HSBC, Its Ex-CEO Robert Milne & Executives Named in FIR for Defrauding Senior Citizens for Rs1.48 Crore
Moneylife Digital Team 14 November 2019
The Mumbai police has finally registered a first information report (FIR) against The Hongkong and Shanghai Banking Corp Ltd (HSBC) India, its former chief executive officer (CEO) Stuart P Milne,Priya Paul, relationship manager and several top officials of the Bank and its subsidiary, Canara HSBC OBC Insurance Co, for defrauding a very senior citizen and his family. According to the FIR, one Priya Paul, who was relationship manager, sold 83-year Rusi Postwala and his family members several insurance policies by redeeming his investments in mutual funds, under the pretext of ensuring better return on investment. Mr Postwala, his wife Rusi and daughter Khushnuma Behram suffered a loss of Rs1.48 crore, as per the FIR.
The FIR, a copy of which has been seen by Moneylife, names Ms Paul, Ms Jhumar, head of premier banking at HSBC's main branch, Vaishali Chauhan, manager of the same branch, Chirag Jain, chief operating officer (COO) of HSBC main branch, Stuart P Milne (the then CEO) of HSBC India, Ramakrishna S, head for retail banking and wealth development at HSBC, Animesh Raizada, head for wealth management at HSBC and Mayur Patni, head for customer relations at the Bank.
Initially, the Mumbai Police closed the file stating that there was no need to investigate the matter since no offence was made out. It was only when Mr Postwala and Ms Behram approached the State Police Complaints Authority, which observed and remarked that cognizable offences are made out in this case, the FIR was registered, after a gap of two years.
Ms Behram, in her complaint says, "...the accused officials of HSBC Bank and Canara HSBC OBC Insurance Co, with an intention to obtain handsome commission had committed offences of forgery, fraud, cheating, criminal breach of trust by forging signature of my daughter in the proposal form and filing wrong information of myself and my father and misappropriation of funds of my father and myself to the tune of Rs1,47,57,837 crore..."
Ms Behram, who is the daughter of Mr Postwala, filed the complaint. Describing the allegedly fraudulent ways used by HSBC officials, she says, "Around July 2013, Priya Paul informed my father in my presence that he should have a well balanced portfolio and since he already had equities and mutual funds, it would be better for him to put Rs5 lakh into insurance. When she realised that we were reluctant, she purposely misinformed us that it would be one time investment and would earn returns of about 8%, a comparatively safer option to investments in mutual funds. Ms Paul had intentionally never informed him that the insurance policy she was selling him was a recurring nature of five continuous years and his money would be locked for 10 years from the date of first premium."
According to Ms Behram, the relationship manager from HSBC told the family that since Mr Postwala was 80 years old, he was not eligible for insurance and the additional side benefit would be given to them as life assured. Ms Paul then made Ms Behram and her two daughters to sign on two policies as life assured and made them to undergo medical tests for two policies.
Over the next year, Ms Paul continued to assure the family that she is handling the portfolio of Mr Postwala and they should not worry about it.
When in 2013-14, Mr Postwala needed some money for investing in a new shop and for construction work at his property in Alibaug, he and the family, including Ms Behram, requested Ms Paul to liquidate his mutual fund investments. However, Ms Paul repeatedly told them that since their mutual fund investments are giving good returns they should sell their investment in shares.
However, when the family found that no interest or dividends were being received by them, they called Ms Paul for a meeting. During the meeting, Ms Paul told them that she had redeemed nearly all mutual funds of Mr Postwala and put all the money in two insurance policies. "We were shocked to know that Ms Paul had redeemed all of my father's mutual funds and diverted the monies to insurance policies without our knowledge. Unknown to us, she had been redeeming almost all of my father's mutual funds and investing this in more and more insurance policies and in turn to meet the premium demands for the same, she kept on redeeming more and more of mutual fund units," Ms Behram says.
