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Craven or Rainbow Hearts? Chasing Shadows, Losing Gold

At the Industry Collection Exhibition, supported by world renowned NM Rothschild & Sons Ltd in association with the World Gold Council and the London Bullion Market Association (LBMA), being held from Feb 9 to May 14, 1998 at the Bank of England Museum in London, Dubai-based Pakistani-origin ARY Traders are displaying ARY Rainbow Hearts gold pendants and ARY gold bars. The Sydney 2000 Olympic Coin Programme, a Joint Venture (JV) between the Royal Australian Mint and the Perth Mint, have appointed ARY Traders as the official distributor of their programme in the UAE. In defence of ARY, which had been named by the Ehtesab Cell, led by Senator Saifur Rahman, of alleged wrongdoings relating to his getting the sole rights to import gold into Pakistan, Mr Rolf Schnebeli, Chief Executive, Middle East & India, World Gold Council said, “ARY is a well-reputed company in Dubai with a long-standing presence in the UAE and during my time I have had very positive experience (of them). I have no reason to doubt ARY’s statement (which had rejected GoP’s alleged charges and challenged them to prove any wrongdoing).

On Mar 14, 1998, in a Reference filed before the Ehtesab Bench of the Lahore High Court against (1) Asif Zardari (2) Brig (Retd) Aslam Hayat Qureshi (3) Salman Faruqui (4) Jawed Talat (5) 4 Directors of ARY Traders led by Haji Abdul Razzak and (6) Jans Schlegelmilch, the aforementioned were charged with causing a loss to the public exchequer of approximately Rs.1820 million, and having committed offence of corruption and for corrupt practices within the meaning of Section 3 read with Section 4(2) of the Ehtesab Act, 1997. In a complaint filed with the Dubai Police on July 12, 1997 MCB had accused Hussain Lawai, former President MCB of committing fraud by transferring US$ 10 million in two instalments of US$ 5 million each on Oct 5, 1994 and Feb 23, 1995 via American Express to the directors of ARY in Dubai for “services rendered”

ARY, comprising 5 establishments with a turnover in the past 3-4 years of US$ 1.5 billion, started as a trading enterprise in Dubai in 1970. With its own jewellery manufacturing unit in Sharjah, ARY gold bars are sold internationally, its ARY Rainbow Hearts, a 24-carat gold pendant incorporating the patented “Kinegram” technology crafted to reflect the rainbow colours. An international exchange company was set up in 1993, an impressive sales and purchase record has been set in a field that only recognises credibility, its trusted name is a household word in the South Asian sub-continent and internationally in the gold trade. With such credibility shoring up an enviable reputation, how come ARY has run afoul of the Government of Pakistan (GoP)? When ARY made a proposal to GoP in 1993 for giving 8-10 companies the right to import gold and shift the bullion trade from Dubai to Pakistan, it was opposed by the Ministries of Finance and Commerce on the plea that (1) a cartel would ensue by restricting to a few importers (2) shifting of the bullion trade to Karachi from Dubai was wishful thinking (3) it would encourage smuggling of gold to India by reducing duty from Rs. 80 per tola to Rs.48 per tola because of the price differential (4) it would drain the foreign currency reserves (5) fixed taxation would be a violation of the principles of taxation (6) a role for State Bank of Pakistan was necessary to import gold when necessary to stabilise prices. The Economic Consultative Committee (ECC) approved the modified proposals of the Ministry of Finance and the scheme was advertised, but only 7 prequalified out of the 11 who applied as only they submitted the call deposit of US$ 100,000. One company ARY was finally selected. The Ehtesab Cell alleges that the exclusivity of the gold/silver trade into Pakistan was given to ARY because profits were to be shared 75:25 between ARY and Asif Zardari (AZ) but when Haji Abdul Razzak apprised AZ the difficulties he agreed to take Rs.5 per tola as his commission. In Nov 1995, two separate summaries were moved by Javed Talat, Secretary Finance before the ECC for exemption of regulatory duty on gold and silver, this was approved. In the meantime Salman Faruqui came in as Secretary Commerce, in his absence two other firms were given permission. On his return he asked the Deputy Secretary concerned to withdraw the letter.

The Ehtesab Bureau has given evidence of accounts opened up in Citibank Dubai and Citibank Geneva in the name of Capricorn Trading Company being operated by Mr. Jans Schlegelmilch but the beneficiary being Asif Zardari. There is a record of US$ 5 million being moved from ARY Traders to Citibank Dubai account of Capricorn Trading, a company incorporated in the British Virgin Islands and run by Mr. Jans Schlegelmilch, acting as agent for AZ in other offshore companies. Massive amounts were transferred from Citibank Dubai to Citibank Geneva, handwritten ledgers of Mr. Schlegelmilch support the evidence.

