Try hard as they may, Islamabad’s bigwigs are finding it difficult to put a lid on last year’s stock exchange scandal.
The latest news is the discovery that all the relevant financial data relating to the stock market scam that caused US 13 billion loss to small investors has been deleted not only from the records of the stock market and the brokers but also that of the Securities and Exchange Commission of Pakistan (SECP).
Apparently the data was surreptitiously deleted at the SECP shortly after Dr Tariq Hassan, its former chairman, was sacked by Shaukat Aziz in January 2006.
It’s time for a recap.
In March 2005 the share market collapsed.Quite suspiciously the KSE-100 share market index had surged from a figure of 6,218 on 31 December 2004 to a startling high of 10,303 on 15 March 2005. In a short space of two and half months the market had ballooned by 65%.
And then it crashed hitting a low of 6,939 on April 12, 2005.
The financial implosion caused a loss of some Rs. 780 billion - the losers were small middle class investors.
And yes, of course, there were mighty big winners as well. Anyone who had shorted the stock at the time of the crash reaped the windfall. And those who had used the multiplier effect of margin trading would have easily reaped well over 100% on their proffered investments. And so hundreds of billions of rupees were made.
On 18 April 2005 the SECP chairman Dr Tariq Hassan appointed an independent Task Force, headed by the ombudsman Justice Salim Akhtar, a retired judge of the Supreme Court, to investigate the allegations of market manipulation, insider trading and other market abuses which were said to have caused the stock market collapse.
Two months later on 30 June 2005 the Task Force handed over its report to Dr Tariq Hassan, the SECP chairman.
It appears that as soon as Hassan decided to proceed on the recommendations of the Task Force report he struck trouble.
According to Dr. Hassan two senior officials, namely the Prime Minister’s Adviser on Finance, Salman Shah and Minister of State Omar Ayub Khan, began obstructing his efforts to deal with the shady network of brokers. Dr Hassan even divulged that he was pressured by Shaukat Aziz to maintain friendly 'close contacts’ with the leading scamsters of the stock exchange crash.
Fed up with these shenanigans, on 4 August 2005, Dr Hassan submitted his resignation. But it was not accepted by his boss Shaukat Aziz.
Five months later when Dr Hassan had reportedly issued orders appointing forensic investigators to probe the few big brokers responsible for the crash, he was sacked. Importantly, Dr Hassan has stated on record that all the relevant data relating to the crash was in possession of the SECP at the time of his dismissal.
One might have thought that things would have ended there, but it was not to be.
In mid 2006 the National Assembly’s Standing Committee on Finance and Revenue decided to discuss the task force’s report on stock market crash.
On 7 July 2006 protesting opposition members overcame government efforts to prevent Dr Tariq Hassan from appearing before the committee. Once the sacked SECP chairman was given a chance to speak the proverbial shit finally hit the fan (see Blog: Shortcut & Co. Facing Serious Sleaze Allegations).
To protect themselves the Islamabadi bigwigs opted for a two-pronged approach to stem this sudden onslaught.
First was an attempt to frighten Tariq Hassan into silence by setting the security agencies upon him – he was followed everywhere, all his phones were bugged. Even the Commando General was brought into the act; Musharraf angrily announced that he held Tariq Hassan “personally responsible for the March 2005 crash”.
And then to placate the opposition (and also to further confuse the issue) it was announced that a US forensic team from Diligence Inc. would be flown in to independently investigate the cause behind the March 2005 crash.
Sources close to this new forensic investigation soon began warning that “The US team now knows more about Dr Hassan than (about) the powerful brokers nominated in the task force’s report on the market crash”.
And at that time even your Blogger made the following comment:
The idea, it appears, is to heap all the blame on Tariq Hassan, who now seems destined to play the role of the scapegoat for the whole debacle. Meanwhile, it will be business as usual at the Karachi Stock Exchange and the shady billionaire brokers and the badla providers will undoubtedly continue with their destructive practices.
And so it was to be.
When the US forensic investigator’s report finally came out at the end of November 2006 it was as many had anticipated: a splendid whitewash.
As Dawn reported:
The report says that the US team had not found sufficient evidence to support the withdrawal of COT that was ‘ostensibly’ responsible for the fall of market prices. It found no patterns of activity or credible evidence to support the ‘theory’ that certain influential brokers ‘systematically and manipulatively’ inflated and then deflated market prices, reaping substantial profits in the process.
The truth be told is that Diligence Inc were quite unable to get any ‘evidence’ to implicate anyone. There was little or no data left for them to examine. Probably not wishing to offend their generous paymasters the investigators took the hint and did not make any fuss about it.
As we now know that soon after Tariq Hassan was sacked in January 2006 all the data relating to the period under investigation conveniently evaporated into thin air
This was publicly confirmed last week when newspapers such as Dawn splashed the following news on the front page :
Disappearance of data gives twist to KSE saga
National Assembly’s standing committee on finance was informed that data pertaining to the booking of shares were deleted not only from the records of the stock market and the brokers but also that of the Securities and Exchange Commission of Pakistan, leaving no proof for the forensic experts to ascertain anything substantial.
One of the members of last year’s investigative Task Force told Dawn:
“There is one big black hole. This (forensic report) is the cover up. You will never get the truth now. But, you can (still) find who covered up the truth”
Will we ever find the culprits who rigged the market, made their mega-billions by bankrupting thousands of small investors and then arranged for all the evidence of their crimes to vanish?
Readers, your guess is as good as mine!
In the meantime here is a list of leading 13 of the 88 brokers who have been named, in the forensic report as having profited from the ‘situation’:
Orix Investment Bank
Abdul Jabbar Khanani
Akbar Ali Cassim and Sons
Stock Exchange Scam