SC suo motu hearing in Axact case begins

Top court asks FIA director general to briefly explain the case


Our Correspondent February 08, 2018
Justice Nisar directs DG FIA to submit report within 10 days. PHOTO: PPI

KARACHI: The Supreme Court began on Wednesday a suo motu hearing into the slow progress in the case against the alleged diploma mill, Axact.

The case was fixed before a three-judge bench of the top court, headed by Chief Justice of Pakistan (CJP) Mian Saqib Nisar and comprising Justice Umar Ata Bandial and Justice Ijazul Ahsan.

The CJP had taken suo motu notice of the case on January 19.

At the outset of the hearing, the court asked FIA Director General Bashir Memon to briefly describe the matter. To that, the FIA official submitted that the agency has already filed its report with the court.

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He gave the judges a summary of the various Axact cases pending in different courts and the modus operandi which Axact has employed “to cheat and defraud thousands of people across the globe by issuing fake university degrees and other qualifications”.

When the bench asked the FIA director about the nature of cases and details of the accused persons, he explained that four different FIRs were registered against Axact, its directors and other staffers.

He also explained that in the Islamabad and Karachi cases, the accused have been acquitted and appeals have been filed against these acquittals. A case in Peshawar has yet to start while a second case in Karachi is being heard, he added.

The chief justice observed that anyone tarnishing the dignity and image of Pakistan would not be spared. The bench observed that the court would exercise all the power available to it under the Constitution to safeguard and protect the dignity of the country.

The court then proceeded to call the registrars of the Islamabad High Court, Sindh High Court and special courts to submit their respective explanations about Axact’s pending cases.

The bench also directed Memon to provide details of all accused persons in Axact cases so that their names could be placed on the Exit Control List (ECL). The FIA DG submitted that all such information would be provided within one hour.

Interestingly, televangelist Amir Liaqat Hussain was also present in court. The bench observed that if Hussain is found to be a beneficiary of the Axact’s fake degree operations, strict action will be taken against him. The bench then issued notices to all accused persons as well as the court registrars for February 9.

FIA investigation

In a report submitted to the court last Friday, the FIA has claimed that the failure in bringing the culprits to justice was due to lack of information sharing by US authorities.

The FIA says that it wrote to the US embassy’s legal attache in November 2015 to request information and details of the shareholding and identities of shareholders, directors, officers, company secretaries, and any authorised signatories for or on behalf of Axact and its known front companies.

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“In response to the above mentioned letter, no reply has yet been received from US government,” says the report.

However, US Embassy’s Assistant Legal Attache Amanda McDaniel, through a letter dated February 8, 2016, has specifically provided details of certain shell companies related to Axact, the identities of their shareholders and directors as well as specific details pertaining to shareholdings.

The people identified in the letter include Axact cofounders Shoaib Sheikh and Viqas Atiq while three of the companies named are Mivvel, Tullow, and Tinko, besides “various tertiary shell companies”, including Blitzace.

Atiq owns 49% of Mivvel while one Gaffar Vyajkora owns the majority 51%. Sheikh owns 49% of both Tullow and Tinko while Zubair Syed owns 51% of Tullow and his wife Uzma Shaheen owns 51% of Tinko, according to the letter from the US embassy.

Sheikh and Atiq have both admitted to this in US court filings.

Audio records of Axact call centre staffers “engaged in phishing and extortion” are available with the FIA, according to reports, but these were not included in the report submitted to the top court.

Bank records for domestic transactions were not investigated either. The FIA report makes no mention of the flow of hundreds of millions of dollars from Axact LLC Dubai to banks in Pakistan.

Taxing situation

The FIA report also seems to praise Axact for its taxpaying practices and regulatory compliance, even though an FBR case study from January 9, 2014 says that Axact is “only partially complying with the prevailing regulatory mechanism developed by State Bank for exporters of software.”

The case study says that receipts relating to sale of IT products in Pakistan are either being suppressed or misdeclared as export proceeds, even though “Axact Pakistan is mainly involved in online marketing… which is entirely different from export of software”.

