Citi scheme lured select few with bank seal, logo

Written by Rishi Raj | New Delhi | Updated: Jan 6 2011, 08:30am hrs
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Mystery surrounds the Rs 300-crore scam at Citibanks Gurgaon branch, even after the arrests of alleged mastermind Shivraj Puri, a Citi relationship manager and Sanjay Gupta, CFO at the Hero group of Munjals. Was Gupta conniving with Puri to rip off investors as alleged by investigators, or was the bank itself in the know of fraudulent schemes as alleged by Helion Advisors MD Sanjeev Aggarwal

FE has obtained a copy of the receipt of the scheme, which reportedly attracted several high-networth individuals to its fancy returns. The receipt, under the letterhead of Citibank, is issued to Mayar Infrastructure Development, located at 10th floor, DLF Square, DLF Phase 2, Gurgaon.

The receipt shows the investor depositing an amount of Rs 500,00,000 on July 27, 2010 for a month after which investment would grow to Rs 507,50,000 a monthly return of 1.5%. The seal on the receipt is of Citbanks Gurgaon branch.

The ceiling on the maximum amount one could deposit under the scheme was Rs 20 crore. It was marketed as a special offer for a select few. The amount was being raised in the form of unsecured unlisted debentures carrying a rate of 17% per annum.

For withdrawal, the depositor had to give a notice in writing at least seven days before the date of maturity and in cases where the depositor wished to roll over beyond one month, the bank made the payment of interest through demand drafts and issued a new deposit receipt. The depositor could roll over for a maximum of six months from the date of deposit.

In the event of part-withdrawal, the scheme treated the original deposit as two deposits, one equal to the withdrawn amount, another equal to the remainder amount. On its part Citibank has maintained that such deposit receipts were forged by Shivraj Puri. The terms and conditions of the deposit says that all bank deposits are insured up to maximum of Rs 1 lakh only.

The point raised by Aggarwal in his complaint on the basis of which the Gurgaon police registered an FIR against Pandit and other senior officials of Citibank is how an employee could undertake fraud of such large scale without the knowledge of the bank.

Aggarwal said that as a common industry practice, Citibank had blank demand drafts requisition forms and common transfer forms signed from him for investments to be made on his behalf, to be used in case of his unavailability. These forms were entrusted with the bank for safe-keeping and were to be used responsibly in the customers best interest. However in this case, he alleges Citibank breached his trust and moved funds worth Rs 32.43 crore without any instructions from his accounts.

Citibank said: As this individual well knows, Citi identified the fraud and immediately reported the matter to the regulators and law enforcement agencies. His claims against senior executives are completely without basis and we intend to contest them vigorously.