Then, on 20 March 2016, Mr Postwala and Ms Behram approached Ms Jhumar, head for premier banking at HSBC's Fort branch. During the meeting, Ms Paul admitted that she had invested in four policies and since she had redeemed all mutual fund investments, except one, of Mr Postwala, for paying premium of the policies, she liquidated mutual fund investment in one scheme of Ms Behram as well. Ms Jumar promised detailed enquiry in the matter, but nothing happened. In fact, Ms Behram says, "we called up Ms Jhumar many times as well as personally went to the bank a few times to meet her, but she refused to accept our calls or even meet us."
When the family escalated the issue to the branch manager Ms Chauhan, they were promised the same things that were promised by Ms Jhumar. But there was no progress.
Ms Behram then asked the Bank for all her bank statements as well as those of her father for the period from 2012 to 2016. "On perusal of my father's bank statements, annual dividend and mutual fund statements, I noticed that all his mutual funds, except one, had been liquidated and monies received in his savings account been immediately used to pay premiums for Canara HSBC Life Insurance policies," Ms Behram says in her complaint. "One of my mutual fund investment was also redeemed and the redeemed amount of Rs1.50 lakh was paid to the same insurance company as premium for a policy," she adds.
According to the complaint filed by Ms Behram, there were a lot of discrepancies and wrong information, including personal details, income and health that was filled in the insurance policy documents. Ms Behram also found one know-your-customer (KYC) form supposedly filled by her, when she was not even present in India.
In addition, the HSBC Bank official had also withdrawn a sum of Rs31.30 lakh from the public provident funds (PPF) account of Mr Postwala, his wife Dhun and daughter Ms Behram on 22 April 2013. Value of these PPF investments would have been Rs45.09 lakh as on 12 March 2018.
The family was also made to sell their shares worth Rs38.12 lakh, which would have been valued at Rs41.02 lakh as on date, including the dividends.
Ms Behram and her father tried to escalate this issue with senior officials of HSBC Bank and Canara HSBC OBC Insurance Co as well as Reserve Bank of India (RBI), the Banking Ombudsman, and Insurance Regulatory Development Authority of India (IRDA). But they did not receive any response.
They succeeded in having the FIR filed due to the help they received from former Mr Mahesh Athavale, a former police officer and lawyers,who had worked in the economic offences wing (EOW) of Mumbai police and investigated several financial crimes.
Few months ago, they approached Moneylife Foundation, where counsellors suggested that the best recourse for them was to file police complaint to get justice.
Responding to Moneylife's mail, an official from HSBC says, "We value our customers and take seriously all concerns and issues raised by them. We are aware of this matter and have provided full support previously to the multiple investigating authorities that were approached by the customer. We are ensuring full cooperation to the ongoing investigation and remain committed to resolving our customer complaints fairly."
This is not the first time that officials of HSBC Bank have cheated its own customers. In March 2014, under pressure from the regulators, HSBC had settled and closed its five-year-old dispute with singer-actress Suchitra Krishnamoorthy.
While the settlement did not permit her to reveal the amount, we learnt that this case of gross mis-selling and customer abuse was been amicably closed. Moneylife Foundation had relentlessly pursued this case for over two years. (Read: HSBC agrees to compensate Suchitra Krishnamoorthy)
Moneylife published an expose in April 2012 on how HSBC looted Ms Krishnamoorthy for over five years by promising an extravagant assured return of 24% from mutual funds as well as insurance.
In November 2013, market regulator SEBI sent a strongly-worded notice to HSBC asking the lender to explain why its acts in handling the portfolio of Ms Krishnamoorthy were not in violation of its regulations governing fraudulent and unfair trade practices and violation of the code of conduct governing mutual fund distributors.
5 years ago
To avail of locker facility, my relative opened an account with a large PSU bank. To avail locker, the manager insisted on one lakh FD and this was also done. To his surprise, instead of a FD, the relative received a insurance policy for that amount. Isn't this also a form of cheating?
Sucheta Dalal
Replied to KAVIRAJ B PATIL comment 5 years ago
It is a fraud. If there is any documentation and if your relative had checked the forms that he signed, he can file a complaint. At the very least he should ask for the original form on which he signed to check if there was any forgery or tampering.
