Book Confirms Musharraf's First Multi-Million Dollar Telephone Scandal

Special SAT Report

WASHINGTON, Sept 8: Musharraf Government's first multi-million dollar scandal of awarding a lucrative cell phone contract to a Canadian company in early 2000, ignoring the ever reliable Chinese friends, became the main reason for a split between Musharraf and his honorable and honest colleague, General Syed M. Amjad, who quit as Chairman of the National Accountability Bureau in less than a year.

"This was an open-and-shut case as all the evidence was there, but when (Gen) Amjad wanted to move in and scuttle the contract, he was refrained from doing so. The only man who had the power to do this was Musharraf himself," reveals a new book on Pakistan due to be released worldwide on Sept 11.

The scandal was first reported by the South Asia Tribune in its issue No 47 on June 22, 2003 and full documentary evidence was also published, including a letter issued by the office of the then Chief Executive General Musharraf ordering that the contract be given to the company he favored and General Amjad objected to. Click to Read the original SAT story with documents

((( REFERENCE / COMPLAINT NO. XIX

Reference dated  28-4-2004 "“ Billions Dollars Exchange Scandal

To:

The Chairman
National Accountability Bureau
President's Secretariat
Islamabad. 

Pakistan Peoples Party ----COMPLAINANT  

V/s 

1. Mir Zafarullah Khan Jamali
    Prime Minister of Pakistan 

2. Mr Shaukat Aziz
    Federal Minister of Finance

 

3. Dr Ishrat Hussain
    Governor
    State Bank of Pakistan ---RESPONDENTS  

Subject : Complaint In terms of Section 5 and 18 (b) (ii) 0F THE NATIONAL ACCOUNTABILITY BUREAU (NAB) ORDINANCE 1999 against the Public Office Holder for punishment under Section 10 of NAB Ordinance REGARDING Multi billion dollar scandal, reported by the auditor general of Pakistan

1.                   The respondents in this complaint do fall within the ambit of NAB Ordinance 1999 for the purposes of investigation trial and punishment.

2.                   The respondents are reportedly guilty of corruption and corrupt practices as defined in Section 9 of the Ordinance and as such are subject to punishment under Section 10 of the Ordinance based upon the following facts and grounds:

Facts and Grounds:

1. According to weekly "SOUTH ASIA TRIBUNE" dated 28 March "“ 3 April 2004, a news item published (copy enclosed), a serious case of abuse of power resulting into massive loss of over Rs 6.2 billion ($109 million) in the murky sale and purchase of dollars from the kerb market, the Auditor General of Pakistan has found during routine checks of State Bank accounts.

2. The matter was brought into the notice of General Pervez Musharaf by the Auditor General of Pakistan but his findings have been ignored by the Presidency for reasons best know to the same.

3. According to the Report, it has been alleged that in continuation with policy of buying dollars from the open market introduced by Nawaz government, the present government purchased billions of dollars from the open market from money changers and middle man at rates much higher than the prevailing open market rates. It has been further alleged that so far almost $ 10 Billion have been purchased in the last four years by the present Gen Musharaf regime. Moreover the State Bank is said to have paid between Rs 2 to 3 per dollar over and above the prevailing inter-Bank rates.

4. All the afore mentioned practices could not have taken place without the blessings of high ups of the Gen Pervez Musharaf government including therein the respondents.

Conclusion:

Based on the above facts and grounds respondents have shown willful indulgence in corrupt practices under Section 9 of the Ordinance. Such persons are subject to punishment under Section 10 of the Ordinance.

As such the Chairman of the NAB is called upon to initiate investigation in connection with the matters set out herein above and further proceed to file a reference against respondents for violating the provisions of Section 9 of the Ordinance punishable under Section 10 of the Ordinance in competent court of law and proceed against those concerned for violating Section 9 of the Ordinance.

