What top SECP bosses told FIA about ‘tampering’ issue

ISLAMABAD: In their statements before the FIA inquiry team probing SECP’s record tampering issue concerning the Sharifs’ Chaudhry Sugar Mills, the chairman SECP and his senior executives blame each other for doing the wrong.

Chairman Zafar Hijazi told the FIA that he had not even the “remotest link” with the matter but his two senior executives — Ali Azeem Ikram and Abid Hussain — insisted that Hijazi had directed them to immediately put a backdated note in the file confirming closing of inquiry against the mill on the relevant date.

All the three agreed that the probe against the Sharifs’ Sugar Mill was closed in 2013 but disagreed over how and on whose instructions the backdated (2013’s) entry was put in the official file of SECP in 2016.

Informed sources said that the SECP chairman in his statement before the FIA said: “Back in 2016, a media programme was brought to my notice wherein it was highlighted that SECP has stopped pursuing the case with the UK authorities about money laundering of Chaudary Sugar Mills Limited. Furthermore, I was informed that the letters written to UK authorities were also shown on the television screen.

“I inquired in this regard from the concerned Commissioner (Mr Tahir Mehmood) at that point in time. The said commissioner was also directed to give a briefing in this matter. In the presence of the concerned commissioner and others, Ms. Maheen Fatima, Director, being the case officer, gave the briefing about the case and informed that the case stood closed since 2013 owing to the satisfactory replies by the company. It was also informed that the UK authorities have also been conveyed about the withdrawal of the request made through earlier letters.

“It is pertinent to mention here that Mr Abid Hussain had also sent an email to my staff on July 25, 2016, which had an attachment in the form of a letter. The letter (attachment) was conveyed for the purposes of my signatures. The facts that were highlighted in the earlier briefing were incorporated in the letter and also the date (Jan 14, 2013) for the closure of the case/investigation under Section 263 was mentioned.

“A brief note in this regard, drafted by Mr. Abid Hussain, concerned Executive Director and corrected by Mr Tahir Mahmood, Commissioner, is also available on record in “keep with (KP)” file and reiterates the same facts. (At the time of handing over the mentioned note on June 21, 2017, I was told by Mr Abid Hussain that it was prepared at the time of briefing in year 2016, when the matter firstly came to my notice as mentioned above, however, now it is being suggested by the same officer that the note was prepared somewhere in January, 2017)

“Mr Abid Hussain repeated the same facts regarding closure of the investigation under reference before the National Assembly Standing Committee on Finance, in my presence and other officers, when the issue was raised before it.

“The stance of Mr Abid Hussain remained unchanged throughout at various occasions, firstly when he briefed about the matter after the media reports; again in the draft note found on the record; then through email and lastly in the statement before the standing committee of the National Assembly. Other concerned officers had taken the same stance throughout without any change.

“SECP received from the Attorney General office, the copy of the complaint of JIT regarding tampering of record. In pursuance of the said complaint, I rechecked the matter with the concerned Commissioner (Mr Tahir Mahmood) who while responding to my queries provided me the copies of the withdrawal letters sent to UK authorities in May 2013 along with other supporting documents in the matter of Chaudhry Sugar Mills Ltd. I prepared the reply with assistance of Mr Tahir Mahmood (Commissioner), Muzzafar Ahmed Mirza (Chief Prosecutor, Head of Legal Affairs), Mr Ali Azeem (Executive Director), Mr Abid Hussain (Executive Director) and Ms Maheen (Director) and submitted the same to the Attorney General’s office in the light of the documents provided to me as well as the briefing given to me by the concerned officers.

“I have now learnt that some undisclosed witnesses have falsely deposed before JIT that the note pertaining proceedings under Section 263 was prepared on my directions in 2016 with the back date in 2013. I vehemently deny the allegation being absolutely false and frivolous. No such directions were ever given by me to anyone.

“My information in this matter was and is only confined to the briefings given to me that find support from the record as well. The matter came to my knowledge, for the first time, when it was highlighted in the media in the said talkshow. This issue, except in the briefing as aforesaid, was never discussed with me by anyone in any manner whatsoever.

“The chairman SECP is not supposed to examine each and every file nor any such exercise is practically possible. He interacts with departments through concerned commissioners and relies upon the briefing given to him.

