Capitalism's Achilles Heel Nawaz Sharif Exposed

Capitalism's Achilles Heel Nawaz Sharif Exposed Page 82 to 85

Nawaz Sharif.

 While Benazir Bhutto hated the generals for executing her father, Nawaz Sharif early on figured out that they held the real power in Pakistan. His father had established a foundry in 1939 and, together with six brothers, had struggled for years only to see their business nationalized by Ali Bhutto’s regime in 1972. This sealed decades of enmity between the Bhuttos and the Sharifs. Following the military coup and General Zia’s assumption of power, the business—Ittefaq—was returned to family hands in 1980. Nawaz Sharif became a director and cultivated relations with senior military officers. This led to his appointment as finance minister of Punjab and then election as chief minister of this most populous province in 1985. During the 1980s and early 1990s, given Sharif ’s political control of Punjab and eventual prime ministership of the country, Ittefaq Industries grew from its original single foundry into 30 businesses producing steel, sugar, paper, and textiles, with combined revenues of $400 million, making it one of the biggest private conglomerates in the nation. As in many other countries, when you control the political realm, you can get anything you want in the economic realm. With Lahore, the capital of Punjab, serving as the seat of the family’s power, one of the first things Sharif did upon becoming prime minister in 1990 was build his long-dreamed-of superhighway from there to the capital, Islamabad. Estimated to cost 8.5 billion rupees, the project went through two biddings. Daewoo of Korea, strengthening its proposals with midnight meetings, was the highest bidder both times, so obviously it won the contract and delivered the job at well over 20 billion rupees. A new highway needs new cars. Sharif authorized importation of 50,000 vehicles duty free, reportedly costing the government $700 million in lost customs duties. Banks were forced to make loans for vehicle purchases to would-be taxi cab drivers upon receipt of a 10 percent deposit. Borrowers got their “Nawaz Sharif cabs,” and some 60 percent of them promptly defaulted. This left the banks with $500 million or so in unpaid loans. Vehicle dealers reportedly made a killing and expressed their appreciation in expected ways. Under Sharif, unpaid bank loans and massive tax evasion remained the favorite ways to get rich. Upon his loss of power the usurping governmentpublished a list of 322 of the largest loan defaulters, representing almost $3 billion out of $4 billion owed to banks. Sharif and his family were tagged for $60 million. The Ittefaq Group went bankrupt in 1993 when Sharif lost his premiership the first time. By then only three units in the group were operational,
and loan defaults of the remaining companies totaled some 5.7 billion rupees, more than $100 million.67Like Bhutto, offshore companies have been linked to Sharif, three in the British Virgin Islands by the names of Nescoll, Nielson, and Shamrock68 and another in the Channel Islands known as Chandron Jersey Pvt. Ltd.69 Some of these entities allegedly were used to facilitate purchase of four rather grand flats on Park Lane in London, at various times occupied by Sharif family members. Reportedly, payment transfers were made to Banque Paribas en Suisse, which then instructed Sharif ’s offshore companies Nescolland Nielson to purchase the four luxury suites.70In her second term, Benazir Bhutto had Pakistan’s Federal InvestigatingAgency begin a probe into the financial affairs of Nawaz Sharif and his family.The probe was headed by Rehman Malik, deputy director general of theagency. Malik had fortified his reputation earlier by aiding in the arrest ofRamzi Yousef, mastermind of the 1993 World Trade Center bombing. DuringSharif ’s second term, the draft report of the investigation was suppressed,Malik was jailed for a year, and later reportedly survived an assassination attempt, after which he fled to London. The Malik report, fiveyears in the making, was released in 1998, with explosive revelations:The records, including government documents, signed affidavits fromPakistani officials, bank files and property records, detail deals that Mr.Malik says benefited Mr. Sharif, his family and his political associates:• At least $160 million pocketed from a contract to build a highwayfrom Lahore, his home town, to Islamabad, the nation’s capital.• At least $140 million in unsecured loans from Pakistan’s state banks.• More than $60 million generated from government rebates onsugar exported by mills controlled by Mr. Sharif and his businessassociates.