Subhash Chand Garg
5 years ago
This is the hallmark work style of the so called efficient MNC's
Vaibhav Dhoka
5 years ago
No body learns from others reported complaints,and falls prey to such tactics.Therefore RBI,SEBI,IRDA withdraw permission to bankers.
Rajnish Surve
5 years ago
Good the HSBC deserved this. The bank is involved in terrorist funding activities should be punish by the Indian government.
5 years ago
Does this mean, that no communication by way of SMS/Emails/Courier/Post was received by Postwala family ?
Was that also manipulated by the RM/Bank ?
Suketu Shah
5 years ago
All wealth managers are the same.All shd be blacklisted.
Rajesh Kothari
Replied to Suketu Shah comment 5 years ago
My experience with most wealth or relationship managers is negative. Their sole interest is their target. Once you succumb to his game plan he stops serving or answering you.
Vikas Gupta
Replied to Suketu Shah comment 5 years ago
5 years ago
The malaise can be traced to the performance metrics and quotas fixed for bank employees.In the last 20 years with a multi national bank as an account holder,I have seen more than 30 Relationship Managers come and go as they cannot meet their quotas and are forced out.Only one lasted for more than a year.When they are under such high pressure to get business and commissions,some turn to outright fraud.
Banking should be just that and banks must not be allowed to turn into brokerage houses selling mutual funds and insurance.
Rajesh Kothari
Replied to SATISH MADHAV comment 5 years ago
Agree strongly that banks should not be allowed to sale financial and insurance products. Since they have access to our bank account they know who has surplus to invest.
Replied to Rajesh Kothari comment 5 years ago
Exactly right.Once,I had received some outstanding payment and deposited it into the SB account of a domestic private bank.The RM alerted the director of private banking who tried his best to con me into investing it in a worthless ULIP scheme which had the highest upfront "investment fee".I stood firm and refused point blank which made him get very angry.
This is how they operate.They try to sweettalk you into falling into an elaborately laid trap.
Vikas Gupta
Replied to SATISH MADHAV comment 5 years ago
Sandeep More
5 years ago
In my heydays, I learnt the hard way that when a Relationship Manager promises 25% pa returns, he is in fact telling us that he would be earning 25% at my expense. HDFC SAP from Standard Life Insurance Co was sold to me as a recurring deposit with free life insurance with minimum annual assured returns of 12% pa
Ajay Kumar
Replied to Sandeep More comment 5 years ago
Same case. Escalated this to the Managing Director Mr. Aditya. Contacted my lawyer who advised me against filing a Police complaint on mis-representation. Lated to my chagrin found out my lawyer was also representing HDFC in other cases!!
Shirish Sadanand Shanbhag
5 years ago
Even when in the past HSBC is exposed, it has not improved its business ethics.
Carlos De Souza
Replied to Shirish Sadanand Shanbhag comment 5 years ago
Does a leopard change its spots ??
Guru Kalle
5 years ago
This is a serious mistake by the bank.How did they allow that to happen ??
Carlos De Souza
Replied to Guru Kalle comment 5 years ago
This is NOT a mistake. They are CHEATS and have been so for decades, if not longer.
Rajesh Kothari
5 years ago
Banker should NOT be your financial consultant. It’s a big mistake.

Also second mistake is giving the PoA to do investment on your behalf. Never do it.

Actually SEBI and RBI should ban banks from acting as investment advisors.
5 years ago
Happens when you listen to your banker , he is there to increase his bank balance , not yours
Mohamed Meghani
5 years ago
This is due to the lax and irresponsible attitude of RBI the so called Watchdog of banks. Can you ever imagine such an attitude of Watchdog in any other nation
GLN Prasad
Replied to Mohamed Meghani comment 5 years ago
Let us be fair, and do not blame RBI for the frauds by Individuals in the Bank. The most shocking lesson is that even superior officials are hand in glove and always try to suppress facts and do not initiate any action to protect their employees. I am afraid that there should have been more such incidents that were not published as this case is not isolated. Exploiting senior citizen's faith in a bank is highly deplorable.
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