“It is pertinent to state that the proceedings under section 263 are entirely different from the money laundering proceedings. The scope of investigation against Chaudhry Sugar Mills pertained to the issues, other than money laundering, which fact is evident from perusal of order under section 261 & the notice under section 263.

“The investigation under section 263 cannot be enlarged to bring under its ambit the probe for money laundering. SECP can neither investigate nor prosecute for money laundering and any possible violation under the Companies Ordinance, 1984 cannot be construed as money laundering offence.

“The proceedings under section 263 appear to have been given name of money laundering proceedings with entirely ulterior motives resulting in misleading the court and defaming apex regulator of capital market.

“In the end, it is vehemently stated that the allegations against me are not only false and incorrect but also mala fide and intended to malign me in a matter with which I have not even the remotest link.”

Sources said that Abid Hussain in his statement before the FIA said: “I was not working in Corporate Supervision Department (CSD) before January 2016. It was on 20 January 2016 that I was transferred to (CSD) as head of department.

“In mid-June 2016, Mr Tahir Mehmood Commissioner (CSD) called me and asked to advise Ms Maheen Fatima (being dealing officer of the case) to prepare a case brief of Chaudhry Sugar Mills for the chairman as there was a talkshow aired by some news channel about that case. The chairman was concerned about it and wanted to be briefed about the case, he said.

“I asked Ms. Maheen Fatima to prepare a case brief. Ms. Maheen prepared a case brief, which was put up to the commissioner who advised to give the draft to the chairman who wanted to see it. I gave the draft brief to the chairman who, after reviewing the same, told me to provide relevant files of the case to him. I provided the files of the case to the chairman and I came back in my room.

“After around an hour, the chairman called me to his office again and started discussing the case with me. I informed him that I have no clue about the case as it pertains to the year 2011 when I was not working in this department. He therefore called Ms Maheen Fatima and also Mr Tahir Mahmood, the commissioner, and discussed the case with them.

“Ms Maheen informed the chairman that the case was closed in the year 2013 after receipt of information from the Chaudhry Sugar (the Company) and even the letter for seeking information from UK authorities was withdrawn after examining the information received from the company.

“The chairman then called Mr Ali Azeem Ikram, Executive Director (Insurance), who was Head of Department (CSD) in the year 2013. He was also of the view that this matter was closed in the year 2013. However, the chairman pointed out that if the case was closed in the year 2013 then why this fact was not recorded on the note sheet.

“The chairman directed us to immediately put a backdated note in the file confirming closing of inquiry on the relevant date. He told Ms Maheen and Mr Ali Azeem to incorporate the closure note on the note sheet to complete the record. The file was handed over to Ms Maheen, who after a few hours, handed over the files back to me stating that the omission of recording the closure of case has been rectified on the note sheet. This fact was also communicated to the chairman.”

Sources said that Ali Azeem Ikram in his statement told the FIA: “On June 10, 2011, I became Head of Enforcement Department, now named as Corporate Supervision Department of SECP (CSD) and I remained in that position till April 1, 2015. From April 1, 2015 till August 17, 2015, I was not head of CSD. On August 17, 2015, I was given additional charge of CSD for five months till 19 January 2016. From 19 January 2016 till today, I am not head of CSD.

“From the CSD record and from my personal knowledge, the following are the background facts of Chaudhry Sugar Mills inquiry: In 2011, on the basis of some documents provided by the then chairman, SECP through Mr Tahir Mahmood Commissioner (CSD), CSD initiated a  probe into the export proceeds received by Chaudhry Sugar Mills (the Company) in the amount of Rs739.767 million (appearing in the Company’s 2010 accounts) which were suspected to be used as a medium to siphon/launder the outcome of concealed fraudulent activities in the disguise of regular and legitimate business activities, where the counter party on the other side of the said transaction was based in UK. A letter in this regard was written by CSD to UK CA with a copy to FSA UK.

“Subsequently, based upon examination of year 2010 annual audited accounts of the Company, a letter was issued by CSD to the Company on August 1, 2011 specifically asking about the details of export sales of Rs739.767 million. The record shows that FSA UK reply was received through email dated September 9, 2011 informing that the case relates to UK CA and they have forwarded the matter to them.