• At least $58 million skimmed from inflated prices paid for importedwheat from the United States and Canada. In the wheatdeal, Mr. Sharif ’s government paid prices far above market valueto a private company owned by a close associate of his in Washington,the records show. Falsely inflated invoices for the wheat generatedtens of millions of dollars in cash.71The report went on to state that “The extent and magnitude of this corruptionis so staggering that it has put the very integrity of the country atstake.”72 In an interview, Malik added: “No other leader of Pakistan hastaken that much money from the banks. There is no rule of law in Pakistan.It doesn’t exist.”73What brought Sharif down in his second term was his attempt to acquirevirtually dictatorial powers. In 1997 he rammed a bill through hiscompliant parliament requiring legislators to vote as their party leaders directed.In 1998 he introduced a bill to impose Sharia law (Muslim religiouslaw) across Pakistan, with himself empowered to issue unilateral directives inthe name of Islam. In 1999 he sought to sideline the army by replacingChief of Staff Pervez Musharraf with a more pliable crony. He forgot thelessons he had learned in the 1980s: The army controls Pakistan and politiciansare a nuisance. As Musharraf was returning from Sri Lanka, Shariftried to sack him in midair and deny the Pakistan International Airwaysflight with 200 civilians on board landing rights in Karachi. Musharraf radioedfrom the aircraft through Dubai to his commander in Karachi, ordering him to seize the airport control tower, accomplished as the plane descendedalmost out of fuel. Musharraf turned the tables and completed hiscoup, and Sharif was jailed.But Sharif had little to fear. This, after all, is Pakistan. Musharraf neededto consolidate his power with the generals, and Sharif knew details about thecorruption of most of the brass. Obviously, it is better to tread lightlyaround the edges of your peer group’s own thievery. So Musharraf had Sharifprobed, tried, convicted, and sentenced to life in prison, but then in 2000exiled him to Saudi Arabia. Twenty-two containers of carpets and furniturefollowed, and, of course, his foreign accounts remained mostly intact. Ensconcedin a glittering palace in Jeddah, he is described as looking “corpulent”amidst “opulent” surroundings.74 Reportedly, he and Benazir Bhuttoeven have an occasional telephone conversation, perhaps together lamentinghow unfair life has become.and loan defaults of the remaining companies totaled some 5.7 billion rupees, more than $100 million.67Like Bhutto, offshore companies have been linked to Sharif, three in the British Virgin Islands by the names of Nescoll, Nielson, and Shamrock68 and another in the Channel Islands known as Chandron Jersey Pvt. Ltd.69 Some of these entities allegedly were used to facilitate purchase of four rather grand flats on Park Lane in London, at various times occupied by Sharif family members. Reportedly, payment transfers were made to Banque Paribas en Suisse, which then instructed Sharif ’s offshore companies Nescolland Nielson to purchase the four luxury suites.70In her second term, Benazir Bhutto had Pakistan’s Federal InvestigatingAgency begin a probe into the financial affairs of Nawaz Sharif and his family.The probe was headed by Rehman Malik, deputy director general of theagency. Malik had fortified his reputation earlier by aiding in the arrest ofRamzi Yousef, mastermind of the 1993 World Trade Center bombing. DuringSharif ’s second term, the draft report of the investigation was suppressed,Malik was jailed for a year, and later reportedly survived an assassination attempt, after which he fled to London. The Malik report, fiveyears in the making, was released in 1998, with explosive revelations:The records, including government documents, signed affidavits fromPakistani officials, bank files and property records, detail deals that Mr.Malik says benefited Mr. Sharif, his family and his political associates:• At least $160 million pocketed from a contract to build a highwayfrom Lahore, his home town, to Islamabad, the nation’s capital.• At least $140 million in unsecured loans from Pakistan’s state banks.• More than $60 million generated from government rebates onsugar exported by mills controlled by Mr. Sharif and his businessassociates.• At least $58 million skimmed from inflated prices paid for importedwheat from the United States and Canada. In the wheatdeal, Mr. Sharif ’s government paid prices far above market valueto a private company owned by a close associate of his in Washington,the records show. Falsely inflated invoices for the wheat generatedtens of millions of dollars in cash.71The report went on to state that “The extent and magnitude of this corruptionis so staggering that it has put the very integrity of the country atstake.”72 In an interview, Malik added: “No other leader of Pakistan hastaken that much money from the banks. There is no rule of law in Pakistan.It doesn’t exist.”73What brought Sharif down in his second term was his attempt to acquirevirtually dictatorial powers. In 1997 he rammed a bill through hiscompliant parliament requiring legislators to vote as their party leaders directed.In 1998 he introduced a bill to impose Sharia law (Muslim religiouslaw) across Pakistan, with himself empowered to issue unilateral directives inthe name of Islam. In 1999 he sought to sideline the army by replacingChief of Staff Pervez Musharraf with a more pliable crony. He forgot thelessons he had learned in the 1980s: The army controls Pakistan and politiciansare a nuisance. As Musharraf was returning from Sri Lanka, Shariftried to sack him in midair and deny the Pakistan International Airwaysflight with 200 civilians on board landing rights in Karachi. Musharraf radioedfrom the aircraft through Dubai to his commander in Karachi, ordering