An FIR has been filed in Gurugram against Citibank, alleging its complicity in the several hundred crore fraud that came to light in 2010 with a bank employee being convicted for running a Ponzi scheme of sorts, in 2014. The complainant is Dr. Pankaj Premnath, son of two customers whose Citibank accounts were used — without their knowledge — to carry out the scam. The complaint cites the observation of a judicial magistrate in the matter that the Citibank employee could not possibly have been working alone.
When contacted about the matter, Citibank declined comment.
The magistrate had, in February 2014, sentenced Shiv Raj Puri, a relationship manager at the bank, to a jail term of two years and six months and a fine of Rs. 10,000 for orchestrating the fraud.
“It is established on record that neither accused Shiv Raj Puri alone was capable of committing the said fraud by luring such number of investors having ample qualification, experience and acumen in financial sector nor he processed all the banking transactions single-handedly nor he alone met with the investors in the branch,” the original judgment had concluded.
“It is clearly established that many other bank employees have actively participated in the said scheme, if bank as an institution was not.”
“The FIR [against Citibank] was filed only after the district court of Gurugram directed the police to lodge it,” Aditya Wadhya, lawyer for Dr. Premnath, said. “This shows that prima facie , the court felt there is some merit to the case.”
Mr. Puri had used Citibank accounts created by Dr. Premnath and Shiela Premnath (the parents of the complainant in the FIR against Citibank, currently aged 97 and 87, respectively) as conduits for funds received from high net-worth individuals (HNIs) who Mr Puri duped by furnishing forged SEBI documents and promising unrealistic returns on investment. These funds were subsequently invested in the stock market without the knowledge of the investors and they lost most of their value in the aftermath of the 2008 financial crisis.
A SEBI report at the time found that Mr. Puri had taken an exposure of a whopping Rs 1.13 lakh crore in the equity market using Rs 236 crore deposited by 51 HNIs and corporates. Of this, the Premnaths had invested their entire savings, amounting to Rs 3-3.5 crore, and had subsequently lost almost that entire amount.
“Over a period of time, the Premnaths and Dr Premnath deposited significant sums of money (more than Rs 3-3.5 crore) in their bank accounts with Citibank,” the FIR against Citibank, a copy of which is in the possession of The Hindu, said. “Upon inquiry, and as subsequent events show, only a fraction of that amount is currently reflected in the bank accounts as being owed to the Premnaths.”
The Reserve Bank of India in July 2011 imposed a penalty of Rs 25 lakh on Citibank for not following account-opening and anti-money laundering norms at its Gurugram branch where the scam took place.
Mr Wadhwa added that the reason his client had filed this FIR, as opposed to raising his issues during the ongoing appeals process of the original judgement, was that the Premnaths were no longer a part of the appeal process as they had been found innocent of any involvement, something Citibank had alleged at the time.
Citibank had filed an FIR in 2010, following the unearthing of the scam, in which it included Mr and Mrs Premnath (then aged 91 and 81, respectively) as being among the accused, an allegation that the Haryana Police quickly dismissed. A court can arraign anybody it feels could be guilty even during a case. It did not do so for the Premnaths, implying that it was convinced of their innocence.
The Premnaths also repeatedly requested Citibank via letters and personally going to the bank for the authorisation documents that had been used in their names to perpetrate the fraud. These documents, however, were not handed over until much later, according to the FIR.
“However, it (Citibank) categorically refused to provide any documentation in relation to the accounts of Mr Premnath and Mrs Premnath,” the FIR by Dr Premnath said. “This action on the part of the Citibank itself reveals their mala fide intention to shield itself and its officers.”
That said, the accounts had been frozen by the investigating authorities and so that would have made it that much harder to provide the documentation.
