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U.S. Objects to Employee Bonus Plans of Diamond Merchant Nirav Modi’s Firm

Nirav Modi

United States Trustee Program, a component of the Department of Justice, has filed a motion of objection against fugitive Indian diamond merchant Nirav Modi’s U.S-based company Firestar Diamond for its plan to pay $2,30,000 in bonuses to employees as part of a retention program, according to India Today.

“The objection is two-fold,” William K Harrington, the United States Trustee (Region 2), who objected to the company, which has filed for bankruptcy in a court in south New York, was quoted as saying in the report. “Court is aware, the ultimate majority shareholder of the debtors, and the founder of Firestar Diamond — Nirav Modi — has been charged by the State Bank of India with criminal conspiracy, fraud and cheating related to the Punjab National Bank”.

Firestar Diamond and its two affiliates — Fantasy Inc and A Jaffe Inc — filed for bankruptcy protection, citing supply chain disruption, a move opposed by the Punjab National Bank, on Feb. 26. The U.S court allowed the companies to sell their assets on May 5.

The Trustee looks into administration of bankruptcy cases and private trustees. “Impact of [Nirav] Modi’s alleged large-scale fraud upon the three debtors here is not yet known and is the subject of an investigation by the Examiner recently appointed in these cases,” the U.S Trustee statement said.

“At this time, an award of bonuses to employees that may have known or should have known about any fraud on the part of Modi and/or these debtors is premature,” the statement added.

According to U.S Trustee, the debtors have failed to disclose the names, titles, roles and job descriptions of the participants so that the Court and other parties in interest can determine whether the KERP (Key Employee Retention Programme) participants exercise control over significant aspect of the debtors’ business or are entitled to indemnification.

“Without this information it is not possible for the Court, the United States Trustee and other parties in interest to determine whether any of the KERP participants are insiders and whether the proposed bonus plans should be evaluated under Section 503(c)(1),” it added.

Meanwhile, Modi, who is believed to be in New York, has reached out to two law firms in the United Kingdom —  Boutique Law and Mishcon De Reya — in a bid to get political asylum in the country, NDTV reported, citing sources. Modi, whose passport has been revoked by the Indian government, has sought asylum on grounds that he faces political persecution in India.

Boutique Law is a firm linked to Indian-origin lawyer Anand Doobey, who specializes in criminal and regulatory cases, such as fraud, extradition and money laundering. Doobey is also part of the panel that works with business tycoon Vijay Mallya, whose case is pending before the UK court.

Saying it has no information on Modi’s move, the Central Bureau of Investigation spokesperson told NDTV:  “We have a diffusion notice out with the Interpol which means that if he moves internationally, they will inform us.”

The Punjab National Bank, who had reported a fraud of Rs 13,000 crore by Nirav Modi and his uncle Mehul Choksi, stated in a release on May 1 that the bank will recover from the impact of the fraud in six month’s time.