Complainant

Pakistan Peoples Party

Through:

Ch. Mohammad Aslam

Advocate High Court 

Islamabad Dated  : 28-4-2004
 

The Reference / Complaint is based on the source incorporated as under :

 

Musharaf Sitting on Multi-Billion Dollar Scandal Reported by Auditor General

By Maryam Hussain

The Weekly "SOUTH ASIA TRIBUNE" - March 28-April 3, 2004

ISLAMABAD: The State Bank of Pakistan has suffered a massive loss of over Rs6.2 billion ($109 million) in the murky sale and purchase of dollars from the kerb market, the Auditor General of Pakistan has found during routine checks of State Bank accounts.

According to some estimates almost $10 billion have so far been purchased by the financial wizards of the Musharraf government to boost foreign exchange reserves in the last 4 years. The total reserves stand at $12 billion.

This financial irregularity has been brought to the notice of General Pervez Musharraf by the Auditor General of Pakistan who recently came to know about this financial mess. But his findings have simply been dumped and the presidency is sitting uneasy over the case, hoping that the scandal would not explode in the media. 

Ironically the policy to buy dollars from the open market was introduced by the Nawaz government after Pakistan went nuclear in May 1998 which brought all kinds of sanctions from all corners of the world. 

Musharraf continued with this policy but the scale was multiplied manifold and large scale irregularities were committed but ignored by the financial managers. 

The scandal involves buying dollars from money changers and middlemen at rates much higher than the prevailing open market rates.  

"No one knows who was the supplier of these billions of dollars, who negotiated the deals, how prices were determined, who benefited from the extra amounts paid to the dealers and whether any attempt was made by the State Bank to regulate the massive purchases at the best available rates which could have saved millions of dollars," a financial expert in Karachi told the South Asia Tribune. 

The expert said the massive loss to SBP occurred because of big financial transaction of dollars through inter bank channels in a bid to temporarily inflate the figures of foreign reserves.  

State Bank is said to have paid between Rs 2-3 per dollar over and above the prevailing inter bank rates.  

According to one expert almost $5.2 billion was purchased from the open market moneychangers and the rest through the inter bank market, between July 1999 and June 2002. 

Governor of the State Bank, Dr Ishrat Hussain, is on record having said that these purchases helped Pakistan avoid new short-term commercial loans, and saved $400 million per annum in the shape of future debt servicing liability." 

The post 9/11 situation provided a new window of opportunity for Pakistan. A surge in remittances through the banking channels started as US started scrutiny of money transfers, especially to determine whether dollars were flowing to terrorist organizations. 

This flow through the banking channels strengthened the rupee against the dollar and the rate dropped from over Rs64 to a dollar to Rs 59.53 by July 17, 2002. 

The SBP management was of the view that as a result of growing inflows, and relatively subdued import volumes, Central Bank had to intervene in the inter bank market more aggressively to stabilize rupee-dollar parity at around Rs60 to a dollar to cushion exports from Pakistan against undue competition.  

Dr. Hussain was also reported as saying that reserves were used as a tool of exchange rate and monetary policy management. 

The SBP used inter bank market to affect monetary policy by either supplying domestic currency to the market or buying it against foreign currencies.  

Defending this policy of dollar purchases to build up reserves, SBP had maintained the position that for ex level serves as a major confidence factor in the perceived risk assessments of a country. The costs of debt become much higher when the lenders know that country had no option except raising new loans to meet its obligations.  

Since nuclear tests of May 1998, and resultant sanctions, external capital flows also turned negative: minus $380 million in 1999-00 and minus $738 million in 2000-01, which was not tenable for a developing country with a large debt burden.

Despite this difficult situation, according to the State Bank, the country paid $3.76 billion in 1999-2000, $5.1 billion in 2000-01, and $6 billion in 20001-02 in servicing the external debt.  

Had there been no purchases, threat of default or much higher debt levels were quite imminent, SBP maintained defending its positions on dollar purchases from the open market. 

However the questions about the procedures of these purchases, what criteria were applied, who were the suppliers and who were the middlemen have not been addressed. 