him to seize the airport control tower, accomplished as the plane descendedalmost out of fuel. Musharraf turned the tables and completed hiscoup, and Sharif was jailed.But Sharif had little to fear. This, after all, is Pakistan. Musharraf neededto consolidate his power with the generals, and Sharif knew details about thecorruption of most of the brass. Obviously, it is better to tread lightlyaround the edges of your peer group’s own thievery. So Musharraf had Sharifprobed, tried, convicted, and sentenced to life in prison, but then in 2000exiled him to Saudi Arabia. Twenty-two containers of carpets and furniturefollowed, and, of course, his foreign accounts remained mostly intact. Ensconcedin a glittering palace in Jeddah, he is described as looking “corpulent”amidst “opulent” surroundings.74 Reportedly, he and Benazir Bhuttoeven have an occasional telephone conversation, perhaps together lamentinghow unfair life has become.and loan defaults of the remaining companies totaled some 5.7 billion rupees, more than $100 million.67Like Bhutto, offshore companies have been linked to Sharif, three in the British Virgin Islands by the names of Nescoll, Nielson, and Shamrock68 and another in the Channel Islands known as Chandron Jersey Pvt. Ltd.69 Some of these entities allegedly were used to facilitate purchase of four rather grand flats on Park Lane in London, at various times occupied by Sharif family members. Reportedly, payment transfers were made to Banque Paribas en Suisse, which then instructed Sharif ’s offshore companies Nescolland Nielson to purchase the four luxury suites.70In her second term, Benazir Bhutto had Pakistan’s Federal InvestigatingAgency begin a probe into the financial affairs of Nawaz Sharif and his family.The probe was headed by Rehman Malik, deputy director general of theagency. Malik had fortified his reputation earlier by aiding in the arrest ofRamzi Yousef, mastermind of the 1993 World Trade Center bombing. DuringSharif ’s second term, the draft report of the investigation was suppressed,Malik was jailed for a year, and later reportedly survived an assassination attempt, after which he fled to London. The Malik report, fiveyears in the making, was released in 1998, with explosive revelations:The records, including government documents, signed affidavits fromPakistani officials, bank files and property records, detail deals that Mr.Malik says benefited Mr. Sharif, his family and his political associates:• At least $160 million pocketed from a contract to build a highwayfrom Lahore, his home town, to Islamabad, the nation’s capital.• At least $140 million in unsecured loans from Pakistan’s state banks.• More than $60 million generated from government rebates onsugar exported by mills controlled by Mr. Sharif and his businessassociates.• At least $58 million skimmed from inflated prices paid for importedwheat from the United States and Canada. In the wheatdeal, Mr. Sharif ’s government paid prices far above market valueto a private company owned by a close associate of his in Washington,the records show. Falsely inflated invoices for the wheat generatedtens of millions of dollars in cash.71The report went on to state that “The extent and magnitude of this corruptionis so staggering that it has put the very integrity of the country atstake.”72 In an interview, Malik added: “No other leader of Pakistan hastaken that much money from the banks. There is no rule of law in Pakistan.It doesn’t exist.”73What brought Sharif down in his second term was his attempt to acquirevirtually dictatorial powers. In 1997 he rammed a bill through hiscompliant parliament requiring legislators to vote as their party leaders directed.In 1998 he introduced a bill to impose Sharia law (Muslim religiouslaw) across Pakistan, with himself empowered to issue unilateral directives inthe name of Islam. In 1999 he sought to sideline the army by replacingChief of Staff Pervez Musharraf with a more pliable crony. He forgot thelessons he had learned in the 1980s: The army controls Pakistan and politiciansare a nuisance. As Musharraf was returning from Sri Lanka, Shariftried to sack him in midair and deny the Pakistan International Airwaysflight with 200 civilians on board landing rights in Karachi. Musharraf radioedfrom the aircraft through Dubai to his commander in Karachi, ordering him to seize the airport control tower, accomplished as the plane descendedalmost out of fuel. Musharraf turned the tables and completed hiscoup, and Sharif was jailed.But Sharif had little to fear. This, after all, is Pakistan. Musharraf neededto consolidate his power with the generals, and Sharif knew details about thecorruption of most of the brass. Obviously, it is better to tread lightlyaround the edges of your peer group’s own thievery. So Musharraf had Sharifprobed, tried, convicted, and sentenced to life in prison, but then in 2000exiled him to Saudi Arabia. Twenty-two containers of carpets and furniturefollowed, and, of course, his foreign accounts remained mostly intact. Ensconcedin a glittering palace in Jeddah, he is described as looking “corpulent”amidst “opulent” surroundings.74 Reportedly, he and Benazir Bhuttoeven have an occasional telephone conversation, perhaps together lamentinghow unfair life has become.

