Monday, December 18, 2006

Big Wigs Erasing Evidence of Their Crime?


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’:

Atlas Investments
AKD Securities
BMA Securities
Arif Habib
Orix Investment Bank
KASB
Taurus Securities
Abdul Jabbar Khanani
Escort Investments
Jehangir Siddiqui
Akbar Ali Cassim and Sons
Motiwala Securities
Elixir Investments









8 comments:

Anonymous said...

Thanks for this - Is there some way that you can have this translated and published in an urdu paper so that many more people could have access to these facts and information? I fear that sometimes we are all preaching to the converted....

Anonymous said...

Creative/Problem-solvers....thats how this firm...Dilligence, Inc....set up by ex CIA people, advertises itself on its own website.

Diligence, Inc.
1211 Connecticut Avenue
6th Floor
Washington DC 20036
Tel: (202) 719-1700
Fax: (202) 719-1701
washdc@diligencellc.com


Diligence is an intelligence gathering and risk management firm that helps its clients confront difficult business challenges.





Diligence was founded in 2000 by a small group of former members of the U.S. Central Intelligence Agency, and Britain's MI5 Intelligence Service. The firm's mission was to bring to bear the founders' expertise, experience and network of relationships to provide clients with a higher standard of business intelligence and analysis, risk assessment and due diligence support for transactions, even in the most challenging of emerging markets.

Over the last five years, we have strongly adhered to the mission of providing the highest quality, most creative service to our clients.

Today, Diligence consists of over 75 professionals drawn not only from the intelligence world, but also from value-added disciplines such as:

The legal profession
Financial regulation
Investment banking
Investigative journalism
Diplomacy
Law enforcement
This well-rounded team is based in offices in Washington, D.C., New York City, Miami, London, Brussels, Moscow and now, Berlin. The firm is growing and will establish a presence in East Asia.

The multiple skill sets of the Diligence professional staff, together with our growing international reach, enable the firm to serve a diverse client base on an array of issues in several key regions, including:

North and South America
Europe
The Middle East
Central Asia
Africa
East and Southeast Asia
Quite simply, our aim is to help our increasingly global clients solve problems wherever they crop up.

More >>

mountainman said...

Plz check the latest report on displaced people in Balochistan. Unicef says 84000 people have been displaced from Kohlu and Dera Bugti. 80% of families say that they have lost a child in past 3 months.

http://www.bbc.co.uk/urdu/pakistan/story/2006/12/061222_unicef_baloch_zs.shtml

This has confirmed our worst fears.
When the crisis first arose, Oxfam and Abdul Sattar Edhi tried to help these people but they were warned and turned away by the powers-that-be. Many people in Balochistan I know tried to help these people individually but had to step back because of the threat from "secret agencies" as they feared that if they tried to help they will join the uneding list of "disappeared" people. The government was hoping that, finding no help or succor from any quarter, these displaced people will be forced to come back to Kohlu and Dera Bugti, beg the government and seek penitence for the sin of supporting Nawab Akbar Bugti_ which some people did. But the majority of these brave tribesmen and their families preferred to starve rather than bow before the government. However, it now appears that having "pacified" Kohlu and Dera Bugti through a campaign of "shock and awe", the Government now wants the Unicef to take care of the mess it has created. I may add in passing that those people who did come back to Dera Bugti were treated as scum of the earth by the civil administration and millitary authorities there. In order to get help, every single person was made to declare before the DCO that he wont support Nawab Bugit's party and that he will be loyal to government, etc. According to informal reports, the DCO in Dera Bugti, with full support from the very top of the Federal Govt, is behaving as if he owns the district and no person's honor is safe.
Also more details are available on BBC's audio report in "Taaza Tareen" and "Sairbeen".

Anonymous said...

Stop complaining !! Army has a country called Pakistan. Before independence, it was British who ruled the masses now its Army. Old wine in new bottle. But British were better than the Pakistani Army.

Anonymous said...

You're all a bunch of traitors making false allegations. Just move to India... or are you already sitting in India? Won't surprise me the least.

mountainman said...

hey onlooker,

long time no see. plz come back. i hope the 'invisible' forces have not got to you.

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Moazzam Ali said...

You're all a bunch of traitors making false allegations. Just move to India... or are you already sitting in India? Won't surprise me the least.
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