A recent Press Trust of India report on Shivraj Puri , the alleged mastermind of the ₹ 400 crore Citibank scam, makes an interesting point: in India fraudsters do not disappear; they only lie low for some time before resurfacing on a different turf with a different modus operandi.

An FIR has been registered against Puri and his parents for allegedly duping a Mumbai businessman and his wife of ₹ 13.15 crore while he was out on bail. He defrauded the couple on the pretext of saving them from being arrested in a court case that never was.

The FIR, filed with the economic offences wing of Delhi Police by Sunil Alagh of Mumbai on 26 August under various sections of Indian Penal Code, says that on 30 June Alagh got a call from Puri’s phone (the caller was his father Raghuraj). Alagh was told that the property dealer he had contacted for selling a residential plot at DLF, Gurgaon, had fraudulently sold the plot to five different people and had also manipulated the stamp duty. As a result, certain criminal cases had been registered against Alagh and his wife, joint owner of the property, at Gurgaon district court for cheating and fraud, and that they could be arrested. I have reviewed the FIR.

The Puri duo offered to get the Alagh couple out of the mess at a price, ₹ 8.5 crore, to be deposited at the Gurgaon court towards stamp duty, including penalty equivalent to five times being levied by the court, and ₹ 2 crore for anticipatory bail. Alagh transferred the money to Puri’s account at ING Vysya Bank Ltd at Karol Bagh, New Delhi. Then, the Puris informed the Alaghs that the criminal case has got transferred from Gurgaon court to Tis Hazari court in New Delhi, as the Enforcement Directorate (ED) has got involved, and demanded ₹ 2 crore each to arrange for the bail to avoid their impending arrests. Overall, the Alaghs could arrange ₹ 13.15 crore while the junior Puri volunteered to organise the rest. The Puris even introduced the Alaghs to an ED official and a police inspector at a hotel opposite the Gurgaon court. The ED official shook hands with Alagh and told him not to worry. Alagh also met the deputy director of ED who was “glad to see him".

By the time the Alaghs found out that there was no criminal case against them, it was too late. Without his knowledge, the Alaghs recorded Shivraj saying the entire money was paid in the court and he would get the money back shortly as the cases were closed. The father-son duo even issued several cheques to the Alaghs, but all of them bounced.

Puri, a former relationship manager at Citibank’s Gurgaon branch, had been involved in a ₹ 400 crore fraud case. He was suspended after the bank lodged a police complaint about suspicious transactions, forgery and criminal activities on 5 December 2010. Puri took about 30 investors for a ride and channelled the money to the stock market. Between 5 December, when the police complaint was filed, and 27 December, when Puri was arrested, the bank appointed one of the big four audit firms to conduct a forensic audit of all transactions related to wealth management, hired law firm Amarchand Mangaldas for legal counsel, and even made Puri sign agreements with some clients who had lost money, promising to return their wealth.

A seven-year veteran at the Gurgaon branch that was opened in 2002, Puri, in his early 30s then, started siphoning off money in the second half of 2009, but the flow became bigger from September 2010 when the stock market started rising. He channelled money into the market devising a couple of ways. First, he enticed customers with a fake circular purported to have been sent by the capital markets regulator, promising 2-3% returns per month.

The forged circular also mentioned a custodian account run by one Premnath (his grandfather) that was passed off as an approved channel to route investor funds. Once the money was deposited in Premnath’s account, it flowed immediately out of it into three other accounts kept with Citibank—in the names of Sheila Premnath, Deeksha Puri and Shivraj Puri himself. Deeksha is Shivraj’s mother and Sheila his grandmother. Deeksha and Shivraj’s father Raghuraj were involved this time, too.

Finally, the funds moved out of these accounts to accounts Puri kept with a few brokerages. Puri also made about half-a-dozen customers of Citibank sign blank cheques and drafts and other financial instruments, and used these to transfer money out of their accounts directly to the brokerages to be invested in the market.

On 27 December 2010, the police registered an FIR following a complaint filed by Citibank; Puri was arrested on 29 December and released on bail by the Punjab and Haryana high court on 28 May 2012.

On 9 November 2011, the trial court formally charged Puri and after the hearings were concluded on 10 February this year, on 25 February the court pronounced Puri guilty under various sections of the IPC and sentenced him to two years and six months in prison and a fine of ₹ 10,000. Yet, in another case, filed by a defrauded investor Sanjeev Aggarwal, Puri was convicted and sentenced to two years and six months in jail, taking the overall imprisonment to five years. It seems that he filed an appeal in a higher court and got back to his vocation of defrauding people.

Indeed, old habits die hard, but I wonder how could Shivraj have introduced the Alaghs to senior police and even ED officials to convince them about the genuineness of the case. Aren’t they also a party to the fraud? Unless we set up fast-track courts to deal with financial frauds, people of Puri’s ilk will continue to play havoc with the system.

Tamal Bandyopadhyay, consulting editor of Mint, is advisor to Bandhan Financial Services Pvt. Ltd, India’s newest bank in the making. He is also the author of Sahara: The Untold Story and A Bank for the Buck. Email your comments to

bankerstrust@livemint.com

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