Monday, May 28, 2007

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Financial scandals regularly occur all over the world, however in Pakistan whenever they occur they hardly ever involve unfamiliar names from financial markets (as is the case in the US, UK and elsewhere) but always our local infamous bunch of the ‘elite and already loaded’.


In recent days much attention has been focussed on a choice new $110 million Lahore housing development project of some 1600 villas under the name of ‘Sukh Chayn Gardens’.

Sukh Chayn Gardens is planned to be a walled and gated community with 24 hour armed security patrols. It is advertised to have its own clubhouse, medical clinic, shopping mall, indoor gymnasium, parks and playgrounds for children, ‘Fresh Water Brook with a Jogging Track’, independent water supply, fibre optic broadband and many other salubrious amenities.

So far it sounds like another fancy suburb for the newly rich and not so famous. But its potential for high scandal lies in the names of its sponsors and how it was financed.

According to a recent newspaper report:

"Sukh Chain Gardens, Lahore, which was inaugurated by Prime Minister Shaukat Aziz and is funded by Chinese. Ejaz Rahim is a partner in one of the biggest housing project in Lahore, while the president of Faysal Bank, Farooq Bengali also holds share in this housing project. Bengali along with Ejaz Rahim, is facing charges of benefiting from a conflict of interest situation by investing personally in a scheme where his bank was the financier. They both invested in a housing project of Habib Rafiq Developers, Alhamra Hills in Islamabad and helped many politicians and businessmen benefit from this scheme, because the project was financed by Faysal Bank. Chaudhary Munir, who is very dear to Chief Minister Punjab because of his special links with the UAE rulers and is in-charge of their investments in Pakistan, is also a partner in Sukh Chain Gardens."

As you perhaps already know Ejaz (or Aijaz) Rahim is facing indictment in the US for making millions of dollars from insider trading

Farooq Bengali is the CEO of Faysal Bank where Rahim was heading the investment bank division until recently. It is widely rumoured among local banking circles that senior bankers at Faysal Bank were engaged in a wide scale front running operation that netted them an untold fortune.

Another major sponsor is Arif Habib, the billionaire stockbroker from Karachi and reputed close associate of Shaukat Aziz.

It is also believed to raise additional finance, plots from the property scheme were handed over to influential people at throwaway rates. The beneficiaries are rumoured to include leading bank CEOs of Pakistan.

But then Sukh Chayn Gardens is just part of a growing scandal…
___________________________________________

Now it has been reported that a three man FBI team has arrived in Pakistan to probe a possible connection between Hafiz Mohammad Zubair Naseem and Ejaz Rahim, involved in the insider trading scam, and some Pakistani brokers, bankers and top policymakers.

Local journalist Syed Saleem Shahzad writes:

"According to sources, a FBI team arrived in Pakistan recently to probe the case and interviewed many top Pakistani bankers. Among those they wanted to talk to sources maintained, were the President of the National Bank of Pakistan, Ali Raza, Zaigham Mehmood Rizvi of House Building Finance Corporation of Pakistan, Farooq Bengali of Faysal Bank, prime ministerial financial advisor Salman Shah, Chief of Pakistan Industrial Credit and Investment Corporation Mohammed Ali Khoja.

The name of Prime Minister Shaukat Aziz, formerly a senior official in Citi Group has also been linked to the probe, it is understood."

___________________________________________

Just to add to all this confusion a leading Karachi banker recently confided that a CEO of a privatised bank purchased a luxury villa in Dubai for $ 2.5 million in cash.

If this is true then it raises two questions:

Normally anything bought with a suitcase full of cash looks extremely suspicious as it circumvents financial documentation. So why did this CEO use cash?

This CEO has only been in charge for two years – so how did this salaried fellow make so much money so fast?
___________________________________________


To add more ‘mirch to the masala’ your Blogger has also been told that a CEO of an overseas bank in Pakistan is possibly facing dismissal because part of the purchase price paid for a takeover of a local bank somehow allegedly managed to find its way back into his private account. An illegal commission perhaps?
___________________________________________


All your Blogger can say is: All glory be to the Bank CEO fraternity of Pakistan!




