Hero firms duped in Citi sham scheme

THE Citibank employee who perpetrated the 400-crore fraud not only duped a string of wealthy individuals,but also took one of Indias biggest business groups for a ride.A few firms belonging to the Munjal-controlled Hero group are learnt to have invested close to 200 crore in the sham investment scheme that promised a high rate of return.

A senior Hero group official used his discretion to invest the money in what initially appeared to be a normal treasury operation done to deploy surplus cash.The money collected from the Hero group entities and others were used to buy stocks by routing funds through multiple bank,trading and demat accounts with three brokerages.

There is no evidence at this stage to suggest the Hero group official was acting in connivance with Shivraj Puri,the disgraced Citibanker who devised the fraudulent scheme.Citibank officials are in touch with the Hero group.They are discussing the matter ever since the bank sensed the fraud, said a person familiar with the ongoing investigation.The investment,according to the person,was not by the flagship Hero Honda,but by entities that were holding investible surplus belonging to group promoters.Hero group officials were not available for comments while an email to Sunil Kant Munjal,promoter-director of Indias largest twowheeler maker Hero Honda,went unanswered.A Citibank spokesperson also declined to comment.

The police has issued a lookout notice alerting airports to track Mr Puri,currently absconding,and other suspects involved in the fraud.What has come as a surprise to banking circles is the blatant nature of the fraud that began with Mr Puri forging a Sebi document that named a Citibank account as the custodian account for a scheme that indicated lucrative returns.An account was opened in the name of one Premnath,who was later found to be a relative of Mr Puri who worked as a relationship manager with the Gurgaon branch.

In the first leg of the transaction,investors submitted schemes favouring the custodian account.In the second leg,the money moved to accounts of friends and relatives,including those of one Sheila Premnath and Shivrajs mother Diksha Puri.One such account also belonged to Shivraj... Its rather foolish for a fraudster to do this, said an official with a local private bank.Subsequently,the money trail leads to brokerages like Religare,Bonanza and IIFL who executed trades.

According to market circles,Shivraj had three demat accounts with Bonanzas Parliament Street branch.These individual accounts were in the names of Diksha Puri,Raghu Raj Puri and his own.These accounts were treated as high networth accounts due to their trading patterns.