Newsmaker: Sanjay Gupta

Caught with his snout in the trough or unwitting victim?

Scan through Sanjay Gupta’s social network profile, and there’s nothing unassuming: He comes across as just another finance manager in an unlisted mid-size firm. But today, the assistant vice-president (finance) for Hero Corporate Services finds himself in the middle of a Rs 300-crore fraud originating at Citibank’s Gurgaon branch.

The Gurgaon police arrested Gupta on Monday for allegedly colluding with Shivraj Puri, a relationship manager at Citibank’s Gurgaon branch, who lured investors into a fraudulent high-return scheme. The police have alleged that Gupta set up two finance firms, which took a commission of Rs 20 crore from Puri after duping Hero Group promoters and entities into investing around Rs 250 crore in the scheme.

Gupta, a chartered accountant, has been associated with the auto industry since the mid-1990s. A commerce graduate from Delhi’s Bhagat Singh College and MBA from IMT Ghaziabad, Gupta had stints with several auto-parts makers like Shriram Group, Bharat Technologies Auto Components, Claas India and Shivam Autotech (a Hero Group company). He joined Hero Corporate in 2008.

In his profile, Gupta claims his responsibilities entail all accounting and finance operations, including banking (both fund- and non-fund based activities like handling letters of credit), raising term loans from banks and financial institutions, handling all tax matters, as well as legal and regulatory compliance. He would certainly be a trusted aide of the Hero Group’s Munjal family. Perhaps that explains how easily he raised the cash to invest in the scam.

It transpires that Puri approached clients with a 90-day deposit scheme that promised a 2 per cent monthly return. Gupta took the proposal to Hero Corporate Service Chairman Sunil Kant Munjal, the youngest son of B M Munjal and an active member at CII. Sunil Kant did not respond to an SMS query. In a statement, the B M Munjal faction of the family said it was a victim of the fraud and is trying to recover the Rs 29 crore it had invested.

Puri, who Gupta believed to be the grandson of a former banker, dropped names like Citibank global CEO Vikram Pandit to lure Hero Corporate into the deal. Soon, other Hero Group companies learnt of this ‘wonderful deal’, and many of them invested amounts ranging from Rs 10 crore to Rs 50 crore, each. Gupta became a point of reference for other group companies. One faction of the Munjal family is believed to have an exposure of around Rs 75 crore.

“The modus operandi was simple: Divert the money to stock markets. It seems it was a structured product, which most people don’t understand as it could be a pure equity or blended product. How can they guarantee a return? There’s no banking instrument which offers 18-24 per cent return. This again highlights the important role CFOs play, as most promoters don’t understand these products; investments are managed by the finance manager,” says a Delhi-based CFO.

What has surprised many is that Gupta personally invested Rs 5 crore — part of what he received as commission from Puri — in the scheme, which is confirmed by his wife, Archana. “If my husband was really involved in the scam, he would not have invested his hard-earned Rs 5 crore in the fake scheme,” she told a newspaper. Auto industry CEOs say there’s no way a salaried CFO in a mid-size firm can invest that kind of money.

Archana claims her husband “was not interested in taking a commission and Puri forced him to do so. He invested Rs 5 crore of that amount and returned another Rs 2.5 crore to the bank. Gupta had also asked why the bank did not deduct tax deduction at source on such huge sums of money. Since he saw huge profits, he also introduced his friends and colleagues to Puri,” she claimed.

A key question in the minds of those defrauded, including those at the Hero Group, is why Citibank went to the police when the matter was close to being resolved? Companies discovered the fraud around a month ago and Puri had even agreed to return the money, say people in the know.

“Obviously, the bank was sleeping. A branch manager can easily trace the money. It’s been a month since the fraud came to light. Neither the bank nor the companies wanted the news to leak, as it would have hit their reputations. It is a mystery why the bank went to the police when it was being resolved,” said an informed source.