Link :The Glasshouse: Some Crimes Do Pay Well in Pakistan



70 comments:

libertarian said...

Onlooker: the brazenness of the folks involved, and the size of the transactions are breath-taking. Will follow the case to see if anyone gets busted.

Anonymous said...

Good job Onlooker. You are the new Ardeshir Cowasjee in a way. Please keep us informed on this as the scale of the theft by all concerned has never been experenced before - even in Pakistan. We are really becoming like some banana republic in Africa.....MAHI

Anonymous said...

Here is the latest update:

PAKISTAN: FOCUS - FBI PROBE HAS THE ESTABLISHMENT ON EDGE


Karachi, 29 May (AKI) - (Syed Saleem Shahzad) - A white four-wheel drive vehicle glides out from the garage of one of the key securities brokerage houses situated in the upmarket Clifton neighbourhood of Karachi. Its destination - a powerful military installation situated at the only curve of the long Shahrah-e-Faisal artery. Once the passenger is introduced, the gates open instantly and a khaki-clad soldier climbs in to escort the vehicle to the majestic building constructed for the British Indian armed forces. A staff officer is on the step to welcome the very special guest.

Everybody in the office understands that senior bosses and staff may be transferred or they may retire, but whoever is in charge is bound to receive a visit from this special guest, a stock broker.

There is no lack of gossip as to the reason for parleys between a stock broker and every new senior army officer in Sindh province. One thing is certain though; under General Pervez Musharraf’s regime, the wealth of Pakistan's oligarchs, the Pakistani military establishment and all its stake holders including politicians, financial experts, journalists and academics, has now been largely shifted from real estate to the stock market.

Uniformed generals, bankers and stock brokers are hand in hand in the galaxy of power. As a result in the stock market scandals from 2000 to 2007, especially the biggest in 2005, punishment was not inflicted on any of those considered responsible and the same goes for the privatization scandals of Pakistan Still Mills, a deal stopped on the orders of Supreme Court of Pakistan after clear evidence of kick backs.

However, this hermetically sealed parallel universe of power is having to come to grips with the real world. In the form of a FBI team, comprising officers Mark Emerson, Alfred Martial and Joseph Simon, on the trail of a multi million dollar insider trading scandal in whcih a Pakistani banker and broker are caugth up.

The American investigators have accessed the records of the hundi business, (non-banking channel for monetary transactions) money laundering and details of stock exchange brokers scams.

Pakistan’s most powerful financial cartel spanning from the twin cities of Rawalpindi and Islamabad to the financial artery of I.I. Chundrigar Road Karachi is in the spotlight.

The story began from Pakistani banker Hafiz Naseem’s complex web of international insider trading in America and reached Pakistan where top figures in the financial sector of the country are now beign fingered.

Naseem, 37, was arrested in New York earlier this month and charged with 26 counts of conspiracy and securities fraud. He is accused of leaking details about nine deals, including the record 32 billion US dollar leveraged buyout of Texas energy giant TXU.

One Pakistani banker, Ejaz Rahim, was also named in investigations for his alleged connection with Naseem’s network on one side and with top Pakistani financial figures on other side. The US Securities and Exchange Commission (SEC), in a lawsuit filed in a Chicago federal court earlier this month, accused Rahim of insider trading based on information it said he got from a Credit Suisse Group investment banker in New York, Hafiz Naseem.

The SEC said Rahim received non-public information about the proposed leveraged buyout of TXU from Naseem, and that Rahim then bought TXU call option contracts and stock. Rahim reaped about 5.1 million dollars in profits through the trades, according to the SEC complaint.

A top security official, speaking on condition of anonymity, confirmed that the visiting FBI interviewed top Pakistani finance officials but maintained that it was not exactly related with international insider trading.

