Recent media reports including Diamond Intelligence Briefing’s (DIB) latest issue published on 10th May 2017, authored by Chaim Even-Zohar, have accused Mr. Jatin Mehta, promoter of Winsome Diamonds and Jewellery Ltd. of defrauding a consortium of Indian banks to the tune of approximately USD 1.25 billion and other alleged wrongdoings. To seek truth on the allegations made in such reports, we reached out to Mr. Harshad Udani – Director of Winsome Diamonds, who obliged us in an e-mail interview.
Clarifications sought and response from Winsome Diamonds
1) BDI: Did Winsome diamonds diverted INR 376 crs from WC Limit obtained from the banks consortium to the 6 subsidiaries in Singapore, Hong Kong, Dubai, Indonesia, Ghana and China, as mentioned by CBI in its statement, and cited in the DIB issue? If so, what was the reason of diversion of this money?
Mr. Harshad Udani – Director, Winsome Diamonds (WD): We are not aware of such allegations in the FIR, there is no such diversion of funds, also it is the desire of the Writer [Chaim Even-Zohar] to mislead the Reader. The E&Y Forensic audit was done. There were no diversions of funds [of] any sort. Winsome has no subsidiaries in Singapore, Hong Kong, Dubai, Indonesia, Ghana and China.
2) BDI: Why were some of the defaulting UAE customers covered under Su-Raj Diamonds’ Group Insurance jewelry block policy?
WD: There was no UAE customers covered under Su-Raj Diamonds’ Group Insurance jewelry block policy.
3) BDI: Did Winsome Diamonds and/ or the banks consortium evaluate credit reports on the 13 defaulting UAE customers, before exporting goods on credit?
WD: Winsome was dealing with the UAE customers since 2002-2003. The Banks had obtained credit rating reports from D&B for the Company’s Customers. The banks were lending to Winsome from 1990’s on the strength of company’s performance and growth. The loans were sanctioned by the banks after thorough due diligence on the UAE customers including through Dun and Bradstreet (D&B) reports.
Over the last decade or so, Winsome has made sales and received approximately USD 1.91 billion from the UAE customers. The banks have also tremendously benefited in terms of commissions, facility charges, etc. from these large sales. Numerous bank records including Credit Assessment Notes, consortium meeting minutes etc. record the outstanding performance and their reasons for repeated increase in the facilities being granted by the banks to the company.
During 2012 itself, Winsome and Forever received an amount of approximately USD 345 million from the UAE customers. The banks never doubted the payment capacity and capability of these customers or that they would default in payments to Winsome for the exports. All of this is a part of contemporaneous record available with the banks. For some of the customers they were dealing with Winsome from 2005/ 2006.
4) BDI: Why did Winsome Diamonds gave such a big exposure to this group of customers?
WD: According to the Director – Finance Head Mr. Ramesh Parikh as reported in the Balance Sheet FY 2012-2013, “Due to negative reports in Diamond Intelligence Brief and other trade and industry Journals about the Group (especially, about the company’s subsidiaries in USA and Belgium) its exports to USA and Europe almost dried up since May 2012 resulting in concentration of exports to UAE market”
5) BDI: In your 5th May submission to BSE, it is mentioned that Kroll Report “..admits it is hearsay and should not relied upon”. Why do you say so?
WD: This the KROLL REPORT available on the BSE website
Excerpts from KROLL REPORT
Private & Confidential
RESTRICTED USE WARNING
This Report was prepared by Kroll at the request of the client to whom it is furnished. The Client agrees that reports and information received from Kroll, including this report, are strictly confidential and are intended solely for the private and exclusive use of the client only in connection with a business, investment or other commercial propose. Any other use (including for employment purposes, credit evaluation or insurance underwriting purposes.) and any communication, publication, disclosure, dissemination or reproduction of this report or any portion of its contents without the written consent of Kroll is strictly forbidden. Kroll assumes no direct, indirect or consequential liability to any third party or other person who is not the intended addresses of this report for the information contained herein, its interpretation or applications, or for omissions or for reliance by any such third party or other person thereon. To the extent information provided in this report is based on a review of publicly-available records, such information, as presented, relies upon the accuracy and completeness of those records, which have not been corroborated by Kroll. Statements herein concerning financial, regulatory or legal matters should be understood to be general observations based solely on Kroll’s experience as risk consultants and may not be relied upon as financial, regulatory or legal advice, which Kroll is not authorized to provide. All such matters should be reviewed with appropriately qualified advisors in these areas. THIS REPORT DOES NOT CONSTITUTE A RECOMMENDATION, ENDORSEMENT, OPINION OR APPROVAL OF ANY KIND WITH RESPECT TO ANY TRANSACTION, DECISION OR EVALUATION AND SHOUW NOT BE RELIED UPON AS SUCH UNDER ANY CIRCUMSTANCES.”