Capitalism's Achilles Heel Scandal PPP

Benazir Bhutto. Born in Karachi in 1953 and educated in private
schools, Benazir Bhutto graduated from Radcliffe College at Harvard University
in 1973. Going on to Oxford for a master’s degree, she displayed her
budding political skills and was elected president of the Student Union in
1977. Meanwhile, her father had become prime minister of Pakistan in

1971, was ousted in a military coup in 1977, and was executed in 1979 on
charges of conspiracy to commit murder. In and out of prison and house arrest,
Benazir was not allowed to leave the country until 1984 but then returned
to lead the democracy movement two years later. Her father’s
usurper, General Muhammad Zia ul-Haq, was killed in a mysterious plane
crash in 1988, which also took the life of the U.S. ambassador Arnold
Raphel, and the head of the U.S. military aid mission to Pakistan, General
H.M. Wasson. Benazir was elected prime minister that year, served until her
ouster in 1990 on charges of corruption and nepotism, was reelected in
1993, and ousted again in 1996, amidst more charges of corruption. During
her two terms in office and since, what has come out portrays Bhutto and
her husband Asif Ali Zardari as world-class thieves.
Upon taking office in 1988, Bhutto reportedly appointed 26,000 party
hacks to state jobs, including positions in state-owned banks. An orgy of
lending without proper collateral followed. Allegedly, Bhutto and Zardari
“gave instructions for billions of rupees of unsecured government loans to be
given to 50 large projects. The loans were sanctioned in the names of ‘front
men’ but went to the ‘Bhutto-Zardari combine.’ ”52 Zardari suggested that
such loans are “normal in the Third World to encourage industrialisation.”53
He used 421 million rupees (about £10 million) to acquire a major interest
in three new sugar mills, all done through nominees acting on his behalf. In
another deal he allegedly received a 40 million rupee kickback on a contract
involving the Pakistan Steel Mill, handled by two of his cronies. Along the
way Zardari acquired a succession of nicknames: Mr. 5 Percent, Mr. 10 Percent,
Mr. 20 Percent, Mr. 30 Percent, and finally, in Bhutto’s second term
when he was appointed “minister of investments,” Mr. 100 Percent.
The Pakistan government’s largest source of revenues is customs duties,
and therefore evasion of duties is a national pastime. Isn’t there some way to
tap into this major income stream, pretending to fight customs corruption
and getting rich at the same time? Of course; we can hire a reputable (or disreputable,
as the case may be) inspection company, have the government pay
the company about a one percent fee to do price checking on imports, and
get multimillion-dollar bribes paid to us upon award of the contracts. Société
Générale de Surveillance (SGS), headquartered in Switzerland, and its then
subsidiary Cotecna, the biggest group in the inspection business, readily
agreed to this subterfuge. Letters in 1994 promised “consultancy fees,” meaning
kickbacks, of 6 percent and 3 percent to two British Virgin Island (BVI)

