REFERENCE / COMPLAINT NO. XVI

Reference dated 23-2-2004 – Irregularities in Mobile Phone Bids / Tender

To:The Chairman
National Accountability Bureau
President’s Secretariat
Islamabad

Subject : Complaint REGARDING OWAIS LEGHARI AND MOBILE TELEPHONE SERVICE BY PAKI stan Peoples Party Through its Central Secretariat, Islamabad In terms of Section 5 and 18 (b) (ii) 0F THE NATIONAL ACCOUNTABILITY BUREAU (NAB) ORDINANCE 1999 against the Public Office Holder for punishment under Section 10 of NAB Ordinance

1. The respondents in this complaint do fall within the ambit of NAB Ordinance 1999 for the purposes of investigation trial and punishment.

2. The respondents are reportedly guilty of corruption and corrupt practices as defined in Section 9 of the Ordinance and as such are subject to punishment under Section 10 of the Ordinance based upon the following facts and grounds:

Facts and Grounds:

According to a News item published in South Asia Tribune dated August 3, 2003 (copy enclosed), a serious case of abuse of power in respect of leakage of information regarding tenders and bids in respect of expansion programme of Government owned mobile telephone service i.e. U-Fone. In the said publication Mr. Awais Khan Leghari Minister for Information Technology and Telecommunication has been attributed with serious irregularities by way of which he reportedly extended undue favour to his favourite company M/s Nortel based at Canada.

The said M/s Nortel of Canada arrived at an agreement for providing equipments to U-Fone. The said Canadian Company provided the entire Network, by virtue of which U-Fone is operating into market.

That the above said respondent to extend undue favour to his aforementioned favourite company has been reported in leakage of international Tender worth US $ 25 million, prior to opening of bids and thus caused heavy fiscal loss to the Government exchequer and made about 4 to 5 million dollars out of the deal in shape of kick-backs and commissions. The Chief Executive U-Fone, Mr. Arshad Khan also seems to be associate of the above respondent in scam.

It has been reported that the Director General IB under the orders of Prime Minister Mr. Zafarullah Jamali thoroughly probed into the matter and submitted report confirming that the bids/tenders were leaked before its formal opening.

The Complainant has also learnt that the said tender were invited for new cities expansion programme. In order to procure equipments for the third phase of the said scheme five companies were pre-qualified by the board and management of the above mentioned mobile phone company. These companies were M/s Alcatel, Ericsson, Huawei Technologies, Motorola and Siemens. All these renowned companies participated in the said bids/tenders and finally tenders were open on March 26, 2003. Prior to opening of bids it has been reported that papers of one of the bids were found to have been opened.

Conclusion:
Based on the above facts and grounds respondents have shown willful indulgence in corrupt practices under Section 9 of the Ordinance. Such persons are subject to punishment under Section 10 of the Ordinance.

As such the Chairman of the NAB is called upon to initiate investigation in connection with the matters set out herein above and further proceed to file a reference against respondents for violating the provisions of Section 9 of the Ordinance punishable under Section 10 of the Ordinance in competent court of law and proceed against those concerned for violating Section 9 of the Ordinance.

Complainant
Pakistan Peoples Party

Through :
Shah Khawar Advocate
Islamabad Dated : 23-2-2004

The Reference / Complaint is based on the source incorporated as under :

Prime Minister Jamali Orders a Probe on Secret Report
How a Present Minister Leaked a $25 Million Phone Tender to His Party
SOUTH ASIA TRIBUNE - August 3-9, 2003
By Rauf Klasra

ISLAMABAD: Prime Minister Zafarullah Jamali has directed the Intelligence Bureau (IB) to probe the unprecedented leakage of international tenders worth $25 million prior to opening of bids for the expansion program of government-owned mobile telephone service, U-Fone.

Young Federal Minister for Information Technology and Telecommunications, Awais Leghari, son of former President Sardar Farooq Leghari, who had appointed the Board of Directors of both PTCL and U-Fone, is being accused of giving favors to some of his favorite companies.

Pakistan Telecommunication Limited commonly referred to as U-Fone is a 100 per cent owned subsidiary of PTCL. It came into existence in 2001. Government owns 88 percent shares in PTCL. It is a GSM-based technological enterprise with almost 500,000 customers nationwide. Mobilink is its main competitor whereas other competitors, Paktel and Instaphone, are based on Analog system.

MS Nortel of Canada provided the equipment to U-Fone under an agreement. It was a turn key project agreement. The said Canadian company provided the entire network by virtue of which U-Fone is operating in the market today. U-Fone has to increase its network in Pakistan.

Although, a smart and young minister from Dera Ghazi Khan, Awais Leghari denies these charges but secret reports sent to the Prime Minister have clearly indicated his name in the scam.

According to an official estimate, people involved in the leakage of the tenders and bids to a particular firm could pocket at least $4m to $5m out of the deal which has become a cause of serious political tussle between the Jamali Government and former President Farooq Leghari.

General Pervez Musharraf is said to be displeased with these corruption reports about Leghari and a clear hint has been given to the elder Leghari by PM Jamali that Awais could be out of the Government in a cabinet reshuffle likely next week.

But, Farooq Leghari has threatened to walk out of the Government alliance if his son was replaced on charges of corruption.

A highly classified report sent to the Prime Minister has advised the Prime Minister to immediately intervene in the first financial scam of his government, otherwise, tax payers would suffer a massive loss of $10m on purchase of equipment from a particular firm at much higher prices for the expansion of mobile service in other cities of Pakistan.

This classified report sent to Prime Minister has been prepared by a ministerial level person in the Jamali cabinet who is not ready to disclose his name. This report clearly establishes the link of Awais Leghari with those who were leaking the tenders to a particular international company.

