US prosecutors have charged Nehal Modi, the younger brother of fugitive diamond merchant Nirav Modi, with defrauding a New York wholesale supplier of diamonds worth $2.6 million.
He has been charged with Grand Larceny in the first degree, which is theft of property worth more than $1 million, and it can land him in jail if convicted.
The younger Modi is accused of procuring diamonds from LLD Diamonds USA, a wholesale company, between March 2015 and August 2015, for purported sale to Costco, a wholesale grocery retail chain, against deferred payment.
He is alleged to have pawned off the diamonds instead, or sold them, and pocketed most of the proceeds for personal use or other businesses.
LLD finally reported him to the office of the Manhattan district attorney, Cy Vance, in August.
“As alleged, Mr. Modi conned a Manhattan diamond wholesaler into fronting him millions worth of diamonds for a purported deal with Costco that never existed,” Vance said on Friday, announcing the indictment (charges) filed in a New York Supreme Court. “While diamonds may be forever, this flawed scheme was not, and now Mr. Modi will face the clarity of a New York Supreme Court indictment. My office will not allow individuals who have the privilege of soliciting business in Manhattan’s iconic diamond industry to defraud our businesses or consumers.”
Vance’s office has jurisdiction over New York City’s prime business area of Manhattan, where elder brother Nirav Modi launched his flagship jewellery boutique store in September 2015 with much fanfare, just the month after his younger brother was reported by LLD to Vance’s office.
The elder Modi had then announced plans to open 100 more stores around the world.
In February 2018, Indian authorities filed charges against the elder Modi for defrauding banks of millions of dollars and sought his arrest, as part of an expanding investigation. He has since fled to the UK, where he has sought political asylum and is fighting extradition to India.
Nehal Modi was released without posting bail on Friday. His attorney Roger Bernstein told New York Post, “This is a commercial dispute” and his client is “not guilty”.
According to the indictment announced by district attorney Vance, Nehal Modi first approached LLD in March 2015. His family connections – coming from a “well-known family in the diamond business” – helped, the district attorney’s office said in a statement.
He is alleged to have asked the wholesaler for $800,000 worth of diamonds to show to Costco for a potential deal.
He got back and is charged with falsely telling LLD that Costco had agreed. LLD allowed Modi to buy the diamonds on credit, to be paid fully within 90 days. “Modi then pawned the diamonds at Modell Collateral Loans, Inc. (‘Modell’) to secure a short-term loan,” the district attorney’s office said.
Over April and May, Modi is alleged to have returned to the company three times and picked up diamonds worth more than $1 million for sale to Costco.
Modi did make a “series of payments” to LLD, but is alleged to have “used the majority of the proceeds for personal use and other business expenses”.
“To cover his fraud, Modi falsely claimed that he was encountering payment issues due to a ‘Costco fulfillment error’ and made repeated promises to satisfy the balance,” said the district attorney’s office.
Modi returned to LLD again in August, and asked for more diamonds for sale to Costco. This time, in view of Modi’s spotty payment record, the wholesaler gave him the diamonds with the condition that they could not be sold with their authorisation.
Modi was already in touch with Modell then and, the statement said, “after picking up the diamonds from LLD, Modi pawned the majority of the diamonds at Modell to secure two separate loans and sold the remainder of the diamonds to various retailers at a steep discount”.
LLD reported the case to the district attorney after failing to get Modi to either return the diamonds or pay the outstanding balance.
