Re: Pakistan Rich list (official): Zardari 2nd richest with 1.8 billion dollars.
*Some Landmark Cases of Corruption in Privatization
[FONT=Arial,Arial]A: Fixing the reference price at will.
*[FONT=Arial,Arial]A chairman of the Federal Anti-Corruption Committee (FACC), late Malik Mohammad Qasim, at a press conference on Feb 9,1995, accused Nawaz Sharif
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govt. of arbitrarily fixing the reference prices of the privatized state units and ignoring those suggested by the evaluations. It was revealed that bids for a total amount of Rs 759 million were received for 16 Ghee Mills but they were sold for 636 million. The management of these units were handed over after a down of Rs 315 million, out of which Rs 137 were repaid as govt. share in Golden Handshake Scheme. The balance has not been paid to-date since the new owners have gone to court, on one pretext or another. Sartaj Aziz defended the allegation in " The privatization of Ghee Mills, a rejoinder to FACC" released at a press conference. This is how he responded to the allegation that several state enterprises were sold at a price below those suggested by valuateors. " No arbitrary fixation of price took place at all. The reason for any deviation from the figures worked out by the consultants have been explained in detail in review note of the valuation of each unit. The Privatization Commission, with approval of the Cabinet Committee on Privatization (CCOP) had agreed to adopt a uniform basis for the value of the goodwill in case of profitable units, as two years purchase of average profit, net of tax. Similarly in the case of loss-making units two years average losses net of tax credit were to be considered. Also a uniform rate of depreciation based on the normal tax depreciation rate was to be considered for depriciable fixed assets. These factors have been uniformally applied to arrive at the reference prices of all units offered for disinvestment without any exception". The transparency in deciding the sale price is evident from the statement above which is not easy to comprehend. But the crux of what it said is " YES, WAYS WERE FOUND TO CHANGE THE REFERENCE PRICES FIXED BY THE EVALUATORS". Selling the units at a price far below the reference price was not limited to ghee units alone. At least half of the industrial units have been sold much below the reference price, on one ground or another.
*[FONT=Arial,Arial]B: Schon Group
*[FONT=Arial,Arial]National Fibre was one of the most profitable public sector units whose profitability induced others like ICI to set up polyester fibre projects. In 1991-92 when the project was privatized it had an impressive balance sheet of paid up capital of Rs 423 million, annual sales of Rs 990 million and a profit of Rs177 million. It was sold on Feb 2, 1992 for Rs 756 million to Schon Group and delivered after a down-payment of Rs 302 million, which is still defaulting in payment of Rs 356 million for National Fibre.
In May 92, Pak-China Fertilizer was also sold to Schon group for Rs 456 million and handed over on a payment of Rs 182 million. A balance of Rs 240 million was outstanding against the group but no effort was made to recover it. Instead, Bhutto govt. approved the sale of Pak-Saudi Fertilizer to front-man for the Schon
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group but thanks largely to the alarm raised by the workers union and *[FONT=Arial,Arial]intervention by President Farooq Leghari *[FONT=Arial,Arial]the deal did not go through. After taking over the management of National Fibre, Schon applied to the Corporate Law Authority (CLA) for the consent to issue shares in the stock market for Rs 35 per share because the company was poised to launch a major expansion programme of Rs 1,700 million. The permission was granted but Karachi Stock Exchange took the plea that the share was overpriced and therefore, the share price was reduced to Rs 26.50. The offer was oversubscribed but on Dec 30,1992 the annual general meeting of the company was called " to approve the management of surplus funds by Schon Management (Pvt.) Limited, an associate company of the group". Both National Fibre and Pak-China Fertilizer have been closed since their privatization. Several cases were registered against members of the Schon group by the caretaker govt. of Meraj Khalid and second Nawaz govt. However, the chairman of the group Akhtar Hussain and his sons managed to escape and are currently living in exile in United States. Under an agreement whose details have not been revealed, despite questions in the Senate and National Assembly, shares of Schon Bank and real estate of Schon Bank have been auctioned by the Ehtasab Bureau for Rs 620 million. An additional amount of Rs 300 million was deposited by the group with the Ehtasab Bureau. Several other properties including two Rolls Royce cars, 12 aircrafts of Schon Air and a plot owned by the Schon Refinery are proposed to be auctioned in near future. A report in daily, the News, Islamabad March 27, 1998 said that Ehtasab Bureau has released an amount of Rs 123 million to clear the outstanding payments to the workers of Pak-China fertilizer and that factory would soon resume operation. A clarification issued by the Ehtasab Bureau, as published in daily, The News, Islamabad two days later said that Bureau had also provided Rs 150 million to the Schon group to start the factory so that 600 factory workers can resume employment. It was not clear as to how Schon group was allowed to continue managing the factory while absconding from law. It was also not clear from the report, from which account Senator Saif-ur-Rehman of Ehtasab Bureau had released Rs 123 million for clearing the bills of Pak-China Fertilizer which for all practical purpose is a private company and not owned by the government.