Kindly read this along with Excerpts from JLM dated 16 Sept, 2013 –
“On being asked that the report is based on various market sources such as industry peers, shipping companies ex-employees of the company and persons/ entities in the same trade and market report without substantiating it with documentary evidence. Ms. Reshmi Khurana of KROLL informed that it has not audited any books of accounts of any establishment nor does it have access to any. She said that the report is based on market intelligence after conducting interviews with various personalities in which case no documentary evidence is possible. She further informed that modalities of our investigation was exchanged with the officials of SCB the Lead Bank of Winsome Diamonds & Jewellery Ltd.
Members asked as to how the responsibility can be fixed in the absence of any proof. She informed that the banks have given the assignment to a reputed investigative agency whose report can be relied upon. She further informed that they requested Standard Chartered Bank to provide information relating to dispatch of goods to Dubai buyers to enable them trace the evidence of delivery of goods at the port of destination. However, we didn’t get the same. Members informed her that all these details are available with every members of the consortium including Standard Chartered Bank. Which are the basic documents for exports.
Members asked as to how the ownership in all the 13 Companies has been established in view of the fact that report of another investigative audit report, due diligence report of D&B have or/found_. She informed that Kroll report is based on information available from Corporate Registry office Dubai.
Members asked as to how did the report conclude by stating that Winsome must have diverted money and invested in real estate and diverted money towards investment in Gemesis Singapore without any concrete evidence. She informed that “based on market intelligence and for such things concrete evidence/ documentary evidence is not available.” The above clearly shows the complicity between SCB and KROLL. In this way Standard Chartered is fueling investigations to harass the Company.
In another recent interview with Diamond World, Mr. Harish Udani also mentioned “She [Ms. Reshmi Khurana] confirmed that the report is based on ‘hearsay’… This is the clear proof that she had no idea how the report was prepared.. Corporate registry in Dubai would never have details of a Sharjah Free Zone Company. She was lying to the Consortium. The consortium already had The Dunn & Bradstreet reports. These D&B reports gave details of the ownership of the defaulting companies. Hence it is clear that this report was made by someone else but was laid out on Kroll letterhead.”
The report apparently contains lot of wrong information, inaccurate data and false points and was eventually rejected by the lenders consortium as documented in the minutes of its 16th September 2013 meeting. Besides, “… the falsity of the Kroll Report is re-confirmed by the reports of the Banking/ Accounting Experts appointed by the Sharjah Federal Court, UAE, who has traced every penny of the company.” However, surprisingly, The Kroll Report is still being used and relied upon by the banks, industry and media.
6) BDI: What were the conclusions of the experts appointed by the Dubai Court?
WD: Excerpts from the Judgement passed by Sharjah Federal Court of First Instance -Ministry of Justice -United Arab Emirates. “Accordingly and as the court was satisfied with the soundness of the missions completed by the expert appointed in the lawsuit, so the court shall not take into consideration the objections raised by the defendant against the expert’s report. As the papers have not included any evidence that will weaken the aforesaid report, so the court adopt the result concluded by the expert that the plaintiff deserves the sum of (fifty four million, eight hundred and eighty five thousand, one hundred and ten US dollars, and fifty eight cents) or its equivalent in AED. Hence, it judges to oblige the defendant to pay it to the plaintiff as it will be included in the text of the judgment.” The Court was pleased to pass the Judgement in favour of WDJL and FPJDL.
7) BDI: Was Winsome Diamonds/ Su-Raj Diamonds or any of its subsidiaries ever involved in trading of Lab-grown Diamonds? Why has the company not answered questions on this issue yet? Please clarify your position.
WD: No, Winsome Diamonds/ Su-Raj Diamonds or any of its subsidiaries are not involved in trading of Lab-grown Diamonds.
