India Police File Case Against Citigroup's Pandit, Other Executives

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

SAIL Follow-On Offer Likely in February

Source :RAJESH ROY:the Wallstreet Journal:JANUARY 5, 2011, 2:11 A.M. ET

 Steel Authority of India Ltd. expects to float the first tranche of its follow-on public offering in the second week of February, Chairman C.S. Verma said Wednesday.

The federal government has decided to divest 10% of its stake in SAIL, while the state-run company will issue additional shares worth 10% of the expanded equity base, in two tranches. Both tranches together are expected to raise a total of 180 billion rupees ($3.99 billion).

The government now holds an 85.82% stake in the steel company.

The company expects to file the initial share prospectus with the securities market regulator on Jan. 20, Mr. Verma said.

Speaking about the company's proposed joint venture with South Korean steelmaker POSCO, he said "modalities [of the JV] are being worked out."

New Year, Old Problems for India Bonds

Source : HARSH JOSHI:The Wallstreet Journal:JANUARY 3, 2011, 6:54 A.M. ET

After a difficult year, India's domestic bond market seems to have found some stability. But it won't last.

Moving conversely to prices, yields on benchmark 10-year government bonds have fallen-to 7.96% on Monday from 8.18% a month ago. Credit the Reserve Bank of India for this: It paused its interest-rate-raising campaign in December, and has been buying government bonds to ease a liquidity shortage in the banking system.

But this short-term move belies a rough ride for bond investors last year. Before they began to rise in December, the 10-year bonds had fallen sharply over the previous six months as the central bank raised its key policy rates six times in just nine months. Also weighing down the price of existing bonds, New Delhi sold $84 billion in bonds between April and December alone.

This decline has made India a standout among emerging currency bond markets in Asia, which have benefited from rising interest among global investors: HSBC's Asia Local Bond Index rose 12.2% in 2010. The India index rose only 5.2%, but that gain is thanks only to interest payments from the bonds included in the calculation.

In part, this underperformance is because India limits foreign investment in government bonds to a total of $10 billion-a tiny piece of the overall market. For Indonesia, where foreigners hungry for emerging-market debt play a much bigger role, HSBC's index rose 21%.

The decline looks certain to continue. The RBI is facing a persistent inflation problem and rate increases could start again as early as the end of this month, says Robert Prior-Wandesforde at Credit Suisse. One market is already anticipating this: Even as bond yields have come down, the five-year overnight indexed swap rate has risen a quarter of a percentage point.

The government, meanwhile, has shown little interest in letting up on the fund raising. Even after raking in an unexpectedly large $30 billion through the sale of government assets, New Delhi isn't veering from its goal of selling $98 billion of debt by the end of the fiscal year, in March. That would be a record for India, and four times what the government was borrowing as recently as 2007. With the economy still growing fast, there's little reason to think New Delhi will demonstrate much restraint in the coming fiscal year.

Put it all together and the 10-year yield could rise nearly half a percentage point by the end of March, says Manoj Swain, chief executive at bond-trading firm Morgan Stanley India Primary Dealer.

This is one market that isn't likely to benefit from India's broader charm.