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First Major Blow for Accountability?

On March 22, 1994, the State Bank of Pakistan (SBP) took significant action to restore the credibility of the Pakistani banking system by removing the top management of Mehran Bank and replacing them with an SBP-appointed Chief Executive. At the same time, FIA arrested the real owner of the Bank, Yunus Habib. To support the case against this gentleman, the Governor SBP laid out the findings of a Committee headed by a Deputy Governor of the Bank, viz. (1) Mehran Bank had been repeatedly violating the statutory liquidity requirement by failing to maintain the liquid assets as provided under Section 29 of the Banking Companies Ordinance 1962, (2) Mehran Bank had been extending loans and advances far in excess of the credit limit set by SBP in clear violation of SBP directions, (3) Mehran Bank had been issuing false certificates in various areas, (4) the management in clear violation of commitments, had given liberal export refinance to defaulters, and (5) the Mehran Bank has committed a breach of trust by not depositing rupee equivalent of US$ 36.7 million (Rs.1.1 billion) to the SBP against the sale of Dollar Bearer Certificate (DBCs) within the stipulated time frame.

On Feb 1, 1994 in an article in THE NATION entitled “DETERIORATION OF FINANCIAL INSTITUTIONS” we wrote that, “The overall environment is one of lack of accountability. In this wild-west atmosphere financial cowboys ran riot. One esteemed gentleman as Provincial Chief of a major NCB advanced hundreds of millions of rupees to fake companies owned by his associates. When this was discovered and he was removed from office, he twice made a comeback on the strength of pressure from authoritative quarters. Instead of being brought to trial he was “permitted” to “honourably” resign. Subsequently he was given permission to open a private bank by the Nawaz Sharif Government, to the credit of SBP they refused to let him become either Chief Executive or Chief Operating Officer, this restriction being made on the basis of the SBP reference to his original bank. However, it is widely rumoured that he is on his way back into the financial corridors of one of the remaining NCBs, this is certainly not on the basis of his reputation but on other “considerations”. He symbolises a pattern of survival manifest in all those engaged in malfeasance, these men are good for conducting financial mayhem in all political seasons”, unquote. Continuing to record the saga of this gentleman in an article entitled “Money and Power”, in THE NATION on Feb 15, 1994, to quote “With bureaucracy letting control slip somewhat to some politicians, a new class of senior banking executives ran riot in the wholesale plunder of the banking system in collaboration with them. If any non-governmental organisation (NGO) with investigative experience is given a mandate (and an incentive as bounty, say 10% of the plundered total they manage to locate), Pakistan’s financial coffers can be refilled dramatically. Excellent data may also become available to the Income Tax and Wealth Authorities e.g. the gentleman who plundered over Rs.4000 million from the banking system. The present modus operandi has become so blatant that people of known dishonesty are increasingly put into control of some financial institutions with impunity, their lack of credibility and reputation makes them insecure and thus totally dependent on their masters for their continued existence, a solid insurance for their continued loyalty. Even the last bastion of financial integrity in the country, the universally esteemed State Bank of Pakistan is now under attack”, unquote. While one must not condemn a man without giving him a chance to have his say in court, the fact of the matter remains that Yunus Habib’s financial misdemeanours were widely known throughout the Pakistani banking system. How ISI’s foreign exchange funds came to be parked in Mehran Bank is another story that one may not press for media disclosure in the national interest but why was Mehran Bank reluctant to part with the ISI’s money and where did it get the courage to hold such powerful institution as the ISI ransom? Enough smoke exists to focus on the source of the fire in a closed-door enquiry.

