Details of $11m loss inflicted by three ex-FBR chiefs

ISLAMABAD: The National Accountability Bureau (NAB) has decided to authorise an inquiry against three former chairmen of the Federal Board of Revenue (FBR) after a detailed interim inquiry report was presented before the NAB Executive Board on an award of contract of FBR computerision to a foreign company, ‘M/s Agility’, which caused a loss of $11 million.
The inquiry report convinced the NAB Chairman, Qamar Zaman Chaudhry, to authorise the inquiry against Abdullah Yousaf, Salman Siddique and Ali Arshad Hakeem on account of misuse of authority by former FBR chairmen and misrepresentation by Ms Agility in detail.
Following is the self-explanatory inquiry report presented before the NAB Executive Board in the last meeting.
Corruption and Corrupt Practices and Misuse of Authority: Brief facts:
1. Inquiry was initiated regarding illegal release of consignments through the Model Customs Collectorate (MCC) and causing loss of over Rs100 billion to the exchequer through tax evasion by misusing of PACCs Pilot Project during 2005-06 and other miscellaneous allegations. The inquiry was completed. Findings of the interim inquiry report are as under:-
a. In March 2003, Agility submitted an unsolicited proposal to the Customs to meet the requirements of FBR. Agility had made a number of serious misrepresentations during the bidding process with the objective of influencing the selection process and thereby procuring award of the contract. Some of the significant misrepresentations made by Agility and acted mala fidely by the FBR officials being, inter alia, the quality of MicroClear, past relevant experience of having successfully undertaken similar projects, the role of Microsoft Corporation, Washington, and experienced key personnel. There were around 47 companies which tendered their Expression of Interest including renowned multinationals of very high repute like IBM, Elsag Italy, Crown Agents London, Bearing Point Virgina, USA, etc. But these misrepresentations worked to the detriment of the FBR in that it was deprived of the benefit of selecting a company suited for the assignment.
b. FBR awarded Pilot Project to Agility on the basis of such misrepresentations. This resulted in the exclusion of prospective bidders and an international company, Bearing Point, Virginia, USA, protested on record against this exclusion.
c. Although, the pilot project was for only one terminal it was unauthorisedly extended to other two terminals by Ashir Azeem (the then Additional Collector Customs) and Azhar Majeed Khalid, the then Director PACCs, allegedly after a meeting between Abdullah Yousaf, the then FBR chairman, with the connivance of Ali Arshad Hakeem, Local Representative of Agility. This was done against the advice of the World Bank.
d. An MOU between Government of Pakistan and Government of Kuwait was signed unilaterally and unauthorisedly by Abdullah Yousaf in his personal capacity and without the requisite official authorisation for rollout of pilot project to M/s Agility. Expenses of the visit were also borne by M/s Agility. However, the Government of Kuwait did not sign the said MoU.
e. Request for Proposal (RFP) was flouted in 2007 by FBR which was tailored to accommodate Agility and its product. It was drafted by Ashir Azeem and Iqbal Muneeb under the supervision of Abdullah Yousaf.
f. Due to this fact World Bank decided to withhold disbursement of $27 million which had been earmarked for purpose of a rollout.
g. Meanwhile, incidents of corruption, fraud and misdeclarations were being reported and concerns were being voiced regarding the Risk Inherent in PACCs. As such, FBR got a system audit of PACCs conducted through an external auditor M/s Sidat Hyder and Murshid. However, M/s Agility did not cooperate in the conduct of the audit.
h. Inspite of non-cooperation of Agility to provide access to live system, the auditors pointed out a number of flaws in PACCs system.
i. Ministry of Finance directed to conduct an inquiry to ascertain as to how the pilot project had been awarded to a warehousing and tracking company. World Bank also advised FBR to make an appropriate exit strategy.
j. Agility had given the understanding to FBR that PACCs was being provided free of cost. However, in April 2009 for the first time Agility informed FBR that it could not continue to provide services free on an indefinite basis. Agility also threatened to unilaterally shut down the system if its demands were not met.
k. The committee constituted on the directions of Ministry of Finance relating to award of Pilot Project highlighted a number of irregularities and illegalities committed in the award and implementation of the pilot project. The minister directed termination of the relationship with Agility.
l. FBR conveyed the decision to Agility on March 27, 2010 and requested for smooth transition of the system by May 31, 2010. However, Agility exerted political pressure to reverse the termination. Azhar Majeed Khalid and Ashir Azeem instigated Agility not to leave Pakistan.
m. FBR had the ability to take over the cooperation of customs after exit of Agility but Agility through political influence extended its stay and succeeded in procuring a sum of $11 million from FBR.
n. As claimed by FBR, Agility had offered $10 million as a full cost of software inclusive of cost of services rendered in the past. As such, the payment of $11 million appears to be unjustified.
o. In a meeting held on Aug 2, 2011 World Bank was of the view that WeBOC (Software developed by Customs to replace PACCs) was reliable and ready but Ali Arshad Hakeem, the then Nadra chairman (formerly a local representative of M/s Agility), supported the stance of Agility. It was decided in the meeting for an amicable settlement with Agility instead of shifting to WeBOC.
p. During the tenure of Salman Siddique as FBR chairman, full focus was on settlement with Agility despite the fact that Agility had initiated arbitration in ICSID. Settlement meetings were held abroad by Salman Siddique and Abdullah Yousaf along with other officers. On July 10, 2012, Ali Arshad Hakeem became FBR chairman. Subsequently, instead of presenting the case properly before ICSID, he made efforts to enter into settlement.
The NAB sources said that experts opinion obtained by the FBR on software of M/s Agility showed that the software was used by Agility as a test lab to develop and to test software. As such, Agility got the project by misrepresenting of deployment of various projects of the same nature. Ownership of software introduced by Agility is also allegedly suspicious, the sources added.
The NAB press release issued on Tuesday said that ‘the accused persons were alleged of corruption and corrupt practices and misuse of authority in award of computerisation of FBR to a foreign company “M/s Agility”. This caused a loss of $11 million and claim of $650 million by Agility. The award of contract and subsequent faulty working of the contractual firm led to huge losses in the clearance of custom goods at the Karachi Port.