How investigators botched up the case against hawala kingpin
By Syed Nazakat in Delhi
In 2006, security agencies in the Italian town of Carpitried to nab an Indian businessman who was running a network of money laundering from Dubai. They called it Operation Khyber Pass, after the famed route in the Hindu Kush mountains, and unmasked his money-laundering ring, where deposits from drug sales around the world were transferred to drug barons in Afghanistan and South America.
The businessman, Naresh Kumar Jain, 52, is described byIndia’s Directorate of Enforcement (ED) as one of the world’s biggest money launderers. He, along with his associates, allegedly handled $2.2 billion daily in hawala business. Though he gave the Italian agencies the slip, he was arrested, along with 39 others, inDubaia year later. He jumped bail inDubaiand enteredIndiathroughNepal. The Indian sleuths arrested him from hisDelhihome on December 6, 2009.
“That was our biggest success and the biggest mistake,” said an investigating officer at the home ministry. Success? It might be. Mistake? It was, as the Delhi High Court released Jain on bail in January this year. Said the court: “The continued detention of the petitioner would be illegal and that Jain should be set free unless he is required to be in custody in some other case.”
Jain was under surveillance of the ED and the Narcotics Control Bureau (NCB). He was arrested and booked by the ED in 2009 under the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, for laundering drug money. But even after two years, the source of Jain’s hawala money is unknown. And despite the leads and evidence, the ED has neither filed a charge sheet against him nor submitted any document in the court to support the case. What it has submitted is an old note dated April 26, 2007. When contacted by THE WEEK, M.G. Attri, deputy director, ED, declined to comment on the matter.
After his arrest, Jain was interrogated at the ED headquarters in Delhi and by a joint team of the ED and NCB. His statement, which he later told the court was forcibly obtained, was recorded. “During interrogation he gave enough leads. But I don’t know why those leads were never followed,” said an officer who was part of the early investigation.
According to the documents initially submitted to the court, the ED recovered Rs 12 lakh from Jain’s house inDelhiand found details of hawala transfers to people inAfghanistan,PakistanandIndia. It told the court that Jain continued his activities even after his return toIndia. The agency, however, failed to furnish any material evidence before the court. Both the ED and NCB told the Delhi High Court that a team was ready to visit theUSfor investigation. Nobody from the ED has yet visited Dubai,Italy, theUK or the US for the investigation.
Also, the ED did not investigate Jain’s friends and relatives in India despite knowing their involvement in the hawala money movement. Jain’s brother Bimal had been under the ED’s scanner since 2006. He was accused of exporting chalk powder as the drug Neproxan toDubai. The CBI is also investigating Rs 250-crore pulses scam involving Jetking International, a firm allegedly linked to the Jain brothers.
“Some [investigating] officers are often handicapped and they remain subordinate to the political class,” said lawyer Anil Divan, who filed a public interest petition with lawyer Ram Jethmalani and others on the black money stashed abroad. “In this case…, after he was arrested, the investigating agencies should have gathered evidence and submitted that in the court.”
Lawyer Balwant S. Bilowria, who has handled many hawala cases, said, “When someone is to be protected, the investigating agency prepares a weak case with a lot of loose ends. In the Jain prosecution, that seems to be the case.
India had sent letters rogatory to the US, the UK, the UAE andItalyto collect evidence against Jain. Only theUSand the UAE responded. The UAE’s reply, in Arabic, was incomplete, hinting at miscommunication between the authorities in Delhi and Dubai. While the Indian agencies asked for details about Jain’s illegal business network in Dubai, the reply was on the legal status of the case.
The US government’s reply, to which THE WEEK had access, says Jain was operating his money laundering business in the US through 16 bank accounts at Man Financial in Manhattan in New York. Three accounts were in the name of Jain’s Jayana Trading Company, two in his nephew Pankaj Jain’s name, four in another nephew Nitin Jain’s name and one in Kanta Nath Jain’s name. In 2009, theUSgovernment froze $4.3 million in these accounts.
The Indian agencies have no idea how much money Jain has sent toIndiathrough hawala. A recent report on International Narcotics Control Strategy in the US says the size of hawala money could be between $13 billion and $17 billion, andIndiacontinues to be the leading recipient of illegal remittances.
