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Confessions of a financial regulator

 

By Umar Cheema

 

ISLAMABAD: A confessional statement of Tahir Mehmood, presently Chairman Securities and Exchange Commission of Pakistan, reveals how he played an instrumental role in facilitating corruption, kickbacks and registering the benami companies with SECP.

He made this confession during an inquiry into an EOBI scandal wherein an amount of over Rs 8 billion (Rs 8,428 million) was illegally invested. It was routed through the companies owned by the then-EOBI Chairman and deposited first in a private bank and then in benami companies. Tahir acted as a middle man during the entire process spanning over five years.

While the key accused, a former chairman EOBI and a banker, entered into plea bargain with NAB by returning the looted money, Tahir went scot-free by becoming the prosecution witness. This was despite the fact he had narrated in the confessional statement that he was promised a job, shares in the shady business and investments in the brokerage house of the guilty banker whose 12 benami companies he got registered along with brokering his corrupt deals with the then chairman EOBI.

 

Tahir didn’t comment on this confessional statement when contacted. “No witness is supposed to give opinion on his statement. It’s always narration of facts. I was clean prosecution witness which resulted in successful recovery as evident from order. Witnesses are always considered on the govt side or prosecution side it’s a settled law. To the extent of my witness statement the case successfully concluded in favour of prosecution,” he replied to this correspondent when the statement was shared with him to determine its veracity. 

 

Considering this confession, Tahir doesn’t command the integrity demanded for the person appointed as Chairman SECP. The laws governing SECP says that a Commissioner/Chairman “shall be a person who is known for integrity, expertise, experience and eminence in any relevant field.” He has served as commissioner thrice (only second person to obtain third tenure) first in PPP and then in PML-N government. PTI government has made him acting Chairman. Earlier, he held this position after Zafar Hijazi was removed. He is now being considered for the regular appointment as SECP chief.

Although reports about his questionable practices continue to make rounds, this confessional statement is of October 12, 2002 regarding Tahir’s role as director finance of EOBI where he was on deputation from SECP. He was a close confidante of the-then Chairman EOBI, Sheikh Barkatullah who “soon started assigning his personal work including corporate and taxation matters to me” and he handled his money market intermediary companies used for routing Rs 8,426 million of EOBI first to Prudential Commercial Bank (PCB), where Tahir Siddiqui was General Manager (Finance) and later in his benami companies that he got registered through Tahir Mehmood.

The story of corrupt practices dates back to 1995 and continued for next five years. While the reference against the key accused was quashed after the looted money recovered, it partly still exists as one of the accused officers refused to become the part of the bargain because doing so could result in his dismissal from the service. The NAB court in Karachi is hearing the matter with Tahir as the prosecution witness. More than 10 summons were delivered to him only this year for appearance but he didn’t. 

Tahir Mehmood said in his confessional statement he was having family relations with Tahir Siddiqui who was then at PCB. In addition, Tahir was also “in the good books of Sheikh Barkatullah” who formed a money market intermediary company on the advice of Siddiqui whereas Tahir Mehmood did the company’s documentation work required for the registration.

Siddiqui first helped Sheikh get the business for the companies before they were used for routing the public money of EOBI to PCB. Two proposals of letter based repo of Rs800 million were received from PCB and approved by Sheikh. He complained to Tahir that Siddiqui didn’t pay the promised commission. “I immediately talked to Tahir Siddiqui over the phone and asked for the reason of non-payment of agreed commission” which was done shortly, he narrated in his confessional statement.

Initially, the commission used to be received by the son-in-law and a nephew of Sheikh who thought they were wasting it. “Then Sheikh Barkatullah ordered me to ask Tahir Siddiqui to pay the commission in cash. I was also ordered to receive the cash from Tahir Siddiqui on his behalf in all future deals,” his confession continues. “Accordingly, each time the deal was finalized between EOBI and Prudential Group, Tahir Siddiqui sent the cash to me in my office and I accordingly delivered the same to Sheikh Barkatullah,” he further disclosed.

In 1999, when Tahir was Incharge Investment Wing of EOBI, a meeting was held between the key accused and Tahir was also present wherein Siddiqui introduced the concept of security based repo deals through which Sheikh received a commission upto 1.25% per annum. Subsequently, the first deal of Rs600 million was executed with the Prudential Group. “I managed all the formalities being Incharge Investment Wing,” Tahir disclosed. Two other deals were brokered between the accused when Tahir was leaving EOBI.

As Tahir rejoined SECP and was made Incharge of Company Registration Office, Karachi, Siddiqui contacted him for the registration of a company (Inter World Securities Limited) but didn’t want his ownership disclosed as he was still affiliated with PCB. Tahir did the needful and Siddiqui “thanked me for this favor.” In October 1999, Siddiqui desired the registration of yet another benami company (Republic Securities Limited). “Tahir Siddiqui again requested me to keep his name secret as the actual sponsor” and he was obliged.

In December 1999, Siddiqui left PCB and sought Tahir help for convincing Sheikh to transfer Financial Investment Bonds in PCB to his benami companies and Tahir obliged. A meeting was arranged between the accused wherein Sheikh was convinced to do the needful as PCB was not a safe bet due to its financial health. “The rate of kickback was not discussed in that meeting as it was already decided that on each security based repo, Sheikh Barkatullah would get 1% to 1.25% per annum of the deal,” reads Tahir’s confessional statement.

The entire process of switch over and how its permission would be granted by EOBI through Sheikh, was drafted by Tahir as per his own admission. “The kickbacks to Sheikh Barkatullah on the above-mentioned deal was paid in advance in the shape of cash and RTCs. Tahir Siddiqui made this payment in my presence at the residence of Sheikh Barkatullah,” Tahir confessed.

Later, another deal was signed and meeting in this regard “was held at my house.” Again, Tahir had it drafted for proper execution and the paper work required for EOBI approval and “Sheikh Barkatullah had been paid his kickbacks in the shape of US$,” according to confessional statement. Recalling another incident, Tahir narrates that Sheikh demanded a four wheeler from Siddiqui during a meeting in which he (Tahir) was present and subsequently Sheikh’s demand was fulfilled.

About benami companies, Tahir has further revealed that in addition to a couple of above-mentioned companies, he registered as many as ten other benami companies for Siddiqui: Total Securities Ltd., Universal Forex (Pvt) Ltd., Avis International (Pvt) Ltd., Hospital Management (Pvt) Ltd., Sky Soft (Pvt) Ltd., National Debt Management (Pvt) Ltd., TS Institute of Information Technology. Southern Communication (Pvt) Ltd., National Capital Management (Pvt) Ltd., and Progressive Securities (Pvt) Ltd.

The last para of his confessional statement is about the incentive he was offered by Siddiqui in return of corrupt activities: “In lieu to the services rendered by me to Tahir Siddiqui, he offered at different occasions that once he established himself, he would induct me in his group as employee and also make me a shareholder. Once, he also mentioned that he had made investment of Rs 50 million for me through his brokerage house,” his statement reads.

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