Friday, July 29, 2011

Gambling in stock market, with other people’s crores

Chandigarh From luring investors into supposedly “high return” schemes — sometimes getting them to sign blank forms — to massive trading in the stock market, Citibank executive Shivraj Puri’s alleged role in a multi-crore fraud has been detailed in a probe report submitted by the Securities Exchange Board of India (SEBI) to the Haryana police.

Puri and his associates were involved in trades to the tune of Rs 1.13 lakh crore in the National Stock Exchange, the report says. It says he lost Rs 228 crore after having got bank clients to invest over Rs 400 crore. The Haryana Police Crime Branch has now written to the NSE and to Ernst and Young to verify whether he did suffered such losses.

The police have charged Puri, some members of his family and accomplices with impersonation, cheating, fraud, forgery and criminal conspiracy. Based on the SEBI report (a copy with The Indian Express), the police plan to file a supplementary chargesheet on the Rs-400-crore-plus scam.

Of the investments he allegedly ensured, over Rs 150 crore came through blank forms that clients signed. “Shivraj was a relationship manager for 51 customer accounts (excluding Puri family-linked accounts) involving 30 households. Shivraj offered fabricated investment schemes, which guaranteed high returns, and received signatures on blank fund transfer forms. Through these forms, Shivraj made demand drafts favouring stockbrokers and invested in the securities market and also transferred funds to Puri family-linked accounts. To hide his misconduct, he issued false certificates on Citibank stationery and dispatched fabricated account statements to investors. This started from February 2009. The total amount received from these clients was Rs 150.35 crore up to December 2010.”

Another Rs 328 crore came from investors in the corporate sector. “Shivraj in collusion with Sanjay Gupta, chief financial officer of Hero Corporate Services Limited, solicited investments from the Munjal group [report names group’s individual entities] by promising them guaranteed high returns based on a forged SEBI letter purportedly issued by SEBI to Citibank, where three individuals — K K Malhotra, Premnath Puri (Shivraj’s step-grandfather) and Rajendra Khosla — were notified as custodians of Citibank. This started from May 2010, where funds were transferred through RTGS in the Premnath account. It was observed that only the Premnath account was used by Shivraj for the fraudulent transactions. The total amount received from these clients was Rs 328.30 crore up to December 2010,” the report says.

“The Premnath account was opened by Shivraj (as the relationship manager) in September 2009 at the Gurgaon branch of Citibank in the joint names of Premnath, Sheila Premnath (Puri’s grandmother) and Deeksha Puri (Puri’s mother),” the report says.

About the investments in the stock market, it says, “Shivraj traded in the futures and options segment of the NSE, predominantly in Nifty Index options. From the data, it is observed that Shivraj lost a total sum of Rs 228 crore while dealing in the stock market... It is observed that the Puri group traded in futures and options segment of the NSE, particularly in Index options, to the tune of Rs 1,13,000.80 crore.”

Haryana’s additional DGP Sharad Kumar, who is heading the police investigation, said that the SEBI report is “quite exhaustive” but added, “We are still not sure if the losses the accused have shown were actually incurred. We have written to the National Stock Exchange to verify the losses and send us a report.”

Rap for Citibank

The report also questions the role of Citibank. “Citibank customers had entrusted their funds to Citibank and it was Citibank that employed the relationship manager to manage their assets. It was the responsibility of Citibank to perform necessary due diligence with regard to the conduct of its relationship manager,” it says.

“Sanjeev Aggarwal in an FIR said Citibank has developed a practice of getting blank demand draft requisition forms signed by customers on the pretext that people being busy would not be available for signing. It was also observed that these clients were not present in the bank when the demand drafts were issued, neither was a call made to them for verification. Such operations, which continued for more than two years, could not have been possible without the implicit knowledge of more employees of Citibank,” it adds.


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