CBI investigative reports on bank fraud charges against Chatwal to be made public

NEW DELHI: India's Central Information Commission (CIC) has ordered the Central Bureau of Investigation (CBI) to make public reports relating to the discharge of US-based hotelier Sant Singh Chatwal, a winner of the prestigious Bharat Ratna Award, from cases of alleged bank fraud.

The CBI had earlier refused to provide information stating that information sought regarding two cases, which were disposed off, were linked with two more cases pending trial. "Hence, the information cannot be supplied to you and exemption under section 8 (1) (h) is claimed."

When the matter reached the transparency panel, Right to Information (RTI) applicant Krishnanand Tripathi argued that since there was no investigation underway in the cases against Chatwal, the information should be disclosed. He alleged that the CBI was "deliberately" trying to suppress information about a "high profile NRI hotelier" as the copy of charge sheet and orders of court were public documents. He also wanted copies of the chargesheet filed against Chatwal. The CBI told the CIC that the chargesheet was a public document.

"A very peculiar claim was made that though the two cases for which information was being sought have been discharged, there are two other fraud cases which are being pursued in which some of the bank officers are the same. No evidence has been given as to how giving the information would impede the prosecution of offenders," Information Commissioner Shailesh Gandhi pointed out.

Gandhi also took objection to the CBI applying section 8 stating that mere existence of the investigation process cannot be a ground for refusal of the information. "The authority withholding information must show satisfactory reasons as to why the release of such information would hamper the investigation process."

Advising the CBI not to exercise the exemption clauses in a liberal manner and refusing information using the exemption clauses was denial of fundamental rights, the CIC asked the CBI to provide the information by end of this month to the applicant.

Between 1992 and 1994, five cases against Chatwal and some bank officials for allegedly conniving with the intention of defrauding the Bank of Baroda and Bank of India had been registered by the CBI.

Three of these cases against Chatwal were closed by CBI itself during the tenure of the then directors Vijay Shanker and Ashwani Kumar while charge sheets were filed by the agency in two cases before the Court of Special Judge, CBI, Mumbai. In these two cases, the court discharged Chatwal.

In his application, Tripathi had sought copies of charge sheets against Chatwal, copies of judgments delivered in the cases, recommendations made by legal and investigating officers after he was exonerated, advice given by Director of Prosecution and final observations and decisions made by the then CBI Directors.

Infamy is Chatwal's last name. He has quite a checkered past and for years was a wanted man in India and the US for his shady business practices. For instance:

1. In 1990, the Securities and Exchange Commission accused Chatwal's chain of Bombay Palace restaurants of stock fraud, saying it secretly siphoned off $2 million in cash from one business to another, falsified the books and disclosures to stockholders. Stockholders suffered huge losses in the case. (Chatwal was forced into personal bankruptcy in 1995 by several banks in India that claimed $22 million in losses. For years, Chatwal had defaulted on loans from the banks, always protecting his assets by filing for bankruptcy protection).
2. Cases against him for fraud were filed by the CBI when Bank of India's Chief Vigilance Officer complained that in 1994, he had in collusion with bank officials, fraudulently obtained a loan of $9 million from the State Bank of India, New York without the required collateral. Two other Indian banks were also part of the complaints. Soon after, Chatwal filed for bankruptcy in 1995. Prior to this, IRS was hotfooting behind Chatwal for $4 million in unpaid business taxes.
3. When NY State placed a lien seeking more than $5 million in taxes, Chatwal forfeited a building to New York City on which he was delinquent on property taxes and was sued by federal regulators seeking to recoup millions of dollars in loans from a failed bank where he served as a director.
4. In 1997, Chatwal was sued by the Federal Deposit Insurance Corporation (FDIC) over his role as a director and a guarantor of unpaid loans at the failed First New York Bank for Business. FDIC accused Chatwal of obtaining improper loans from the failed First New York Bank for Business - a small bank formerly known as First Women's Bank - causing the bank to lose more than $25 million. It seems Chatwal arranged more than $14 million in loans to himself and his businesses, often with no collateral, then failed to repay most of the loans on time, the FDIC said in court documents. Chatwal's bad loans to himself alone cost the bank more than $12 million, according to the FDIC.
5. It was alleged that his loans had "resulted in losses to the bank in excess of $12 million" and his claims that he did not have enough funds were met with skepticism since he was living in and continued to reside in a large and luxurious penthouse rental. "The debtor has managed to continue living in luxurious style in the same penthouse apartment he resided in at a time he claimed a net worth of tens of millions of dollars without adequate explanation of how his family's limited income is able to support such a lifestyle," the government said when it filed a case against him.
6. Chatwal's bank also loaned his wife, Pardaman Chatwal, $1.8 million in 1987, which she used to buy their 7,000-square-foot rooftop mansion at 300 E. 93rd St., according to the FDIC. Years later, ownership of the penthouse mysteriously shifted to a real estate company held in name by Chatwal's brother, the FDIC said. Chatwal claimed his wife, not he, held a lease on the apartment - an "oral lease" for $5,000 a month in rent - creating an obstacle for creditors wanting to claim the property.
7. It was unclear how much was ever recovered by the FDIC, a government agency that bails out banks to protect the public's cash. During the legal fight, Chatwal said he made only $1,500 a week as a hotel consultant. FDIC officials could not be reached for comment. One federal judge noted during a hearing in July 1996 that Chatwal had filed separate bankruptcy cases for all 56 of his restaurants and six of his nine hotels.
8. But Chatwal's underhand and shady dealings were not limited to financial fraud only. Members of the Indian community are well aware that Chatwal was solely responsible for the closure of the third largest weekly and largely successful NY-based Indian American newspaper in the 1990s. Chatwal verbally threatened the publication's Editor-in-Chief with dire consequences if he went ahead and printed a revealing investigative report on Chatwal's shenanigans. The editor was put under such intense pressure and bullying that he folded his dream newspaper and as a consequence lost his livelihood, the effects of which he is still reeling under.

Source: NRI PRESS CLUB, Chicago
posted on May 17,2011.