NAB has evidence of mass corruption in past defence deals
NAB still to take up cases against corrupt officers; documents with NAB suggest many deals made by military men involved kickbacks

By: Kamran Khan

KARACHI: The long arm of the National Accountability Bureau (NAB), which has already twisted some of the "untouchables" among the political, bureaucratic and business elite of the country, is still far away from touching the veteran military top brass that was at the helm of affairs when questionable military purchases worth billions of dollars were made in the past two decades.

In a month-long investigation by the News Intelligence Unit (NIU), during which more than three dozen present and retired civil and military officials were interviewed and scores of related documents examined, it emerged the national exchequer may have lost up to Rs. 570 crore (US $1 billion) in the shape of alleged kickbacks in contracts. These related to tanks, submarines, mine hunters, Mirage fighters and army jeeps in multi-purpose deals signed by the Army Welfare Trust, Shaheen and Bahria foundations.

The NIU investigation has revealed that the NAB is already in possession of enough documentary or circumstantial evidence to launch a full-scale probe against at least 20 retried senior military officials including three former chiefs of army staff, two naval chiefs and an Air Force chief in purchases of tanks, submarines, naval mine hunters, Mirage fighters and army jeeps. But there is nothing to suggest NAB is close to filing a reference against any former ranking military official or even serve them with a questionnaire.

Interestingly, the documents seen by the NIU providing extensive clues about alleged corruption in mega defence contracts and in the affairs of the Army Welfare Trust (AWT), Shaheen Foundation, Bahria Foundation and Defence Housing Authority (DHA) were made available from the NAB's huge reservoir of incriminating documents, much of which was built by the former Ehtesab Bureau. There is no indication yet NAB would, at any time in the near future, make any use of this reservoir.

Besides sizeable documentary evidence, the army-run NAB is also equipped with experienced serving military officials who have brought with them personal expertise and knowledge about many of the questionable defence deals. Among the NAB's much-talked about consultants, is Major (retd) Saeed Akhter Malik, a former representative for Styer sniper rifles in Pakistan. Saeed can provide an insight to NAB about the "invisible prerequisites" for selling sniper rifle to army-run organisations like ASF and Pakistan Coast Guards.

Though the defence budget of Rs 135 billion, including the military purchases of about Rs 1100 crore per annum, far exceeds the total budget of all civilian departments of the Government of Pakistan, NAB is barred from investigating the corruption cases that relate to the active service military officials. There is, however, no restriction on the organisation from investigating past military deals and retired military officials.

While a majority of contracts relating to controversial defence purchases have not yet been touched by the NAB, the organisation is making a low-key effort to seek the extradition of former chief of Naval Staff Admiral Mansurul Haq from the United States.

The NAB is in possession of documentary evidence, left by the former Ehtesab Bureau, that the DCN-I (Direction des Constructions Navales International) of France had made an indirect payment of about US $ five million to Admiral Mansurul Haq for a grossly over-invoiced up-gradation project for three Agosta B submarines. The NAB is seeking Admiral Mansur's extradition on that count, but it seems to be not interested to get to the bottom of the most embarrassing defence purchase episode of Pakistan's history.

During its investigation the NIU discovered that behind a much- publicised demand for Admiral Mansur's extradition lay an institutional effort to cover up the whole scandal. Unimpeachable sources have informed the NIU that while the NAB made public demands for Mansur's extradition, the former Naval chief, who had received advance information to that effect from an official channel, has already left her daughter's Austin residence in the state of Texas for a new undisclosed location outside the US.

The NIU can disclose that Commodore Shahid, the former director of Naval Intelligence who was convicted by a Field General Court Martial (FGCM) to seven years of rigorous imprisonment for his alleged role in the submarine corruption case, was pardoned by the former Naval chief Admiral Fasih Bukhari, only three months after the conviction. Commodore Shahid spent 12 weeks of this imprisonment in the comfortable atmosphere of his residence in Islamabad, during which there was no restriction on his movement in the city.

For receiving heavy kickbacks in a submarine deal Commodore Shahid and Captain Liaquat Ali Malik, both considered close to the top Naval hierarchy involved in the submarine deal, were awarded seven and three years rigorous imprisonment, respectively, by a military court in November 1998. These officials had been convicted on the basis of irrefutable bank statements and other documentary evidence, besides damning evidence from another serving Pakistan Navy Captain.

During the trial and after their conviction both officers, however, rigidly maintained they were just the pawns in a large game, and they have been made the scapegoats. Commodore Shahid, who had held the sensitive post of director Naval Intelligence, was believed to be privy to each and every behind-the-scene development on this subject and his threat to spill the beans is understood to have resulted in his unprecedented pardon by the former naval chief. Before his pardon, the Navy never allowed the authorities to shift the convicted commodore from his house to a prison.

