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Friday, February 16, 2024

Hudaibiya Paper Mills: Will money trail ever be explained?

The Securities and Exchange Commission of Pakistan (SECP) has submitted the record of the Hudaibiya Paper Mills case to the Panamagate JIT.

As the JIT examines the records it is crucial for the public to understand the basics of the complex Hudaibiya Paper Mills case.

GVS has endeavored to unravel the intricate web of the Sharif family’s purported illicit financial activities – from the published accounts to-date.

NAB originally filed a reference in 2000 against Mian Muhammad Nawaz Sharif and his family, implicating them for money laundering. This case was still proceeding, when Mian Nawaz Sharif and family signed a deal of self-exile with Gen. Musharraf opting to stay out of country’s politics for next ten years. Its not clear if freezing the proceedings was part of the deal, but suddenly Musharraf govt. lost all interest, adding weight to the allegations that “Nawaz-Musharraf Deal” brokered by Saad Haririri, Lebanese business tycoon, and Saudi Royal Family was also to get rid of these difficult cases which could have then convicted the former Prime Minister.

Hudaibiya Accounts

The reference states “There was an unexplained investment of Rs.642.743 million (Rs. Sixty Four Crore plus) appearing in books of the mill as share deposit money. The same belonged to the directors/shareholders and beneficial owners of the company, which they had fraudulently amassed under the garb of foreign equity investment.”

Bottom line: In the period from 1996-1998 Rs.642 million was deposited into the accounts of Hudaibiya Paper Mills (HPM) which was owned exclusively by members of the Sharif family.

Read More: Panama JIT reviews the questionable history of the Sharif family

Dar may dismiss his previous statements but his confession remains a fascinating study of an international money laundering operation.

Prior to this gargantuan and, as of yet, unexplained investment, Hudaibiya (HPM) assets were merely Rs.95.7 million and the company had reported huge losses to the tune of Rs.809 million.

The question of the source of these Rs.642 million, unfortunately, does not have a simple answer -and is not settled to this day. The details regarding the origin of these funds are so convoluted that they cannot be presented in a coherent fashion.

However, there are a few aspects of this maddening case that have come to light, and these aspects raise even more difficult and painful questions about the dealings of Pakistan’s ruling family and its associates. A rich source of these insights is none other than the incumbent Finance Minister Ishaq Dar and his confessional statement of 2000.

Dar now dismisses his previous statements, given under oath, and had obtained court orders against these once PMLN came to power in Punjab after the 2008 elections. But opposition emphasizes upon the corroborative nature of facts mentioned there. And these facts in Dar’s confession offer a fascinating study of an international money laundering operation.

Purported methodology employed

Before getting into the nitty gritty, it would be pertinent to give a brief description of the purported methodologies apparently employed for money laundering in this case. The basic concept is to deposit illicit funds – funds without ascertainable sources – into different bank accounts and then channel them through many other different accounts, inside and outside the country, in order to create multiple layers of transactions which make it difficult to discern the source. While investigative agencies can always connect the transactions but given multiple and contradictory protections available in Pakistan’s legal process, to different kinds of transactions and issues of period limitations, time barred etc, it will be next to impossible to prove the crime in a court of law.

Ishaq Dar had then confessed to opening fake accounts under different names which include members of the now infamous Qazi family, he said in his statement:

“I opened two foreign currency accounts in the name of Sikandara Masood Qazi and Talat Masood Qazi with the foreign currency funds provided by the Sharif family in the Bank of America by signing as Sikandara Masood Qazi and Talat Masood Qazi. All instructions to the bank in the name of these two persons were signed by me under the orders of original depositors, namely Nawaz Sharif and Shahbaz Sharif”

Regarding the methodology of money laundering employed, the NAB report states “It appears from the evidence that in order to launder and conceal their ill-gotten wealth, both the Sharif brothers appeared to have fraudulently opened fictitious foreign currency accounts in the names of various individuals with the active connivance of some of their close associates and employees.”