Jain allegedly invested money in the US Commodity Exchange by floating two fake companies―Hainke & Anderson Trading and Jayana Trading―and made profits through unreal transactions. “He used layering, a money laundering technique, to disguise the origin of funds,” said B.B. Mishra, deputy director general, NCB.
A week before his arrest inDubai, Jain had made a number of phone calls to his people asking them to stay underground. The voice samples of these conversations form a part of the UAE’s investigation against him.Indiahas requested the UAE for the voice samples.
Son of a farmer, Jain dropped out of school and left his hometown in Panipat district in Haryana forDelhi. His first brush with the authorities was in 1995 when he was named in a gold smuggling case. He was caught at the Indira Gandhi International airport in Delhi by the customs, but it failed to provide any evidence against him in court. Later he went toDubaiand started a firm called Kumar Trading Co. The court documents say this firm soon became the foundation for his hawala operations.
Jain’s business was not limited to money laundering. TheUSdepartment of homeland security had said he was linked to drug money laundering in Pakistan and Afghanistan on behalf of al Qaeda. Indian investigators have confirmed that he has made hawala transactions toPakistanandAfghanistan. Also, during his interrogation, he allegedly disclosed his links with Mustafa Pyar Ali and Illot Abrahim of Dubai, Ul Shanot of Holland and the Pakistani Parvez Ahmed who was arrested in Italy.
Ahmed, along with some others, owned a hair care products store inItaly, which allegedly was a hawala centre bringing in drug receipts from all over northernItaly. According to theUSletter rogatory, phone calls from the store toDubaiwould authorise money transfers to be made from Jain’s account to drug exporters, mainly inTurkey. Jain used to skim a commission of 10 per cent off these transactions.
Jain, still wanted in the UAE and theUS, declined to speak to THE WEEK on the case. His lawyer Naveen Malhotra, however, denied all the charges against Jain and said he was a legitimate businessman. “He had a factory in South Africa. He used to supply readymade garments to Afghanistan and Nepal. He never dealt in arms or drugs. The ED is making wild allegations against Jain without any proof,” he said.
The Delhi High Court has given Jain only a conditional relief. He has to report to the NCB office once a week and cannot leave the country. The home ministry has issued a lookout notice against Jain at all airports and seaports. Now the NCB is planning to approach the court with fresh evidence to restart the trial. “He stands accused in the court of law,” said prosecution lawyer Rajesh Manchanda.
The investigators believe that Jain can give a lot of information on the hawala operations in India. In his interactions with the ED, he allegedly dropped many names, which make a political hot list. The problem with the whole investigation, said a senior officer, is that Jain was given enough time to erase evidence. “Today all our leads are dead,” he said. The clumsy investigation ensured that the case will fall flat in court. The government might not even approach court to resume his trail. Perhaps that was the intention.
Box: Who is Naresh Kumar Jain?
The ED calls the 52-year-old NRI one of the world’s biggest money launderers who, along with associates, allegedly operated $2.2 billion daily in hawala business. Son of farmer, Jain dropped out of school and left his hometown in Panipat in Haryana forDelhi. In 1995, he was named in a case of gold smuggling and was caught at the Indira Gandhi International airport inDelhi. Later he went toDubaiand started Kumar Trading Co, which allegedly became the foundation for his hawala operations.
What did he do?
Jain allegedly ran a network of money laundering business fromDubai, which is involved in financing various people all over the world for sale, purchase, transportation of narcotics. He allegedly invested money in the US Commodity Exchange by floating two fake companies―Hainke & Anderson Trading and Jayana Trading Co―and made profits through unreal transactions. TheUSdepartment of homeland security says he was linked to drug money laundering in Pakistan and Afghanistanon behalf of al Qaeda He is wanted in the US and the UAE for illegal money transactions.
How did the ED mess up the case?
Despite the leads and evidence, the ED has neither filed a charge sheet against him nor submitted any document in the court to support the case. Even after two years of Jain’s arrest, the source of his hawala money is unknown. Nobody from the ED has yet visitedDubai,Italy, the UK or the US to further investigate the case. The ED did not investigate Jain’s friends and relatives inIndia. despite knowing their involvement in the hawala money movement.
(25 September, 2011, THE WEEK)