Pakistani Corruption, Western Banks

Benazir Bhutto and tales of Corruption

By Salah Uddin Shoaib Choudhury—— Bio and Archives--October 19, 2007

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During her two terms in the office of Prime Minister in Pakistan, Benazir Bhutto, daughter of Zulfiqar Ali Bhutto acquired wealth and cash worth a few hundred million dollars, most of which is located in Europe and Middle East.


According to investigation reports available with Pakistani authorities, Benazir, a student at Harvard and Oxford for six years in the 1970s, has been a vocal critic of “avaricious politicians.” In a Harvard commencement speech in 1989, she said that such people had looted developing countries and left them without the means to tackle their social problems. Since she was ousted as prime minister during her second term, on Nov. 5, 1996, on charges that included gross corruption, she has been the leader of Pakistan’s main opposition group, the Pakistan People’s Party.

Ms. Butto corruption stories started coming within the radar of Pakistani military ruler Pervez Musharraf when an informer offered to sell documents that appeared to have been taken from the Geneva office of Jens Schlegelmilch, whom Bhutto described as the family’s attorney in Europe for more than 20 years, and as a close personal friend. Pakistani investigators have confirmed that the original asking price for the documents was $10 million. Eventually the seller traveled to London and concluded the deal for $1 million in cash. The documents included: statements for several accounts in Switzerland, including the Citibank accounts in Dubai and Geneva; 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, many registered in the British Virgin Islands. 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—which included Barclay’s Bank and Union Bank of Switzerland as well as Citibank—the arrangements made by the Bhutto family for their wealth relied on Western property companies, Western lawyers and a network of Western friends.

The Bhuttos are among a few hundred so-called feudal families, mostly large landowners, that have dominated politics and business in Pakistan since its creation in 1947. Benazir’s father, Zulfiqar Ali Bhutto was an Oxford-educated landowner who became Pakistan’s prime minister in the 1970s, only to be ousted and jailed in 1977 when his military chief, Gen. Mohammed Zia ul-Haq, mounted a coup. Zulfiqar was hanged two years later, after he refused Zia’s offer of clemency for a murder conviction that many Pakistanis regarded as politically tainted. Benazir Bhutto, the eldest of four children, spent the next decade under house arrest, in jail or in self-imposed exile, campaigning against Zia’s military regime.

In 1987, Benazir married Asif Ali Zardari, little known then for anything but a passion for polo. It was an arranged union, with Bhutto’s mother picking the groom. Many Pakistanis were startled by the social and financial differences. By the Bhuttos’ standards, Zardari’s family was of modest means, with limited holdings and a rundown movie theater in Karachi. Zardari’s only experience of higher education was a stint at a commercial college in London. In part, the marriage was intended to protect Benazir’s political career by countering conservative Muslims’ complaints about her unmarried status.

In 1988, Benazir became Pakistan’s first female Prime Minister, when General Ziaul Huq was killed in a plane crash. Many Pakistanis still speak of the mesmeric effect she had at that moment, as the daughter who had avenged her father and the politician who had restored democracy. Twenty months after she took office, Benazir was dismissed by Pakistan’s president on grounds of corruption and misrule. But the Nawaz Sharif government that succeeded her was unable to secure any convictions against Benazir or her husband before Sharif, in turn, was ousted from office, also for corruption and misrule. When Benazir Bhutto took office as prime minister again, after a victory in 1993, Bhutto struck many of her friends as a changed person, obsessed with her dismissal in 1990, high-handed to the point of arrogance, and contemptuous of the liberal principles she had placed at the center of her politics in the 1980s. Moreover, twin posts, as prime minister and finance minister, gave her virtually free rein. Asif Zardari became her alter ego, riding roughshod over the bureaucracy although he had no formal economic powers until Bhutto appointed him Investment Minister, reporting only to herself, in July 1996. They maintained an imperial lifestyle in the new prime minister’s residence in Islamabad, a $50 million mansion set on 110 acres on an Islamabad hilltop. Among the transactions Zardari exploited, according to these officials: defense contracts; power plant projects; the privatization of state-owned industries; the awarding of broadcast licenses; the granting of an export monopoly for the country’s huge rice harvest; the purchase of planes for Pakistan International Airlines; the assignment of textile export quotas; the granting of oil and gas permits; authorizations to build sugar mills, and the sale of government lands. Benazir Bhutto and Zardari took pains to avoid creating a documentary record of their role in hundreds of deals. The couple adopted a system under which they assigned favors by writing orders on yellow Post-It notes and attaching them to official files. After the deals were completed, the notes were removed, destroying all trace of involvement.

