The FIA’s Commercial Banking Circle (CBC) has registered a case against 30 people, including former and current officers of the NBP and Hascol, on the basis of evidence found in an inquiry into bank default, financial fraud and money laundering of more than Rs54 billion by the petroleum company.
Talking to The News, Director FIA Sindh Amir Farooqi said an inquiry dated 7-7-2021 was registered under orders of the competent authority on the basis of a source report regarding scam/default of Rs54 billion. The scam was allegedly committed by Hascol Petroleum Ltd (HPL) through its directors/management, in collusion with directors on behalf of its stakeholders -- M/S Vito! Dubai Ltd, Fossil Energy (Pvt) Ltd, Marshal Gas (Pvt) Ltd, and officials of NBP and others commercial banks -- from 2015 to 2020 in the form of bank loans, and funded and non-funded financing facilities, which were granted to Hascol by the NBP in violation of prudent banking laws and practices, which amounted to criminal breach of trust, causing a wrongful loss to the NBP/national exchequer and wrongful gain for Hascol.
HPL was incorporated by Mumtaz Hassan Khan as a private limited company on March 28, 2001, for the procurement (local/import), storage and marketing of petroleum, chemicals and LPG. It was converted into a public unlisted company on September 12, 2007, and listed on the Pakistan Stock Exchange on May-12, 2014.
The proceedings of the abovementioned inquiry substantiated the following illegalities and infractions committed by the sponsoring directors and officers of HPL in collusion with the then sanctioning, implementing and monitoring officers of the NBP, FIA Director Farooqi said. He added that the HPL's first significant borrowing relationship was initiated with the Summit Bank in 2009, which remained its main banker until the entry of the NBP.
The inquiry revealed that the NBP granted its first facility of Rs2 billion to HPL on June 16, 2014, in response to the HPL's request addressed to Ms. Rima Ather, who had moved from the Pak Iran Investment Company (PAIR Investment) to the NBP as SVP Corporate Banking Group (CBG).
It is also noted that Syed Iqbal Ahmed Ashraf, a former group chief at the NBP and president of het Pak Iran Investment Company Limited (PAIR; an existing lender of HPL) was appointed by the NBP as president in January 2014.
Mr. Ashraf had brought Ms. Rima Athar with him. This LC Facility could not be availed due to non-perfection of security arrangement (achieved on May 15, 2015, after which the NBP opened its first LC on July 3, 2015). During Ashraf's tenure as president, HPL's facilities were initiated and peaked at Rs5 billion in a short span of 18 months.
Farooqi said that later Saeed Ahmed joined the NBP as president on March 24, 2017, and within 18 months (from May 2017 to November 2018), the NBP increased its exposure by 313 per cent to Rs15.65 billion plus another Rs4 billion to Hascol Terminal Limited (HTL) guaranteed by the HPL.
During this tenure, Ms. Rima Ather was replaced by Syed Irtiza Kazmi, SVP-CIBG. As if these rapid enhancements were not enough, the NBP somehow further enhanced its LC facility on October 8, 2018, by another Rs18 billion and increasing the NBP's total sanctioned limits to Rs21.65 billion, well before the joining of Mr. Arif Usmani as president NBP on February 12, 2019.
Both these presidents, Syed Iqbal Ahmed Ashraf and Saeed Ahmed, have prima facie abused their official position as public servants, while sanctioning through their credit committees the above huge financial facilities to the HPL, according to the inquiry findings.
The FIA director said the incrimination of the part of Byco would be probed as a separate criminal enquiry. This investigation has determined that mere incompetence and institutional failure alone were not the sole cause of these reckless lending decisions. Evidence has been recovered which proves that the HPL used to siphon off funds through middlemen for bribing their bankers. In just one such instance, cheques for Rs117 million were issued by th HPL to Tahir Ali and his several companies without any underlying contract(s). These middlemen are yet to be investigated in detail and their roles will be defined in the detailed investigation report.
He added that total default of all banks was Rs54 billion. The default of the NBP was Rs18 billion alone, and Hascol credit line was increased by the NBP president and the credit group from Rs2 billion to Rs18 billion against weak securities.
Credit head Reema Athar and Irtiza Kazmi were the key players in it. Reema Athar remained director in Clover pvt Ltd, a company owned by Saleem Butt, and also remained director on the board of Fossils Energy, subsidiary of Saleem Butt.
Moreover, the NBP opened fake LCs to the tune of Rs95 billion for Hascol in favour of Byco Petroleum. No fuel was underlying for this quantum of LC and these were opened only to increase the liquidity in Hascol. Other banks, including the NBP, opened non-product LCs to the tune of Rs540 billion for Hascol. Hascol and Vitol through over-invoicing transferred $42 million illegally outside Pakistan, according to the inquiry.
FIA Director Farooqi said Hascol siphoned off funds through fake contractors to the tune of Rs117 million and the tax evasion by Hascol was also expected to be unearthed, which may be to the tune of Rs4-5 billion.
Moreover, the purchase of millions of dollars and money transfer outside Pakistan in million dollars by CEO Saleem Butt and COO M. Ali Ansari of Hascol are also on record. The dumping of petroleum products through middlemen is also on record, which caused a loss of Rs9 billion to the company.