KARACHI, Sept 15: The Security and Exchange Commission of Pakistan (SECP) in its final report held the main sponsors of the Crescent Standard Investment Bank (CSIBL) responsible for the loss caused to the stakeholders and depositors and said the bank’s license should be cancelled.

The commission’s third report published on August 29, 2006 was the final one but was not made public. The 30-page report reveals violations, frauds and losses made by the bank and its management.

The report said that the main sponsors--Anjum M Saleem and Altaf M Saleem--used the bank’s assets illegally for personal benefits.

“It has come to the knowledge of the commission that the bank paid Rs50 million each on behalf of Altaf Saleem, sponsor of Crescent Group and Anjum Saleem, sponsor and chief executive of the bank,” said the third inspection report.

The facility of Rs50 million each was granted by Habib Bank Ltd to Altaf Saleem and Anjum Saleem against a pledging of equity portfolio of CSIBL. Shares of PICIC valued at Rs124.88 million, SNGPL Rs1.55 million, PIA Rs15.26 million and SSGC Rs3.29 million were pledged.

By April 10, 2006 the facility of CSIBL of Rs100 million towards Altaf Saleem and Anjum Saleem had been settled by way of premature encashment of Certificates of Investment (COIs) to the tune of Rs95.04 million except outstanding COIs of nominal amount of Rs4.62 million to be matured in September and October 2006.

Anjum Saleem was appointed as director on March 9, 2006 and bank’s chief executive on April 1, 2006.

The report says that due to the payment of Rs100 million, CSIBL got its equity portfolio released from the HBL that was initially pledged by CSIBL to enable Altaf Saleem and Anjum Saleem to obtain running finance facilities.

“As CSIBL had already paid to Altaf Saleem and Anjum Saleem their principal amount of Rs95.04 million as well as mark-up (on April 10, 2006), therefore, payment against personal running finance facilities of Rs100 million tantamount to embezzlement of funds of CSIBL,” said the commission’s report.

“It may be concluded that the CSIBL’s assets to the extent of Rs100 million have been misappropriated,” said the report.

The commission’s finding showed that the directors of the bank were made irrelevant and the actual transactions and reports were not approved by the board.

The report said that in reply to the show cause notices issued by the commission to the directors, it was admitted that the management of the bank had been guilty of unlawful and fraudulent conduct. It was also pleaded that the board of directors was not aware of such conduct. Chairman and director of the bank Manzur ul Haq said in a letter to the commission that recent events like the unearthing of the J.O. Vohra transaction and the sale of assets of the bank without the board’s prior approval or knowledge “bring me to the sad conclusion that the board at best is irrelevant at the bank.

Directors of the bank were also quoted in the third inspection report of the commission that they were not aware of the illegal working of the management.

The bank had been maintaining double books to hide its transactions and was found involved in investment in its own subsidiary companies.

The equity of the bank had been eroded to the tune of Rs2.082 billion (in negative) as of August 26, 2006. “So it does not have the minimum regulatory equity of Rs300 million as required for the business of investment finance services, and Rs200 million as required for the business of leasing,” the report said.

“The bank is, therefore, in violation of the stipulated conditions for holding the licenses in terms of the NBFC Rules,” said the commission report.

The bank’s total deposits showed a figure of Rs6.049 billion, including Rs1.929 billion deposits of individuals and Rs4.120 billion of corporate and institutional clients.

The deposits of Sialkot International Airport Limited are Rs555.57 million, National Telecommunication Corporation Rs309.50 million, Wapda Rs300 million, FPCCI Rs29.50 million and Barrett Hodgson Pakistan Rs28 million.

The commission received numerous complaints from individuals as well as institutional depositors of the bank regarding inability of the bank to meet its liabilities towards them.

The commission has already issued order for suppression of board of directors and appointed Badar-ud-Din Khan to exercise all powers and duties of the board with effect from August 30, 2006.