Even prima facie there seems to be no case against ARY Traders but before we jump to conclusions let us take the case of transfer of US$ 10 million from MCB to ARY’s account. The transfer to AZ’s account is suspiciously coincidental with the Citibank transfers for about the same value of money on or around the same dates. The Dubai Courts have ruled in favour of ARY and others while asking police to gather more evidence, this in fact seems to be commission paid out to ARY as part of the Underwriting of the PTCL share issue and onto AZ! Haji Abdul Razzak contends that when he had been informed by UBS on telephone that they along with Khadim Ali Shah Bukhari & Co had been entrusted for floating the public issue at a base price of Rs.30 per share, he had immediately rung up (then) MCB President Hussain Lawai and said this would amount to looting the nation. Lawai spoke to Ms Benazir, and requested the deal be cancelled. MCB then took up the issue along with its foreign partners at a base price of Rs.45 per share, whereas PTCL shares were eventually sold at price of Rs.56 per share, giving the public exchequer an extra revenue of US$ 450 million. Haji Abdul Razzak points out to the loans he made available to GoP, beginning with the first Nawaz Sharif Regime in July 1992 and to three other subsequent regimes to avert crises, most recently during the period of the Meraj Khalid Caretaker Regime when US$ 250 million was made available to avoid default. He refers to it as his patriotic duty and scoffs at suggestions that it was profit-oriented, if so why did others not give the loan? He pointed out that at Rs.5 per tola, commission to AZ as claimed by the Ehtesab Bureau, AZ would stand to make only Rs.20 million, “peanuts” for the type of money AZ was accused of getting. He vehemently denies any deal with AZ wherein any money was paid as commission.

An objective analysis of the aforegoing and other related documents reveals that (1) one cannot escape the element of criminal wrongdoing in the original purchase of the MCB, organised by Hussain Lawai, but including 12 leading businessmen (2) Haji Abdul Razzak acted as a conduit for using MCB money on a circuitous route to give the second and final instalment in purchasing the bank (3) subsequently when PPP regime took over Hussain Lawai was bailed out by Haji Abdul Razzak by going directly to AZ whom he knew through AZ’s good friend, real estate dealer Iqbal Memon (4) subsequently Hussain Lawai became friendly with AZ, like a good many senior bankers at that time this relationship became very close (5) since Mian Mansha’s personal and business interests were being hounded by the PPP regime and he had to go into “self-exile”, he had reason to have grievance against Hussain Lawai whom he suspected to using AZ to pressurise him into staying abroad (6) when the PPP/AZ regime was overthrown, the personal issue between Mian Mansha and Hussain Lawai, both strong men and gifted entrepreneurs, became a very public affair (7) when Senator Saifur Rahman came into the picture as Chairman Ehtesab Bureau, he went the route of pressurising ARY in order to get them to testify against AZ (8) when persuasion with ARY and Hussain Lawai failed, GoP then went the criminal prosecution route. There is no doubt that AZ is an out-and-out crook who used his wife’s PM-ship to organise multifarious methods to loot this nation ruthlessly along with his cronies. He destroyed the credibility of PPP, once regarded as Pakistan’s only political grouping with strong roots in all the Provinces. This man set up dozens of offshore companies, he and his wife have dozens and dozens of illegal foreign bank accounts for which there is no accounting for the source of the money, they have real estate all over the world, much in excess of their wealth declaration on oath. Whatever opinion one may have about Saif, the fact is he has exposed the Zardaris, husband and wife. ARY Traders may or may not have paid money for “services rendered”, one would still give them the benefit of doubt because of their documented support to Pakistan as well as the larger interest of uncovering bigger criminals. As regards money transfer (HUNDI), that is ARY’s core business and like many other financial institutions they have to respect confidentiality as otherwise it would destroy their credibility. While HUNDI route is an accepted order of the way, looted wealth of the nation can only be sent out through such a route. The result has been a Catch-22 situation in which no side is the gainer and only personal egos are being assuaged.

One must differentiate between personal vengeance and the national interest. If the real intention is to get back AZ money, GoP must recognize that ARY Traders has been of help to the nation in the past and could possibly be an asset for the future. ARY Traders must take into account that the nation has a genuine grievance as respects AZ, they seem to be giving him tacit protection which may harm the interests of the nation. Quiet negotiations are required between the two parties, arbitration perhaps, that can resolve the present crisis. A similar patch-up in a give-and-take situation is required between Mian Mansha and Hussain Lawai, or else not only both these individuals but MCB will be in a real mess. It does not serve Pakistan’s interests by prosecuting ARY, ARY does not serve Pakistan by protecting the biggest bandit to loot the country since Pakistan came into being.

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