Azmat MaliC
Islamabad – Transparency International Pakistan (TIP) has invited attention of Chief Justice of Pakistan to allegations of collusion between state institutions including SECP, NAB, FIA and NBP and asked for constitution of a Joint Investigation Team (JIT) into a mega stock exchange fraud in country’s history.
In a 50-page letter, with all background and related documents, to Registrar Supreme Court on July 11, TIP Chairman Sohail Muzaffar has invited attention of the Chief Justice through the Human Rights Cell of the court and requested for constitution of a JIT.
“The Honorable Chief Justice, Supreme Court is requested to take notice f the role of SECP, NAB, NBP, SBP and FIA of suppressing documents from Supreme Court and Sindh High Court, falsifying/tampering records and not preosecuiting the accused of corruption and money laundering, and form a joint investigation Team to investigate records of the SECP, NAB, NBP, SBP and FIA and forensic audit of cell phone data and SECP, FIA and NAB records, as these crimes were committed mostly 9 years ago in 2008 and 2009, and culprits are not punished through most of these cases have been referred to NAB by the Supreme Court in HRC No 14249/S of 2013,†the letter said.
“Transparency International Pakistan is striving for across the board application of Rule of Law, which is the only way to stop corruption,†the chairman said in his letter.
According to the details, on 13th May 2013, a request for taking up a Suo Moto action was sent to the Supreme Court by TI Pakistan, which pertained to collusion between SECP and stockbroker companies of fraudulent jack in up the share prices and also allegations of money laundering and the insider trading in Azgard Nine limited shares trade and PICT.
Shares, and loss to exchequer by JS secure Fund I, illegal payment of fee of US $ 4.2million to a Director in 2013 in trading of PICT shares by JSCL on which SECP itself has made investigation and found suspicions of shares manipulation, insider trading and money laundering, by itself selling the share in Pakistan and also itself buying the shares through a Bank Julius Bear in Switzerland, it added.
The Honorable Chief Justice of Pakistan took up the notices were sent to SECP and NAB under HRC no 14249/s of 2013, seeking their comments. Though NAB has taken up the complaint and started inquiries in 2013,but subsequent events indicated that NAB,SECP,NBP and FIA are not ready to take action against the responsible parties, it appears that these agencies are also involved in record Tempering ,record suppressing and hiding reports from the Honorable Supreme court and Honorable Sindh High Court, and by their collusion, these agencies were able to take order from Honorable Sindh High Court, which Amounts to ignoring the Honorable Supreme Court Orders in NICL case, and that FIA,SECP and Nab submitted false statement in SHC in Feb 2015,that a joint investigations conducted by the three agencies has found no irregularities in NICL Rs.2 billion illegal investment in JS Principal Secure Fund –I.
This case is based on the Special Audit carried out by Auditor General Pakistan in his report submitted in the apex court. AGP Audit report which was prepared on the directions of Supreme Court had determined corruption and loss to exchequer of Rs 255 million. In fact, TI Pakistan received many complaints that SECP has conducted many inquiry/investigations in 2008, 2009 and 2012, which comprised of following cases.
Following SECP Investigations were reported to TI Pakistan, which were forwarded by TI Pakistan to Chairman SECP, and copied to PM, Minister of Finance, Chairman NAB, Governor State Bank of Pakistan, and some were copied also FTO.
