Bhutto & Zardari’s Corruption highlighted in Raymond Baker’s book on Dirty Money | Teeth Maestro

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10/18/12 1:10 AMBhutto & Zardaris Corruption highlighted in Raymond Bakers book on Dirty Money | Teeth Maestro

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Bhutto & Zardaris Corruption highlighted in RaymondBakers book on Dirty Money

In continuation of highlighting the stakeholders of Corrup-

tion in Pakistan as reported by Capitalisms Achilles

Heel: Dirty Money and How to Renew the Free-Market

System His comments on Nawaz Sharif can be found here,

while Benazir Bhutto, Zardari & PPPs reign on corruption

is reproduced below [Credit @Aleem_Ashraf]

Corruption and criminality run from the top down, with

the political class constantly looting the national treasury

and distorting economic policy for personal gain. Bank

loans are granted largely on the basis of status and connec-

tions. The rich stash much of their money abroad in thosewilling western coffers, while exhibiting little inclination to repay their rupee bor-

rowings. Pakistans recent history has been dominated by two familiesthe Bhut-

tos and the Sharifsboth merely tolerated by the military, the real power in the

country. When it comes to economic destruction, theres not a lot of difference

among the three.
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Benazir Bhutto on pages 77-82: Born in Karachi in 1953

and educated in private schools, Benazir Bhutto graduated

from Radcliffe College at Harvard University in 1973. Go-

ing on to Oxford for a masters degree, she displayed her

budding political skills and was elected president of the

Student Union in 1977. Meanwhile, her father had becomeprime minister of Pakistan in

1971, was ousted in a military coup in 1977, and was exe-

cuted in 1979 on charges of conspiracy to commit murder.

In and out of prison and house arrest, Benazir was not al-

lowed to leave the country until 1984 but then returned to

lead the democracy movement two years later. Her fathers usurper, General

Muhammad Zia ul-Haq, was killed in a mysterious plane crash in 1988, which also

took the life of the U.S. ambassador Arnold Raphel, and the head of the U.S. military

aid mission to Pakistan, General H.M. Wasson. Benazir was elected prime minister

that year, served until her ouster in 1990 on charges of corruption and nepotism, was

reelected in 1993, and ousted again in 1996, amidst more charges of corruption. Dur-

ing her two terms in office and since, what has come out portrays Bhutto and her

husband Asif Ali Zardari as world-class thieves.

Upon taking office in 1988, Bhutto reportedly appointed 26,000 party hacks to state

jobs, including positions in state-owned banks. An orgy of lending without proper

collateral followed. Allegedly, Bhutto and Zardari gave instructions for billions of

rupees of unsecured government loans to be given to 50 large projects. The loans

were sanctioned in the names of front men but went to the Bhutto-Zardari com-

bine. Zardari suggested that such loans are normal in the Third World to encour-

age industrialisation. He used 421 million rupees (about 10 million) to acquire amajor interest in three new sugar mills, all done through nominees acting on his be-

half. In another deal he allegedly received a 40 million rupee kickback on a contract

involving the Pakistan Steel Mill, handled by two of his cronies. Along the way

Zardari acquired a succession of nicknames: Mr. 5 Percent, Mr. 10 Percent, Mr. 20

Percent, Mr. 30 Percent, and finally, in Bhuttos second term when he was appointed

minister of investments, Mr. 100 Percent.

The Pakistan governments largest source of revenues is customs duties, and there-fore evasion of duties is a national pastime. Isnt there some way to tap into this ma-


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jor income stream, pretending to fight customs corruption and getting rich at the

same time? Of course; we can hire a reputable (or disreputable, as the case may be)

inspection company, have the government pay the company about a one percent fee

to do price checking on imports, and get multimillion-dollar bribes paid to us

upon award of the contracts. Socit Gnrale de Surveillance (SGS), headquartered

in Switzerland, and its then subsidiary Cotecna, the biggest group in the inspectionbusiness, readily agreed to this subterfuge.

Letters in 1994 promised consultancy fees, meaning kickbacks, of 6 percent and 3

percent to two British Virgin Island (BVI) companies, Bomer Finances Inc. and Nas-

sam Overseas Inc., controlled by Bhutto and Zardari. Payments of $12 million were

made to Swiss bank accounts of the BVI companies. SGS allegedly has paid kick-

backs on other inspection contracts around the world. Upon being accused in the in-

spection kickback scheme, Bhutto sniffed, I ran the government to the best of my

honest ability. And I did it for nothing but acknowledgment and love.

Then there was the 1994 deal to import $83 million worth of tractors from Poland.

Ursus Tractors allegedly paid a 7 percent commission to another of Zardaris

Caribbean companies, Dargal Associated. Bhutto waived import duties on the trac-

tors, costing the Pakistani government some 1.7 billion rupees in lost revenues.

Upon discovery of this scheme the Poles hastened to turn over 500 pages of docu-mentation confirming the kickback.

