Sterling Biotech of India round-tripped standby letters of credit (L/Cs) to fraudulently finance its Nigerian oil operations according to India's Enforcement Directorate (ED).

It is continuing to probe an alleged US$1.2 billion bank loan fraud conducted by the pharmaceuticals giant and its main promoters Nitin Sandesara, Chetan Sandesara and Deepti Sandesara, all of whom have reportedly absconded.

Round-tripping is defined by The Wall Street Journal as a form of barter that involves a company selling an unused asset to another company, while at the same time agreeing to buy back the same or similar assets at about the same price.

L/C abuse

"The main promoters (of the Sterling group) have not only siphoned off loan funds to finance their Nigerian oil business but also for their personal purposes," the ED said in a statement.

It added that loan funds were "diverted for non-mandated purposes, layered and laundered through a web of multiple domestic as well as offshore entities."

"Investigations revealed that the group was engaged in round-tripping of standby L/C funds to the tune of 4,500 crore rupees [US$676 million] by violating conditions laid by the RBI [Reserve Bank of India - central bank] while sanctioning the loan," the ED said.

Assets attached

Members of the Sandesara family are also suspected of connections with some high-profile politicians.

The ED has so far seized from the family and attached assets worth around US$730 million in this case.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.