Investigators in India have raided the premises of former Central Bank of India employees in connection with alleged frauds that used letters of credit (L/Cs) to a significant extent.

Officers from the Central Bureau of Investigation also raided business and residential premises of people connected with the Mehta Group in connection with the long string of frauds, allegedly committed during the 1980s and 1990s.

Raids

The investigators simultaneously raided eight premises owned or used by several members of the Mehta family, one of the country's most prominent business families.

They also raided the residential premises of Central Bank of India former zonal manager Gopal Krishnan and former chief manager S U Nath according to reports in the Mumbai press.

Dummy companies

The size of the frauds allegedly perpetrated by the Mehtas and their co-conspirators could be staggering, with some reports suggesting the total sums involved could be more than US$1 billion.

The frauds apparently involved L/C payments channelled through a dense and complex maze of dummy companies registered in India and abroad.

Improper verification

The former bank employees are reported to have arranged for the Central Bank of India to extend one L/C with an apparent face value of around US$2.4 million and another of around US$221,000 without properly verifying the property shown as collateral security.

In total, the Mehta Group is alleged to have fraudulently used 22 L/Cs for domestic transactions and three against imports it is supposed to have made.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.