Evidence in black and white available with NAB also provides ample evidence that kickbacks were also paid in the purchase of Edrian class minesweepers for the Pakistan Navy. The deal worth US $ 250 million had raised several eyebrows regarding the cost and the effectiveness of the project. NIU believed that Commodore Shahid was loaded with inside information on this particular deal also, and his honest testimony may provide vital links to establish payment of kickbacks.

The NIU has learned that while NAB appeared to be not interested in investigating Commodore Shahid's statements and the events that led to his dramatic pardon, it has not yet questioned Admiral A U Khan and Rear Admiral Mujtaba, the two senior ranking naval official who had played a significant role in the navy's decision to buy Agosta submarines under the then naval chief Admiral Saeed Khan.

Admiral A U Khan, who had received a surprising extension in the service in Pakistan National Shipping Corporation (PNSC), after the military take-over, is also closely related to a Federal minister. Admiral Mansurul Haq's financial deals while heading the PNSC before he was handpicked to head Pakistan Navy, though caused the collapse of the PNSC, but NAB is yet to start its probe into the PNSC affairs. The NIU is told the NAB is "fully loaded" with evidence against Admiral Mansur and two other top-ranking former naval officials on the kickbacks worth Rs 500 million they received on the land deals involving Bahria Foundation.

Admiral A U Khan or Rear Admiral Mujtaba are yet to be questioned by NAB about their role in the submarine deal. Several sources said Admiral A U Khan's 1994 visit to France was the turning point in the Navy's final decision to prefer the French subs over the Swedish model. A former Citibank official in Karachi, who had travelled to France with Admiral Mansurul Haq on his famous visit to conclude the up-gradation deal with the DCN-I, is now working closely with a top NAB official, but there is nothing to suggest if he had shared his knowledge, or has been asked to do so, about the kickbacks in the submarine deal with NAB.

In his private Sindh Club circle, the same former Citibank official is claiming that it was because of his personal relationship with Admiral Mansurul Haq, NAB has not yet moved to seize three personal houses of the former naval chief that are worth at least Rs 15 crore. A senior NAB official, however, informed the NIU that this individual was involved in NAB's plea of bargain with Tas Jumani who was wanted by NAB in a Rs 8 crore corruption case involving Pakistan State Oil. The NAB source emphatically denied the former Citibank official had anything to do with Admiral Mansur's investigation.

Whatever may be the role of the former Citibank official in the submarine saga, but the documents available with NAB and other informed sources have named a Monte Carlo and London-based former BCCI official, as the principal go-between the DCN-I, the submarine manufacturer and the top naval officials in Pakistan. NAB officials estimate that in US$100 million kickback in the submarine deal, this go-between made a cool US$10 million in commission.

He also acted as the principal go-between with Mirage 2000 manufacturer Dassault Aviation and the Government of Pakistan for an aborted purchase of 40 Mirage 2000 for a deal worth US$4 billion. At that time he was believed to be closely tied with both political and key Pakistan Air Force players. Although the Mirage 2000 deal never materialised, this individual's role remained unclear in PAF's surprise deal to buy 40 pieces of old model Mirages for US$120 million.

NAB's reservoir of documents has some interesting material about this PAF purchase of 34 Mirage-vf and 6 Mirage 3 BE from the SEGAM of France. The role played by the then Director General Defence Procurement (DG, DP) Rear Admiral Saeed Akhter remained central to the whole deal, which had been concluded by the then Air Force chief Air Chief Marshal Abbas Khattak and the SEGAM officials in France.

Amid charges of kickbacks worth US$20 million, distributed between the PAF command and the DG, DP, Rear Admiral Saeed Akhter left his job, under unexplained circumstances, and left for Europe where he settled permanently. At the time of the deal and afterwards, the dismissed Vice Chief of Air Staff Air Marshal Arshad Choudry had voiced concern about rising corruption in the PAF, and in a specific meeting with the then President Farooq Leghari, the Vice Air Chief offered to prove kickbacks and commission in deals ranging from land deals in Karachi to Mirage purchases to the Mirage rebuild factory in Kamra.

Imprudent and sometimes intriguing financial decisions, during the same period, caused losses worth tens of crores of rupees to the active-service PAF officers-run Shaheen Foundation, the Shaheen Air venture with a Karachi-based General Sales Agent (GSA) for some foreign airlines resulted in more than Rs 500 million losses to the Foundation.

