New Delhi: Two days after CNN-IBN exposed money-laundering by the promoters of Mumbai-based Lilavati Hospital, Vijay Choraria, a trustee in the hospital promoted by the Kirtilal Mehta family resigned.
He has also resigned from the board of the Prabodh Kirtilal Mehta and Rashmi Kirtilal Mehta owned Kirti Equities, which is a shareholder in ING Investment Management which controls the finances on ING Vysya Bank
Choraria told CNN-IBN that he resigned to distance himself form the Mehtas.
On Thursday, CNN-IBN exposed how hundreds of crores of rupees were being siphoned out of the Hospital into several foreign bank accounts in tax havens and then laundered via the hawala route back into India.
Brothers Prabodh Kirtilal Mehta and Rashmi Kirtilal Mehta, named in the swindler's list that CNN-IBN exposed almost two weeks back, own the Socalo Stiftung Trust in the LGT Bank in Liechtenstein. But the curiosity remained about their identity.
The Mehta brothers, along with their sons, Chetan and Bhavin are trustees of Mumbai's famous Lilavati Hospital - the hospital where maximum city's rich and famous rush to when they fall ill.
Between 2002-2010, nearly Rs 500 crore was spent to buy medicines and pharmaceuticals the hospital and of that, nearly half the money, Rs 250 crore was diverted via hawala in banks accounts in several tax havens.
And between 2002 and 2010, nearly Rs 125 crore was spent to buy medical instruments, and of that, nearly Rs 50 crore was diverted in foreign accounts.
CNN-IBN found out Mehta brothers use to launder money are in six key foreign bank accounts - HSBC Private Bank in Bahamas; HSBC Private Bank in Mauritius; HSBC Private Bank in Singapore; ABN-AMRO Private Bank in Geneva; Credit Suisse in Dubai and UBS in Dubai.
A close scrutiny of the official list of the medical suppliers to the Lilavati Hospital revealed that since 2002, the hospital has not been buying medicines directly from any manufacturers or even distributors.
Without any tenders or requisite approvals from the board, Lilavati sources their medicine from 400 small individual medical stores and out of those, 250 are located in the slums of Dharavi.
And in the balance sheets of Lilalavati since 2005, Rs 35 crore is outstanding to Mayfair Realtors & Vesta Ltd, the firm which was contracted to deliver machinery to Lilavati.
But till 2011, the firm has not even delivered a screwdriver to the hospital.
Mayfair Realtors & Vesta Ltd is owned by Suresh Motwane, a declared absconder wanted in 40 cases of fraud and cheating by Mumbai police.
Prabodh, Rashmi, Chetan and Bhavin have also used crores of trust's money to fund their personal legal battles.
But that was just the tip of the iceberg. The CNN-IBN investigation found that their foreign accounts are not just simple instruments of tax evasion, but of large scale money laundering.
The fascinating story of money laundering from India began in Belgium. More specifically, the city of Antwerp, the diamond capital of Europe, where Kirtilal Mehta, the man who set up Lilavati Hospital, started Gembel European Sales in 1932. In 1970, he handed over the global diamond trading company to his sons - Prabodh Kirtilal Mehta and Rashmi Kirtilal Mehta.
Gembel, owned by Prabodh, Rashmi, Chetan and Bhavin, buys rough stones and then works in partnership with jewellery designers and manufacturers to produce exquisite polished pieces for high-net-worth consumers.
In 2007, Gembel European Sales and it's main owner Prabodh Mehta was convicted of money laundering, fraud and forgery in diamond business in Belgium.
According to court documents available with CNN-IBN, they were implicated in laundering 26 million Euro, nearly Rs 170 crore. Prabodh was sentenced to 6 months imprisonment and a 3-year probation.
And Prabodh's son Chetan was convicted in Israel for the charges of trying to bribe government officials.
And yet, defying all rules of the Reserve Bank of India, they became shareholders and directors in ING Investment Management which manages all the funds of ING Vysya Bank.
ING Investment Management manages all the portfolios of the bank as well as individual schemes, handling nearly Rs 50,000 crore of public money.
Kirti Equities Private Limited is the third largest shareholder of ING Investment Management (India) Limited with a 14.34 per cent stake. And that's where starts a complex shareholding puzzle created to fool the investigators, both at home and abroad.
The CNN-IBN investigation decoded the cipher network and found out that Kirti Equities Private Limited is registered in the Mumbai residence of Rashmi Kirtilal Mehta. But it is held by Kirti Communication, a company owned by the Mehta brothers and their sons in Les Cascades in Port Louis, the capital of the tax haven of Mauritius.
CNN-IBN also learnt that Vijay Choraria was the common link between the Mehta brothers. He is a Director of Kirti Equities and a trustee at Lilavati hospital nominated by Prabodh and Rashmi Mehta.
Sources in the Enforcement Directorate said that they were also looking into De-Five (Mauritius) Holdings Ltd, which till 2010 held nearly 3 per cent in IndusInd Bank. Investigators suspect De-Five (Mauritius) Holdings Ltd is owned by the four Mehtas.
Gembel European Sales in Belgium is an interesting company. It is the flagship company of Prabodh Kirtilal Mehta, Rashmi Kirtilal Mehta and their sons - Chetan and Bhavin - yet, these balance sheets of Gembel shows that the company made an overall profit of just Rs 2.5 crore over the past eight years, from 2001 to 2009.
According to the 2002-2005 balance sheets of Gembel, the company made net loss of 1.9 million Euro or Rs 12 crore.
In 2006, the company made a net profit of $ 300,000, but in 2007, it suffered a net loss of $ 600,000.
But the CNN-IBN investigation showed how they created multi-layered companies across the globe in various jurisdictions to hide the money laundering and all funds kept ending up in India.
Despite the parent company Gembel making a mini-profit, in 2003, Mehtas register a company in Singapore - Arpee Gems Private Limited, with a capital infusion of $18 million, that is nearly Rs 90 crore.
A close look at their shareholders revealed more interesting facts.
While B&C Manufacturing (Mauritius) is a shareholder in Arpee Gems, Burmaruby (Mauritius) is a shareholder in Arpee Gems. On the other hand HSBS Trustees Limited is a shareholder in Arpee Gems (Singapore) along with Bhavin and Chetan. Arpee Gems from Singapore pumps money into a Mumbai-based company Adesh International.
Balance sheet of Adesh International also revealed unsecured loans from Gembel Mauritius every year.
According to a high-level source in the Enforcement Directorate, the modus operandi was simple.
Laundered funds were brought into Adesh International as capital as a first step to make money kosher / black money white. Adesh then bought bogus bills in Indian market to purchase stock of diamonds and then exports diamonds to bogus parties overseas.
The bogus parties, which have tainted fund, sent them to India against the export, thus making the funds legitimate.
Adesh then apparently paid money to the party from whom it brought the bogus bill in the first place as it has an outstanding against that bill.
In reality, the money paid to the party in the end had the black money overseas but Adesh International was used to bring its funds down to India after making it white.
However, it was just the tip of the iceberg. Enforcement Directorate sources said that they faced lot of resistance from EOW of Mumbai Police while investigating the case.
The Lilavati Hospital management had denied these allegations. A statement issued by them reads, "The allegations regarding medicine purchases are baseless. The medicines have been purchased from manufacturers and authorized distributors. We have documents to corroborate. The allegations against Vesta and Mayfair are not true. The trust has filed a case in the Bombay High Court to recover the advance money. Vesta and Mayfair had transferred immovable properties to the trust to extinguish their liability."
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