Power to plunder

Zardari exploited every conceivable avenue to skim the exchequer right under the nose of his wife. Defence contracts, power plant projects, the privatisation 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, authorisations to build sugar mills, and the sale of government lands were all game for his greed.

In separate interviews to the New York Times, Bhutto and Zardari both denied the story of pillage, claiming they are victims of political vendetta.

The astonishing story of power and pelf was reported extensively in the newspaper on Friday in a story which began on page one and occupied two full inside pages running into some 10,000 words. The story is written by John Burns, the Times’ South Asia bureau chief and two-time Pulitzer Prize winner.

Burns says the newspaper conducted a three-month investigation into the subject after Pakistani investigators began releasing some of the Bhutto family documents, including “several thick binders full of documents” made available to it over several days in October. Investigations based on the documents substantiated the widely-held belief that Pakistan is among the most corrupt countries in the world. Transparency International’s sleaze list ranks Pakistan as the world’s second most corrupt country after Nigeria. India, at eighth, is not far behind.

The Pakistani Government came across documents relating to the Bhutto family’s foreign assets after it hired Jules Kroll Associates, a New York investigative agency, to look for evidence of corruption abroad. As the agency was sniffing around in Europe, an informer offered to sell documents that appeared to have been taken from the Geneva office of Jens Schlegelmilch, whom Benazir Bhutto described as the family’s attorney in Europe for more than 20 years, and as a close personal friend. The unidentified mole originally asked for $10 million for the documents but ultimately sold it to Pakistani officials, who moved in on the investigation when they sensed the explosive nature of the documents, 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’ were agreed on, and certificates incorporating the offshore companies used as fronts in the deals, many registered in the British Virgin Islands.

In the largest single payment investigators have discovered, Abdul Razzak, a gold bullion dealer in the Middle East, was shown to have deposited at least $10 million into one of Zardari’s accounts after the Bhutto government gave him a monopoly on gold imports that sustained Pakistan’s jewellery industry. The money was deposited into a Citibank account in Dubai, one of several Citibank accounts used by Zardari.

The rip-off began in January 1994, weeks after Bhutto began her second term, when her confidante Schlegelmilch (who developed his relationship with the Bhutto family through links between his Iranian-born wife and Bhutto’s mother, who was also born in Iran) established a British Virgin Island company known as Capricorn Trading, SA, with Zardari as its principal owner.

Nine months later, on Oct 5, 1994, an account was opened at the Dubai offices of Citibank in the name of Capricorn Trading. The same day, a Citibank deposit slip for the account shows a deposit of $5 million by Razzak’s company, ARY Traders. Two weeks later, another Citibank deposit slip showed that ARY had paid a further $5 million.

In November 1994, Pakistan’s Commerce Ministry wrote to Razzak informing him that he had been granted a licence that made him, for at least the next two years, Pakistan’s sole authorised gold importer.

In an interview to the New York Times in his office in Dubai, Razzak acknowledged that he had used the licence to import more than $500 million in gold into Pakistan, and that he had travelled to Islamabad several times to meet with Bhutto and Zardari. But he denied that there had been any secret deal. “I have not paid a single cent to Zardari,” he said, suggesting that the Citibank documents that showed his company paying the $10 million to Zardari were forged to destroy his reputation.

According to the Times, potentially the most lucrative deal uncovered by the documents involved the effort by Dassault Aviation, the French military contractor, to sell Pakistan 32 Mirage 2000-5 fighter planes. Dassault had agreed to pay Zardari and a Pakistani partner a $200- million commission for a $4 billion jet fighter deal which was scuppered when Bhutto’s government was dismissed.

According to the Times, Bhutto’s lawyer Schlegelmilch wrote a memo for his files describing his talks at Dassault’s headquarters on the Champs-Elysees in Paris. According to the memo, the company’s executives offered a `remuneration’ of 5 per cent to Marleton Business SA, an offshore company controlled by Zardari. The memo indicated that in addition to Dassault, the payoff would be made by two companies involved in the manufacture of the Mirages: Snecma, an engine manufacturer, and Thomson-CSF, a maker of aviation electronics.

The Mirages were to replace two squadrons of F-16s whose purchase was blocked when the Bush administration determined in 1990 that Pakistan was covertly developing nuclear weapons. The Times story suggests that Amer Lodhi, a Paris-based lawyer and banker who had lived for years in the United States, whose sister Maleeha Lodhi was Pakistan’s ambassador to the United States in 1994, was also in on the deal.

The Bhuttos siphoned off money from even routine domestic contracts aimed at improving the bleeding economy. In one case detailed by the investigation, a Swiss company hired to curb customs fraud in Pakistan paid millions of dollars between 1994 and 1996 to offshore companies controlled by Zardari and Bhutto’s widowed mother, Nusrat Bhutto.

Following pressure from the IMF to contain the budget deficit, plug leakage and increase revenues during Bhutto’s firm term, Pakistan entrusted pre-shipment `verification’ of all major imports to two reputed Swiss companies, Societe Generale de Surveillance SA and a subsidiary, Cotecna Inspection SA. But the Bhuttos slimed in on this too. In 1994, executives of the two Swiss companies wrote promising to pay “commissions” totaling 9 per cent to three offshore companies controlled by Zardari and Nusrat Bhutto.

A letter by one of the firms was blunt. “Should we receive, within six months of today, a contract for inspection and price verification of goods imported into Pakistan, we will pay you 6 per cent 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,” it said.

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. The investigators estimated that the Bhutto family companies made $11.8 million from the deals, at least a third of which showed up in banking documents the Nawaz Sharif Government has acquired.