The collateral placed in Saeed Ahmed’s account is stated in the NAB report as being to the sum of $3.735 million.

What makes this all the more intriguing is that another such  account was opened in the name of Mr. Saeed Ahmed, a batch-mate of Nawaz Sharif from College and current president of National Bank of Pakistan, upon the directives of Shahbaz Sharif who wanted the funds in foreign currency accounts transferred to the Hudaibiya Mills account in Pakistan following media scrutiny of the Qazi family.

For this purpose, Dar employed an indirect method, and one must admit: ingenious method, of first transferring all funds to Saeed Ahmed’s account then using them as a collateral to get loans for his company First Hajveri Modaraba. These loans were then transferred to the Sharif group of companies’ account of Hudaibiya Mills. The fact that Saeed Ahmed later rises from total obscurity to become the President of National Bank of Pakistan itself is intriguing. Thought opposition on media keeps agitating this, but to this day there is no explanation from Mr. Saeed Ahmed or Ishaq Dar as to who that Saeed Ahmed was, if not the same person.

Read More: JIT: Now is the real test of Pakistan’s institutions

The collateral placed in Saeed Ahmed’s account is stated in the NAB report as being to the sum of $3.735 million.

Additional Incriminations

A startling claim the NAB report makes is that the total amount of money laundered by the Sharif Family is approximately Rs.1.2 billion.

“The amounts that have been deposited in the said accounts stand unexplained and appear to be beyond the known source of income of the accused individuals,” it says.

The Nawaz government of 1990 passed a law called Protection of Economic Reforms Act 1992, according to which all Pakistani citizens holding foreign currency accounts will enjoy immunity from any inquiries of the Income Tax Department or any other taxation authority regarding the source of their funds.

Another revelation in the report is that Mr. Mansour Zaigham (money changer based in Lahore) along with Mr. Altaf Khanani were involved in remitting Rs.164 million from a suspicious source abroad to the Hudaibiya (HPM) account.

Khanani is currently jailed in the United States on charges of money laundering.

Question naturally arises: Why all this escaped the kind of scrutiny it deserved? Answer is: Nawaz government of 1990-93 passed a law called Protection of Economic Reforms Act 1992, according to which all Pakistani citizens holding foreign currency accounts will enjoy immunity from any inquiries of the Income Tax Department or any other taxation authority regarding the source of their funds. Simply put: No questions could be asked.

This law gave the elites of Pakistan license to possess and use ill-gotten funds without fear of retribution.

Qatari Letter

The Qatari letter, which has been a highlight of the recent Supreme Court proceedings, also originated out of the need for justification of one of the many questions regarding Sharif family’s business dealings.

In the NAB report of 2000, it is stated that the Sharif family settled a dispute with Al-Towfeek Investment Fund and paid them $8.7 million dollars in damages. The dispute was over the default of loans given to Hudaibiya Paper Mills and the case was settled out of court. The NAB report indicated that the source of the $8.7 million appeared to be illicit funds.

Read More: Week 4 of the JIT; What do we know so far?

During the Supreme Court’s proceedings on the Panamagate case, when the judges queried Nawaz Sharif’s legal team regarding the source of this settlement after which the defendants produced a letter from a Qatari prince which claimed that the funds had been given to the Sharif family as payment of an old agreement between the Prince and Nawaz Sharif’s late father. But defendants provided no bank statements or any other evidence of financial transactions to back the claim of the Qatari Prince.

The court has since then rejected the letter and has termed it as having no legal standing. But we don’t know if that was a order or merely an observation – for later has no legal value. It remains to be seen how the Panama JIT will resolve these difficult questions of Hudaibiya Paper Mills money trail. Had the proceedings of JIT been open and transparent to media and opposition then the Pakistani public would have got the opportunity to ponder on the kind and quality of evidences its ruling family is submitting.