The situation at the Shaheen Foundation, mostly because of some decisions directed by ACM Abbas Khattak, came to a point that Air Marshal Shafiq Hyder, a highly regarded officer, asked for a premature retirement citing affairs at the Shaheen Foundation. The Shafiq Hyder episode came at a time when the Shaheen Foundation had offered to give its name to a shadowy Shaheen Pay TV project that was to be controlled by PAY TV (Ireland), a mysterious company that did not reveal the names of its directors even to the Shaheen Foundation chief, who had instruction from the ACM Abbas Khattak to sign this deal with PAY TV (Ireland).

Several sources mentioned that a Peshawar-based individual, Andrew Shalom, with mysterious connections in Europe, was the go-between the then Air Force chief in various projects including the Shaheen Pay TV project undertaken by the Shaheen Foundation. Sources said if NAB ever decides to undertake a probe into the alleged PAF corruption scandals under the former ACM Abbas Khattak, the two former Air Marshals of the PAF would love to extend their cooperation and their insight.

Acquisition of new tanks has remained central to the defence strategy envisioned by the successive chiefs of Army Staff since Gen Ziaul Haq. In the past one decade alone, cash-strapped Pakistan has spent about Rs 900 crore (US$1.6b) to equip the Army with the finest of desert battle machines. Allegations of kickbacks, also from senior army circles, were made each time the army leadership went into serious negotiations for tank purchases since General Ziaul Haq witnessed the final trial run of American made Abraham tanks at the Army's tank trial site of Khairpur Tamewali on August 17, 1988. The same afternoon that day, Gen Ziaul Haq's plane, also carrying the top leadership of Pakistan Army, crashed not far from Khairpur Tamewali.

While Gen Zia had favoured the US built model of the tanks for an about US$700 million purchase, his successor Gen Mirza Aslam Beg opted for the US $1 billion Al-Khalid manufacturing plant to build MBT 2000 tanks with Chinese cooperation. While Gen Beg's US$1 billion Al-Khalid plan was still operational, his successor Gen Asif Nawaz went full swing to conclude a US$ 450 million purchase for 320 T-72 tanks from Poland.

Though Gen Asif Nawaz had died by the day when this deal was to be signed with the visiting Polish team, his successor Gen Abdul Wahid Kakar's team of experts rejected the deal outrightly, citing the reasons that could form the basis for a NAB investigation. For his part Gen Abdul Wahid thought there was no reason to rush through a tank deal, and Pakistan was better off concentrating on Gen Beg's Al-Khalid programme.

Gen Wahid's successor General Jehangir Karamat, however, thought it was vital for the country's defence to immediately equip the army with the best possible tanks. He struck a US$550 million deal with Ukraine, which at that time did not even have a diplomatic presence in Pakistan, for 320 T 80 UD tanks in 1996.

General Asif Nawaz wanted to purchase the same number of 320 tanks for a price tag of US$450 million, while Gen Karamat negotiated to buy the same number of tanks, with almost the same capacity, for US $550 million, through a deal which finally cost the nation a cool US $650 million.

The criticism of General Beg's ambition to build the Pakistani version of MBT 2000 at a cost of Rs 570 crore remained restricted to an influential circle in the army that principally backed Gen Asif Nawaz, and Gen Jehangir Karamat's drive for speedy induction of the tanks, but allegations of kickbacks in the Al-Khalid project had surfaced several times in the past. The reservations of the successive army chiefs about this expansive project may also explain the snags that caused huge delays in the completion of the project.

NAB's present reservoir of documents has nothing to substantiate allegation of kickbacks in the tank deals, but several NAB insiders who had also worked closely with the former Ehtesab Bureau chief Senator Saifur Rehman Khan have revealed that the former Senator had personally investigated General Jehangir Karamat's T80UD tanks with Ukraine.

Sources said in this respect the affairs of TFT Progress, the company that acted as the go-between the GHQ and the Ukrainian supplier, were fully investigated to establish the role played by Col Mahmood (retd) alias Moda, a former course mate of Gen Jehangir Karamat. As representative of the Ukrainian supplier, Col Mahmood, Army sources acknowledge, had played a key role in bringing the GHQ and the Ukrainian government close to a deal.

Confirmed reports indicated that while Gen Jehangir Karamat was still serving as the COAS and also after his resignation, Col Mahmood had been vigorously questioned by the people acting on the Ehtesab Bureau's behalf. One reliable source informed the NIU that the Nawaz Sharif government probe into this tank deal also focused on a retired major general and a close personal friend of General Jehangir Karamat, who was then serving as an additional secretary in the Ministry of Defence. Knowledgeable sources however discounted rumours that during his last meeting with Gen Jehangir Karamat, former prime minister Nawaz Sharif ever mentioned to the former COAS the outcome of his probe against the Ukrainian tank deal.