One deal that appears to have made a handsome profit for Zardari involved Pakistan’s effort to increase its customs revenues. Since fewer than one in every 100 Pakistanis pays income tax, customs revenues represent the state’s largest revenue source. But for decades the system has been corrupted, with businesses under invoicing imports, or paying bribes, to escape duties. In the 1980s, Pakistan came under pressure from the International Monetary Fund to increase government revenues and to cut a runaway budget deficit. During Bhutto’s first term, Pakistan entrusted pre-shipment “verification” of all major imports to two Swiss companies with blue-ribbon reputations, Societe Generale de Surveillance SA [SGS] and a subsidiary, Cotecna Inspection SA. But this stab at improving Pakistan’s fiscal soundness was quickly turned to generating profits for the Bhutto family’s accounts, as both the companies got into making fabulous amount of cash by issuing certificate on under invoiceing as well sharing the profit with the power house. This is not the only case in Pakistan, these Swiss companies are allegedly involved in corruption in a number of countries, wherever they got the assignments of issuing certificates on the pricing of the products. In Bangladesh too, Cotecna is recently accused of issuing certificate to the under invoiced import of luxurious Hammer jeeps. Most of the pre-shipment inspection companies enlisted to issue ‘Clean Report of Findings’ made huge amounts of money through illegal means under the hidden support of the people in power.

In 1994, executives of the two Swiss companies wrote, promising to pay “commissions” totaling 9 percent to three offshore companies controlled by Asif Ali Zardari and Nusrat Bhutto [Benazir’s mother]. A Cotecna letter in June 1994 was direct: “Should we receive, within six months of today, a contract for inspection and price verification of goods imported into Pakistan,” it read, “we will pay you 6 percent of the total amount invoiced and paid to the government of Pakistan for such a contract and during the whole duration of that contract and its renewal.” Similar letters, dated March and June 1994, were sent by Societe Generale de Surveillance, promising “consultancy fees” of 6 percent and 3 percent to two other offshore companies controlled by the Bhutto family. According to Pakistani investigators, the two Swiss companies inspected more than $15.4 billion in imports into Pakistan from January 1995 to March 1997, making more than $131 million. Bhutto family companies made $11.8 million from the deals. For Societe Generale de Surveillance, with 35,000 employees and more than $2 billion a year in earnings, the relationship with the Bhutto family has been painful. In addition to doing customs inspections, the company awards certificates of technical quality. In effect, its business is integrity.

The Pakistani investigation of Benazir’s two terms in office has tied a range of overseas properties to her husband and other family members. Among these are Rockwood, a 355-acre estate south of London, and a $2.5 million country manor in Normandy. The listed owners of the manor, which is known as the House of the White Queen, are Hakim and Zarrin Zardari, Bhutto’s parents-in-law, who had only modest assets when she married Zardari. Other properties that Pakistani investigators have linked to members of the Bhutto family include a string of luxury apartments in London. Pakistan has asked the U.S. Justice Department to investigate still more bank accounts and properties, including a country club and a polo ranch in Palm Beach County, Fla., said to be worth about $4 million, that were bought by associates of Zardari in the mid-1990s.

Both Benazir and her husband, Asif Ali Zadari, who has been in prison since she was ousted from office in 1996 for corruption, have been sentenced to five years in prison. However, Benazir repeatedly claimed that the Bhuttos cannot get a fair trial in Pakistan, which is probably true. Pakistan’s corrupt legal system is an extension of tribal warfare: judges and witness, like its venal politicians, are bought and sold like so many bags of basmati rice. Being convicted, Benazir already lost her right to run for office and even her extensive personal property. But, latest developments in Pakistan evidently show that, by reaching into a secret understanding with President Pervez Musharraf, Benazir is not only re-attaining her right to be in politics but also going to burry all corruption charges, proved by investigators through months of hard work.

Many cynical Pakistanis discounted accusations against the Bhuttos as a frame-up. But all this changed when incorruptible Swiss federal prosecutors announced the Bhuttos and their Pakistan People’s Party had hidden at least 20 million Swiss francs (C$20 million) made from money laundering, illegal payoffs, and, possibly, drug dealing in numbered accounts in Geneva. ‘Few people believed the Pakistani government charges,’ Benazir said, ‘until the Swiss investigation. But that changed everything.’ Indeed. Not only did the Swiss charges widely discredit the Bhutto clan in Pakistan, the accusations of massive bribery and drug dealing caused Benazir’s many ardent supporters in Washington and the western media, whom she was seeking to enlist to her cause, to give her the cold shoulder. Why would the normally discreet, cautious Swiss bring such inflammatory charges unless they had overwhelming proof of guilt?

Benazir, who is deeply in love with Asif Zadari, seems not to have seen any of this. As Balzac wryly noted, ‘when women love us, they forgive us everything…’ but added, ‘women, when they are not in love, have all the cold blood of an experienced attorney.’ I believe Benazir shut her eyes to the rapaciousness of her family. One sympathizes with her as a wife whose judgment may have been clouded by emotion and loyalty. But in her role as prime minister, and the first woman to head an Islamic nation, she should have been more the cold-blooded attorney and less the adoring wife.

Pakistan is already in a huge mess. But aside from the perennial Benazir and Nawaz, no other national leaders have sprung from Pakistan’s arid political soil. The middle class, as Benazir observes, has no influence at all. Pakistan’s Islamic parties have little more. The only national institution that works, and commands respect, is the military. But, this time, possibly this very institution is also going to bear the fate of uncertainty as being mis-utilized by General Musharraf.

Salah Uddin Shoaib Choudhury is the editor & publisher of The Weekly Blitz. He is a journalist, columnist, author and Peace activist. He is the recipient of PEN USA Freedom to Write Award 2005, Recipient of American Jewish Committee Moral Courage Award 2006.

Salah can be reached at: .(JavaScript must be enabled to view this email address)


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