BIGGEST FINANCIAL SCAM IN PAKISTAN'S HISTORY

SHAMIM RIZVI
(feedback@pgeconomist.com)

May 2 - 15, 2011

Perhaps the biggest financial scam in Pakistan's history involving a staggering amount of over Rs143 billion came to public notice as a result of a detailed probe into the affairs of the Bank of Punjab conducted under the orders of the Supreme Court of Pakistan. A three member bench of the Apex court headed by the Chief Justice while hearing a case relating to the loan scandal of Harris Steel in June last year noted many irregularities and ordered a through probe into the affairs and working of the Bank.

The Court appointed Aftab Sultan, Additional Inspector General of Police Punjab as head of joint investigation team set up to look into the irregularities in the BoP as the court was not satisfied with the investigations conducted by the National Accountability Bureau (NAB).

The 5000 pages long report submitted to the court on Wednesday last week concluded that a whopping amount of over Rs143 billion was swindled in the Bank of Punjab in different ways. This huge amount was either turned into non-performing loans or was dishonestly swindled by its directors. The report revealed that former Chief Minister Punjab, Ch. Pervez Illahi siphoned Rs5.4 billion from the BoP while Chairman Federal Board of Revenue Salman Siddique approved unlawful credit proposals of billions of rupees. The report said that the bank was virtually deprived of more than Rs11 billion in advances and mark-up by the Harris group alone.

The report revealed that all non-performing loans of BoP during the period of Hamesh Khan as its Chairman totaled about Rs76 billion. The directors sitting on the Board of Governors of the bank too obtained credit and other facilities in defiance of the statutory regulations.

During the hearing, the three member Bench of the Supreme Court comprising Chief Justice Iftikhar Muhammad Choudhry, Justice Muhammad Sair Ali and Justice Ghulam Rabbani asked Advocate General Punjab Khawaja Harris Ahmed to read out the important findings of the 5000 page long report. Among other things, the advocate general said that former CM of Punjab secured a huge loan of Rs5.4 billion on the name of Phalia Sugar Mills while the amount was later invested on a new project, Colony Sugar Mills. The then Chief Secretary Punjab Kamran Rasool took a long leave and during his leave period he worked on he new project owned by the chief minister. During this period, he also continued as chairman board of governors of BoP which he held in his official capacity as chief secretary. During this period he also interacted Hamesh Khan, the then President of BoP.

Continuing, he said that FBR Chairman, then one of the two directors of the bank, approved on behalf of the Board of Directors of BoP, unlawful credit proposals amounting to Rs1.1 billion. According to the report, the bank showed profits during the period from 2005 to 2008 while actually it was running in losses. It said that the bank's liabilities were increasing with every passing day. It said that Hamesh Khan, with the help of board members, had issued loans to the bank defaulters.

The probe report regretted that billion of rupees had been doled out from the BoP against negligible securities and without any collateral to non-existent group clients like Harris group, one of the main beneficiaries. Despite having no businesses, Harris Group opened accounts in the BoP by using fake identities and documents and funds were sanctioned to them at their discretion. In more than 95 per cent cases, the sanctioned funds were withdrawn within a day after approval. According to the repot, "It has now been conclusively established that properties pledged with the bank as security were heavily overvalued" and such over-valuations were the result of manipulations with the active connivance of all concerned. The report has sought another four weeks time from the Apex court to probe into the lawyers' scandal in the Harris Steel case. Former Federal Law Minister, Babar Awan and few other top lawyers are also alleged to have received huge amounts of money from the Harris Steel owners to secure favorable orders from the court of former chief justice.

The Apex Court directed Khawaja Harris to make the report public and accessible to all citizens interested in seeing it. The court also directed NAB to obtain a copy of the report and study it minutely and consider it respect of the cases and references already pending. The NAB has also been directed by the court to read the report carefully and collect evidence in its light. The court also appreciated the efforts of Additional Inspector General of Police Punjab, Aftab Sultan in compiling such a thorough report.