companies, Bomer Finances Inc. and Nassam Overseas Inc., controlled by
Bhutto and Zardari. Payments of $12 million were made to Swiss bank accounts
of the BVI companies.54 SGS allegedly has paid kickbacks on other inspection
contracts around the world. Upon being accused in the inspection
kickback scheme, Bhutto sniffed, “I ran the government to the best of my
honest ability. And I did it for nothing but acknowledgment and love.”55
Then there was the 1994 deal to import $83 million worth of tractors
from Poland. Ursus Tractors allegedly paid a 7 percent commission to another
of Zardari’s Caribbean companies, Dargal Associated. Bhutto waived
import duties on the tractors, costing the Pakistani government some 1.7
billion rupees in lost revenues. Upon discovery of this scheme the Poles hastened
to turn over 500 pages of documentation confirming the kickback.56
The Polish tractor deal was just a warm-up for the French fighter jet
deal. After the U.S. government cancelled a sale of two squadrons of F-16s,
Bhutto dangled a $4 billion contract for Mirages in front of the French—
Dassault Aviation; Snecma, the engine manufacturer; and Thomson-CSF,
producer of aviation electronics. Without missing a beat they allegedly
agreed to pay a “remuneration” of 5 percent to Marleton Business S.A., yet
another of Zardari’s British Virgin Island companies.57 This would have generated
a tidy $200 million for the Bhutto-Zardari couple, but unfortunately
for them she was driven from office before they could collect.
Ah, but the gold deal gave some comfort to these aspiring kleptocrats.
Gold is culturally important in the Asian subcontinent, in particular as a
way for women to accumulate wealth. Upwards of $100 billion is invested
in this unproductive asset in Pakistan, India, and surrounding countries.
Smuggling is big business. Ostensibly to regulate the trade, a Pakistani bullion
dealer in Dubai, Abdul Razzak Yaqub, asked Bhutto for an exclusive
import license. In 1994, yet another Zardari offshore company, M.S. Capricorn
Trading, was created in the British Virgin Islands. Later in the year, Jens
Schlegelmilch, “a Swiss lawyer who was the Bhutto family’s attorney in Europe
and close personal friend for more than 20 years,”58 opened an account
for Capricorn Trading at the Dubai branch of Citibank. According to a
1999 U.S. Senate report: “Mr. Schlegelmilch did not reveal to the Dubai
banker that Mr. Zardari was the beneficial owner of the PIC [private investment
company], and the account manager never asked him the identity of
the beneficial owner of the account. . . . Shortly after opening the account in
Dubai, Mr. Schlegelmilch signed a standard referral agreement with