According to a NAB source, if just two extra rupees were paid for each dollar to favorites, the total purchase of $5 billion would mean an whopping Rs 10 billion going out to unknown middlemen and agents of the big and the powerful, including many serving and retired generals. 

"This bonanza would be hard to resist and the State Bank authorities are acting dumb and deaf about these issues because revealing the details could mean exposing many big names in the current government set up," an analyst said. It is however Prime Minister Jamali's responsibility to clear these issues as his government would be blamed in future when these scandals are probed by future NAB authorities. 

Experts say if action was not taken now, Mr. Jamali would be seen as an accomplice.

Yet the Auditor General of Pakistan has already officially set the ball rolling by sending a report to the Presidency. The stone walling at the Presidency is keeping the lid tightly closed on the massive scandal.

Once names start appearing about the currency dealers and their powerful backers, the Musharraf Government will have to answer many questions, especially about alleged corruption at the higher levels.

A Report in 'The News' earlier said:

ISLAMABAD: Five audit reports of Pakistan Army containing details of "financial and administrative irregularities to tune of Rs 40 billion" in defence budget in 2001-2002, were tabled in National Assembly here Monday. 

The Auditor General of Pakistan in his five reports has identified many "common lapses and negligence" on the part of Army, such as "prevalent practice of violation of rules, procedures, regulations, weak internal financial control over spending." According to the AGP, these irregularities cover only the accounts of defence services, controllers military accounts, special audit report of GE (Army services), special audit of DW&CE (Air and DW&CE(Army) and cantonment boards. Many other audit reports of the federal ministries were also tabled in the House but their financial impact is less than that of the audit containing the details of irregularities in the military. 

Over three dozen government owned public enterprises were found involved in irregular spending of Rs 17 billion during the year 2001-2002. According to the AGP, the audit report on the accounts of defence services has topped the list of irregularities as over Rs 29 billion  were found misused, Rs 27 billion, recoverable, violation of rules, Rs 761 million, mismanagement, Rs 165 million, violation of propriety Rs 8.5 million, recoverable Rs 213 million, overpayments Rs 5.9 million, irregular expenditures Rs 43 million, unauthorized expenditure Rs 10.2 million, extra and avoidable expenditure Rs 2.6milloiin and others Rs 1.2 million. 

The special audit report on GE army services Rawalpindi covers irregularities. Mismanagement Rs 790 million, misuse Rs 2.9milion, recoverable Rs 109million, violation of rules Rs 32million and others Rs 40milloin. The audit report on the accounts of controller of military accounts covers the irregularities of Rs 6 billion on account of irregular expenditure, mismanagement Rs 56 million and unauthorised payments Rs 228 million. 

The audit report on accounts of defence services (DP division) covers the irregularities of Rs 858 million, recoverable Rs 18million, negligence Rs 2.3 million, unauthorised/ irregular expenditure Rs 1.4 million, violation of rules, Rs 217million and others Rs 72million. Special audit report on the projects of DW&CE (air) DW and CE (Army) covers irregularities of Rs 132 million, violation of rules Rs 16.358 million, overpayments Rs1.4 million, recoverable Rs 4.8 million, others. 

Rs 4.4 million. Special audit report on the accounts of cantonment board covers the irregularities of Rs1.9 billion on account of mismanagement, recoverable Rs1.6 billion, violation of rules Rs34milloin and others Rs 7.7 million.)))
 

The latest confirmation comes in the book written by Hassan Abbas, a former police officer and currently Research fellow at the Harvard Law School and a PhD. candidate at the Fletcher School of Law and Diplomacy, Tufts University. The book is titled Pakistan's Drift Into Extremism: Allah, The Army, And America's War On Terror, published by M.E. Sharpe.

The author, who was also associated with NAB for some time and saw all these inner contradictions of Musharraf's accountability bureau, has thrown a new light on how Musharraf started the accountability process to give credibility to his illegal regime but soon became a victim of its own ambitions.

