SFIO gets forensic auditors to unearth Winsome Group’s complex dealings

Mumbai: India’s Serious Fraud Investigation Office (SFIO), which probes white-collar crimes, has engaged forensic auditors Chokshi & Chokshi, and officials seconded by PwC to look into the accounts, transaction patterns, and foreign exchange derivative deals of Winsome group — one of the largest wilful defaulters whose promoters and some of their key aides have long crossed the borders to take citizenship of countries having no extradition treaty with India.

The Winsome story, which has baffled probe agencies due to the complex and overseas dealings, began with a series of defaults in the summer of 2013 and left 15 banks in India with a total unrecoverable exposure of ₹6,800 crore to Winsome Diamonds & Jewellery, a listed company, and group firm Forever.

Unlike flamboyant defaulters like Vijay Mallya and Nirav Modi, Winsome promoter Jatin Mehta has been an unfamiliar name outside Mumbai’s diamond district. Multiple agencies have been looking into Winsome with the Central Bureau Investigation filing a chargesheet in June 2018 and the Enforcement Directorate initiating multiple letters rogatory to obtain information from banks in UAE. The ongoing forensic audit, initiated by SFIO a few months ago, will tell whether there is adequate information that can be pieced together to complete the money trail.

“The SFIO investigation in the Winsome case has been going on for quite some time and the matter is also being investigated by the CBI and ED. However, a parallel investigation by the CBI and the SFIO is going to cause a multiplicity of proceedings and may also be a source of conflict. Generally, SFIO is authorised to prosecute offences both under the Companies Act and the Indian Penal Code. In the instant case, both the agencies may end up prosecuting the accused under the IPC, which may give rise to double jeopardy issues. Be that as it may, it is difficult that the prosecutions will reach fruition without the presence of the prime accused who is currently absconding. SFIO should have been brought in much earlier,” said Zulfiquar Memon, managing partner, MZM Legal.

While CBI had sent a request to Interpol for issuance of a red corner notice (RCN) against Mehta, legal circles said that detention of a person (under RCN alert) in the course of travel is often at the discretion of airport authorities and depends on the bilateral relationship with the country.
THE TRANSACTIONS

Winsome had imported gold on the back of standby letters of credit (SBLC) — or guarantees — given by Indian banks in favour of international bullion banks which supplied the gold.

Winsome and Forever used the gold to make jewellery, which was exported to 13 UAE entities linked to Hathyam Salman Ali Obaidah, a Jordanian businessman. When Winsome was not paid for its ‘exports’ by the UAE customers, banks in India, as per the SBLC covenants, had to pay the global bullion banks that supplied the gold.
When questioned by the consortium of local banks led by Standard Chartered, Winsome has said its inability to repay was due to huge losses, running into a billion dollars, suffered by its UAE clients when their currency derivative bets backfired. Winsome later moved the UAE court against the UAE companies and blamed StanChart for its troubles. But, banks in India never bought the story and categorised Winsome as a wilful defaulter.

Banks and agencies had tried to find out the identities of the counterparties in the over-the-counter forex derivative deals cut by the UAE firms — and whether these counterparties were connected to Mehta or his family members in any way.

“It’s not known if SFIO or CBI has this information. There was a buzz that a foreign bank that found itself on the back foot for having done large derivative deals with the Winsome group against insufficient underlying orders had informally shared some information. But there are doubts whether the information would stand legal scrutiny. SFIO had been in touch with some of the former Winsome directors and independent board members. But it’s widely believed they were just Mehta’s rubber stamps,” said a senior banker.

“It’s an old case. If data and records are missing, forensic auditors may not be able to comment conclusively on whether defaults were caused by frauds and diversion,” said another banker who had dealt with Winsome.

Rishi Goel, additional director, SFIO did not respond to queries from ET.