ISLAMABAD: A foreign assets recovery firm had claimed $515 million as compensation after the termination of its agreement but had settled on a much lower sum of $2 million after negotiations with the National Accountability Bureau (NAB).
In its objections, the Auditor-General of Pakistan (AGP) held that against a claim of $515.6m, only $2.2m were paid and accepted by International Assets Recovery (IAR), indicating that the demand was not filed on a factual basis. Either the claim was exorbitant or there was some flaw in the agreement reached between IAR and NAB/the Pakistan government, documents show.
An amount of $.15m was also paid to Broadsheet LLC, a firm different from the one headed by Kaveh Moussavi. President Dr Arif Alvi, on the recommendation of an official committee, had approved the payment of $3.7 million [$2.2m plus $1.5m] to Broadsheet LLC and IAR by NAB as compensation after the termination of the asset recovery agreement.
Documents reveal that IAR had claimed $515.6 million from NAB on the basis of the interpretation of the commercial services agreement. Clause 4.2 provided that the firm will receive 20 percent of the amount available to be transferred, plus a bonus if any as may be allowed by the NAB chairman, and NAB would get the 80 percent balance, less a bonus if any is to be paid, the audit noted.
IAR had asked the NAB management to provide details of the amount recovered as a result of efforts of the concerned firm, but nothing was furnished. It is therefore assumed that in fact no commendable efforts were made by this firm, yet a large amount was claimed and paid to it, the AGP said.
That the agreement was defective was evident from the remarks of the finance secretary given in a summary dated May 10, 2007 that stated that “this is a particularly one-sided agreement. Clause 4.1 mandates NAB to share the proceeds, irrespective of the firm’s involvement.”
The audit held that due to the non-observance of proper procedure, NAB had to face the large claim. This also indicates that no prudent mechanism was in place to evaluate the working and performance of these firms.
Quoting the law, the AGP said canons of financial propriety stipulate that every public officer is expected to exercise the same vigilance in respect of expenditure incurred from public money as a person of ordinary prudence would exercise in respect of his own money.
The NAB management had entered into the agreement with Broadsheet (Isle of Man) on June 20, 2000 and with the IAR on July 15, 2000 for finding persons and entities which had fraudulently obtained, converted and/or secreted funds and other assets belonging to the Pakistan government or other institutions and were holding such assets outside Pakistan.
NAB told the audit that the amount of $1.5m was paid to Jerry James, who purportedly presented himself as the legitimate owner of Broadsheet (Isle of Man), in connection with the settlement agreement. Jerry James died in 2011. The debtors of Broadsheet (Isle of Man) tried to revive the company, which was accepted by the High Court of Justice, Isle of Man. The company sued NAB on the grounds that the equitable transfer of shares was never made. Thus Broadsheet (Isle of Man) started arbitration proceedings against the Pakistan government/NAB, the audit noted.
The Departmental Audit Committee (DAC), on Sep 28, 2020, was provided the record pertaining to the payment and approval of $3.7m after settlement agreements, with the approval of the president on the recommendation of a committee comprising the finance secretary, principal secretary to the prime minister, interior secretary, law secretary, and attorney general of Pakistan.
A sub-panel of the Public Accounts Committee (PAC) had cleared the DAC’s recommendation on Sep 30, 2020 by settling the audit para. The PAC has now recalled the decision of the subcommittee, headed by Pakistan Tehreek-e-Insaf (PTI) lawmaker Riaz Fatyana, and is set to hold a discussion on it.
Meanwhile, Speaker Asad Qaisar has asked the PAC to desist from the practice as the issue doesn’t fall in its purview. However, PAC chairman Rana Tanvir Hussain has taken the opposite view.
Under the rules, the decision of the sub-committees had to be laid before the PAC for approval. The audit para dated back to 2010-2011 and was since lying unsettled.
NAB told the audit that there were several reasons for it to enter into an agreement with these firms. First, the Pakistan government/NAB, at that point in time, had not developed formal linkages with foreign governments to seek such cooperation. Two, corruption was not a globally recognised priority issue and hence international cooperation was not so forthcoming. Three, the agreement was on a contingency basis and no upfront payment or expenditure was involved. It was because of these reasons that NAB agreed to other provisions of the agreement which were not so favourable.
Since the performance of Broadsheet and IAR, NAB claimed, was not satisfactory, after a lapse of three years it decided to terminate the contracts through its UK-based lawyer Kendal Freeman on October 28, 2003.