New Delhi: A senior executive of the Hero Group was arrested by Gurgaon police on Monday as the investigative net on the Rs. 300 crore fraud at the local branch of Citibank was cast wider. The arrest of Sanjay Gupta, associate vice-president of Hero Corporate Service Ltd, came after the police questioned him for three days. Nearly Rs20 crore has been recovered from his various bank accounts. A local court sent Gupta to five days of remand to allow the police to question him further.
Gupta’s arrest came a week after Gurgaon police arrested Shivraj Puri, a relationship manager with Citibank, as the chief suspect in a fraud that involved luring rich clients into allegedly fraudulent investment schemes with offers of high returns. Till the arrest of Gupta, Puri was believed to be the lone mastermind of the scam that was unearthed last week following a police complaint filed by Citibank.
Puri is alleged to have used forged letterheads of the capital market regulator, Securities and Exchange Board of India (Sebi), and Citibank to sell the schemes. “Gupta had invested around Rs250 crore from different Hero Group companies and their promoters. He formed two finance companies, BG Finance and G2S, and charged commission of Rs20 crore from Puri for investing the amount,” Gurgaon police commissioner S.S. Deswal said.
“Puri had confessed that Gupta was aware of the forged Sebi letter, on which the amounts were lured from high networth clients,” Deswal added. They both will now be cross-questioned to verify their statements.
Assistant commissioner of police Dalbir Singh said the police are investigating the modus operandi of Gupta.
“Gupta and Puri were working hand in glove. They knew from where the money is coming and where it is being invested,” said a senior police official on condition of anonymity. The police said the role of other senior executives in the Hero Group will remain under the scanner till the investigations are completed.
However, Gupta’s lawyer C.L. Kakkar told the court that his client is not the accused, but a victim, and he could turn a witness if required.
Meanwhile, Hero Group said it is fully cooperating with the authorities and its main objective is to recover the money.
“Hero Group is committed to fully cooperate with the authorities investigating the alleged Citibank fraud case,” the company said in a statement released on Monday. “As a victim, our prime priority is to recover our investments. As the matter is under investigation by relevant authorities, we don’t wish to comment further at this stage.”
According to the police, most of the Rs300 crore raised by Puri was invested in financial instruments and there are chances of recovering the money.
On Friday, the Hero Group said it was a victim of the multi-crore fraud and that some of its promoters have been duped by Puri. It had said Hero Group’s Rs28.75 crore exposure to the fraud was via group firms. The company had cited these investments as “part of routine treasury operation in what seemed like perfectly legal investment options”.
Citibank said in a statement last week that it was inspecting suspicious transactions and providing full assistance to the authorities. On Friday, the Reserve Bank of India also said it has begun a probe into the fraud.
Puri allegedly sold bogus investment products to high networth individuals and corporate entities, claiming they would generate 18% returns, and routed the funds to the stock market. The matter came to light when one of the clients spoke to a senior bank manager. A major chunk of investment into stock markets was done through derivatives such as Nifty options while cash market exposure was negligible.
The allegations are the latest financial scandal to hit India.
In November, several executives of state-run banks and an insurer in Mumbai were arrested over alleged bribes paid to sanction loans to property developers.