“Again the record shows that on September 7, 2011, a reply was received from the company giving details of export sales amounting Rs739.767 million. As per the details, the receivables were from Taiwan, Turkey, Japan, Malaysia and Korea. None of the amount was receivable from UK parties.

“So the matter as apprehended in the original letter to UKCA in fact was cleared in September 2011 as no UK party was there in export sales. UKCA responded after almost a year vide letter dated July 26, 2012 and asked for certain legal basis for seeking such assistance.

“The record further shows that in reply to the examination letter incomplete information was provided by the company. Next option was to ask the SECP concerned registrar to issue a notice for calling of information under section 261. The registrar issued the said notice and in reply to 261 calling for information notice the information received from the company was still deficient and the registrar reported that the information provided by the company was still incomplete.

“The next step for proceedings further in the matter as prescribed in the Companies Ordinance 1984 was to issue an order under section 263, which in fact was typically a calling for information order. It was thus that an investigation order under 263 of the Companies Ordinance 1984 was issued on October 04, 2012 through which major contents of information required were from the company such as explanation with regard to compliance with the requirements of accounting standards relating to employee benefits accounting, age analysis of receivables from associated and break-up of other receivables.

“The company provided detailed information and documents through its letters dated November 06, 2012 and January 04, 2013 after which no further information was required. As all the information was provided, therefore, no further correspondence was carried out and the last letter in the record in this regard was the one dated January 9, 2013 from the company consultant.

“Later, when UK CA asked for whether information is needed, the CSD seems to have written back withdrawing its request for assistance stands and a letter to this effect was issued on May 21, 2013 followed by another one on July 22, 2013.

“There are two files maintained at CSD with regard to Chaudhry Sugar Mills Limited, one regarding the anti-money laundering investigation in the shape of letter written to UK CA and the other file is the routine examination file. The relevant note portion in the anti-money laundering investigation file shows that the case was closed in May 2013. The routine examination file had only one point which was used as a trigger in the UK CA file and that was export sales, which was not the part of Section 263 order, and the subject closure note says that no need to seek information from UK CA as receivables against export proceeds have no UK based company. The evidences available on record letters for closure to UK CA in 2013, relevant note portion of anti-money laundering investigation file and non-inclusion of export sales regarding observation in the Section 263 order demonstrates that the matter was already closed.

“One day in June 2016, (I do not recall the exact date), when I was not in charge of CSD, in the first half of the day, I was called into chairman’s office. When I entered the chairman office, I noticed that apart from the current chairman, Mr Tahir Mehmood, Commissioner (CLD), Mr Abid Hussain and Ms Maheen Fatima Director CSD, were already sitting there and files of Chaudhry Sugar Mills were lying open on chairman’s table.

“The chairman at first became aggressive towards me and said that I should not have written the letters and resisted the then chairman and he then instructed me to close the investigation file in back date. The chairman directed us to immediately put a backdated note in the file to confirm closing of inquiry on the relevant date.

“Things happened so quickly that I was totally unprepared and found the situation shocking. Just like others, I felt that I had no option but to comply with the directions being aggressively given to us (three senior executives and I) on our faces by the chairman.

“We all felt that we had no choice. Ms. Maheen Fatima prepared the note with her signatures, I signed it and Mr Abid Hussain reported the compliance of the same to Mr Tahir Mahmood, Commissioner CSD, for onward confirmation to the chairman that his directions had been complied with.

“All this was done on the direct instructions of the current chairman and none of us thought that we were in a position to say no. I belong to a respectable and educated family and I have always performed my duties efficiently and with integrity.

“As explained, firstly, I did not sign the note voluntarily and out of free will. I did it under specific direction and in extreme urgency and pressure where I truly believed that I had no choice but to do as expressly directed by the chairman. Secondly, when signing the note, I did not believe that I was doing something illegal. I genuinely believed that as the matter already stood closed, all I was being directed to do was just to address a minor omission in our internal record which would have no impact on the matter itself or to the outside world.

“Lastly, the above incident took place 10 months before JIT was even ordered to be set up. So there is no possibility that when complying with the chairman’s orders to sign the note, I was intending to mislead the JIT or the Honourable Supreme Court of Pakistan.”