The Polish tractor deal was just a warm-up for the French fighter jet deal. After the

U.S. government cancelled a sale of two squadrons of F-16s, Bhutto dangled a $4

billion contract for Mirages in front of the FrenchDassault Aviation; Snecma, the

engine manufacturer; and Thomson-CSF, producer of aviation electronics. Without

missing a beat they allegedly agreed to pay a remuneration of 5 percent to Mar-

leton Business S.A., yet another of Zardaris British Virgin Island companies. Thiswould have generated a tidy $200 million for the Bhutto-Zardari couple, but unfor-

tunately for them she was driven from office before they could collect.

Ah, but the gold deal gave some comfort to these aspiring kleptocrats. Gold is cultur-

ally important in the Asian subcontinent, in particular as a way for women to accu-

mulate wealth. Upwards of $100 billion is invested in this unproductive asset in Pak-

istan, India, and surrounding countries. Smuggling is big business. Ostensibly to reg-

ulate the trade, a Pakistani bullion dealer in Dubai, Abdul Razzak Yaqub, asked

Bhutto for an exclusive im ort license. In 1994, et another Zardari offshore com a-


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ny, M.S. Capricorn Trading, was created in the British Virgin Islands. Later in the

year, Jens Schlegelmilch, a Swiss lawyer who was the Bhutto familys attorney in

Europe and close personal friend for more than 20 years, opened an account for

Capricorn Trading at the Dubai branch of Citibank. According to a 1999 U.S. Senate

report: Mr. Schlegelmilch did not reveal to the Dubai banker that Mr. Zardari was

the beneficial owner of the PIC [private investment company], and the account man-

ager never asked him the identity of the beneficial owner of the account. . . . Shortly

after opening the account in Dubai, Mr. Schlegelmilch signed a standard referral

agreement with Citibank Switzerland private bank guaranteeing him 20 percent of

the first three years of client net revenues earned by the bank from each client he

referred to the private bank. In other words, Citibank was contracting to pay a

finders fee for millions brought in from dubious sources. Citibank went on to open

three accounts in Switzerland for Zardari, with Schlegelmilch as the signatory.

In October 1994, Citibank records show that $10 million was deposited into Capri-

corns Dubai account by Razzak Yaqubs company, A.R.Y. International Exchange.

In December, Razzak Yaqub received an exclusive import license and proceeded

over the next three years to ship more than $500 million in gold to Pakistan. Addi-

tional deposits flowed into the Dubai and Swiss Citibank accounts, and funds also

were shifted to Citibank Channel Island subsidiaries. The original ceiling on the ac-

counts of $40 million was reached quickly

Toward the end of her second term, the Bhutto case took a bizarre turn. Representa-

tives of the Pakistan Muslim League, an opposition party, met in 1995 with private

investigators in London who offered documentary proof from an unnamed source

of Bhuttos corruption, in return for a modest fee of $10 million. That deal was not

consummated, but two years later, with Bhutto out of office and under investigation,

the offer was reportedly concluded for $1 million. The documents appeared to

have been taken from the Geneva office of Jens Schlegelmilch.

In 2000 Pakistans National Accountability Bureau, with the thankless task of investi-

gating corruption, drew upon these documents and other sources and released de-

tails of assets and accounts belonging to Bhutto and Zardari. Even to jaded observers,

the scale of their holdings was stunning: hundreds of properties, dozens of compa-

nies, and dozens of bank accounts. A partial listing of only foreign holdings reported

by the National Accountability Bureau is provided in Table 3.4.


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Summarizing this and other documentation, the New York Times reported that thematerial included . . . letters from executives promising payoffs, with details of the percent-

age payments to be made; memorandums detailing meetings at which these commissions and

remunerations were agreed on, and certificates incorporating the offshore companies used as

fronts in the deals. . . . The documents also revealed the crucial role played by Western institu-

tions. Apart from the companies that made payoffs, and the network of banks that handled the

money . . . the arrangements made by the Bhutto family for their wealth relied on Western

property companies, Western lawyers and a network of Western friends.

Even the Swiss finally had had enough. Seventeen bank accounts linked to Bhutto
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and Zardari were frozen. The two were charged with money laundering in connec-

tion with bribes received from the inspection company SGS and were convicted by a

Swiss court in 2003, with fines and suspended prison sentences. This was short-lived;

the decision was overturned and referred back to cantonal prosecutors upon appeal.

Meanwhile, Zardari was in prison in Pakistan from 1996 to 2004 on assorted charges.

Bhutto, with her father executed, two brothers assassinated, her mother an amnesiac,

her husband still troublesome, and she living in exile between London and Dubai,

portrays herself as the victim: I never asked for power. I think they [the Pakistani

people] need me. I dont think its addictive. You want to run away from it, but it

doesnt let you go. . . . I think the reason this happens is that we want to give love and

we receive love. Save your tears. In the global collection of displaced leaders, Be-

nazir Bhutto may be the least sympathetic character of all.

Bhutto & Zardari’s Corruption highlighted in Raymond Baker’s book on Dirty Money | Teeth Maestro

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