ISLAMABAD, April 20: A Punjab government inquiry report on the Bank of Punjab's multi-billion loan scam submitted to the Supreme Court on Wednesday has recommended severe action under the criminal law against Sheikh Muhammad Afzal, the principal accused in the scam, and other officials responsible for defrauding the bank.

“The bankers have schemed, connived, aided and abetted Sheikh Muhammad Afzal in executing the swindle and, therefore, none of them deserves any leniency. It's time they face the full wrath of the criminal law,” said the voluminous report prepared by Additional Inspector General Aftab Sultan.

On June 18 last year, the Supreme Court appointed Aftab Sultan as head of a probe team to look into irregularities in the bank because the court was not satisfied with the investigation conducted by the National Accountability Bureau (NAB) and observed that more irregularities of Rs17 billion had been detected.

Advocate Khawaja Haris read out extracts from volume I of the report before a three-judge SC bench, headed by Chief Justice Iftikhar Mohammad Chaudhry. The report says that money belonging to creditors was given to bank's directors who got the facility of loans extended for their personal businesses.

Khawaja Haris alleged that a loan of Rs5.492 billion was given to former Punjab chief minister Chaudhry Pervez Elahi for the purchase of properties for Phalia Sugar Mills owned by him. It is now called New Colony Sugar Mills.

“Deceit, deception and insatiable lust for money shook the bank's foundation and it lost an inestimable amount of deposits and profits,” the report said, adding that the bank's very existence became doubtful and because of unprecedented media scrutiny its equity market capitalisation declined by a staggering amount of Rs64 billion within a short time.

The court observed that information contained in the volume 1 related to commission, omission, fraudulent, corrupt practices and criminal negligence attributed to director, officers and employees of the bank. It said the big fraud was committed between 2005 and 2008.

The court ordered that the inquiry report be made public and accessible to those interested in getting its copy subject to rules and regulations.

Sheikh Afzal, who was arrested in Malaysia by Interpol last year and brought to Pakistan, confessed to having bought a whole lot of 'worthy people' to get out of the country because his name was on the exit control list.

The report also dealt at length with the oversight and negligence on the part of former chairmen of the BoP's board of directors -- former Punjab chief secretary Kamran Rasool, Hafeez Ahkhtar Randhawa, Shahzad Hassan Pervez, incumbent FBR chairman Salman Siddique and Shahzad Ali Malik -- during the period when Hamesh Khan was president of the bank.

However, the report clarified that although the directors acted negligently in the discharge of their duties, criminal liability could not be placed on their shoulders because they were neither beneficiaries nor part of the scam. In fact they took their work in a casual and unprofessional manner and signed almost every paper that was presented to them by Hamesh Khan.

The report alleged that Salman Siddique had approved in a very casual manner an unlawful credit proposal of Rs1.1 billion in July 2006 on behalf of the BoP's board. As a director he signed a proposal for increasing credit limits in old accounts of Sheikh Afzal to adjust the liability of his string of fake accounts in June 2007 in a casual manner.

Kamran Rasool was instrumental in the appointment of Hamesh Khan in 2003 for the sole reason that he liked him as a banker while working for Kunjah Textile Mills in Gujrat owned by the family of Chaudhry Pervez Elahi. (Mr Rasool was then on long leave).

In the recommendation section, the report censured the performance of the State Bank in relation to the appointment in the board of directors and said it was not at all satisfactory. Hamesh Khan was allowed to be appointed in an extraordinary fashion which enabled him to work around prudential regulations.

“The government's nominated directors must meet a more rigorous set of tests to qualify,” the report said, adding that for the moment the issue was to select a right person for a deeply-troubled major bank in the public sector which had lost tens of billions of rupees to frauds and bad loans.

The report suggested that NAB should be ordered to proceed in association with the Association of Chartered Accountants of Pakistan against the firms involved in concealing or misrepresenting facts about Sheikh Afzal's business or the bank's own accounts.

The Punjab government should be directed to amend the bank's bylaws to allow the Punjab Assembly's Public Accounts Committee to review all appointments in the bank's board of directors. The role of chairmen and members of the board were deplorable at best because they served merely as rubber stamps during the time Hamesh Khan was in office.

“The bank was never run professionally, with successive governments literally abusing it. Even today, bank's financial health is precarious and things have not taken a turn for the better,” the report said.

It said that many references were pending with NAB, including complaints about the Bankers' Avenue Cooperative Housing Society and accounts of Ejaz Group, Chenab Group, Colony Group, Amtex Group and Three Star Group.

During the Hamesh Khan's tenure, the bank allowed a sizable advance at very low or negligible interest rates to selected government servants, both civil and military. “The Supreme Court, if it deems appropriate, may direct the authorities to probe into this matter,” the report suggested.

“The Punjab government may be directed to consider privatisation as an option while trying to rebuild the bank. Instead of spending taxpayers' money on propping up a bank that has consistently failed to manage properly, the government should cut its losses by privatising the bank as early as possible,” the report said.

It also requested the apex court to direct the SBP to strictly regulate the asset valuators and surveyors because a loose regime was maintained by the Pakistan Banks' Association. The report requested the court not to allow any accused to enter into a plea bargain in view of the size of the fraud.

It called for recovering the principal amount, along with full mark-up, from Sheikh Afzal and his accomplice. Besides, the NAB should be asked to recover all bonuses and performance bonuses extended to Hamesh Khan and recall the President's Pride of Performance Award given to him.

The report said that four directors of the bank -- Farid Mughis Sheikh, Khurram Iftikhar, Ijaz Gohar and Mian Latif -- had obtained credit facilities for their industrial groups in contravention of the BoP Act. The NAB should be directed to file separate references against them.

The court directed the board of directors to consider contents of the report and chart out future course of action both in civil and criminal cases.

The NAB was asked to consider the suggestions made in the report and produce evidences before courts where different references were pending.

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