*[FONT=Arial,Arial]C: Sikandar Jatoi
*[FONT=Arial,Arial]Metropolitan Steel had an annual turnover of Rs 1,200 million and had undergone an expansion with an investment of Rs 200 million on the eve of its privatization in 1992. It was sold for Rs 66.67 million to Messers Sikandar Jatoi and handed over after a down payment of Rs 30.7 million. The Privatizaton Commission wrote out a checque of Rs 25 million to the new managenment as government contribution for Golden Handshake which means that Sikandar Jatoi walked away with Metropolitan Steel for a laughable Rs 5 million. Not a single
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payment has been made to the privatization comission since its privatization. Instead he moved Sindh High Court to claim a refund of Rs 100 million sales tax which the court upheld. The unit has remained closed since its privatization. Sikandar Jatoi also bought Zeal Pak Cement on Oct 19,1992, for Rs 293 million and was handed over the unit, after a down payment of Rs 95 million. The Privatization Commission repaid Rs 56 million by way of government contribution in Golden Handshake. The units is closed since its privatization. Jatoi also played a key role in the dubious privatization of UBL and deposited the earnest money on behalf of succesful bidder Basharahil through a cheque drawn on Muslim Commercial Bank, courtesy its president Hussain Lawai.
*[FONT=Arial,Arial]D: Tawakkals
*[FONT=Arial,Arial]Naya Daur Motors was evaluated at Rs 231 million and sold for Rs 69 million to Tawakkals but the bid price was revised downward to Rs 22.30 million and the new owner, thus walked away with spoils after a payment of Rs 15.69 million. It was on the basis of this unit that Tawakkals mobilised Rs 2 billion for Kia Motors from 4,000 people and are languishing in Jail. Tawakkals were also sold Baluchistan Wheels for Rs 270 million against which an amount of Rs 116 million is outstanding.
*[FONT=Arial,Arial]E: Kot Addu Power Company
*[FONT=Arial,Arial]National Power of UK was selected strategic partner for Kot Addu Power Plant by accepting its bid for 26% shares for US$ 215 million. Messers CS First Boston which acted as financial advisor for the deal was paid a fee of US$ 13.132 million. The bid was reported to be unconditional when it was accepted but when Escrow Agreement was signed four conditions were incorporated. The total amount that was deposited in the Government of Pakistan account was US$ 163 million, resulting in the direct loss of US$ 51 million. Later, National Power was also sold additional 10% shares at a price of US$ 76 million against the approved price of US$ 82.7 million.
*[FONT=Arial,Arial]F: OGDC Privatization Bid
*[FONT=Arial,Arial]In 1996-97, Oil and Gas Development Corporation produced 22,082 barrels per day (BPD) of oil, 474 MMCFD of gas, 167 tons per day of LPG and had an annual gross sale of Rs 11,595 million. It has nine drilling rigs, two work-over rigs, a Seismic Data Processing Centre and a host of related infrastructure facilities. Its privatization was advocated by Benazir govt. on the ground that it was constantly running into losses. The fact is that recruitment's were made in OGDC and irregularities were committed on such a scale that the government appeared to be in race to bankrupt it as early as possible. The irregularities in the award of LPG quota is just one case in point. Not only LPG was allocated to favorites for a song, no effort was made to recover the cost. It fell to the lot of the
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caretaker govt. to recover Rs 1,500 million from the LPG companies during its three month tenure.
