KARACHI: Five former senior officials of National Bank of Pakistan (NBP) and two corporate chiefs are in the crosshairs of the National Accountability Bureau (NAB) for allegedly engaging in a fraud to the tune of Rs10.4 billion.

The accused include Azgard Nine Ltd CEO Abid Humayun Shaikh and CFO Abid Amin. The company is a Lahore-based textile concern. The accused also include NBP’s former president Abid Brohi and former chief operating officer Qamar Hussain. In addition, NBP’s former group chief for corporate and investment banking Nadeem Anwer Ilyas and former SEVPs Nausherwan Adil and Rafiq Bengali are also among the accused.

NAB filed a reference before an accountability court in Karachi against these officials alleging that they engaged in a “debt swap and master restructuring of loans” schemes on fraudulent grounds.

The reference alleges that when Azgard Nine was “under obligation to repay a sum of around Rs40bn to 63 different financial institutions, including Rs3.41bn to NBP”, the seven accused “in connivance with each other, devised a plan to settle the debt of 22 financial institutions amounting to Rs10.5bn, including Rs3.41bn of NBP, and entered in debt swap and master restructuring of loans.”

Reference alleges that accused colluded in a corrupt scheme to defraud the national exchequer of up to Rs3.3bn

The alleged scheme involved the banks purchasing shares of Agritech Ltd, a subsidiary of Azgard Nine, at a rate far above their market price. Azgard Nine then used the proceeds from the sale to settle a large part of the money owed to NBP and others.

A NAB investigation showed that the stock was purchased at Rs35 per share whereas its market price at the time was Rs13.47, with a calculated loss to the national exchequer to the tune of Rs3.3bn.

The reference claims that the pricing mechanism, whereby the shares were valued at such a premium over their market rate, was devised by Mr Ilyas, then chief of corporate and investment banking group at NBP. The allegedly fraudulent price was then approved by Mr Brohi, Mr Hussain, Mr Adil and Mr Bengali in their capacity as members of NBP’s credit committee.

The scheme was developed at NBP in early 2011. A consortium of banks, including some of Pakistan’s largest ones that were struggling with a mountain of nonperforming loans, agreed to participate because NBP assured them that it would buy the shares back from them at a future date at Rs35. According to one source with familiarity of the matter, that buyback was executed in 2016, possibly beginning slightly earlier, leaving NBP holding all the shares of Agritech that were part of the scheme and purchased at Rs35 each.

Agritech Ltd’s stock is currently trading at Rs8 per share.

Investigations by NAB got going by 2016, after verification and inquiry, and have now concluded with filing of this reference. All the seven accused are listed in the reference as absconders.

Published in Dawn, September 13th, 2017