Tuesday, May 08, 2007

Some Crimes Do Pay Well in Pakistan

A 37-year old Pakistani Banker based in New York named Hafiz Mohammad Zubair Naseem has hit international headlines by being charged for running an insider trading scheme linked to acquisitions involving nine publicly traded United States companies that netted millions of dollars.

This junior investment banker, who worked in Credit Suisse’s energy banking group in Manhattan, is accused of calling an unidentified banker in Pakistan and tipping him about deals shortly before they were publicly announced.

The unidentified banker in Pakistan has turned out to be the former head of Faysal Bank (Investment Banking Group), Ejaz Rahim, who yesterday, while denying any wrong doing, admitted to the Business Recorder that he made $5 million in a single trade.

According to the Business Recorder Naseem and Rahim have a decade old relationship, which began when Rahim, then employed with American Express Banking Corporation in Lahore, hired Naseem as a subordinate sometime in 1996-97.

US press reports that Naseem went to the New York in 2002 to attend business school at New York University. Subsequently after a stint at J.P. Morgan, in March 2006 he joined Credit Suisse’s energy banking group in Manhattan.

In a series of news articles the New York Times reported:

The complaint says that between April 2006 and February 2007 Mr. Naseem tipped off a co-conspirator about acquisitions involving Northwestern Corporation, Energy Partners, Veritas DGC, Jacuzzi Brands, Trammell Crow, Hydril Company, Caremark Rx, John H. Harland Company, and TXU Corporation.

“Because many of the subject transactions were staffed by members of the Global Energy Group, Naseem had access to information about these transactions by virtue of his membership in the Global Energy Group,” the complaint said.

It said Mr. Naseem’s desk was also near a printer used for some of the non-energy deals that he is accused of giving tip-offs about.

Mr. Naseem “regularly and repeatedly” called the Pakistani banker at his home and on his cellphone in advance of a potential deal, federal prosecutors and regulators contend. Shortly after receiving such a call, the banker would buy securities based on the news.

Then, once a public announcement was made, he would quickly sell. He executed dozens of trades, often in an offshore account.

Mr. Naseem authorized the Pakistani banker, who is identified in the criminal complaint as “co-conspirator 1” to operate a brokerage account on his behalf, according to the deposition of the Federal Bureau of Investigation agent in charge of the case.

After confirming in an e-mail message that the banker “can do whatever he wants,” the agent said that Mr. Naseem concluded one message with the comment: “Let the fun begin.”


Today’s Dawn informs us that Hafiz Naseem was earlier found to have been involved in illegal banking practices in American Express in Pakistan (where he had been hired by Ejaz Rahim).

The rumour mills among local banking circles allege that over the past number of years there had been a lot of ‘front running’ activity at the bank that Ejaz Rahim was subsequently employed at in Karachi and huge amounts of money are claimed to have been made by a group of senior bankers.

If these allegations are true, some might say: So what? Isn’t such white collar crime par for the course in Pakistan?

Insider trading in the share market, while a crime according to law, is the means of making big bucks in Pakistan To my knowledge no stock broker in the mighty USA has made a billion dollars simply by trading in shares – the same however doesn’t apply in Pakistan (which has a minuscule market when compared with Wall Street).

But with the powerful US Securities and Exchange Commission (SEC) now involved in the Naseem's case, the local laws pertaining to insider trading might finally be dragged from out of cold storage for a brief period just to please our Americans overlords.

So it’s no wonder, as Dawn reports, that “certain top bankers in Pakistan are now filled with fear about finding their names in sudden limelight”.

Don’t worry gentlemen, if by chance your names do appear, it will only be a short period of public disgrace. All you will get is a legal slap on the wrist and better still, you will be able to keep your ill-gotten loot. As most of our society worships money, you will all soon be forgiven and your lives will rapidly return to normal once again. (Gordon Gekko would have seriously envied you all).

Remember white-collar crime always pays in Pakistan!

The Glasshouse: The Rich and Infamous?


Cy said...

All right, Mr/Ms Onlooker - I have made up my mind to unmask you. You're far too good to remain anonymous. You have been warned.

AAS said...

Hey leave Mr. Onlooker alone. He is pretty cool...if i knew he was id urge him to go into politics. :)

Anonymous said...

I remember Zardari used to boost: “Money making is the best pursuit of life”. Such statements may be the doctrine of many and one would not find it offensive, provided the “money” was coming from “legitimate” sources. Many of such politicians, bankers, or generals’ assets don’t seem to match with their known income. As said before on this blog and by many others elsewhere: Politics, money and crime are knotted together in the fabric of Pakistan. But the biggest deals are made by the axis of the military and their chumchas. Our “shortcut” and “clean-shaven” and/or “fuzzy” guys are used to launder funds for many a disgraced politicians in exile. Yes, my friend, the cancer is spread all over the country and from chuprasi to the bigshots and in all shapes and sizes. And yes, it is also happening in other parts of the world in varying degree. But here, we should be concerned about our Land of the Pure. It’s a vicious circle, which in greater parts is responsible for our mess and dependency on foreign aids and remote control by the Uncle Sams of this world.

PS: AAS my friend, this cancer about covers the whole spectrum. Sorry for being so serious all the time. I may have to take time off and take it easy as my right arm is giving up on me!

AAs said...

I know what you mean jusAthot...things are just not going well for Pakistan as usual. When the army leaves the scene it will be the politicians profiting...its a never ending cycle.

Mr T said...

The truth is that insider trading of this sort goes on within Pakistan ALL the time. We don't have as strict monitoring controls as the USA, which is able to detect activity such as this.

rob said...

Riding the rapid expansion of the Internet, some parts of the offshore banking king industry are making tax-avoidance techniques -- once mainly offered to high-net-worth individuals in private conferences -- available online to average ...

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