HSBC, Its Ex-CEO Robert Milne & Executives Named in FIR for Defrauding Senior Citizens for Rs1.48 Crore
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)
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.