Enforcement directorate may take over Citibank fraud probe; lookout notice for Shivraj Puri, others

The Centre is in damage-control mode after the Rs400 crore Gurgaon Citibank fraud, with finance minister Pranab Mukherjee stepping in to calm nerves.

Mukherjee said on Wednesday, a day after the fraud became public, that it was an act of “individual misdemeanour”.

Meanwhile, Gurgaon Police have issued a lookout notice for the bank's relationship manager Shivraj Puri, the prime accused, and three others and there were indications that the enforcement directorate may take over the case.

A case of cheating and forgery was registered against Puri and the others DLF Phase-II Police Station on Monday night after Citibank lodged a formal complaint. Eighteen accounts holding close to Rs4 crore have been frozen so far.

Investigation so far has revealed that Puri and aides forged market regulator Sebi’s notification for obtaining funds from customers by fooling them into believing that the bank was investing their money in such a manner that it would generate unusually high returns.

Puri told his victims that he had been authorised by the bank's investment product committee.

Probe has found that Puri took money from high networth individuals (HNI) and invested in the stock market through brokerage firms such as Religare Securities.

Religare admitted on Wednesday Puri was its client in his individual capacity since June 2009 but said it had “no knowledge of the details of this alleged scam”.

Citibank said, “We have reported the matter to all relevant regulatory and law enforcement authorities. Identified suspicious transactions have been isolated and we are providing full assistance to the authorities in investigation.” It also assured customers that their money was safe. “This issue does not impact other accounts, transactions or customers of the bank,” a senior official of the bank said.

Puri had opened three accounts in a Gurgaon branch in the names of his relatives. He had asked customers to deposit money in these accounts under a scheme that promised double returns.

But once money was deposited, Puri transferred it into his own account, a police officer said. Bank officials are still not sure of the amount but prima facie at least Rs100 crore was deposited in the three accounts.

A spokesperson said the fraud came to light after the bank probed certain suspicious transactions based on documents allegedly forged by an employee.

The Citibank scam comes only a month after the bribe-for-loan scandal involving top brass of LIC Housing Finance.