Citibank Switzerland private bank guaranteeing him 20 percent of the first
three years of client net revenues earned by the bank from each client he referred
to the private bank.”59 In other words, Citibank was contracting to
pay a finder’s fee for millions brought in from dubious sources. Citibank
went on to open three accounts in Switzerland for Zardari, with
Schlegelmilch as the signatory.
In October 1994, Citibank records show that $10 million was deposited
into Capricorn’s Dubai account by Razzak Yaqub’s company, A.R.Y. International
Exchange.60 In December, Razzak Yaqub received an exclusive import
license and proceeded over the next three years to ship more than $500 million
in gold to Pakistan. Additional deposits flowed into the Dubai and
Swiss Citibank accounts, and funds also were shifted to Citibank Channel
Island subsidiaries. The original ceiling on the accounts of $40 million was
reached quickly.61
Toward the end of her second term, the Bhutto case took a bizarre turn.
Representatives of the Pakistan Muslim League, an opposition party, met in
1995 with private investigators in London who offered documentary proof
from an unnamed source of Bhutto’s corruption, in return for a modest fee
of $10 million. That deal was not consummated, but two years later, with
Bhutto out of office and under investigation, the offer was reportedly concluded
for $1 million.62 The documents “appeared to have been taken from
the Geneva office of Jens Schlegelmilch.”63
In 2000 Pakistan’s National Accountability Bureau, with the thankless
task of investigating corruption, drew upon these documents and other
sources and released details of assets and accounts belonging to Bhutto and
Zardari. Even to jaded observers, the scale of their holdings was stunning:
hundreds of properties, dozens of companies, and dozens of bank accounts.
A partial listing of only foreign holdings reported by the National Accountability
Bureau is provided in Table 3.4.64
Summarizing this and other documentation, the New York Times reported
that the material included “. . . letters from executives promising
payoffs, with details of the percentage payments to be made; memorandums
detailing meetings at which these ‘commissions’ and ‘remunerations’ were
agreed on, and certificates incorporating the offshore companies used as
fronts in the deals. . . . The documents also revealed the crucial role played
by Western institutions. Apart from the companies that made payoffs, and
the network of banks that handled the money . . . the arrangements made by

TABLE 3.4 FOREIGN ASSETS ALLEGEDLY BELONGING TO BHUTTO AND ZARDARI
Country Properties/Companies Bank Accounts
United Rockwood Estate, Surrey, 20 Barclays Bank, 3 accounts;
Kingdom room mansion, 355 acres, polo National Westminster Bank;
grounds; 4 London flats Harrods Bank; Midland Bank
France Normandy chateau, in Crédit Agricole, 3 accounts;
Zardari’s parents’ name; Banque Nationale de Paris; Banque
Cannes properties La Henin
Switzerland Union Bank of Switzerland;
Barclays Bank (Geneva); Citibank
(Geneva); Banque Nationale de
Paris; Swiss Bank Corporation;
Credit Suisse; Pictet et Cie; Banque
Francaise du Commerce; Cantrade
Ormond Burrus; Banque Pasha
United Wellington Club East, Florida; Barclays Bank, New York;
States India Mound, Florida; Citibank, New York;
3 residential properties, UBS, New York
Florida; Lapworth Investment,
Florida; Intro Food, Florida;
Dynatel Trading, Florida; A.S.
Realty, Florida; Bon Voyage
Travel, Florida
British Bomer Finance, Mariston
Virgin Securities, Marleton Business,
Islands Capricorn Trading, Dargal
Associated, Fargarita Consulting,
Marvil Associated, Penbury
Finance, Oxton Trading,
Brinslen Investment, Climitex
Holding, Elkins Holding,
Minterler Invest, Silvernut
Investment, Tacolen Investment,
Tulerston Invest, Marledon
Invest, Dustan Trading,
Reconstruction and Development
Finance, Nassam Alexander


the Bhutto family for their wealth relied on Western property companies,
Western lawyers and a network of Western friends.”65
Even the Swiss finally had had enough. Seventeen bank accounts linked
to Bhutto and Zardari were frozen. The two were charged with money laundering
in connection with bribes received from the inspection company
SGS and were convicted by a Swiss court in 2003, with fines and suspended
prison sentences. This was short-lived; the decision was overturned and referred
back to cantonal prosecutors upon appeal. Meanwhile, Zardari was in
prison in Pakistan from 1996 to 2004 on assorted charges.
Bhutto, with her father executed, two brothers assassinated, her mother
an amnesiac, her husband still troublesome, and she living in exile between
London and Dubai, portrays herself as the victim: “I never asked for power.
I think they [the Pakistani people] need me. I don’t think it’s addictive. You
want to run away from it, but it doesn’t let you go. . . . I think the reason
this happens is that we want to give love and we receive love.”66
Save your tears. In the global collection of displaced leaders, Benazir
Bhutto may be the least sympathetic character of all.

SC concern about missing Persons