The case study also notes that “tax record reflects that Axact Pakistan (Pvt) Limited is a subsidiary of Axact FZ LLC UAE and the parent company holds almost 100% share capital; whereas company’s website (www.axact.com) unveils the engineered corporate veil when it clearly spells out that Axact Pakistan with head office at Karachi is managing Axact Dubai which is corporate head office.”

It adds that Axact’s income and its source and claim of tax exemption, coupled with the fact that its directors filed incomplete tax returns which are not commensurate with one another, indicate that the directors of Axact have been concealing their income.

The FIA also claims that “Pakistan was the first and only country which swiftly took action against the scam and ensured closure of this dirty business”, even though Pakistan has not convicted a single individual in the Axact scam, while the fact is that a US court in August 2017 convicted Axact Vice President Umair Hamid to 21 months in prison and a fine of $5.3 million "for his role in an international diploma mill scheme operated through the Pakistani company”.

The FIA also ignores cases predating the New York Times investigation such as the racketeering (organised crime) case against Belford University, which Axact lost and was fined $22.7 million for, or the  Student Network Resources case regarding term paper websites, which Axact lost and was ordered to pay the plaintiff more than $650,000.

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Further, FIA has failed to provide details of the Axact’s alleged money laundering operations which were critical to the Umair Hamid case.

In addition, Axact has gotten a stay against the FBR which stems from a raid led by the Customs intelligence DG in which more than Rs800 million worth of equipment was seized. The equipment belonged to the Bol television channel, which is a sister concern of Axact. The raid stemmed from the fact that Bol’s equipment was allegedly not being imported legally and was being brought in via couriers and smugglers. The stay is still in place.

Legal battles

Axact maintains a large and very active legal department which regularly takes stay orders and files criminal and civil cases against anyone who dares point out any wrongdoing or inconsistencies in its work.

In the early 2000s, the president of Pakistan Software Houses Association had pointed out that Axact is a diploma mill. She was sued for Rs100 million.

Axact also sued a number of media companies and owners for pointing out or printing court proceedings relating the 2015 court case. It has also filed a case against the management and editorial staff of Express Media Group for Rs21.1 billion, which is the highest-ever damages claim in Pakistan. Criminal cases were also filed.

Their influence on the courts is such that Islamabad District and Sessions Judge Pervaiz Qadir Memon admitted before two Islamabad High Court judges that he had acquitted Shoaib Sheikh and his accomplices after accepting a bribe of Rs5 million.

Winding road

The case has taken numerous twists and turns since the 2015 New York Times investigation into fake degrees alleged that Axact was making hundreds of millions of dollars selling phoney academic credentials to thousands of people around the world.

The NYT report and subsequent FIA investigations said that Axact used a series of shell companies to manage its illegal affairs, including the webpages for dozens of non-existent universities, high schools, and accreditation bodies, banking affairs, and possible money laundering. The company was also accused of extortion, the claims that were repeated in 2018 stories appearing in the BBC and Gulf News.

Former FBI agent Allen Ezell told the BBC that Axact had continued to launch new online universities and was also involved in extortion and blackmail.

"Normally a diploma mill is finished with you by the time you get your degree. That's just the beginning now. You get a telephone call that looks like it's coming from your embassy or local law enforcement, threatening to arrest or deport you unless you get some additional documents to help support the phony diploma you already have," he said.

Previously, the FIA had also told the Supreme Court that the Axact case is real, and that Pakistan's biggest forensic investigation had revealed that 215,507 students of different countries had been issued bogus documents from Axact.

Approximately 2.1 million blank bogus degrees and certificates of universities and schools were recovered from the administrative process management department of Axact in Karachi, which took 15 days just to count. These details were included in the challan submitted to the courts.

Recent reports also suggest that well over 1,100 Pakistanis are among the 200,000-strong client list of various Axact-operated ‘universities’.

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