Dirty Wealth from Lahore to Panama

By: Asad Kharal
Published: July 10, 2016
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How the Sharif family used its political clout to make megabucks

This is no ordinary tale of financial crimes and corruption that involves only a handful of illegal deals, a few acts of theft of public money or fraud. It is a sad, continuing story of loot and plunder spanning over more than three decades.
The case involves robbing the once nationalised banks and financial institutions through orchestrated loan defaults, depriving the national exchequer of tens of billions of rupees through tax evasion and laundering money away from Pakistan every year — since the early 1990s. This was done to purchase property, establish secretive offshore companies, operate bank accounts to stack the ill-gotten wealth and whiten a portion of black money by bringing it back to Pakistan.
This charge-sheet – which at first glance seem to have been made against a mafia chief rather than a three-time elected prime minister of the Islamic Republic – does not end here. It also involves megabucks made in the early 1980s by abusing official positions – starting when Nawaz Sharif was picked by the then military rulers and inducted into the Punjab provincial cabinet as finance minister. At the time of his nomination as Punjab finance minister, the Sharif family owned only one industrial unit.
The story goes on. The number of Sharif family’s industrial units jumped to nine from one between 1985 and 1990 when Nawaz Sharif was chief minister Punjab. During his first two-year stint as prime minister from 1991-93, he managed to expand his industrial empire from nine to 28.
Sharif’s family business expanded at breakneck speed on the back of his political clout, which was used not just to get loans that were never meant to be repaid but also to frame laws and regulations and make decisions which benefited his businesses. The accumulative figure and the total impact of this massive loot and plunder runs into more than Rs100 billion — a price this poor country and its people have paid through their tears, sweat and blood to sustain such sham democratic rulers and their rule.
Although the Panama leaks — which have revealed the prime minister’s two sons and daughter as operating offshore companies and owning properties abroad — have rocked the Sharif government, much of this information has been known since the early 1990s and widely reported in the local and international media at that time.

FIA investigations
In 1994 the FIA conducted detailed investigations into the financial crimes of Nawaz Sharif and his family and came up with mountains of information more explosive than the Panama leaks. The leaks only confirm and reconfirm past allegations from the early 1990s – from the Sharifs owning Park Lane London properties to operating offshore  companies.
But politics of expediency and rampant corruption in Pakistan’s system saved Sharif and his family from accountability. However, following the Panama scandal, Sharif has tried to portray his family and himself as being wrongfully implicated in some new charges.
According to him, his talented sons bought properties and established companies abroad through fair business practices. How his children got the seed money to start these businesses is yet to be explained by the prime minister.

Sharif did not clarify whether the funds used to establish offshore companies were moved abroad from Pakistan. If they were, did he use the proper banking channels for the transfers? Did he pay due taxes? Where and how this money was generated – business, investments, loans? And if the funds were already parked abroad, what were their sources?

He also did not clarify whether the funds used to establish offshore companies were moved abroad from Pakistan. If they were, did he use the proper banking channels for the transfers? Did he pay due taxes? Where and how this money was generated – business, investments, loans? And if the funds were already parked abroad, what were their sources?
These are some basic questions Sharif and his family need to answer. However, the prime minister has tried to deflect these straight questions through meaningless verbosity. For example, he claimed during his address to the nation following the Panama scandal that even in the early 1970s his family owned a large industrial empire. But official documents expose his lie.

Evading taxes
According to official data, the Sharif family declared an income of a mere Rs7, 623 and assets worth Rs7, 194 in fiscal year 1970-71. That year, they did not pay a single rupee as income tax.
Sharif also claimed that in 1979 his family got back the de-nationalised Ittefaq Foundry which was in ruins. But he failed to mention that General Ziaul Haq – who was his political godfather – wrote-off more than Rs83 million the Sharifs owed to the national exchequer.
A cursory look at Sharif’s financial records shows that he and his family declared only a tip of their earnings and assets and paid token amounts in taxes all through the 1980s and 1990s despite their expanding industrial and business empire.
For instance, official record shows that the Sharif family declared a total earnings of Rs938,311 in FY1988-89, while its assets worth was only Rs242,915. In 1992-93 the Sharif family declared an income of Rs43,727 and assets worth Rs311,573 and paid only Rs 6,170 in tax. In 1993-94 the Sharifs declared Rs282,504 as income, Rs181,491 worth of assets — and paid a tax of Rs10,422.
At the individual level, Nawaz Sharif paid only a meagre amount in income tax; for instance in 1992-93, he paid an income tax of Rs2,660 while in 1993-94 he paid tax of Rs14, 698. In fiscal year 1994-95, Sharif did not pay any income tax, but paid Rs2.1 million in wealth tax. In 1995-96 he paid Rs447 as income tax and deposited Rs792,235 as wealth tax, recording a drop of over 1.3 million in his wealth in a year. The year 1996 is also when Sharif bought a Russian-made helicopter for one million dollars; this he never declared in his  assets.
In 1996-97 Sharif became even more poor. His income dropped by 50,000 and he failed to pay any income tax. His wealth tax also reduced to Rs640,799 – marking a drop of Rs151,436 compared to the previous year. The same financial year, Shahbaz Sharif paid a tax of Rs897, while Hussain Nawaz paid Rs786,568 in taxes.
A chronic loan defaulter   Nawaz Sharif, while defending his family in the Panama leaks case, tried to take credit for repaying a Rs6 billion loan against 1993’s principal amount of Rs6.14 billion. Even this amount was paid 21 years after the loan was taken. And on its basis the National Bank of Pakistan issued an NOC to the Sharif family, forgiving and forgetting the interest accumulated all these years. This interest alone amounts to at least triple the amount of the borrowed sum.

