Embezzlement of Rs700m: SECP held responsible for negligence

Natover Lease owner transferred depositors’ funds into personal accounts.

ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP), auditors and a credit rating agency have been held responsible by a special parliamentary panel for negligence that provided an opportunity to a politically ‘well-connected’ personality to siphon off depositors Rs700 million.

A special panel constituted by Senate Standing Committee on Finance held its first hearing on investigation to siphon off Rs700 million by Natover Lease and Refinancing Company, owned by Nadeem Sheikh.

The panel, headed by Senator Haroon Akhtar Khan, refused to give a clean chit to the regulator SECP while deciding to summon the credit rating agency that gave an investment rating to Sheikh’s company and the external auditors who could not detect the lapses while performing the annual audits. It also decided to summon directors of Natover Company.

SECP Executive Director Specialised Companies Division Asif Jalal Bhatti told the committee that Nadeem Sheikh established a subsidiary firm NIPL and started taking deposits by using the infrastructure of Natover.

SECP Chairman Mohammad Ali admitted that taking deposits by NIPL was a criminal offense as they did not have a mandate to. Depositors were lured by offering 18 per cent return, he said adding that the company illegally collected Rs372 million deposits from 2003 to June 2006.

Nadeem Sheikh deposited the amounts in NIPL accounts and then transferred it to his personal accounts, said Ali. The SECP has no trail of the money and the only way to return depositors’ amount is to catch Sheikh, added Ali.

“Nadeem Sheikh was politically well-connected and despite the confession statement he is a free citizen,” said Ali.

The panel grilled the SECP for not performing its duties effectively. “The SECP was responsible for not inspecting company’s accounts,” ruled Senator Haroon Akhtar.

“Leasing inspection was not the priority of the SECP at that time as it was giving more importance to asset management inspection amid facing human resources constraints”, said Mohammad Ali.

The panel shrugged off SECP’s excuse and asked it to present proof that it had raised the issue of human resource constraints with the finance ministry.

The SECP chairman complained that the regulator did not have effective powers to ensure fair dealing and the people were openly making money through illegal means and the regulator could do nothing but become a silent spectator.

He said the courts were also taking time in deciding criminal cases and so far not even a single criminal case has been decided. Ali said the SECP has filed criminal cases against NIPL, Natover, Islamic Development Bank and Crescent Standard Development Bank.

The panel decided to call National Accountability Bureau to brief it on the progress on NIPL case as the Bureau could not proceed on the SECP’s request to chase Nadeem Sheikh. The SECP made request in July 2008, said Bhatti.

Published in The Express Tribune, December 15^th, 2011.