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
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
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
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
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
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 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.