1. Investigation Report of SECP on Manipulation and other prohibitive activities in Azgard Nine Shares Dec 2008.
2. Investigation Report 2012 of SECP in the shares of Pakistan International Container Terminal, insider trading and share manipulation of selling in Pakistan and buying through bank Julius bare co.ltd , Switzerland at lower price, and selling to new buyer at more than double price.ali Jahangir Siddiqi, director JSCL was involved in the sale of PICT shares to ICTSI Mauritius , and his brother Ali Raza Siddique was director in PICTL due to which he had inside information about the acquisition of PICTL shares by foreign company hence there is a potential case of insider trading against him and JS group. The inquiry report revealed JS group related entities and identified strong traces of market abuse. there was a strong apprehension that Jahangir Siddiqi himself was ultimate client of this bank Julius buyer. To complete this link, further probe was made to find ultimate owners of the subject matter shares. The probe led SECP to various international agencies including Swiss financial market supervisory authority (FINMA), and Swiss federal administrative court
3. Investigation report in on the illegal use of funds by Mahvish and Jahangir Siddiqi foundation, an education trust as group fund of illegally investing in the shares of JS group, and making illegal profit of over Rs 2 Billion on investment of Rs 45 million in 2008.
4. Investigation Report of SECP on illegal fee of US $ 4.3 Million of JSCL to Director of JSCL, Ali Siddique, 2004.
5. Auditor general Pakistan Special Audit report of Feb 2011, on Corruption in NICL, included Rs 255 Loss to exchequer due to Rs 2 Billion illegal investment in JS Secured Fund I,
6. State Bank Of Pakistan Report sent to SECP on the non compliance of JS Bank AGM, dated AUG 2014. TI Pakistan has already informed the honorable Supreme Court about these ambiguities created by SECP,NAB,FBR,SBP and FIA vide its letter to SECP and copy Supreme Court dated 2nd JUNE 2016 Annex-A, and letter dated 3JUNE 2016 sent to Honorable Chief Justice Annex –B. These letters in also include the documentary proofs.
Another Investigation conducted by SECP is about the mega scandal of illegal Rights Issue by JSCL in 2008 in which share price of JSCL was jacked up from Rs. 22 to Rs.1326 in six months and then brought back to Rs. 20 in next six months.This caused public exchequer loss of Rs.12 Billion and more than Rs. 100 Billion loss was suffered by small investors, and the stock market crashed.
TI Pakistan received following additional documentary proofs of SECP, NAB and FIA omissions and commission.
1.NAB letter to Supreme Court dated 26 Aug 2014,in the HRC No.14249/s of 2013 misinformed the apex court, when the apex court ask NAB on 12 Aug 2014 to submit progress report, on US $4.2 Million fee,
“as regards to US $4.2Million fee paid to a director of JSCL,SECP is conducting and inquiryâ€. Whereas, SECP had conducted and inquiry and completed it on 2nd January 2014. And inquiry report conclusion was as under -D.
“The inspection report submitted to Ali Azeem Ikram,Head of Enforcement Department SECP recommended that potential violation were reported. As per report of SECP, the Advisory Fees paid to Ali Jahangir was justified as the Directors of JSCL failed to justify the efforts made by Ali Jahangir in the brokerage of PICTL shares. Andnon-compliance of the companies ordinance, 1984.â€
1. When NAB asked SECP for its enquiry into US$ 4.2 million fee in PICT share dealings, on 16th July 2015, SECP informed NAB that advisory fee paid in prerogative of board of Directors of JSCL,and did not provide the SECP inquiry report on 2nd January 2014.Annex-E.
2. NAB has not yet field reference in accountability court, even after SECP Inquiry report of 2nd January 2014 was provided to NAB by TI Pakistan 22 month ago in September 2015.
3. SECP, NAB and FBR have not taken any action against Mahvish& Jahangir Siddique Foundation, an Education Trust, though Lubna Farrukh Mirza; Chief Commissioner Federal Board of Revenue informed the chairman FBR that the NGO exemption given to Mahvish & Jahangir Siddique Foundation, an Education Trust shall be revoked.
