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Bank of Punjab Scandal Unleashed Essay

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Over Rs 17bn more loans revealed by Hamesh Khan | Names four Bank of Punjab directors who got benefits for themselves| By Ansar Abbasi| | ISLAMABAD: Hamesh Khan’s stunning revelations before the NAB investigators have taken the lid off a unique scandal of the banking history in which the Bank of Punjab offered loans worth billions of rupees to the business concerns of its directors.

Sources said that all these directors were associated with the Bank of Punjab during Pervez Elahi’s tenure as chief minister Punjab, a point that might lead NAB to look into the political aspects of the BoP scam. “The Bank of Punjab is proving to be Pakistan’s “Enron”, with every day new discoveries are being made,” a source said, adding that Hamesh Khan has revealed to investigators that besides Salman Siddique, the incumbent federal secretary finance and four other directors appointed by former chief minister Pervaiz Elahi took loans from the BoP, while they were sitting BoD members.

One of these directors, Hamesh alleged, had purchased the Phalia Sugar Mills from the Chaudhrys of Gujrat. The incumbent BoP, President Naeem Khan, when approached confirmed that five directors of the BoP were recipient of huge BoP loans in violation of the policy of “good corporate governance”. Khan said that the conditions set in the good corporate governance principles were not followed while offering loans worth billions of rupees to the business concerns or relatives of the then directors.

He said the BoP has issued notices for repayment of loan money to four of its ex-directors and is also taking legal action against them. Khan said the criminal side of these controversial loaning is being looked into by the NAB, which has already obtained the relevant record from the BoP. Khan said the corporate governance of the BoP was at its worst during the last several years but he added during his tenure he has already got the law amendment to make sure that in future no director of the bank or any of his relative could be offered loan in any case. Even otherwise Section 19. of the Bank of Punjab Act 1988 envisages that the bank shall not grant any person who has been elected or appointed as a director and for so long as he continues to hold that office any advances, loan, credit limit, guarantee or other facilities, or alter to his advantage, loan, credit limit, guarantee or other facility granted before his election or appointment as a director. The News has already reported the case of conflict of interest of the incumbent secretary finance and the then director/acting chairman of the BoP as during his association with the BoP, his father was offered a loan of Rs40 million.

The said loan was, however, returned in 2008. But the case of other four ex-directors of the BoP is too serious as in their cases not only the amount involved is big it has yet to be re-paid. The four BoD members, who took loans against policy include Gohar Ejaz, Khurram Iftikhar, Fareed Mughees Sheikh and Mian Muhammad Latif. The sources said Gohar Ejaz was appointed BoD member in June 2003 by Ch Pervaiz Elahi to represent the government of Punjab, and he remained on BoD till April 2008.

These sources said and the BoP documents show that he took loans worth Rs974 million in the name of his companies Ejaz Spinning Mills Ltd and Ejaz Textile Mills Limited. However, when contacted, Gohar Ejaz categorically denied this. Khurram Iftikhar was made director in March 2007. The sources said that his companies borrowed loans of Rs 5. 6 billion in name of Amfort (Pvt) Ltd, Amtex Limited, and Shama Exports (Pvt) Ltd. These loans, the BoP president confirms, have run into problems following which the BoP has put the firms on notice.

He continued as BoD member of the BoP till April 2008. Khurram Iftikhar told The News that major part of the reported Rs5. 6 billion loan was obtained by his companies before he became the bank director. He added that he never got any of his loans rescheduled, did not get reduced mark-up rate or defaulted on any loan. He said the things are proceeding just normally between his companies and the BoP. Khurram Iftikhar also denied he is the director of all the three companies as reflected in the documents made available to The News.

Fareed Mughees Sheikh (CEO Colony Group) was appointed director of BoP in March 2007. Colony Group took loans worth Rs10 billion, now most of these loans have been labelled non-prudent loans and are included in the toxic and risky portfolio of BoP, and the bank is rescheduling them. This Group, as revealed by Hamesh Khan, purchased the Phalia Sugar Mills belonging to Ch Pervaiz Elahi, through loans taken out from the BoP during BoD incumbency of Fareed Sheikh who was also CEO of Colony Group, which purchased Chaudhrys Sugar Mill in 2007.

Fareed was contacted at his mobile number but it remained unanswered. Mian Muhammad Latif of Chenab Limited (Popularly known as Chen-One) was appointed director of BoP in October 2002. He got loan worth Rs1. 24 billion from BoP. He was also removed in 2008. Mian Latif when contacted said when the BoP opened its branch in Faisalabad during his directorship, it was housed in his building for which he never charged any rent. After one year, he said, the BoP approached him saying since the said Faisalabad branch was not doing good business so he should get into business with the Bank.

Latif said that on this he agreed but tendered his resignation before getting the loan facility/business limit from BoP BoD membership. He said he had clearly told the BoD that he would not continue as director of the BOP if he gets into business with the bank but his resignation was not accepted. Latif added that he was told that the BoP had got it cleared from the State Bank that he could continue as BoP BoD member. Mian Latif said the BoP loan given to his company is less than Rs1 billion. The bank sources, however, insist that if not all majority of the loans ffered to all the above ex-directors of the BoP were extended to their respective companies/business concerns during Hamesh Khan’s tenure and continued during their directorship. This situation shows that almost half of the directors had taken loans from the bank in violation of the banking policy and the corporate governance code. It is worth mentioning that it was the BOD, which had approved rescheduling of the “Harris Steel” fraudulent loan. None of the BoD members put the management on the mat for fraudulent lending to the Harris Steel. |

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