Abbas observes that NAB had an ominous start to begin with. In its first two weeks of operations, it cracked open a multimillion- dollar case of fraud and corruption. Nortel, a Canadian telecommunications company, had unfairly been handed a fat contract to build a mobile telephone network in Pakistan.

After General Amjad's departure and appointment of a new Chairman, the NAB was dead for all practical purposes, Abbas says. A noble experiment had ended because those who had initiated it did not have the moral stamina to carry it through.

Following are excerpts of his book's chapter on NAB: "The first decisive step that Musharraf took (after taking over in October 1999) was on the domestic front - accountability of the corrupt. With every change of government since the revival of democracy in 1985, the cry for accountability had become louder and louder, but as the problem was so widespread and the ramparts of vested interest so invincible, no government dared go beyond a judicious mixture of flimsy steps and lip service toward meeting this demand.

By the time Musharraf found himself catapulted to the helm, he had no option but to bow to the overwhelming sentiment of the people. Thus before the month of October 1999 was exhausted, he announced the formation of the National Accountability Bureau (NAB), with Lieutenant General Syed Mohammad Amjad as its first chairman.

And by a strange irony, it was fated that the "Attock conspiracy" officers who had paid a heavy price for attempting to conduct accountability twenty-five years before would have a fair representation on the Bureau. Within two days of the formation of the NAB, the services of Saeed Akhtar Malik and Farouk Adam Khan of the Attock court martial fame were requisitioned.

General Amjad was the ideal and unanimous choice of the senior ranks of the army to be the NAB chairman. He was an officer of extraordinary diligence and exemplary character, his name was a byword for integrity. Ayaz Amir, a leading Pakistani journalist, while treating Musharraf's choice of certain cabinet members to scathing criticism, had this to say about Amjad: "Chief [Musharraf] has redeemed himself by picking Lieutenant General Amjad - and if anyone can make NAB work, it is Amjad, and if he falters or fails, or even if the pace of his offensive slackens, General Musharraf can say good-bye to the public goodwill."

In the event, Musharraf's credibility and commitment were to be defined by the performance of the NAB, the words of the journalist were to be prophetic.

From the survey of the NAB team, one could only draw optimism. Farouk Adam had a courtly manner, an impressive personality, and a unique ability to smile through the tedium of a sixteen-hour workday.

Saeed A. Malik had much idealism and passion and also a flair for winning the esteem of those working under him. He had written a freelance column for a decade in a leading English-language newspaper of the times (The Muslim), invariably exposing the corrupt practices of the ruling elite.

The initial labors of the NAB were dedicated to drawing up the NAB Ordinance to provide a legal framework for this new organization. The central principle that dictated the ordinance was the shifting of the onus of proof to the accused, that is, that if the accused person could not reconcile his wealth, earnings, expenses, and taxes that he had paid, he must be deemed guilty of corruption.

The framers of this ordinance were very conscious that this Draconian law would be applied to a maximum of only four hundred of the most corrupt in the land, and the principle that would determine the qualification of these "selected few" would be that of either an association with a great crime or having a big name adorned perhaps by a theft not that big. Without such a law, the NAB would essentially have been a nonstarter because of the virtual nonexistence of investigative and prosecutorial resources. Had this ordinance been judiciously used to attain the purpose it was designed for, things would be much different today.

To implement this agenda, Amjad was given full authority to select the "targets," though he regularly consulted the ISI and a few legal experts while making vital decisions in this regard. Amjad had a free hand to hold across-the-board and evenhanded accountability from which no one was exempt, except the judiciary and serving armed forces officials.

On November 17, 1999, the NAB moved in for its first crop of arrests. Many of those arrested were big names. There was great euphoria among the people because many individuals who had always considered themselves beyond the reach of law were now behind bars. Yet most of the arrests were made on the charges of loan default, perhaps the easiest charge to prove, but one that the NAB could be horrendously wrong about because it was very difficult to tell an honest from a willful default.

