Citigroup says claims against executives including CEO Vikram Pandit,
shown in New York last month, "are completely without basis."
Source; ANANT VIJAY KALA & NUPUR ACHARYA:WSJ:JANUARY 4, 2011
MUMBAI—The Indian police Tuesday registered a case against top Citigroup Inc. officials, including Chief Executive Vikram Pandit, in connection with a estimated three-billion-rupee ($67.2 million) alleged fraud at a Citibank branch in a New Delhi suburb.
The move follows a complaint by bank customer Sanjeev Agarwal, who was allegedly duped in an investment fraud orchestrated by an employee of the Gurgaon branch of the U.S. bank.
The case begins the investigations into the charges leveled by Mr. Agarwal against Citigroup and the executives.
"We have registered a case of fraud on the basis of the complaint received from Agarwal," Dalbir Singh, assistant commissioner of police of Gurgaon, a satellite city of New Delhi, told Dow Jones Newswires.
In addition to Mr. Pandit, Mr. Agarwal's complaint names William R. Rhodes, who retired as senior vice chairman of Citigroup on April 30; Chief Operating Officer Douglas Peterson; Chief Financial Officer John Gerspach; and three others, including Shivraj Puri, the branch employee accused in the investment fraud.
Citigroup in a statement said the Mr. Agarwal's claims against senior executives "are completely without basis and we intend to contest them vigorously."
The bank said it identified the fraud and immediately reported the matter to the regulators and law-enforcement agencies.
"It was on Citi complaint that the Gurgaon police lodged an FIR [first information report] and are currently investigating the matter. Citi will continue to work with the authorities on this investigation," Citigroup said.
Assistant Commissioner Singh said police will investigate the charges and take further action. Mr. Puri was arrested last month and has been suspended by the bank.
Under Indian law, the police are required to register a first information report on the basis of any complaint received that appears to involve a crime. The FIR marks the beginning of the investigations into the alleged crime.
According to a copy of Mr. Agarwal's complaint seen by Dow Jones Newswires, Mr. Agarwal is accusing Mr. Puri of misappropriating about 324 million rupees between August 2009 and November last year.
Mr. Agarwal alleged that Mr. Puri redeemed the investments made with this money without Mr. Agarwal's consent.
Mr. Puri also allegedly sent false statements to Mr. Agarwal that showed the value of the investments made under the scheme at an inflated amount.
Mr. Agarwal is one of several investors who put in money in the scheme. On Sunday, the police arrested Sanjay Gupta, the chief financial officer of Hero Corporate Services, a Hero Group firm, for allegedly receiving commissions to invest Hero's money in the scheme.
The fraud came to light last month after Citibank noticed "suspicious transactions" at the branch.
Police said Mr. Puri, a relationship manager with the bank, lured customers with investment schemes promising high returns. These schemes weren't backed by the bank. Mr. Puri allegedly produced a fake letter of India's capital markets regulator Securities and Exchange Board of India to lend credibility to the scheme.
Investors allegedly were asked to deposit the money in accounts held by Mr. Puri's relatives and close associates. The money was later transferred to Mr. Puri's account and either withdrawn by him or invested in stock markets.
The scale of the fraud hasn't been fully ascertained, but police said it could involve as much as three billion rupees.
Write to Anant Vijay Kala at anant.kala@dowjones.com and Nupur Acharya atnupur.acharya@dowjones.com
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