*[FONT=Arial,Arial]G: UBL Privatization Bid
*[FONT=Arial,Arial]In September 91, Chairman, Privatization Commission, Saeed Qadir has speculated in an interview with Sabih uddin Ghausi of Daily DAWN that UBL could fetch a price of Rs150 per share, against Rs 70 of ABL and Rs 54 of MCB but in 1996 it was sold to a dubious group for Rs 15 per share. Such a big fall in such a short time could happen only through a determined effort by the controllers of the bank to bankrupt it before its privatization. That a sustained effort was made by the govt. to bankrupt the bank before its privatization is also evident from the annual balance sheets of the bank. UBL earned Rs 236 million profit in 1991, Rs 258 million in 1992 and Rs 275 in 1993 which went down to Rs 59 million in 1994 and gave a loss of Rs 720 million in 1995. During three years of Benazir govt. overdue advances jumped from Rs 12 billion to Rs 18 billion and 30 loans worth Rs 2 billion were rescheduled, scores of loans were written off. In 1996 UBL had 3,000 ghost workers, Rs 700 million per annum was being spent on the union whose office bearers were in possession of 190 bank vehicles. The employees of the bank had extracted unrecoverable loans worth Rs 800 million. The bad loans amounted to Rs 17 billion (25% of all advances) and the bank was working with a net negative worth of Rs 12 billion. It was for this reason that Consultant Credit Lyonnais, Deloitte Touche Tohmatsu and Khalid Majid Hussan Shah Rehman had recommended " that the bank can not be sold without the govt. first pumping in at least Rs 15 billion to make it a viable operation." Without taking into consideration the recommendation of Credit Lyonnais, the Privatization Commission decided to dispose of UBL on " [FONT=Arial,Arial]As is, where is basis[FONT=Arial,Arial]", and invited bids on Oct 6,1995. Eight bids were received. Six were rejected on the ground that the bidders did not have the required capital worth of Rs 1,500 million or were defaulting on loans. Surprisingly those who were disqualified included Saigols, Atlas-Bank of Tokyo and a consortium of Crescent and Dewan groups. The Crescent-Deewan joint bid was rejected on the ground that they were defaulting in the payment of a loan obligation. After a charade of negotiations during which Chairman of the Privatization Commission made a pilgrimage to Saudi Arabia, the bid of dubious Basharahill was accepted at Rs 15.30 per share. However the deal had to be called off when it was found out that even the earnest money of Rs 300 million was made available by Muslim Commercial Bank and was deposited by Sikandar Jatoi.
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*[FONT=Arial,Arial]H: Pak-Saudi Fertilizer Privatization Bids
*[FONT=Arial,Arial]" Last year this project made a profit of Rs 1,094 million. Next year it could be all yours" proclaimed an advertisement in the newspapers inviting bids for the privatization of Pak-Saudi Fertilizer Limited, one of the most profitable State enterprises under the Ministry of Production. The unit was a gold mine, not just because of its profitability but because whoever owned the unit was in a position to strangulate three other units of National Fertilizer Corporation (NFC) namely Pak-American Fertilizer, Hazara Phosphate and National Fertilizer Company Jaranwala, Lyalpur (NFCL) because they supplied raw material to this company. Both Nawaz and Benazir tried to sell Pak-Saudi Fertilizer to front man but the sales could not be carried out because of hue and cry raised by union and the press. When bids were invited first by Nawaz Sharif in 1991, two serious bidders emerged, both claiming to represent workers since Employees-Oversees Investors Buy-out was accepted by the government, although it did not meet the payment conditions of the Privatization Commission and sought to make the final payment by launching a modaraba. Advertisements in the national newspapers by PSFL union claimed that the real force behind the successful bidder was a friend of General Saeed Qadir, Chairman, Privatization Commission. The deal had to be called off. During second Benazir govt. a UAE-based company was declared successful but it transpired that the company was a front for Schon Group which enjoyed cordial relations with Asif Zardari. The bid was aborted like previous one.
*Mian Mohammad Mansha and Nawaz Sharif: Privatization of Muslim Commercial Bank - The Master Stroke?
*[FONT=Arial,Arial]"[FONT=Arial,Arial]Investment in the shares of MCB has been one of my biggest business slip ups...........In hindsight, I should have never invested in this bank.[FONT=Arial,Arial]" [FONT=Arial,Arial]Mian Mohammad Mansha-Interview, daily, The Nation, April 28,1997. *[FONT=Arial,Arial]Nawaz Sharif Came into power on November 6,1990, invited bids for the privatization of Muslim Commercial Bank (MCB) on December 15,1990 and announced its privatizaion to successful bidder, Messers Abdullah and others on January 9,1991.
Five bids were received for Muslim Commercail Bank with Tawakkals and Adamjee, being the highest and second highest bidders. Adamjee who formed a joint venture with Yunus Brothers, perhaps the biggest Export Houses in
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Pakistan, had incorporated Muslim Commercial Bank in 1949. As previous owner, they had the first right of purchase but, third lowest bid by Messers Abdullah and others, a consortium comprising of 12 leading industrialists, mostly from Punjab and headed by Mian Mohammad Mansha, was asked to match the highest bid and declared winner.
At the press Conference called to announce the sale of MCB to the National Group, Finance Minister Sartaj Aziz said that two highest bids were rejected because the bidders had failed to disclose the source of their income. A press release distributed at the press conference claimed that the committee which scrutinized the five bids was guided by four major considerations namely 1) corporate and financial record of bidders, 2) capability of managing the bank on sound professional basis, 3) dispersal of share-holding to avoid concentration of ownership and control and 4) price offered on " as is where is" basis, without any condition. Tawakkals filed a case in High Court but withdrew it under pressure from the Finance Ministry. In the subsequent privatization by Nawaz Sharif, Tawakkals succeeded in the privatization of three industrial units in such a dubious manner that Chairman, Privatization Commission came to be known as General Saeed Qadir Tawakkal, to rhyme like Abdul Qadir Tawakkal of Tawakkal group.