“The third party involvement is not specificallly connected to the insider trading allegations. Most of the trading was done personally by Ejaz Rahim himself. What I know of the FBI investigations is that they are about money transactions concerning terror networks like Al-Qaeda,” the official asserted. Sources in the banking sector maintain that it is a multi-faceted inquiry because the whole network is interrelated with stockmarkets, banks and even with Pakistan's politicians.

Well-placed sources confirmed top men in the corridors of power and leading bankers have been investigated and some of their connections have been established.

However, there are many queries which the financial regulators have been unable to answer during the recent course of investigations:

An active connivance of a leading Forex brokerage house with Al-Qaeda channels was alleged traced several months ago. Despite available evidence why was no action undertaken? The connection trail of the Forex company passes through stock markets, banks and up to a very powerful politician from central Punjab.

Who has been involved in the big scams, how were they covered up and by which cartel? The stock market fiasco 2005 is the best example.

The stock market crash caused a loss of over Rs780 billion (USD 12.87 billion) in March 2005 to a large number of small investors, had raised many questions on role of the regulator Security Exchange Comission of Pakistan (SECP) and the management of Karachi Stock Exchange (KSE). A task force was constituted, headed by a retired justice, which pin pointed 11 big brokerage houses involved in malpractices which resulted the market crash.

However, the bombshell was the statement by the former chairman of Security Exchange Commission of Pakistan (SECP), Dr. Tariq Hassan, in which he alleged that high-ranking finance ministry officials, including Prime Minister Shaukat Aziz, had forcibly stopped him from taking action against the “big fish.”

Hassan had issued a ‘white paper’ in July 2006 on the March 2005 stock exchange crash, and claimed he had reached close to a ‘few big fish” when he was shown the door.

Local media reports said that the former SECP chairman was summoned to a national assembly’s standing committee on finance in July 2006. He asked during the meeting how could he get hold of those powerful brokers who, he alleged, had access to the prime minister.

It was also reported that Hassan faced tough questions from the Minister of State for Finance Omar Ayub Khan and Prime Minister’s Adviser Dr Salman Shah, apparently because he had mentioned their names in letters he had sent to the prime minister and accused them of pressurising him not to replace the "carry-over transaction with margin financing", reprotedly one of the main technical causes of the crash.

Whether the FBI nets 'the big fish' remains to be seen. Pakistan is one of the US's key allies in the 'war against terror' so alongside the investigative thrust there will also be political considerations to be weighed, especially as President Musharraf's stay in power is already being challenged in mass protests revolving around the suspended chief justice.

From http://www.adnki.com/index_2Level_English.php?cat=Politics&loid=8.0.419661270&par=

AAS said...

You know for scumbags like this..there should be a rather huge penalty. Not only should they be tried in an honest and fair court of law...but i would sanction having their hands cut...only for scum like this.

They are not just stealing money but they are stealing the lives of the everyday person and the very future of our nation.

Ahsan said...

this is completely insane. where the hell did all this money come from? pakistan has always been corrupt but the sheer scale and magnitude of this shit is truly astounding. sab sey pehley pakistan, indeed.

Anonymous said...

> The name of Prime Minister Shaukat Aziz, formerly a senior official in Citi Group has also been linked to the probe, it is understood."

> [PM Shaukat Aziz} forcibly stopped him from taking action against the “big fish.”

Shortcut is no Cleancut – but a whiz at choreography when it comes to financial dealings – be it banking or stock market. No wonder, the likes of Thaksin (or rather Thug-sin), the disgraced ex-PM of Thailand was a close buddy, as a result of services rendered ....

Anonymous said...

such a bunch of crap!! there no truth to any such scandal and you must feel like a total ass for coming up with such ridiculous accusations!! FBI investigation in pakistan??? verify your facts loser!

Anonymous said...

Thus such devils in various disguises rob the country and flee in disgrace! May God's wrath be on them eternally!

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