Financial fraud: Employee steals from WAPDA to start father’s flour mill
FIA begins extradition process against suspect who fled the country.
The Federal Investigation Agency (FIA) has begun the extradition process against a man accused of having stolen Rs190 million from the Water and Power Development Authority (Wapda) to help his family start a flour mill in Pakistan and move abroad himself.
Syed Muhammad Naqi Riaz, formerly an accounts officer at Wapda, allegedly stole Rs190 million and gave nearly Rs28 million to his father to start a flour mill and used most of the rest to flee the country.
Riaz allegedly embezzled the money by taking advantage of the fact that he was the designated registrar of the utility’s Islamic bonds. When a stock or bond is issued by a company, it must designate one of its officers to manage its records of who owns the stock or bonds so that any dividend or interest payments can be made to the right persons.
Riaz handled this task for Wapda’s Islamic bonds – known as sukuks – of which the utility issued Rs8 billion worth in February 2006. The sukuk was the first rupee-denominated Islamic bond issued in the country and was jointly under-written by Citibank, Jahangir Siddiqui & Company and MCB Bank. The bond was used to finance raising the level of the Mangla dam and buying hydroelectric turbines.
According to FIA officials familiar with the investigation, Riaz issued fake sukuk certificates worth Rs190 million and gave them to his cousin, Ahsan Raza, who then redeemed them for cash at branches of MCB Bank and Habib Bank in Lahore.
Raza then reportedly transferred most of the cash back to Riaz, who gave some of it to his family members and fled the country with most of the rest. FIA investigators have recovered at least Rs35 million of the stolen amount.
The fraud was caught when the certificates were sent in by MCB Bank and Habib Bank to Wapda to be redeemed for cash after they had honoured their commitment to redeem the certificates for Wapda bondholders at their bank branches.
When Wapda tried to reconcile the fake certificates with its records, it discovered that they were forgeries. But by this time, Riaz had already fled the country, reportedly heading to the United Kingdom.
The real certificates, meanwhile, had been purchased by the National Fertiliser Company, which then sold them to Swift Engineering Solutions, who then sold them to Al Meezan Asset Management, a financial services firm based in Karachi.
While the financial fraud was not a sophisticated one, the family’s plans with the money suggest a degree of entrepreneurial drive. The FIA has obtained court orders to freeze Rs17.5 million worth of assets of the suspect’s father, Riaz Hussain, who was starting a flour mill with the money his son allegedly embezzled from Wapda. Another Rs9.8 million in cash has also been seized by investigators.
Most of the remaining the money has not yet been traced by the FIA, though investigators believe it was moved abroad using informal money transfer systems known as hundi or hawala.
Sources familiar with the investigation say that the government has contacted the Serious Organised Crime Agency (Soca) in the United Kingdom as well as law enforcement agencies in the United Arab Emirates for their help in recovering the embezzled amount.
The FIA has arrested eight out of the 15 suspects in the case, including the father of the alleged mastermind and two accounts officers at Wapda. Most of the others have been placed on the exit control list (ECL) to prevent them from leaving the country.
The authority, meanwhile, is investigating at least four of its senior officers for their alleged failure to detect and prevent this fraud.
Published in The Express Tribune, March 28th, 2011.