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July 11, 2017

JIT report recommends reopening of Hudaibiya Paper Mills case


July 11, 2017

ISLAMABAD: In its report submitted to the Supreme Court, the Joint Investigation Team (JIT) has recommended the reopening of Hudaibiya Paper Mills Ltd observing that substantial evidence substantiates the FIA and NAB investigations and establishes linkage between the investigations of two departments.

“It is recommended that all the three cases are fit to reopen for investigation and trial on the basis of new additional evidence procured and brought on record by the JIT. In view of foregoing, the honourable bench may pass appropriate orders including filing of reference against the accused already identified in the reference, if deemed fit,” the JIT report said in its recommendation with regard to Hudaibiya Papers Mills Ltd.

The JIT recommended that in view of significance of key role played by Saeed Ahmed in light of evidence and witness statements already on record and additional evidence collected by it (JIT) in the Hudaibiya Paper Mills reference, his name be also added to the list of persons accused in the case.

The JIT recommended that based on the significance of his role in the FIA FIRs and in light  of new evidence collected by it, the name of Javed Kayani may also be included in the list of the persons already accused in the case.

The report said as directed by the honourable court, the JIT examined the record of investigations of FIA cases and NAB references and the underlying evidence and material, including the witness statements.

The examination was essentially carried out with a view to ascertaining the nexus of respondents and their close family members, if any with other assets or pecuniary resources with their origin not disclosed or disproportionate to their known sources of income.

During the course of examination of record received from different banks and departments, the JIT collected additional evidence which was not on record in the FIA and NAB investigations.

New bank accounts, including an account of Mukhtar Hussain and employees of Ittefaq Group/Sharif family companies and three bank accounts of Saeed Ahmed, a confidant of Ishaq Dar, also mentioned u/s 164 in the Hudaibiya reference, were identified. The movement of funds in these accounts has close linkages with the other already identified fictitious/fraudulently opened accounts mentioned in the subject investigations.

The JIT investigation revealed that the process of money laundering actually started in September 1991 as against the first identified transaction in August 1992 by FIA and NAB investigations and these transactions showed that funds to the tune of $2,238,333 were deposited in the first two such accounts opened in the name of Saeed Ahmad and Mukhtar Hussain.

Subsequently, the total funds from these accounts were transferred to the accounts of Musa Ghani and Talat Masud Qazi, the two persons already identified in the previous investigations, through Dollar Bearer Certificates (DBCs) in order to hide the source of funds.

Out of the total outflow outside the country, an amount of US$ 3.907 million was sent to the United Kingdom. This amount included US$ 0.350 million to Shamrock Consulting Corporation, London already identified in FIA’s Challan. However, the JIT discovered an additional US$3.557 million remitted to different companies and individuals in London during the period 1993 to 1995.

Parallel comparison of cases filed by the FIA in 1994 and NAB’s final reference filed in the year 2000 revealed very strong inter-linkages between the cases filed in different time frames by two different investigating institutions.

In fact, substantive portion of aggregate funds identified in the FIRs of FIA were traced to banks accounts used/mentioned in the NAB reference on Hudaibiya Paper Mills.

Investigation revealed for example DBCs of US$3.800 million bearing specific numbers were issued from one account disclosed in the FIA case. Subsequently, the DBCs bearing the same serial numbers were deposited in the bank accounts of Qazi family mentioned in the NAB reference.

In addition to the new evidence brought on record, a comprehensive start-to-end trial of funds encapsulating the evidence covered by the FIA and NAB’s investigations for the entire period from 1991 to 2000 depicted in detailed flow chart of funds, with relevant evidences collected during the course of investigations.

An evaluation of Ishaq Dar’s statement made u/s 164 in the Hudaibiya Reference was carried out with specific reference to the banking/financial transactions mentioned therein and this evaluation revealed that the aforementioned statement was substantively corroborated by documented banking records/evidence and witness statements forming part of the reference.

It is also worth mentioning that soon after the promulgation of Protection of Economic Reforms Act, 1992 on 28-07-1992 when respondent No 1 (Nawaz Sharif) was the prime minister, majority of fake/fictitious bank accounts were got opened. This fact was also mentioned in Ishaq Dar’s statement made u/s 164.

The JIT in its finding stated that in light of above findings, it can be safely concluded that since the inception in 1991 and culminating in 1998, various fictitious and fraudulent foreign currency accounts were opened and loans were obtained/secured with deposits therein used for benefit of business concerns namely Hudaibiya Papers, Hudaibiya Engineering, Chaudhry Sugar mills, Hamza Board Mills owned by the respondents and their close family members.

“Finally, the unwinding of intricate loan structure set up by respondent No 10 was completed in 1998 whereby the entire remaining proceeds amounting to Rs712 million approximately ended up in the two companies namely Hudaibiya Paper Mills (Rs642 million) and Hudaibiya Engineering (Rs70 million) as advance against share subscription,” the JIT findings stated.

The JIT findings stated that since 1998 both companied have not issued shares against the advance and according to returns including the audited financial statements submitted by these companies with the SECP, there is no claim made whatsoever by any person against the companies demanding issuance of share certificates against the advance or return thereof. 

This indicates that persons on record of the company ie Saddiqa Sayed Mahfoodh Hashim Khaden and members of Qazi family transferring such huge funds in the accounts of company (as advance against share subscription) were not actual depositors of these funds. 

The actual persons making these deposits, apparently, intended to hide their true identities. It is evident that the real beneficiaries of these funds were equity holders in the HPML. It may be further noted that the nexus of respondents NO 1, 6 and 7 is established by the fact that they are cited as accused while Respondents No 10 is cited as an approver in the NAB filed reference no 5 of 2000.

The JIT in its finding stated that it is also pertinent to note that in audited accounts of Hudaibiya Paper Mills Ltd, for the year ended June 30, 2000, it was observed that an amount outstanding to Rs310.23 million on June 30, 1999, an account of liabilities against assets subject to finance lease payable to Al-Towfeek Company for Investment funds, Bahrain and was settled and converted into a long term loan of Rs494.960 million during the year according to the audited accounts of the company. 

As per accounts of the company filed with the SECP, the aforesaid liabilities against assets subject to finance lease of Al-Towfeek Company were settled for US$8 million on January 5, 2000. 

The settlement amount of US$8 million was converted into PKR @ Rs53.80/US dollar prevailing on the date of settlement. The loan of Rs494.960 million was booked against the settlement of liability ie against assets subject to finance lease, plus loading of onetime cost of 15 percent.

The JIT findings stated that according to respondent no 7, he was informed by a representative of Al-Thani family of Qatar that US$8 million was paid by that family to Al-Towfeek Company in January 2000, in connection with the decree issued by the High Court of Justice-Queen’s Bench and out of court settlement against the parties. The respondent no 7 further stated that he was informed by the representative of Al-Thani family that the payment was made on the instruction of Mian Sharif out of the funds placed by him with them.

If the above stance taken by the respondents is correct, thus in that case, the outstanding liability to Al-Towfeek Company, was in fact taken over by Mian Sharif and under the norms of accounting disclosure, should have been reflected in the accounts of Hudaibiya Papers Mills Ltd, as a loan from directors, as Mian Sharif was a director of the company at the date of substitution, instead of a long term loan payable to an undisclosed lender.