The PM has also been asked in the secret report to get the copy of the agreement of $25 million regarding expansion of official mobile service from U-Fone and pass it on to National Accountability Bureau (NAB) to maintain transparency.

When contacted by South Asia Tribune, Spokesman PTCL Sultan Hassan said that he had no information about any such inquiry or other details of the developments as claimed to be part of a report to the PM by some concerned government quarters.

Chief Executive of U-Fone, Arshad Khan strongly defended the performance of his company saying it had done a good job in the past and would continue to perform its duties in the greater interests of the entire nation. He said only people with vested interest were spreading such rumors to malign the company. He also lectured this scribe on the benefits of reporters staying away from such issues as this was against the interests of the country.

Mr Khan who actually helped launching of U-Fone mobile service and making it a success story, said the company had been doing everything in a transparent way and concerned quarters had already been conveyed our view point on the issues involved. On the question of an inquiry, he said he could not give the details and those should be asked from whoever had either ordered the inquiry or started the probe. He repeatedly made it clear that the company was being run on professional and commercial lines.

Meanwhile sources in the Prime Minister Secretariat confirmed that Mr. Jamali had ordered Director General IB to inquire into the matter and submit him the report after it was brought to his notice that tenders were leaked before the formal opening of the bids. According to available copy of the report submitted to the Prime Minister regarding irregularities in the U-Fone expansion program, tenders were invited for the “new cities expansion” category. It was planned to expand the network of U-Fone service.

In order to procure equipment for these new cities under the third phase, five new vendors were pre-qualified by the board and management of the mobile service company for the bidding process. They were Alcatel, Ericsson, Huawei Technologies, Motorola and Siemens.

PM was informed that tenders were invited and subsequently bids were opened on March 26, 2003. But prior to opening of bids, papers of one of the bids were found to have been opened. This matter was agitated. PM was informed that the Board of Directors decided not to go for the re-tendering process as it would consume time and official phone service might lose the prospective market/potential customers. The Board, it may be added, has several members appointed by the young minister under probe.

Moreover, it was told that it would also not be in the financial interests of the U-Fone company since its rival, Mobilink, was already ahead of the U-Fone, as it was actively involved in the process of commissioning the equipment for its proposed expansion. U-Fone probably will be in a position to do so in six to nine months, PM was told with the apprehension that there were chances that the Government-owned mobile service may lose its market.

The PM was also informed that there were doubts about the honesty levels of some of the Directors of U-Fone, since they owed their recent appointment to Minister Awais Leghari. Fears were conveyed to the PM, that these Board members may work even against the interests of the company, if the situation so demanded.

The PM was informed that this can be very aptly verified from the record if there is any, as the word in the market was that even the minutes of the meeting of the U-Fone Board were not circulated to some of the Directors. The PM was told that this Board had already decided about the procedure of bidding which was not fair and if the Government did not intervene, U-Fone will suffer an irreparable loss, according to some estimates close to $10-12 million.

The PM was told that the negotiations being carried out at the U-Fone Headquarters showed equipment worth $24 to $25 million may be bought for $28 million or more and the extra amount will end up in the safe accounts of many.

The report to the PM said the expansion program, commonly referred to as the Third phase of U-Fone, can be categorized under two schemes:

(a) the existing network expansion category
(b) The New Cities expansion category.

Since both these categories are included under the same expansion program, therefore, this concern, amongst others, has caused reason to prepare the report.

The Existing Network Expansion Category: The inexorable logic from the afore stated will be that the cities of Pakistan in which U-Fone is already operational will inevitably be equipped with the network of MS Nortel. So, the neighboring cities of such areas where the services of mobile phone is already available have to be provided with the equipment of Nortel. It is logical and will of-course be cheaper too. These cities have been included in the further expansion program now being termed as the third phase.

The Board of Directors of U-Fone has approved this. The report said it might be worth mentioning that the Federal Minister for IT&T Awais Leghari recently appointed the majority of the Directors of the Board of both PTCL and U-Fone.

With these considerations, one is poised with an important issue and that is of the price i.e. will U-Fone pay the same price which it paid at the time of its start on, or will it be any other price. The report says that Nortel will and should remain as the solve vendor for the proposed expansion under this category.

The New Cities Expansion Category: The report said the government is trying to provide network in order to enable the U-Fone mobile telephone services to the people in other cities in addition to major ones.

Therefore, in order to procure equipment for these new proposed cities under the third phase, five new vendors were pre-qualified by the Board and the management of U-Fone for the bidding process namely Alcatel, Ericsson, Huawei Technologies, Motorola and Siemens.

But, the bids were leaked. The report has now suggested that the government may immediately constitute a committee to ensure something like this does not happen again. At the same time, we must also ensure that U-Fone does not lose its prospective customers either. But in any event, before the conclusion of the agreement, the NAB should approve it.

We may have recourse to any of the following:

(i) We can either recall for the entire re-tendering. This might cause a further delay of at least four to six months but as it is our main competitor Mobilink has won the race. It is opening its market to its customers in a couple of weeks.

(ii) Since the vendors will remain the same, we may alternatively ask all the remaining four to compete with each other in the presence of a committee especially constituted for the purpose. If this proposal is accepted, then the entire exercise should be over within a week and U-Fone may invariably save millions of US$ with our small efforts.

Moreover, Nortel will have to match the same price and it will.

(iii) it must be categorically borne in mind that there is no technological difference in the equipment of all these vendors. At least U-Fone’s management should not have any problem since they were the ones who pre-qualified all these categories after technical evaluation.

(iv) by this exercise, an important factor will also be elucidated. Nortel who has been enjoying monopoly status so far in supplying equipment and has been charging their desirable charges in connivance with PTCL management, this would have to be settled scores with us at our terms.

This exercise will also unveil the magnitude of the corruption in which our management has been actively involved.