Probing Rs20b financial crime: FIA begins crackdown against 3 sugar millers

August 05, 2020

ISLAMABAD: The federal government has formed a high powered combined investigation team to probe an alleged financial crime of over Rs20 billion involving three biggest groups running sugar mills in...

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ISLAMABAD: The federal government has formed a high powered combined investigation team to probe an alleged financial crime of over Rs20 billion involving three biggest groups running sugar mills in the country.

The CIT formed by head of Federal Investigation Agency (FIA) Wajid Zia has initiated legal actions against JDW Group of Companies, owned by PTI leader Jahangir Khan Tareen and Alliance Sugar Mills owned by RYK Group with major share of family of Federal Minister for Economic Affairs Makhdoom Khusro Bakhtiar and PML-Q leader Chaudhry Moonis Elahi.

The action is coming up in light of the federal cabinet’s 23rd June decision which came in light of Sugar Inquiry Commission’s recommendations, official documents revealed. The CIT, headed by Director FIA Dr Rizwan, has been empowered to start inquiry against alleged corporate/financial crime/benami business of JDW Group involving over Rs16.1 billion in light of Sugar Commission’s recommendations.

“(Alleged) corporate fraud of Rs3.6 billion by JDW through overvalued purchase of associated company JKT Farming System Ltd and booking losses through it,” read a document submitted before the federal cabinet on 23th June.

“[Alleged] corporate fraud of Rs3.1 billion by JDW through investment in Faruki Pulp Ltd and booking impairment losses through it — inexplicable transfer of Rs2.5 billion by JDW through non-arm’s cash transfers to various sister entities via Amir Waris cash boy — inexplicable transfer of Rs7 billion by JDW to Dherki Sugar Mills (non-arm’s cash transfers) without true and full disclosure in the financial statement,” added the official document exclusively available with this correspondent.

“[Alleged] corporate fraud by Al-Arabia Sugar Mills through GNC undisclosed (grantis) sales and accounting jugglery of reversal of sales — inexplicable transfer of Rs1.195 billion by Al-Arabia to Ramzan Sugar Mills not disclosed in financial statements —inexplicable transfer of Rs402 million by Al-Arabia to Sharif Feed Mills and Sharif D. Farms since 2017-18,” the document further read.

“Inexplicable cash transfer of Rs2.25 billion by Alliance Sugar Mills to Asad Hussain in (Ali Traders Gujrat) through CPVs not disclosed in financial statements (excess payment of Rs3.4 billion by Asad Hussain to the company),” official document revealed.

Further official details on these sugar mills’ alleged financial crime revealed that Alliance Sugar Mills showed that almost 90 percent of its total sales have been carried out through one sales agent i.e. Ali Traders. Ali Traders is a main broker of the Alliance Sugar Mills. It is found from the Mills’ record that almost 92 percent of total local sales of Alliance Sugar is done through All Traders. However, against total sales during the years 2017-18 to 2019-20, which amounts to Rs15 billion, through Ali Traders, the company has received Rs14 billion. The additional payment of Rs3.4 billion is not explainable. During the same period, the record of the company shows that the company has paid Rs2.25 billion to Ali Traders through cash payment vouchers (CPV).

“Investigations further revealed about JDW Group mills that protection of sugarcane vs. crop area especially in the light of illegally enhanced crushing capacities of sugar mills, direct banking payments systems for bona fide cane-growers, not commission-agents IR-readable barcode TAG on every sugar-bag produced for transparent documentation of sugar-production and sale/supply chain trails off-line/online-monitoring by FBR mandatory registration of brokers, sugar dealers, whole-sellers with NTN and STRN linked to their bank accounts with mandatory registration of go-down and automated online inventory management system,” revealed official documents. The team inquired from the management of the company that attended the inquiry proceedings in this regard.

The FIA team saw total cash deposits made by Aamir Waris (Rs1,299,1234) during the period under review, a summary of which included multiples entities and individuals. Documents made recommendations made by the commission that the cash transactions are totally inexplicable and warrant further investigation by the SECP.

The team is also probing loss of Rs3.6 billion by JDW on acquisition of 11 (Farming Systems Ltd. (private company owned by director’s family).

Further, the FIA team while reviewing the bank statements of the company found out that huge amounts of cash were transferred to Deharki Sugar Mills, while the financial statements of the company reported a much smaller amount. In Sep 30, 2018, the company transferred Rs2.7 billion to Dherkl Sugar Mills through banking channel, however, the financial statements only reported Rs319 million as outflows.

The FIA team further found an investment of Rs3,154.43 million in Farud Pulp Mills Limited (FPML). Brief of the case dealt in SECP in 2018 revealed that Faruki Pulp Mills Limited (FPML) recommenced its trial production in 2012 followed by second trial run in 2013, however, both were unsuccessful and thus it remained as a non-operational company since its incorporation in 1991. Due to severely distressed financial and operational position of FPML, even its statutory auditors from 2012 onwards issued modified reports due to existence of material uncertainty casting serious doubt on the ability of FPML to continue as a going concern. However, the board of directors of JDW Sugar Mills, without informing the aforementioned material information to ordinary shareholders of Sugar Mills Limited made a total equity investment of Rs3,154.43 million in FPML.

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