With the first blood having been drawn, the public appetite was whetted and they bayed for more. Their clamor could have been ignored, but not that of the government, whose credibility and performance had nothing but the achievements of the NAB to show for itself.

The ordinary public was under the impression that the ISI and other intelligence agencies had collected enough data on corrupt elements when they were "monitoring" the civilian governments during the 1990s, but when a few ISI files were handed over to NAB officials, these were mostly speculative and devoid of any sound material necessary to prove a case in a court of law.

To quicken up things, General Amjad hurriedly developed a core team to run the organization comprising bankers, economists, lawyers, and a few from the intelligence and police backgrounds. It was a combination never tried before, the only handicap being a shortage of time to organize and deliver.

Around that time, a letter from Musharraf's office to the NAB (dated December 11, 1999) adequately reflects the anxiety of the government and its dependence on the NAB to shore up its credibility: "It has been reported with a great concern that corrupt politicians are becoming bold and the press is gradually becoming sympathetic to them. This trend must be stopped and reversed.

Following steps are suggested: 1. Move fast on all issues, 2. Expose the corrupt people very expeditiously, 3. Scoop on corruption on a daily basis.

Consequently, more people were arrested based on their filthy reputations, but proof of their corruption was lacking. The NAB could have gained a lot of credibility in its initial days by prosecuting the ones who were already in custody, but the special accountability courts were not in place yet as selection of judges and establishing a new chain of courts and developing a whole new infrastructure was taking time.

What the military hierarchy did not realize was that there is a huge difference between deploying a military unit to a new location and in establishing a law enforcement institution that has to act within the parameters of law. To overcome this shortage, dozens of retired ISI officials were inducted who perhaps knew the art of interrogation well, but had very little legal and investigative experience, which was the core requirement in this case.

There was a reason behind the compulsion that the new inductees had to be former ISI officials - the ISI was providing the funds for this NAB expansion and they opted to benefit their comrades in the process.

As if these problems were not enough to hamper the NAB work, all of the arrested persons were kept in different cities under the custody of respective military commands where the local military officials and intelligence operatives started investigating/ interrogating the accused on their own.

Every single institution was trying to spy on NAB, making the task further complicated. This was symbolic of the general state of affairs in Pakistan.

Amjad and Farouk Adam, the two public faces of the NAB, were now under immense pressure from the public, the press, and the government. As they addressed the press, it seemed to the military hierarchy that they were hogging the limelight, and they became victims of gratuitous envy.

Shaukat Aziz, the finance minister, who had Musharraf's ear, was for blanket protection to businessmen despite the fact that some of the latter, in cahoots with the bankers, were the biggest crooks.

Amjad, on the other hand, was heading toward making an example of those industrialists and businessmen who had established their business empires through corrupt practices. This was a risky business as big money was involved.

One of Amjad's problems was the subtle increase of government interference with his functioning. As it was, NAB had an ominous start to begin with. In its first two weeks of operations, it cracked open a multimillion- dollar case of fraud and corruption. Nortel, a Canadian telecommunications company, had unfairly been handed a fat contract to build a mobile telephone network in Pakistan.

This was an open-and-shut case as all the evidence was there, but when Amjad wanted to move in and scuttle the contract, he was refrained from doing so. The only man who had the power to do this was Musharraf himself.

As the NAB moved along, two questions were frequently asked of Amjad, that is, whether there were any holy cows, and if the army generals involved in corruption would also be arrested.

The government position was that only serving army officers and the judiciary were exempt from the NAB because both institutions had effective in-house correction systems, but technically, retired armed forces officials were not a part of this category.

When a journalist publicly asked Amjad about press reports maintaining that corrupt military officials alone had deposited $1billion in foreign banks from kickbacks from weapons purchases, he shot back by saying: "We have not been sitting on our butts as regards defense deals."

