th on India's rich list.

The 47-year-old's high-end eponymous Nirav Modi brand has shops in several of the world's major cities.

New Delhi suspended the passports of Mr Modi and Mr Choksi following reports that the pair had left the country.

In a letter to bank officials quoted by The Press Trust of India, Mr Modi accused PNB of acting hastily and "erroneously" inflating the amount he owed the bank.

"Your actions have destroyed my brand and the business, and have now restricted your ability to recover all the dues," he said in the letter cited by PTI.

India's government is trying to reduce the crippling debts of the country's embattled state banks, including PNB.

It recently announced a $32bn recapitalisation plan to help them clean up their books.