SECP Inspectors pointed out following observations:
a) There is a sufficient evidence that MJSF and JS Group were involved in market manipulations/ insider trading;
b) The JS group’s companies particularly JSCL and JSGCL gave donation to the Foundation and with this money the Foundation purchased shares of associated companies.
c) As per SECP’s own report the Foundation had realized capital gain of Rs 2,610.643 Million during the period June 30, 2007 to March 31,2008 in following companies shares:
a. Rs 45.334 Million in the shares of JS Value Fund Limited;
b. Rs 2,382.804 Million in the shares of JSCL;
c. Rs 147.804 Million in the shares of JSGCL;
d. Rs 34.701 Million in the shares of Azgard Nine Limited (ANL)
Following suspicious transactions have also been reported:
• Mahvish& Jahangir Siddique Foundation purchased 17 Million shares of JS Growth Fund
• It purchased 350,000 shares of EFU General on March 19, 2008 from Jahangir Siddique&sons (Private) Limited.
• It purchased 6.8 Million and 1.5 Million shares of Lucky Cement on April 3, 2008 and April 4, 2008.AliJahangir who is representing on the BOD of both MJSF and JSCL also offloaded his 122,800 shares of Lucky Cement to MJSF.
• During the period March 10,2008 and April 8,2008 it sold 1.98 Million shares of JSCL and purchased 0.429 Million shares of JSCL.
e) MJSF is using foundation funds against the restrictions imposed by its own Articles of Association which clearly provides that monies validly set apart or not utilized for the object of association, shall be restricted 25% of the income, including surplus worked out of the amount of donations made to the association and the amount so in excess of the said limit shall be invested in government.
f) Associated companies namely JSL,JSGCL,ABAMCO Limited, Jahangir Siddique Investments Bank Limited(JS Bank currently) and JS Investments used to make donations to MJSF,thus, avoiding tax on one hand and on the other these donations are being invested in the shares of the companies in which there are common directors.
g) At the time of purchasing and selling ofshares associated companies MJSF,significant volumes and price fluctuation were noticed in the share price of these associated companies,their appears a chance of insider trading, asthe material non-public information concerning the associated companies in which shares MJSF used to trader comes first to the common directors of MJSF and its associated companies.
1. Tahir Mehmood was Executive Director during that period ,who in order to facilitate the MJSF and JS Group,authored the a circular dated Dec 24,2008 wherein an impression was created as if probation to investment in associated companies in a new requirement of the law.Circular 29/2008 dated Dec 24, 2008 clause 4(v) states that-“The associations shall make no investment, whatsoever,in any of its associated companies.â€
2. Subsequently Tahir Mehmood ,Commissioner SECP, in order to facilitate MJSF and JS Group in making investments in shares of JS Group Companies revised the earlier SECP Circular No.29/2008 by issuing another Circular No.2 of 2012 dated 16.1.2012 substituting the clause 4(v)of the Circular 29/2008 as under: “The association shall make no investment ,whatsoever,in any of its associated companies except with the prior approval of the commission and subject to such condition as it may deem fit to impose.â€
3. Abid Hussain, Executive Director SECP was in charge of the April 2008 inspection MJSF who despite documenting above referred grave violation of the law made certain recommendations of change in law and did not take further action and thus facilitated MJSF.
4. The matter of suspicious transactions identified by Inspection team, in their report dated June 18, 2008, were forwarded to Securities Market Division (SMD) SECP.Akif Saeed, who was the Executive Director then, instead of conducting investigation into it, manipulated the issue by raising issues and posing queries of the Inspection Team, which were the subject matter of SMD.5. Akif Saeed before joining SECP used to work American Express Bank.JS Bank was formed by merger between American Express Bank Ltd and JS investment Bank Ltd. Akif is a personal friend of CEO JS Investment (Formerly JS ABAMCO).
6. In response to transparency International Pakistan letter dated June 25, 2013, SECP in its response dated July 9, 2013 tried to justify MJSF position and watered down the entire issue.
This clearly reflects how SECP has failed in proper functioning and has become conduit to the furtherance of the crime and protection of accused.
7. FIA conducted the inquiry in the Rs 255 loss exchequer due to Rs 2 billion illegal investment in JS Secured Fund I, and inquiry report submitted by the IO FIA Muhammad Mansoor Mohmand ,on 15 Aug 2014.
