Friday February 23, 2018
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Why the work culture in Indian govt offices is responsible for corporate espionage

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By Harshmeet Singh

The recent series of CBI raids in the capital, where two Government officials have been arrested, suggest that there are still a number of missing links in the recent corporate espionage cases. Government offices even in the most advanced nations are prone to information theft. Examples such as WikiLeaks and Edward Snowden are testimony to the fact that even the most technologically advanced nations in the world aren’t fully equipped to prevent the leak of confidential information.

The state of most public offices in India is appalling. The ready to implode buildings that house these offices are well known for their negligible levels of hygiene and neglect. Such features make public offices a highly unsecure space with liberal access to notorious elements.

Liberal & Unchecked offices

The offices held by the Central Government are in a comparatively better state as compared to the state department offices when it comes to keeping a check on the visitors. But with the cases of information theft from critical central Ministries making headlines, these security arrangements have certainly been proven inadequate.

The place in question, where the information theft occurred, is Shastri Bhawan which is the address to a number of significant Ministries. On any regular day, the campus of Shastri Bhawan is filled with people of influence and those wanting to meet the influential. Out of these, hardly a few would be able to explain the proper reason for their presence inside the campus. Post the leakage of classified documents from the Natural Gas Ministry and the Union Petroleum Ministry at the Shastri Bhawan, the security agencies must introspect their leniency while letting the visitors enter into classified areas.

An act of corporate world?

There is still suspense over the exact information contained in the stolen documents. According to sources,  the documents contained data on the possible future policies of the Government. Claims of national security leaks haven’t been warranted yet. But the critical timing of this theft (pre-budget weeks) has turned all the heads towards a possible corporate angle to this deed. The urge to score a quick one against their competitors by tweaking their plans according to the upcoming policies is being viewed as the possible inspiration behind this theft. For profit minded corporate, this wouldn’t be a difficult decision. With the corporate world continuing its pursuit of every possible profit, it is difficult to assume that such cases won’t repeat. However, our focus must be to minimize the reach of these notorious elements into classified areas of Government offices.

If reports are to be believed, the only security measure employed at the Shastri Bhawan was CCTVs. The keys to the offices were in possession of the office peons who were easily bribed into giving them to the conspirators. If all this is true, it implies that the documents were carelessly placed at the table or kept in open cupboards. If either scenario comes out to be true, the secretariat staff needs to be held accountable for apparent carelessness.

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Lapse of security

Based on the initial reports, it is known that the theft didn’t include high end levels of technical sophistication. Since most of the critical data was stored on the computers, the common knowledge is that the stolen information wasn’t extremely crucial to the Government decisions. If this is true, the higher official deserve a pat on their back for making use of technology and trying to store as much information in the form of soft copies as possible.

The Government must also consider extending the same security arrangements to other ministerial offices as there are at the Prime Minister’s office, to ensure that such cases of corporate espionage do not arise again.

Government’s response

Since in such cases, even the slightest of time lags can prove to be detrimental to the probe, the Government deserves accolades for its swift actions and subsequent raids that have resulted into several arrests. Further probe will answer a number of questions, including the people behind the entire conspiracy. Proper implementation of lessons from this episode and strict laws against theft of classified information would go a long way in ensuring that such episodes aren’t repeated.

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PNB Fraud Fully Exposes the Malicious Intent Of Nirav Modi

For the past seven years, Nirav Modi’s three firms-Diamond R Us, Solar Exports and Stellar Diamonds-were in the process of procuring the LoU's from the Punjab National Bank (PNB)

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Nirav Modi's stamped his name in India’s top corporates with growing global prestige with his fame and affluence.
Nirav Modi's stamped his name in India’s top corporates with growing global prestige with his fame and affluence. Facebook
  • Nirav Modi is India’s one of the better- known diamantaires
  • Since 2013, Nirav Modi has been a regular on the lists of rich and famous Indians
  • Nirav Modi and his firms exploited the loopholes in the banking system to the fullest by seeking letters of undertaking

Who Is Nirav Modi

Nirav Modi is India’s one of the better- known diamantaires. Hewas born in a diamond-dealing family and spent his childhood in Antwerp, Belgium. At an early age of 19, he set sail for Mumbai. After spending nine years down the lane, he came up with his own company named Firestar Diamond Ltd. Initially, Nirav Modi started with selling loose stones and employed the only handful of people. But after attaining staggering success in his business till last year, the number of employees was more than two thousand.

As per the Firestar Group figures, the company’s revenue jumped over three years from 103 billion rupees to some 147 billion rupees by the 2016-17 fiscal year. Since 2013, Nirav Modi has been a regular on the lists of rich and famous Indians. According to Forbes magazine rankings, Nirav Modi’s net worth ranges to some $1.8 billion which itself explains the lavish lifestyle of the business tycoon.

Also Read: Biggest Bank Frauds Which Shook The Indian Economy

Nirav Modi’s stamped his name in India’s top corporates with growing global prestige with his fame and affluence. The Bollywood star and former Miss World, Priyanka Chopra also adorned with Modi’s jewels. From Hollywood’s red carpets to the Bollywood awards, his diamonds have sparkled on the bodies of actors and models like Kate Winslet, Dakota Johnson and Priyanka Chopra.

Last month, Nirav Modi was spotted at the World Economic Forum in Davos. A group photograph with Prime Minister Narendra Modi in the foreground and Nirav Modi in between rows of Indian business leaders have come under fire from the Congress party and notably carried out by the Indian media. Some political parties have taken a direct shot at Prime Minister for facilitating the run of Nirav Modi. In one of its tweet, Rahul Gandhi blamed Narendra Modi for this blunder.