For nearly 30 months while Nawaz Sharif was in power, Bhutto and her party leaders ceaselessly attacked the privatization process, particularly privatization of MCB to Mian Mansha and his associates, as an act of favourtism and part of a game plan. Farooq Leghari, Finance Minister in the caretaker govt. of Prime Minister Moeen Qureshi, declared on the floor of the Senate on May 18,1993 that
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MCB was privatized as part of a grand design to grab some of the most profitable units slated for privatization. " In the very first case of privatization of MCB, highest bidder who was the oringinal owner was also excluded. The third group got it. And I will tell you later, what happened to the third group and how they manipulated and used MCB for a host of other takeovers of the govt. corporate sector. It did not happen by coincidence. It happened by design", Leghari declared. But all said and done, the story behind MCB's privatization has not been told and perhaps will never be told because those *[FONT=Arial,Arial]who could have done it, decided to make real capital after making political capital out of it. Once she came into power in 1993, Benazir developed amnesia **about her pledge to investigate the privatization of MCB. However, MCB President Hussain Lawai, accompanied by Mian Mohammad Mansha held at least one meeting with Prime Minister's spouse Asif Zardari. Nobody knows what transpired in the meeting but within a week Mian Mansha went into forced exile, to return to Pakistan only after the ouster of Benazir in Nov 1996. It was also, only after the dissmissal of her govt. that collusion between Lawai and Asif Zardari, in several remunerative deals like award of gold monopoly to ARY Traders, loan to Sadaruddin Hashwani to facilitate the purchase of Occidental Petroleum and dubious UBL privatization to Basharahill became the public knowledge. During first Benazir govt.(1988-90) Saddaruddin Hashwani had gone into forced exile, after a meeting with Asif Zardari amidst reports that he was under pressure to deliver Pakistan Services Ltd. operating the chain of Pearl Continental Hotels to a nominee of Asif Zardari. While Mian Mansha was in exile, S M Munir, a member of National Group owning MCB and Chairman, Din group was appointed a federal minister. President MCB, Hussain Lawai was appointed an adviser to the Prime Minister. " Mian Mansha can not be forgiven", a close aide to Prime Minister Nawaz Sharif, now a cabinet minister told a group of reporters in the National Assembly cafeteria, minutes after the new assembly had taken oath in Feb 1997. Mansha and his associates had wholeheartedly supported first Nawaz govt as is evident from the number of companies incorporated and listed on KSE, by Nishat and Chinioti communitiy. What went wrong between the " Lahore Maphia" and second Nawaz govt is a big mystery? But let us see how MCB was used to raid the State enterprises.
MCB was sold for Rs 2,420 against a down-payment of Rs 804 million. Within a year of privatization of MCB, Privatization Commission sold some of the most profitable cement plants to Mian Mansha, his relatives and business associates. Thus D G Khan Cement was sold to Tariq Saeed Saigol for Rs 1,799 million, Maple Leaf Cement to Nishat Mills for Rs 291 million, Pak Cement and White
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Cement for Rs 137 million and Rs 188 million respectively to Mian Jehangir Elahi and Associates. Dandot Cement was sold to the Chakwal group for Rs 254 million. D G Khan Cement was acquired by Kohinoor Textile Mills (KTM) of Tariq Saeed Saigol by borrowing heavily from the bank, as is evident from the annual reports of KTM for 1992 which show no debt and 1993 which reveal heavy indebtedness. Nishat Mills had assumed the management of Maple Leaf Cement on Jan 8, 1992 but within a few months of the sale D G Khan Cement by KTM to Mian Mansha, Maple Leaf Cement was sold by Mian Mansha to Tariq Saeed Saigol. KTM had also invested in the privatization of White Cement and Pak Cement but its investment was also divested in March 1992, in favour of Mian Mansha. Dandot Cement was officially privatized to employees group but somehow it has become a part of Chakwal group, also closely related in business to Mian Mansha. Thus it was through a complex intercorporate financing that Mian Mansha, his relatives and business associates ended up with five of eight privatized cement units which accounted for 45% to total industrial assets privatized by Nawaz Sharif. Within months of their privatization, cement prices catapulated in domestic market, forcing the govt. to order the dormant Monopoly Control Authority (MCA) to hold an inquiry into the possibility of cartelisation of cement. As was expected the inquiry absolved the privatized units of any wrong doing. It was because of the assets acquired in privatization that Nishat group of Mian Mansha which was at the 15th position among the list of 43 top industrial families in Pakistan in 1972 and sixth in the ranking of the Monthly Herald in 1990 had risen to the top of the corporate world in 1993, by the time, Nawaz Sharif was dismissed on charges of corruption and other irregularities.