Several present and retired officials who spoke to the NIU on the subject of corruption in defence contracts desired that 1995 army purchase of 3700 Land Rover Jeeps - that had carried a price tag of about Rs 180 crore for the army - be investigated by NAB. These sources said NAB only needs to investigate the price Bangladesh army had paid for the same vehicle around the same time period that the GHQ finalised this deal.

NIU has learned the owner of the key supplier of this vehicle to the army was a close relative of a then serving Lieutenant General, who was also the main decision-maker in the purchase. Though NAB has no documents on this controversial purchase of Land Rover jeeps by the Army, top NAB officials have been given extensive briefings and documentary evidence on the corruption that has now created a financial crisis in the Army Welfare Trust, an organisation dedicated to the welfare of retired army personnel.

Based on these briefings and documents, NAB is yet to question the former AWT chairman Lt Gen Farrukh Khan for his 1994 decision to borrow US $200 million from the famous US investment Bank Merrill Lynch. A decision later by Merrill to invoke a clause in its agreement with the AWT to call its loan any time in the future brought AWT to its knees, as the National Bank of Pakistan was called to rescue the Welfare Trust.

NAB is yet to respond to the pleas for investigation into Lt Gen Farrukh Khan's decision to allow an advance payment of Rs 25 crore to Mitsubishi for a power plant for the AWT's Nizampur Cement plant. Once again, due to the weaker agreement, the Japanese concern reneged its commitment with the Nizampur Cement Plant, causing a straight Rs 25 crore loss.

Millions of AWT's dollars were wasted in a useless pharmaceutical plant constructed in association with a Chinese company. Sources said only a week of "NAB-style" probing was enough to unearth the scam in the pharmaceutical project. Detailed documents obtained by NIU on corruption in the AWT-run cement plants and its former chairman's dealing with the Privatisation Commission on the subject of cement plants in 1995 are already available with NAB, awaiting executive orders for a probe.

Like most of the defence-related organisations, the affairs of the Defence Housing Authorities in Karachi and Lahore, despite having an average turnover of about Rs 750 million a year, have never seen an independent scrutiny of their affairs.

The present DHA administrators in Karachi and Lahore appeared to have worked hard to free these organisation from institutionalised corruption, of sorts, but this NIU investigation discovered that despite serious complaints of financial corruption, particularly in the years between 1994-97, no action was taken against the perpetrators who had converted the DHA Karachi into one of the most corrupt organisations in the country.

The NIU met several individuals to confirm that almost every allottee in the DHA's Marina Scheme in its phase 8 had to pay an additional sum of up to 20 per cent, which went to top DHA officials of that time. This particularly attracted tremendous attention because in this scheme the DHA had allowed allotments for the civilians to create recreational facilities on the shore front.

As expected, the real estate prices in this area sky-rocketed within one year of the announcement of the scheme. While the prices were showing an upward swing the DHA restricted the allotment only to people close to its then director Planning and the administrator.

The largest plots went to the people widely known to be close to the director planning. One such individual was the father of a Pakistani model who made her name in India. While the Marina Scheme was in full swing in 1994, precious land, particularly in the phase 2 and 5 of DHA in Karachi was allotted in the name of "extra land adjacent to the existing commercial and residential plots at the reserved DHA prices".

The NIU discovered that some of the known investors in the DHA Karachi, colluded with the former Director planning, who was then thought to be the most powerful DHA official to multiply their millions in overnight deals involving allotment of extra land.

While the Marina Scheme and extra land allotment continued, the then DHA administrator and his director Planning created more plots for flat sites, a scheme that was knitted in close collaboration with some of the known builders of Karachi, who were supposed to get the larger piece of the cake. The scheme, however, got busted in its early phase as the Federal Defence Secretary, who also serves as the Chairman of DHA, got wind of this plan and ordered the scrapping of the scheme.

"If the NAB is not probing against the DHA and particularly its longest serving director planning and a former administrator, it should stop its anti-corruption crusade in the country," a DHA insider observed while expressing surprise as to how the Army can allow the worst type of corruption to continue just under its nose.

Senior NAB sources said they had no explicit instruction from Chief Executive General Pervaiz Musharraf or anyone else in the top Army brass to avoid a probe against the ex-army officials. These sources said the multi-million dollar defence deals and other defence-related corruption cases will be investigated "sooner rather than later." One senior source said the Chairman, NAB has himself ordered an extensive probe on charges that relate to the family fortunes of the sons of a former top military official. At least one of his sons is an active politician.