Yet it was daily becoming clearer that all the big names among the retired generals were beyond the province of the NAB. The names of Generals Aslam Beg, Hamid Gul, Zahid Ali Akbar, Talat Masood, Saeed Qadir, Farrukh Khan, and Air Marshals Anwar Shamim and Abbas Khattak were discussed more than once, but nothing came of these discussions.

Amjad was absolutely dedicated to having them probed, but was restrained from doing so. The reputation of Amjad, however, remained unimpaired. By releasing Khawaja Asif and Mr. Nawaz Tiwana, a leading politician and a bureaucrat, respectively, from detention and personally apologizing to them for wrongful arrest by the NAB, Amjad had set a new precedent in Pakistan by accepting that the mighty are often fallible. This only enhanced his stature, and the envy of his peers.

In another high-profile case, a leading politician from the North-West Frontier Province (NWFP) known for his corrupt practices threatened NAB officials during his interrogation by saying that he was a CIA agent, and that political instability would be created in the country if he were not released immediately.

Amjad responded by making things harsher for him and by appointing more investigators to probe his case. The politician was ultimately convicted.

One of the brightest experiences of the NAB was the performance of its Central Investigation Team (CIT). General Amjad had allowed Saeed Malik to handpick a team of officers to give the NAB a limited in-house investigative capability. A former commander of army's SSG, Brigadier Mohammad Nazir, an officer of unimpeachable integrity, was selected to head the CIT. The performance of the 12-member CIT team was outstanding on many counts.

For instance, in a mere five months a three-man cell of the CIT (Lieutenant Colonel Riazuddin, Nadir Imtiaz Khan, and Major Taimur Shah) recovered or saved for the government of Pakistan Rs 3 billion (around US$500 million). But unfortunately, the most outstanding member of the team Lieutenant Colonel Obaidullah, a former ISI official, tragically died of a massive heart attack shortly after being wrongly accused of "mishandling" a case by a very senior NAB official.

The saddest commentary on Musharraf's much-vaunted commitment to the cause of accountability is that each member of this team of rare officers was hounded out of the NAB soon after Amjad's departure from the institution.

Their only handicap was that not one of them was prone to entertaining any adverse dictates. And so ended a heroic chapter of the war against crime by a handful of officers in a corrupt environment.

Reportedly, Amjad had asked to be relieved of his duties more than once. He was not one to take government partiality lying down. He left the NAB at the end of September 2000.

NAB's change of command, in the words of Mohammad Malick's commentary in Dawn, was "a clear sign of NAB's tailored, if not changed, priorities." No one then knew who the real "tailor" might be, but there was an acknowledgment that "Amjad remained a very fair accountability chief."

But Tariq Ali in his book The Clash of Fundamentalisms: Crusades, Jihadis, and Modernity, was much more perceptive when he observed that Amjad was ready to push through, but "Musharraf balked at the scale of the enterprise."

The new chairman was General Khalid Maqbool, whose reputation was no match for Amjad's. The NAB was dead for all practical purposes. A noble experiment had ended because those who had initiated it did not have the moral stamina to carry it through. But it would not be they who would pay the price for this failure. This would be paid once more by those who have always paid it, the people of Pakistan.

Musharraf had made a clear choice "” he would compromise with those politicians who were ready to side with him. He had given in to the building pressure from various sectors that wanted the regime to behave "normally" and not as a revolutionary one.

This was the dilemma Musharraf faced "” the masses were looking for a Messiah in him, whereas the political and military elite wanted the status quo to continue. Musharraf was still swinging in between.

I cannot help recalling one of the conversations between Saeed A. Malik and (late) General Ghulam Ahmed (Musharraf's Chief of Staff) - Malik was strongly asserting that everything was "do-able" provided the Musharraf government had the will to do it, and General GA stunned the audience when he said: "But, sir, first they [Musharraf, General Mahmood, and General Aziz] will have to get out of the cage of Kargil, otherwise all their efforts will be reactive."

And he was not being disloyal. He was merely delivering an analytical conclusion, and his tone and tenor were entirely reflective of this. No one in Musharraf's government could have mustered the courage to say this."