Video Link -The Citi Fraud?
Background :
Sanjeev Aggarwal, M.D. of Helion Advisors had been a Citi Bank Wealth Management client since 2002. He claims to have been duped to the tune of Rs.33 crores at a principal level [excluding missed opportunity of returns on the investment]. That is a hell of a lot of money to loose. He obviously did what every investor would do. Felt angry and cheated by the Bank that he trusted for almost 8 years. So, he went and filed an FIR against the Bank for mis-appropriation of funds. From Vikram Pandit,CEO of Citi to Country Head Pramit Jhaveri and other executives have been named as culprits in the FIR. Apparently, the master mind behind the fraud [?] Shivraj Puri who was the Relationship Manager for Sanjeev Aggarwal had been investing in stock markets[options strategies] by transferring funds from Aggarwal to his account regularly. It seems for 18 months he got ‘blank documents’ signed by Aggarwal and also promised an unusually high return of 18%.

Questions :

1. Why did Sanjeev Aggarwal sign blank documents [D.D. forms?] for 18 months without clearly knowing where and how it is invested?
2. According to reports, some of the clients did receive gains from investments for some time and this has not been mentioned in the FIR.
3. Why did the investor believe the relationship manager’s promise of high returns when he is supposed to be a knowledgeable and a sophisticated investor?
4. The pattern does seem to have close resemblance to the Aditya Birla Money’s structured product scam.
5. Why is it Sanjeev Aggarwal did not read any documents related to investments before investing? If for a moment, we accept that there were no documents and literature on the investments, why did he then go ahead and invest? Or for that matter, lets pose this question to him. Will he as a Private Equity Investor when approached by an Entrepreneur to invest in his company with the promise of excellent returns, prefer to put in money without doing due dilligence and not ask hundreds of questions to the entrepreneur?
6. Do you think that you and I as a retail investor can file an FIR with police authorities and will the media buy into our stories?

What emerges clearly from this episode are:
1. Money not only talks but screams [because] it has the media on its side.
2. Greed is not Good – Gordon Gekko may not agree with it..But its your money.. You better care for it..
3. Regardless of whether you are a retail investor or a sophisticated investor, it is important to read, ask questions, understand the product that your relationship manager suggests before investing.
4. Most important, understand your ‘Risk Profile’ that is commensurate with Returns.
5. If you are not clear about the product and its benefits, don’t invest. Period.
6. You and I as retail investors cannot get away with these costly mistakes like Sanjeev Aggarwal. They wil manage to recover the money ultimately. Remember, they have the media on their side. You and I do not have it.

To sum up the lessons from a Private Equity Investor:

1. Greed is not in..Its out..Get that straight.
2. Read.Read.Read.Question. Question. Question. Until you understand, do not invest.
3. Fill up your own form. Don’t be stupid enough to allow some one else to do that for you. You know what would happen.
4. If you can’t find time to fill the form, Please do not invest. Let the money lie in the savings account. Be Happy.
5. For God’s sake, learn lessons from history. Don’t get carried away by the lure of high returns, the bank or trust some one by face value.

Happy New Year 2011!