Flawed : Unraveling corporate conspiracies and industry scandals

Bhaskar Parichha discusses Flawed, a book that unravels the mystery surrounding Nirav Modi, the financial scandal and the man behind it all.

When the story of a fugitive diamantaire fills the pages of a book, it is bound to evince more than average interest. ‘Flawed: The Rise and Fall of India’s Diamond Mogul Nirav Modi‘ does exactly that. The book written by journalist-author Pavan C Lall sheds light on one of the biggest financial scandals in India, and profiles the man allegedly behind it.

Kolkata-born and Texas –raised Pavan C. Lall is an associate editor at the Business Standard, where he writes about the automotive sector, private equity, real estate, storied conglomerates and more. A winner of the Citi Journalistic Excellence Award 2016,  Pavan –  having a soft spot for  unraveling corporate conspiracies and industry scandals and laying them bare –  does that here  with  great aplomb.

Says the blurb of the book,

‘In early 2018, the implosion of Nirav Modi’s Firestar Diamond International, on its way to becoming India’s first truly global luxury company, threw the country’s diamond industry and its banking system into utter disarray. Allegations against Modi, of defrauding banks to the tune of US$1.8 billion, brought a whole business community under scrutiny and escalated rapidly into an international scandal.’

The book has several dimensions. One, it is based on personal encounters, incisive interviews and meticulous research. Two,The riveting narrative exposes the incredible twists and turns of the Nirav Modi story – of a third-generation diamantaire who moved from Belgium to India to apprentice with his uncle, Mehul Choksi, an established diamond merchant with extensive connections.

Writes Lall in the book, ‘with the first tier of international expansion rolled out, Modi turned his attention to sales. By then, business had started to slow down. According to widespread media reports, revenue was high with sales of Rs 12,500 crore for financial year 2016, but almost half, or Rs 7,000 crore, of that came from trading in diamonds. The private-label business in which he made jewelry for others accounted for Rs 5,500 crore and made for the majority of his revenues, while the retail business was generating only Rs 470 crore as revenue.’

The book systematically chronicles the account of an astute businessman whose firm grips over an intercontinental supply chain saw his branded jewelry stores dotting not just every Indian metropolis but also marquee locations such as London, New York, and Hong Kong. The 200-page paperback is also an account of a ‘reclusive, inscrutable man with a penchant for the high life that possibly led him to fly too close to the sun.’

Wharton School dropout, Nirav Modi landed in India in the 1990s to learn about the diamond trade and eventually moved on to establish his own brand ‘Firestar.’ Given the course  of his entrepreneurship –  from creating a global luxury brand at a scale that had never emerged from India before –  to his steep crash as the Punjab National Bank (PNB) exposed his fraud of, reportedly up to Rs 14,000 crore that embarrassed the country no end, the book is as potent as it is comprehensive.

The 200-page paperback is also an account of a ‘reclusive, inscrutable man with a penchant for the high life that possibly led him to fly too close to the sun.’

If Modi had captured the Indian imagination at the time of the scandal, this book only takes forward that chilling story. When on 29 January 2018, PNB registered the complaint against Modi, alleging that he had led the biggest bank fraud in Indian history; the scam had a massive psychological hit on business across the country, the entire diamond industry negatively impacted.

Written in an overwhelming style, Lall recounts at length Modi’s young days, initiation into the diamond industry and his training there, the rise and lavishness of his business, its eventual fall, and aftermath. The author also drives home Modi’s edginess and his undoing.

If the PNB scandal was a big flaw, it was ordained to be that. No one could have run off a disgrace, not certainly if the amount ran into several thousand crores.

The book has also a linked  reference to the November  2016 demonetization: ‘Shortly after the ban, in early 2017, a story began doing the rounds that there was a full-scale raid in progress and that it was being conducted not just on Nirav Modi but also on his close associates. While it is not verifiable, an official with a law firm said that the rumor is that Modi converted at least Rs. 300 crore in this way. A raid in Indian business parlance is essentially a search and survey operation that is conducted by the Income Tax Department when they receive a  tip-off that a person or corporation is or has been hoarding “black money”, or cash that they haven’t paid tax on.’

‘In theory, it’s a move against corruption, but in practice it’s a search-and-sweep operation that gives the officers conducting the raid almost Gestapo-like powers that include entering and searching any building or facility that is under suspicion, breaking open sealed cupboards, locks and containers, carrying out personal searches, making an inventory of valuables, taking copies of accounts and seizing items deemed illegal. Needless to say, the cell phones of those being raided are confiscated and their communication with the outside world is cut off, ‘says the book.

Then there is a throwback to the previous search operations on dubious business deals: ‘The last big raid in the jewelry world is documented as having happened some time in 2013 when the National Investigation Agency and the Income Tax Department carried out a joint operation in Mumbai. It led to a haul of diamonds, cash and bullion worth around Rs 200 crore. Those raids happened at Mumbai Central station after the authorities zeroed in on four trucks, from which over a hundred bags were seized, and the people in the vehicles, including the drivers, helpers, office peons of diamond traders and angadias, unregulated couriers who offer illegal banking services were taken into custody.’

Flawed’ is a book with gripping details about the rise of a global player and an equally dramatic plunge of Nirav Modi – now in custody in London. Modi – who the author calls had an “appetite for risk” – awaits an extradition trial next month.

Fascinating and instructive, the book also raises essential questions about how one man’s drive to succeed at all costs can make an entire network of banking business vulnerable.

About the Reviewer

Bhaskar Parichha is a senior journalist and author based in Bhubaneswar. He does book reviews for major publishing houses – mostly  non-fiction.

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