It goes to the credit of the Governor that he was resolute in moving against this daylight robbery. Since the actual arrest of this financial scam artist extraordinaire was impossible without official sanction, full credit must go to the Ms Benazir regime. While one does not have any inside knowledge of the events leading upto the Yunus Habib arrest, one can imagine the type of pressure that must have been put on the PM to avoid taking such a drastic step. A cacophony of disparate voices must have advised Ms Benazir against this move, holding forth that in the present circumstances it would cause resentment among the business community, undermine their confidence, cause a flight of capital, derail the stock market, etc. All this is hogwash spread by vested interests who do not want Yunus Habib to become the leading beacon in a campaign to bring their own financial malfeasance to book. Given that the son of Safdar Zaidi, Chairman Pakistan Investment Board (PIB), is a top executive in Mehran Bank, one can well understand the range and depth of this man’s lobbying to escape the arm of justice. A few weeks ago Yunus Habib was even said to be odds-on favourite to become President of UBL such was this man’s potential clout. It goes without saying that he had his hooks in at a fairly high level in successive political governments. In the face of such pressure the Ms Benazir decision to take action against this man is like a breath of fresh air in an atmosphere dank with the stale air of corruption. It revives memories of her triumphal return to Pakistan in 1986 when her image was that of a modern day “Joan of Arc” set to do battle against corruption, the poor man’s answer for the suffering masses to be rid of the parasites who had become rich in an era without accountability. Ms Benazir’s extremely symbolic action is a strong indicator that despite her travails and missteps she still has the instinct and the resolve to get to the basic flaws in the Pakistani system, an environment where the corrupt and the crooked can flout their ill-gotten wealth without fear of retribution, an atmosphere where only those who are perpetually on the make can own the Earth and the meek inherit poverty and misery. The Mehran Bank scandal is only the tip of an iceberg wallowing in an ocean of corruption and headed straight for a Titanic-like economic disaster for Pakistan. If once vaunted and powerful Habib Bank is in desperate financial straits today because of bad debts, it is because Yunus Habib, associates, colleagues, superiors and successors have plenty to do with it.

Many financial knaves will unsheathe their swords to pry Yunus Habib loose from the clutches of the law, one daresays that given the Pakistani track record of failing to bring a single instance of white collar crime to justice, he has a fair chance of escaping severe punishment again. The interest of those involved in financial bungling is not to save Yunus Habib as an individual but to defend an entire system that has been badly corrupted and has thrown accountability out of the window. In fact, Pakistan remains a safe haven for those BCCI executives who stole and looted depositors’ money world-wide blindly. Why should Pakistan get a bad name for a handful of crooks who caused misery to millions of small depositors as well as thousands of their honest BCCI colleagues who are on the unemployment dole having been tarred and feathered because of BCCI? Any leverage that the financial Un-Godly can use to threaten, coerce and cajole the government to release Yunus Habib, they will. Both Yunus Habib himself and like-minded people who have been associated in some manner or the other in the siphoning off of funds will spread their ill-gotten wealth like water to get him off the hook at one stage or another. A crass suspicion even arises that he may have been thrown into the clink to extract “protection money” out of him, with the possibility of his head on-a-platter Yunus Habib would possibly be extremely “generous” to his “benefactor”, no questions asked. Everybody would then be that much happier, the masses because they would have been fed sensation for a short duration as a pallative and Yunus Habib could laugh all the way to his bank since the funds he could use are not his in the first place so why should he have heartburn about giving away a part since it is for a good cause, his own? One does feel that this time it could be possible that the PM means business and will not succumb to either external or internal pressure. Any backtracking on Yunus Habib will mean that money is being used to corrupt the process of accountability, freeing him would make for another scandal.

As the PM Ms. Benazir has finally scored on a major issue, she must be vehemently supported in this by all and sundry, including the Opposition and the media. Corruption should not escape approbation due to party politics, it is a major issue requiring bi-partisan political approach. Yunus Habib remains a living symbol of the fact that there was no accountability in the system, as such his persecution by the State by all means available would signal a virtual “Jehad” against corruption. His due punishment will act as an indicator that his role model as a blatant white collar criminal does not pay. To paraphrase Neil Armstrong, this may be a first small step by Ms Benazir in the fight against corruption, it is a giant step for inculcating a system of accountability. While Neil Armstrong’s walk on the moon was very real, one only hopes that Yunus Habib is not the centrepiece of a contrived drama meant to chase shadows on the moon.

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