The National Bank letter – dated December 23, 2014 which the Punjab chief minister showed, raises many questions including how individuals who were bank-loan defaulters from 1993 to 2014 were allowed to contest the 2013 elections

The National Bank letter – dated December 23, 2014 – which the Punjab chief minister showed in a press conference, raises many questions including how individuals who were bank-loan defaulters from 1993 to 2014 were allowed to contest the 2013 general elections.
According to official documents, Ittefaq Foundry owed a staggering Rs230 million in taxes in 1988-89. According to a 1995 Lahore High Court ruling, the Sharif family also had to pay Rs150 million worth in penalty – an amount what was never paid.

Exploiting political clout
A 1998 report of the State Bank of Pakistan said the Ittefaq Group was a defaulter of Rs3.21 billion and recommended that no new loans be given to it. But the same day, the then United Bank Limited president Zubair Soomro approved a Rs200 million loan to Hussain Nawaz, the prime minister’s son, for Chaudhry Sugar Mills — despite objections by the UBL’s regional chief in Lahore. The next day, May 29, 1998, the loans were disbursed on a fast-track basis. Chaudhry Sugar Mills also got a Rs50 million loan from Mehran Bank, which was approved on just one call from the PM’s House.
Sharif built his family fortunes using political clout, which he also used to perpetuate his power. The way he bribed and bought people corrupted Pakistani politics even more. He awarded 10 valuable plots to 10 Lahore High Court judges between 1985 and 1990 when he was the chief minister of Punjab. He also distributed more than Rs340 million among 77 lawmakers in 1987 to keep their loyalties in the wake of the political challenge coming from Benazir Bhutto’s return to Pakistan.
The way Nawaz Sharif and his family abused their official positions to make megabucks for themselves and their friends also has no parallel. For example, after the 1998 nuclear tests, Nawaz Sharif suddenly reduced the import duties on luxury cars to 125 percent — from 325 percent — for a brief period. During this window of opportunity, 80 luxury cars were imported by one of his friends. As soon as these vehicles were cleared by the customs, the duty was raised again, inflicting a heavy loss on the national exchequer. There are countless such cases when political power was used to make easy, quick money.
During his second stint in power as prime minister, Nawaz Sharif reduced the duty on steel scrap to Rs500 per ton from Rs1,500, benefiting his family industry.
In another such case of abuse of power, Sharif family made megabucks by exporting sugar to India. The family managed to become the dominant sugar exporter to India because they had their man in the PM’s House. Nawaz Sharif ensured that only his family got the facility of using the Pakistan Railways for exports, while his political connections facilitated deals. The Sharif family got a rebate which was worth Rs2 billion. A former Indian minister was the business partner of the Sharifs in this deal. During this period Hussain Nawaz’s meetings were arranged with Indian politicians and officials and business people. The Sharif family also used their political clout to victimise those officials who dared to proceed against them on loan default, income tax evasion and other corruption cases.

Sharifs and Panama
When the Sharifs went into exile in Saudi Arabia after a deal with the former military-led government in 2000, Nawaz Sharif left with a truckload of personal belongings. But he was forced to leave all his wealth and property in Pakistan.Then how did his family manage to setup steel mills and buy expensive properties in London while they were in Saudi Arabia?

The way Nawaz Sharif and his family abused their official positions to make megabucks for themselves has no parallel

The answer to this question is that the Sharifs had hidden wealth abroad. The London properties — four luxury flats number 16, 16-A, 17 and 17-A Avenfield House in a costly London neighbourhood — were not purchased in 2006 as claimed by Hussain Nawaz, but between 1993 and 1996 from the money already laundered away and kept in Switzerland and the UK. This wealth and these assets were not declared by the Sharif family before Pakistan’s income tax and customs authorities. The flats were managed by two British Virgin Islands registered offshore companies — Nielsen Enterprises Limited and Nescoll Limited.
The leading British newspaper, The Independent, carried a story about Sharif’s ownership of these flats and offshore companies on October 20, 1998, while the Guardian published a similar report on October 24, 1999. Similar stories were carried in some leading Pakistani publications as well. Yet, our prime minister continues to mislead the nation about his offshore accounts, businesses, companies and property through lies and spin with the help of his media cronies. Nielsen Enterprises Limited and Nescoll Limited, which were operated through nominated directors, were transferred in the name of Mariam Nawaz and Hussain Nawaz in 2006.
Hussain Nawaz started owning up to the offshore companies and properties abroad on various news channels a few days before the Panama scandal came to light. This was just an attempt to offset the impact of the leaks. Records show that the Sharif family owns at least nine offshore companies – in which Prime Minister Nawaz Sharif is a direct or indirect beneficiary. These include Shamrock, Nescoll Limited, Nielsen Enterprises Limited, Comburg and Hangon. The million dollar question is: will Nawaz Sharif again manage to escape the accountability process? Is Pakistan destined to be ruled by corrupt and anti-people politicians? So far the Sharif government has managed to engage the opposition in seemingly endless debates and discussion in a bid to buy time.
The opposition has so far failed to build the required pressure that can force Nawaz Sharif to step down and pave the way for a fair, transparent and independent inquiry. This cannot happen as long as Sharif is the prime minister. History shows us that, in Pakistan, the combination of political power and dirty wealth can be the biggest shield for the corrupt. For now, Sharif and his family seem to enjoy both.

About the Author
Asad Kharal
is a renowned investigative journalist who has also hosted a prime time current affairs program, Andar Ki Baat, on ARY. He has received several awards for his work, including the Illinois Associated Press Editors Association (IAPEA) award in the breaking news category.