8) BDI: Has Winsome Diamonds/ Su-Raj Diamonds ever made payment on someone else’s behalf for Lab-grown diamonds?
WD: No, Winsome Diamonds/ Su-Raj Diamonds has not made payment on someone else’s behalf for Lab-grown diamonds
9) BDI: Did Winsome Diamonds/ Su-Raj Diamonds at any time buy HPHT diamonds from Gemesis Diamond Corporation and/ or paid bills to Gemesis on someone else’s behalf?
WD: No, Winsome Diamonds/ Su-Raj Diamonds has not purchased HPHT diamonds from Gemesis Diamond Corporation and/ or paid bills to Gemesis on someone else’s behalf.
10) BDI: Were any of the companies like Diamtec, Nozomi, SJR Developers etc. mentioned in the DIB issue, ever related to Winsome Diamonds? If so, please describe the nature of relationship.
The DIB issue itself says the transaction was genuine
Besides, in the same DIB report it is mentioned that the goods were indeed exported and the 13 defaulting customers indeed owe money to Winsome Diamonds – “Much has been said – but even more remains to be said – about the reports by the Accounting Experts/Banking experts, appointed by the Sharjah Court of First Instance, First Plenary Commercial Department and the Sharjah Federal Court of First Instance, Second Plenary Commercial Department in the various suits filed by Winsome against 13 UAE companies that had defaulted in payment of dues amounting to some $1.2 billion.
These reports unequivocally confirm that Winsome indeed exported goods to these 13 UAE companies in accordance with the purchase orders, invoices, bills of lading, and customs clearance from Sharjah/Dubai port after paying the customs clearing fees by the said 13 UAE companies. The goods were duly received by these 13 UAE companies. So there is no doubt that the defaulting companies owe all of this money to Winsome.”
Moreover, as one can see in Winsome Diamonds’ 5th May submission to BSE below, the company had filed 26 suits against the defaulting customers in Sharjah court and they have won the cases in UAE. Sharjah Federal Court has already passed orders appointing Banking/ Accounting experts to report on the business of the UAE defaulting customers.
Mr. Harshad Udani apart from answering our questions also stated “It was due to unavoidable circumstances the Company could not pay to the Banker the due amount of LCs [of] around [INR] 80 crores [~ USD 12 million] which led to devolvement of all foreign LCs due to cross default clause (though it was not due for payment to the Banker and receivables from foreign buyers were also not due for payment to us).” According to the company’s 5th May BSE submission, Winsome Diamonds had requested for a delayed payment but the lead banker Standard Chartered who was also a supplier of bullion to the company invoked the cross default clause in the LC. Other bullion banks followed immediately.
One bank has already settled with Winsome Diamonds
According to a recent media report, one bank in the consortium of 15 banks – State Bank of Mauritius has “recently cut a settlement deal with the Winsome group”. Other banks in the consortium did not focus on recovering its money by partnering with Winsome Diamonds when they were suing its defaulting customers and instead went into a legal battle with Winsome itself.
Intention of such false media stories
There are strong reasons to believe that the issue of bank default is only a disguise and the real motive behind such stories and actions is do a monumental reputation damage and more importantly to obliterate the Lab-grown diamond business that Mr. Jatin Mehta’s son Vishal Mehta has successfully grown over the years. Mr. Harshad Udani added “We understand [that] DIB – Diamond Intelligence Briefing, led by Mr. Chaim S Zohar [Even-Zohar] is focusing mainly on the growing demands of the Lab Grown Diamonds and its impact on the earth mined diamonds. It seems he is acting as the agent of earth mined diamonds, big houses. He has skilfully diverted attention of media on this score, hence priorities are changed. When anybody is alleging anything he should come out with the full evidences so that you can get the proper reply thereof. Merely alleging on the suspicions and apprehensions without any proof can tarnish the image of the Company / person [though] short term only, but you can not get much mileage.”
Winsome Diamonds’ BSE filings
Winsome Diamonds is a Bombay Stock Exchange (BSE Limited) listed company and has been regularly making all necessary submissions to the exchange and clarifying its position against such unsubstantiated media reports. Its latest submission happened as recent as 5th May 2017 (Please see below). However, media has chosen to ignore and omit these from their stories. As mentioned by DIB’s author Chaim Even-Zohar himself “In the age of ‘fake news’, one can promulgate any spin…” Exactly!!