Citibank fraud: Who is to be blamed?

In a startling development in the multi-crore financial scam in Gurgaon, investigators have now trained their guns on more local Citibank executives, and have decided to ask them to appear for questioning.

Investigators said they were examining a complaint filed by Sanjeev Aggarwal, a high net-worth client of Citibank and managing director of Helion Advisors, who had filed a complaint on Tuesday, claiming a loss of Rs 32.43 crore in the financial scam.

Aggarwal had named Citibank global CEO Vikram Pandit and Chairman William R Rhodes, among several other senior members of the bank, in his complaint.

"We are concentrating on investigating the case in Gurgaon and will question the people here. We have so far not found anything against top members of the bank, so we are not planning to question Vikram Pandit," said S S Deswal, the Gurgaon police commissioner.

Deswal also said the police were going through the details provided by Aggarwal, and that any action by the police on his complaint would be taken only after preliminary investigations were completed. Aggarwal has accused the Citibank brass of criminal conspiracy, cheating, breach of trust and fraud in handling his accounts.

When contacted, a Citibank India spokesperson declined to comment on today's developments.

The bank had issued a statement on Aggarwal's complaint late on Tuesday, saying it had found and reported the matter to regulators and law enforcement agencies and that Aggarwal's claims against senior executives are without basis and the bank wants to contest them vigorously.

So far, investigators have estimated that the financial fraud would be over Rs 300 crore.

The case first came to light on December 28 when Binu Soman, an assistant vice-president at Citibank, filed an official complaint with the Gurgaon police accusing relationship manager Shivraj Puri of forging Sebi documents, duping high net-worth clients and illegally transferring money to be invested in the stock market.

Although the police have found that Puri had opened 18 bank accounts in Citibank in the name of his family members, they have maintained that none of Puri's family members were actually involved in the scam.

Even though Citibank discovered the fraud almost a month before it actually filed a police complaint, the bank decided to carry out internal investigations first.

Aggarwal keeps pressure on Citi to make good his losses

Sanjeev Aggarwal, co-founder of private equity fund Helion Investment Advisors, who accused Citibank of duping him of Rs 32.43 crore of his savings on Tuesday, kept up the pressure on the bank to 'own up to its wrongdoing, and make up for the losses.'

Meeting reporters at his home in Gurgaon, Aggarwal said the Rs 300-crore fraud is a systemic failure and believes multiple parties must have been involved in such a big fraud. "One person can't do this. There are more people involved," Aggarwal said.

Aggarwal, who co-founded business process outsourcing firm Daksh which was later taken over by IBM and a co-founder of private equity fund Helion Investment Advisors, has been a Citibank customer since 2002, and member of its a wealth management scheme of Citibank since 2004. "The fraud took place in the last one year," he said.

"As a standard operating practice, Citibank gets its customers to sign on blank documents which allow them to buy and sell securities. That instrument was used to move money into employees' own accounts rather than my account," Aggarwal said.

He discovered the fraud in the first week of December when he got a call from Citibank stating that Citi's Relationship Manager Shivraj Puri is on leave and there is something wrong with his account.

"My trust was shaken when one day I found that there is a gap of Rs 33 crore, which was flown out of my account into other accounts."

Aggarwal took time to file an FIR as he was trying to understand what has happened as a large amount of money has disappeared in a flash.

"At one time Citi was keen on a settlement but I realised that the settlement process was not working out," he said. "Citi needs to own upto its wrongdoing, and make good my losses," he added.

On Tuesday, Aggarwal filed a complaint against Citibank and 11 others, including Citigroup's Chief Executive Officer Vikram Pandit, Chairman William R. Rhodes, Chief Financial Officer John Gerspach and Chief Operating Officer Douglas Peterson and Relationship Manager Shivraj Puri.

In his first information report (FIR) filed at DLF-II police station on Tuesday, Aggarwal has accused Shivraj Puri, who is at the centre of the scam, and others of falsification of accounts, breach of trust and criminal conspiracy.

Puri had convinced corporate and individual clients to hand over their money to him for a high-return investment scheme.

Puri diverted the money into the market through different broking firms, whose officials are being questioned by the Gurgaon Police.

Several high net worth investors like Aggarwal and companies of the Hero Group have been caught in this fraud.

The fraud was discovered over a month back and customers say there was first an attempt at settlement, before Citibank lodged an FIR with police.

Fraud at Citibank not a regulatory failure: Montek

Planning Commission Deputy Chairman Montek Singh Ahluwalia said the Rs 300-crore fraud at Citibank was an individual case and should not be seen as a regulatory failure.

"I don't see this as a regulatory failure Individual problems always crop up. But I don't think that fraud can ever be ruled out. When it happens, you need to move quickly and take corrective action," Ahluwalia said on the sidelines of Skoch summit.

The Reserve Bank of India is also looking into the matter, said an official from the central bank. While the SEBI and the local police are doing their investigation, the I-T department is also looking into the source of funds invested by high networth individuals (HNIs) in the schemes offered to them.