Axact fraud case: FIA report raises questions about FIA

ISLAMABAD: Federal Investigation Agency (FIA) has though acknowledged before the Supreme Court that the fake degree scandal of Axact Company is based on facts, the report it submitted appears to be an attempt of bailing out the accused through misrepresentation of facts.

SC Chief Justice Saqib Nisar had taken suo moto notice of the case and ordered the FIA to submit a detailed report on the status of investigation which started after The New York Times broke the scandal in June 2015 exposing the diploma mill orchestrated by the Axact.

The report submitted to the court late Friday made tall claims about the FIA’s past performance in the case but didn’t offer any promise of bringing the culprits to justice. Instead, the failure was attributed to the lack of cooperation from the USA in information sharing.

A detailed reading of the report has found important information relating to the case were conspicuous by omission and misleading details were shared with the court. Included among them were letters exchanged between the FIA and US authorities. The report submitted before the court claims that out of several information requests sent to the American officials, only one was responded. This is not only untrue, an important letter has been kept away from the court's attention.

According to the FIA report, the FBI had only responded to one information request declaring that the list of online universities run by the Axact Company didn’t have proper accreditation to issue the legitimate degrees.

Regarding another request of 2015 wherein “details of the shareholding and identity of the shareholders, directors, officers” was requested (among other information), the FIA has claimed that “no reply has yet been received from US government.”

As a matter of fact, this letter was not only replied on February 8, 2016, it was the most damning evidence to establish linkage between Shoaib Sheikh and his offshore companies in the US which he had been denying in the past.

“Viqas Atiq, the Chief Operating Officer of Axact, holds 49 percent of the share of Mivvel Inc. Shoaib Ahmed, and the owner/president of Axact, holds 49 percent of the shares of Tullow and Tinko. With respect to Mivvel Inc., the remaining 51 percent of the shares belong to Ali Ghaffar Vyajkora…..”

With this letter, triangle of crime is established: that diploma mill was orchestrated by the Axact and these offshore companies were part of this business and owned by Shoaib Sheikh and associates.

The FIA in its submission to the Supreme Court further says that “during course of investigation, four thousand (4,000) students whose email contact details were recovered from the records of M/s Axact, were contacted through email to verify/ascertain regarding obtaining of fake/bogus degree/certificate from so called online universities/schools. Only seven (7) victims replied and reply of even single person was not satisfactory or confirmed regarding obtaining of fake/bogus degree/certificate from online universities/schools.”

The above statement is in contradiction with the FIA’s already admitted fact that the diploma mill existed and the agency’s information was based on the audio recording it found during the course of investigation. Also the fact remains that no effort was made to approach the victims in person abroad. It could have been done in the case where a class suit was filed by the victims in Michigan State who would be willing to share their experiences.

The FIA in its submission also noted that in order to ascertain the veracity of news items about the resumption of operations of Axact-run universities, it checked and found out that 84 such universities “are found to be available for viewing on Internet. However, only Universal Access Numbers of USA are mentioned on the websites as contact details.”

The FIA didn’t mention that it was its responsibility to have either transferred domains in its own name during the course of investigation or ordered their blockage. As the investigation is still with it, the FIA could have registered fresh FIR against Axact on this charge.

Further, the FIA completely ignores the phishing and extortion alleged by the story published in Gulf News. The FIA had recovered hundreds of audio recordings from Axact House which proved that Axact lured people to purchasing fake degrees by setting up numerous job sites from where they gathered data on potential customers for their fake degree business. Then they targeted these customers with specific fake degrees/diplomas telling them they will stand a better chance of securing that job if they acquire a specific degree or diploma from a fictitious Axact created university. Once they purchase the degree/diploma, Axact representatives would call back to extort money out of them under the pretext of accreditation and verification and threatening to expose their fake degrees to their employers, education institutions etc. All audio recordings are available with FIA which was deliberately not included in the report.

The FIA has further said that “they paid taxes and performed their act while remaining in the centre of all regulators.” The FIA chose not to mention the FBR’s case study of January 9, 2014 which examines the tax returns filed by Axact (Pvt) Ltd for the year 2013 and has made the following observations:

i. “M/s Axact (Pvt) Ltd is only partially complying with the prevailing regulatory mechanism (Part-12, Chapter XII, Foreign Exchange Manual) developed by State Bank for exporters of software. Receipts relating to sale of IT products in Pakistan are either being suppressed or misdeclared as export proceeds.

ii. M/s Axact Pakistan is mainly involved in Internet/online marketing, mainly selling easily downloadable IT products. This activity is entirely different from export of software.

iii. Company’s declared version regarding its status suffers from serious contradictions. Tax record reflects that M/s Axact Pakistan (Pvt) Limited is a subsidiary of M/s Axact FZ LLC UAE and the parent company holds almost 100 percent share capital; whereas company’s website (www.axact.com) unveils the engineered corporate veil when it clearly spells out that Axact Pakistan with head office at Karachi is managing Axact Dubai which is corporate head office…”

The FBR’s case study further reveals that Axact (Pvt) Ltd’s income, its source and claim of exemption from tax, coupled with the fact that the directors of Axact (Pvt) Ltd filed incomplete returns of income for tax year 2013 are under cloud as the tax returns of directors and income generated by Axact (Pvt) Ltd are not in commensurate with one another, thereby indicating that the directors of Axact (Pvt) Ltd have been concealing their income.

That contrary to its representations vis-à-vis its business activities, i.e. the business of development and sale of IT products including, but not limited to, ERP, software, etc., it is noteworthy that FBR’s case study further reveals that Axact (Pvt) Ltd is not a member of Pakistan Software House Association (“P@SHA”) and is neither an ISO-certified nor a CMM/CMMI certified company, and that the brochure or website of Axact (Pvt) Ltd does not mention its participation in any national or international bidding process.

FIA says that “Pakistan was the first and only country which swiftly took action against the scam and ensured closure of this dirty business.”

This is not accurate. Pakistan has not convicted a single individual in the Axact scam. Whereas, in the US, Axact’s employee has been convicted for selling the fake degrees and committing money laundering. Further, FIA does not mention the old case of Belford University where Axact already lost. Details of both cases are available on official US Department of Justice websites.

Further, FIA has failed to provide details of the massive money laundering operation that Axact has done through hawala and through individuals to move the funds to and from Pakistan for which their representative has been prosecuted and convicted in the US five months ago.