Top auditor’s report says something different about PTI’s Tareen

His JDW Sugar Mills became principal shareholder in Faruki Pulp Mills Limited in 2007, then loans were written off and then Tareen became its director

ISLAMABAD: The financial statement of Faruki Pulp Mills Limited (FPML) audited by the AF Ferguson shows that after the establishment of the company in 1991 and a failed trial run in 1997, the only new investors invested capital in the company was in 2007 and this new investor was M/s JDW Sugar Mills Limited (of Jehangir Khan Tareen) which according to the same Ferguson audit reports became the “principal shareholder of FPML”. The bank documents show that the loans continued to be written off till 2010.

The FPML had become a dead unit after the 1999 failed trial run. The audit reports establish that major restructuring of loans of the FPML acquired from different Pakistani banks took place in 2007. The 2007 was the last year of Tareen as  minister for industries and production in General Musharraf’s cabinet. The process of loans write-off FPML started in 2007 and continued till 2010.

The official documents available with The News show that FPML got loans amounting Rs78,561,000 and Rs9,015,000 written off from United Bank Limited (UBL) and MCB respectively in the year 2010. FPML was set up in 1991 by Faruki family members, namely Mian Majeed A Faruki, Maj (R) Nasim Faruki, Shahid Akbar Faruki, Kaleem A Faruki, Naeem A Faruki, Waleed Akbar Faruki, Salim A Faruki, Abdul Sami and Parvaiz Aslam Faruki.

When JDW Sugar Mills invested in FPML in 2007, it became principal shareholder but most importantly members of Farooki family continued as shareholders. Shahid Akbar Faruki and Waleed Akbar Faruki also held top management positions in the company according to its website. They initially invested, acquired loans, but became helpless after 1997 failed trial run till the time new investors invested in 2007 to become principal shareholder.

In its report to ECP at the time of 2013 General Elections, State Bank of Pakistan (SBP) presented the same position vide its letter No.CPD/CPU-01/122/NA-154/35202-2698829-5/2013 dated March 28, 2013 and held that FPML got loans written off from three banks in which share of Tareen and his son stands at Rs 99.638 million.

However, senior PTI leader Jahangir Khan Tareen told media on Tuesday that FPML got its loans written off before he became director of the company. He provided media with the letters of three banks UBL, MCB and Faysal Bank showing that loans of FPML were written off before the date he became director of the company. He also provided a letter of SBP showing that Tareen was a government-nominated director of Heavy Mechanical Complex (HMC) and overdue amount mention against his name doesn’t make him liable for liabilities of HMC.

As a matter of fact, SBP had only clarified position regarding overdue amount and the banks issued statement on the basis of a certified copy of Form-29 provided to them showing Tareen becoming director of FPML on December 29, 2010 in documents of the company maintained at SECP.

It is a known fact that any person who got his loan written off becomes disqualified for lifetime to become member of national or a provincial assembly under article 63(1)(n). It is clear that after investment of JDW Sugar Mills in FPML in 2007, if Jahangir Tareen had become its director and got the loans of his new company written off, he would have been disqualified to become a parliamentarian for the rest of his life.

Documents establish that he became director of the company immediately after loans of the company were written off. To more elaborate this point, interestingly, the bank documents provided by Tareen to media on Tuesday, which were also submitted by him before returning officer of NA-154 in 2013 to undo effect of SBP letter, Tareen become director of FPML on December 29, 2010 and resigned on February 4, 2013 just before election but the FPML website www.farukipulpmills.com still shows him as CEO of the company though he had resigned as director. The dates of his becoming director of FPML may have some benefit for him to save himself from the impact of article 63(1)(n) for contesting elections but it could not hide investments of JDW Sugar Mills in FPML in 2007 as reflected in AF Ferguson audit reports and subsequent loans write offs till 2010.

Now coming to documents, UBL official documents show that the bank had provided a financial facility to Faruki Pulp Mills Ltd. Mangowal, Tehsil & Distt. Gujrat in the seven persons: Mian Majeed A Faruki, S/O Mian Mohammad Akbar Faruki, CNIC# 34201-0453242-5, Maj (R) Nasim Faruki, S/O Mian Mohammad Akbar Faruki, CNIC# 34201-0350518-3, Kaleem A. Faruki, S/O Mian Mohammad Akbar Faruki, CNIC# 35201-1513228-7, Naeem A. Faruki, S/O Mian Mohammad Akbar Faruki, CNIC# 35201-1425526-3, Salim A. Faruki, S/O Mian Mohammad Akbar Faruki, CNIC# 35202-7905561-1, Abdul Sami, S/O Mian Abdus Samad, CNIC# 35202-4367455-7 and Parvaiz Aslam Faruki, S/O Aslam Riaz Faruki, CNIC# 35201-6788982-5. The bank documents show that loan was only written off an amount of Rs78,561,000 in year 2010, three years arrival of new investor.

MCB documents show that same persons with same details acquired a financial facility. Only in year 2010 the bank had written off FPML loan amounting Rs9,015,000, the MCB documents show. Similar favour of writing off loan was forwarded by the Faysal Bank to FPML.

Now the audit reports: Faruki Pulp Mills Limited, Financial Statement for the year ended June 30, 2011 prepared by A.F. Ferguson, Chartered Accountants, Lahore. Auditors’ report was submitted on November 4, 2011. On its page, under the heading, “Legal status and nature of business”, the report reads, “Faruki Pulp Mills Limited ('The Company') was incorporated as a public limited Company under the Companies Ordinance, 1984 vide certificate of incorporation dated October 20, 1991. The Company will be engaged in the manufacture of paper pulp. The production facility is situated 20 Km from Gujrat and the registered office is situated in Lahore.

The company had its trial production run in the year 1997 but could not commence commercial production as some of the production processes' vital for commercial viability were incomplete.' Further construction was suspended due to insufficient funds.

Pursuant to the injection of further capital by the new investors, restructuring with the lenders in 2007 and obtaining long-term loan from consortium of banks in 2010, completion of production facility and trial production thereof, start of commercial production is expected within 6 months of the reporting date.

The Audit Report for the year ended on June 30, 2012 and submitted on November 16, 2012, on its Page-7, under the headings “Legal status and nature of business” and “Going Concern Assumption”, after reproducing the above paras from the report of the previous year, reads: “…These financial statements have been prepared on a going concern basis as the management is confident, based upon a commitment of continued financial support from its principal shareholder, M/s JDW Sugar Mills Limited.”

The official website of JWD at its web-link http://www.jdw-group.com/About-JDW/ gives introduction of FPML but without disclosing exact detail about date of investment in the company as everyone in Gujrat’s FPML knows as to when JWD invested there. The introduction of FPML on JWD web reads; “Faruki Pulp Mills Limited was incorporated as a public limited company under the Companies Ordinance, 1984 on October 20, 1991. The Company is engaged in the manufacturing of wood pulp from Eucalyptus for consumption in local and foreign paper industry. This project was started in early 1990 but due to various reasons could not be completed on time. This will be first of its kind project in Pakistan based on 100% supply of all raw materials locally. Due to its technical and professional viability, JDW Group has chosen this business for strategic investment with an objective of diversification. This is an agro based industry using local raw materials.” Apparently, to keep this issue confidential, Tareen never tried to get removed the SBP report still available on ECP website giving details of loans write off by FPML.