Page 18 - Bloomberg Businessweek July 2018

Bloomberg Businessweek
THE HEIST ISSUE

country’s banking assets, are unwieldy and inefficient, sought to turn Gitanjali into a boutique retail brand, to
vulnerable to heavy hints from corrupt politicians. Their elevate it above the rote labor of cutting and polishing
books crawl with non performing loans, on which borrow- that his peers undertook. “Nirav also wanted to be very
ers have stopped paying the interest or principal: $108 bil- much like that,” the banker says. “He was never called a
lion as of last September. This compelled the government, ‘diamond trader.’ For him, it was always ‘diamantaire.’ ”
in October, to announce that it would stuff the banks with In 1999, Modi founded Firestar Diamond Inc., dealing
$31 billion in fresh capital over the next two years. at first in loose diamonds before expanding into the man-
Against this backdrop, the con allegedly orchestrated ufacture of jewelry for retailers around the world. But
by Modi and an uncle, Mehul Choksi, went off like a he wasn’t content backstage; he wanted to be out front,
Catherine wheel, spraying sparks in every direction. Top- bridging the line that divides prosperous customer from
ranking executives have fallen, banking rules have had to opulent product. Eleven years ago, he bought A.Jaffe, the
be changed, Mumbai’s diamond merchants have noted venerable American bridal jewelry brand, for $50 million.
glumly that credit has become harder to obtain. For reg- Then, in 2010, he created Nirav Modi, an eponymous
ulators, the long and durable life of the swindle has forced brand that released limited-edition lines: elastic gold ban-
two uncomfortable questions into view. How high up in gles; earrings drizzled with jewels; rings crowned with
PNB did it go? And what further crises are buried within rare, fat, pink and yellow diamonds; necklaces with names
the untidy ledgers of India’s biggest banks? For everyone such as Riviere of Perfection and Emerald Waterfall that
else, though, the more intriguing riddle is: How, and why, were made to be murmured by husky-voiced women in
would Modi have done it? advertisements. At least on paper, Modi was the designer
of every piece of jewelry sold under the brand. He’d col-
odi’s life always had a diamantine glint. He grew lapsed his empire into his persona.
Mup in the Belgian city of Antwerp, the pivot of the Two former employees recount the care with which he
world’s diamond trade. His father, his family, their peo- fashioned his image. The Nirav Modi marketing team was
ple all bought, cut, and sold diamonds for a living. Over given meticulous notes on the kind of person he was, or

56 the better part of a century, this community—members of wished to be built into. A member of the team kept her
the Jain faith, hailing from Palanpur, a town in the western notes, three pages of the Modi aesthetic condensed into
state of Gujarat—has come to dominate the global indus- bullet points: He read Robert Frost and John Keats, Plato
try. Nine of every 10 rough diamonds are worked and pol- and Aristotle; he loved the clean lines of Art Deco, and
ished in Gujarat, and Palanpuri Jain families have long the music of Nina Simone, and Raphael’s Three Graces,
dispatched sons and cousins and nephews to Antwerp to and “butterflies and ladybugs but not necessarily for jew-
tap trade networks and enlarge their businesses. Modi’s ellery.” He went to the ballet and liked any dance, really,
father moved there in the 1960s. At the dinner table, Modi that “exudes grace and highlights femininity.” He was “not
told the luxury magazine #Legend, his family spoke end- fond of geometric shapes” and hated “bad craftsmanship
lessly about diamonds: “It was our way of conversation.” in anything—whether furniture or jewellery.”
After he became successful, Modi frequently said he’d This employee describes her stint as a strange time and
really wanted to be an orchestral conductor. Instead, he Modi as a polite, persnickety man. During her job inter-
went to the University of Pennsylvania to study finance, view in his art-filled office, she recalls, he pointed to a
then dropped out to apprentice under Choksi in India, poster on the wall—one of the tiny-lettered kind that com-
Hong Kong, and Japan—earning, according to one report, press a book’s full text into an image—and asked her if she
the equivalent of $52 a month today. Most Gujarati dia- knew what it was. “He made me get up to go look at it,” she
mond barons are discreet about their wealth, but Choksi, says. When she recognized it as The Count of Monte Cristo,
a round man with a jolly smile, liked to talk about his Ascot he seemed inordinately impressed. Her workplace held
Chang suits and his yacht. Years later he would take his hundreds of people, but she remembers that it was always
company, Gitanjali Gems Ltd., public on the Bombay Stock hushed. Cameras were everywhere—a routine measure,
Exchange, recruiting brand ambassadors from Bollywood given all the jewelry on the premises, except super visors
and opening posh showrooms. used them “to spy on people,” she says. “If you spent too
Neither Modi nor Choksi could be reached for this long talking to a colleague, they’d email you a photo of it
story, and their lawyers declined requests for com- and tell you off.” Modi wasn’t always in, but when he was,
ment. But a banker who once counted Modi as a client he seemed to follow a finicky schedule: “At a certain time
and knows Mumbai’s diamond business well says Choksi he’d have fruit, and then at a certain time he’d have his
“I COULDN’T UNDERSTAND HOW THIS COULD HAVE HAPPENED. THIS WAS ALL RISK MANAGEMENT 101”