Nirav Modi and his firms exploited the loopholes in the banking system to the fullest by seeking letters of undertaking (LOU) and thus raised credit from foreign banks to pay to its merchants. In simple words, LOU is a bank guarantee issued for overseas import payments. The scandal is termed as India’s biggest banking scams in ages.

For the past seven years, Nirav Modi’s three firms-Diamond R Us, Solar Exports and Stellar Diamonds-were in the process of procuring the LOU’s from the Punjab National Bank (PNB). Through these bank guarantees, Nirav Modi was able to raise the short-term loans from foreign branches of Indian banks to pay to its suppliers of raw material for his business.

A criminal complaint with the CBI was filed on January 29 accusing Nirav Modi and others of defrauding the bank and causing it a loss of Rs. 280 crore.
A criminal complaint with the CBI was filed on January 29 accusing Nirav Modi and others of defrauding the bank and causing it a loss of Rs. 280 crore. Wikimedia Commons

Due to the recent setback to the Punjab National Bank, its shares closed 2% lower at Rs. 125.65 against the previous day’s closing on BSE.

The CBI (Central Bureau of Investigation) booked the billionaire jewellery designer on January 31, along with his wife Ami, brother Nishal and business partner Mehul Choksi. The Nirav Modi’s wife is a U.S. citizen and said to be equally involved in the billion dollar fraud. The charges levelled against them were of allegedly cheating state-run Punjab National Bank to the tune of Rs. 280 crore. Within a fortnight of the first complaint by the Punjab National Bank, CBI was taken into the loop.

Also Read: 16 Indian origin people indicted for running a scam in the United States

Nirav Modi and his brother Nishal, who is a Belgian citizen, left India on January 1. However, it is still not known if they travelled together or separately. Meanwhile, Nirav Modi’s wife Ami, who is a US citizen, left India on January 6. Following the footsteps of his business associates, Mehul Choksi, the promoter of Gitanjali jewellery chain, left on January 4, the officials said.

After the exposure of the scam, CBI and the Enforcement Directorate moved to the External Affairs Ministry in order to get revoked the passports of Nirav Modi and his associates. Hence, the passports of Nirav Modi and Mehul Choksi got suspended for four weeks.

The last nail is struck by CBI as it has asked Interpol for help to arrest celebrity jeweller Nirav Modi, who is being investigated for one of the biggest bank frauds of the country.

Due to the recent setback to the Punjab National Bank, its shares closed 2% lower at Rs. 125.65 against the previous day's closing on BSE.
Due to the recent setback to the Punjab National Bank, its shares closed 2% lower at Rs. 125.65 against the previous day’s closing on BSE. Wikimedia Commons

The federal investigative agency and the law enforcement officials raided his jewellery stores and other businesses in Mumbai and New Delhi. However, Nirav Modi’s flagship company, Firestar Diamond, has denied any involvement in the case.

Also Read: 5 scams that rocked India in 2015

After this scam, Nirav Modi’s biggest rivals like Tanishq and Gitanjali Gems must be having a heave of sigh in terms of competition. As per the NDTV’s report, Nirav Modi is holed up at New York’s JW Marriott Essex House at 160 Central Park South, which includes both a hotel and apartments. The place is situated in a premier location overlooking New York’s well known Central Park.

In the following paragraph, thePNB’s swoop of Rs. 11,300 Crore is explained as it is:

  • There is a system of bank guarantee called a letter of undertaking (LOU). Under this a bank allows its customer to raise money from another Indian bank’s foreign branch in the form of a short-term credit. So basically, the LOU serves the purpose of a bank guarantee.
  • In order to avail LOU, the customer or organization is expected to pay margin money to the LOU issuing bank and hence the credit limit is granted. But in the Nirav Modi’s fraud case, he didn’t pay up any margin money and on the top of that, no credit limit was set up for him.
  • On a regular basis, Nirav Modi managed to pay to its suppliers of rough stones for his three firms. The money was paid through the loans by banks including Axis Bank, and Allahabad Bank. It was done by Nirav Modi’s firms on showing the letters of undertakings issued by the Punjab National Bank.
  • Early this year, Punjab National Bank discovered that there was no official record of such letters of the undertaking before reporting the matter to the CBI.
  • In this case, Nirav Modi and his firms were supposed to repay the loans but till now, all these loans have allegedly been rolled over for want of funds. Incidentally, when the borrower fails to make the repayment, the bank which has issued the LOU is constrained to honour the commitments on the behalf of its customers.
  • On February 15, the RBI (Reserve Bank of India), the central finance body of India reportedly directed the Punjab National Bank to pay all these banks that gave loans to Modi’s firm on the basis of guarantees issued by the state lender.
  • So virtually, Indian bank’s foreign branches were making payments on behalf of Nirav Modi’s to its suppliers in the form of loans.
  • The hell broke out in January when Modi’s firm requested further LOUs for paying the overseas suppliers. The bank officials straightforwardly refused to entertain the request on the ground that Modi’s firm needs to keep 100% collateral for the same. On this, Modi’s firm argued that no such money was kept ‘on margin’ in the past either and this led to an investigation by the bank officials who scanned the records only to discover that there was no trace of any such transaction. Lately, it was known that the guarantees/ undertakings were issued by bypassing the rules in collusion with some Punjab National Bank
  • The violation of the Punjab National Bank’s end was a too glaring blunder to ignore. Hence, a criminal complaint with the CBI was filed on January 29 accusing Nirav Modi and others of defrauding the bank and causing it a loss of Rs. 280 crore.The complaint included Nirav Modi and Mehul Choksi, managing director of Gitanjali Gems. But later on, Nirav Modi’s brother and his wife were also found to be included in this startling scam.