Arguably the most dangerous nation on Earth, Pakistan is a bubbling cauldronof corruption and crime, where grasping politicians, greedy generals,drug smugglers, and terrorists intermix in a volatile web, made more threateningby a nuclear bazaar operated as a national sideline. Corruption andcriminality run from the top down, with the political class constantly loot-ing the national treasury and distorting economic policy for personal gain.Bank loans are granted largely on the basis of status and connections. Therich stash much of their money abroad in those willing western coffers,while exhibiting little inclination to repay their rupee borrowings. Banks failand Pakistanis lose their meager savings. At the bottom, wretched and illiteratemasses seethe with discontent, a perfect nurturing ground for terrorism.It started a long time ago:In the distant past the East India Company used to siphon away a greatdeal of the assets and treasures of the Indian subcontinent or buy themat very low prices and send them abroad when the British ruled thecountry.But in recent decades it is the rich and crafty Pakistanis who have siphonedaway a large part of the resources of the country with unremittingvigor. That began when a part of our export earnings was allowedto be kept abroad, with the practice of under-invoicing the exports orover-invoicing the imports. And that was followed by retaining abroadan increasing part of the money obtained as kickbacks during the importof machinery from the late 1950s.Later, politicians in office, senior bureaucrats and top military commandersjoined them by sending their illegally earned money abroad.Subsequently, obtaining large bribes abroad and putting them in theirbank accounts there became the fashion. Some of the top rulers toojoined them merrily. . . .The total wealth siphoned away in this manner has been estimatedto be between 60 billion and 100 billion dollars.51Pakistan’s recent history has been dominated by two families—theBhuttos and the Sharifs—both merely tolerated by the military, the realpower in the country. When it comes to economic destruction, there’s not alot of difference among the three.Benazir Bhutto. Born in Karachi in 1953 and educated in privateschools, Benazir Bhutto graduated from Radcliffe College at Harvard Universityin 1973. Going on to Oxford for a master’s degree, she displayed herbudding political skills and was elected president of the Student Union in1977. Meanwhile, her father had become prime minister of Pakistan in 1971, was ousted in a military coup in 1977, and was executed in 1979 oncharges of conspiracy to commit murder. In and out of prison and house arrest,Benazir was not allowed to leave the country until 1984 but then returnedto lead the democracy movement two years later. Her father’susurper, General Muhammad Zia ul-Haq, was killed in a mysterious planecrash in 1988, which also took the life of the U.S. ambassador ArnoldRaphel, and the head of the U.S. military aid mission to Pakistan, GeneralH.M. Wasson. Benazir was elected prime minister that year, served until herouster in 1990 on charges of corruption and nepotism, was reelected in1993, and ousted again in 1996, amidst more charges of corruption. Duringher two terms in office and since, what has come out portrays Bhutto andher husband Asif Ali Zardari as world-class thieves.Upon taking office in 1988, Bhutto reportedly appointed 26,000 partyhacks to state jobs, including positions in state-owned banks. An orgy oflending without proper collateral followed. Allegedly, Bhutto and Zardari“gave instructions for billions of rupees of unsecured government loans to begiven to 50 large projects. The loans were sanctioned in the names of ‘frontmen’ but went to the ‘Bhutto-Zardari combine.’ ”52 Zardari suggested thatsuch loans are “normal in the Third World to encourage industrialisation.”53He used 421 million rupees (about 10 million) to acquire a major interestin three new sugar mills, all done through nominees acting on his behalf. Inanother deal he allegedly received a 40 million rupee kickback on a contractinvolving the Pakistan Steel Mill, handled by two of his cronies. Along theway Zardari acquired a succession of nicknames: Mr. 5 Percent, Mr. 10 Percent,Mr. 20 Percent, Mr. 30 Percent, and finally, in Bhutto’s second termwhen he was appointed “minister of investments,” Mr. 100 Percent.The Pakistan government’s largest source of revenues is customs duties,and therefore evasion of duties is a national pastime. Isn’t there some way totap into this major income stream, pretending to fight customs corruptionand 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 paythe company about a one percent fee to do price checking on imports, andget multimillion-dollar bribes paid to us upon award of the contracts. SocitGnrale de Surveillance (SGS), headquartered in Switzerland, and its thensubsidiary Cotecna, the biggest group in the inspection business, readilyagreed to this subterfuge. Letters in 1994 promised “consultancy fees,” meaningkickbacks, companies, Bomer Finances Inc. and Nassam Overseas Inc., controlled by
Bhutto and Zardari. Payments of $12 million were made to Swiss bank accounts
of the BVI companies.54 SGS allegedly has paid kickbacks on other inspection
contracts around the world. Upon being accused in the inspection
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.”55
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 Zardari’s Caribbean companies, Dargal Associated. Bhutto waived
import duties on the tractors, 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 documentation confirming the kickback.56
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 French—
Dassault 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 Marleton Business S.A., yet
another of Zardari’s British Virgin Island companies.57 This would have generated
a tidy $200 million for the Bhutto-Zardari couple, but unfortunately
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 culturally important in the Asian subcontinent, in particular as a
way for women to accumulate wealth. Upwards of $100 billion is invested
in this unproductive asset in Pakistan, India, and surrounding countries.
Smuggling is big business. Ostensibly to regulate the trade, a Pakistani bullion
dealer in Dubai, Abdul Razzak Yaqub, asked Bhutto for an exclusive
import license. In 1994, yet another Zardari offshore company, M.S. Capricorn
Trading, was created in the British Virgin Islands. Later in the year, Jens
Schlegelmilch, “a Swiss lawyer who was the Bhutto family’s attorney in Europe
and close personal friend for more than 20 years,”58 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 manager 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 withof 6 percent and 3 percent to two British Virgin Island (BVI) companies, Bomer Finances Inc. and Nassam Overseas Inc., controlled by
Bhutto and Zardari. Payments of $12 million were made to Swiss bank accounts
of the BVI companies.54 SGS allegedly has paid kickbacks on other inspection
contracts around the world. Upon being accused in the inspection
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.”55
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 Zardari’s Caribbean companies, Dargal Associated. Bhutto waived
import duties on the tractors, 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 documentation confirming the kickback.56
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 French—
Dassault 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 Marleton Business S.A., yet
another of Zardari’s British Virgin Island companies.57 This would have generated
a tidy $200 million for the Bhutto-Zardari couple, but unfortunately
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 culturally important in the Asian subcontinent, in particular as a
way for women to accumulate wealth. Upwards of $100 billion is invested
in this unproductive asset in Pakistan, India, and surrounding countries.
Smuggling is big business. Ostensibly to regulate the trade, a Pakistani bullion
dealer in Dubai, Abdul Razzak Yaqub, asked Bhutto for an exclusive
import license. In 1994, yet another Zardari offshore company, M.S. Capricorn
Trading, was created in the British Virgin Islands. Later in the year, Jens
Schlegelmilch, “a Swiss lawyer who was the Bhutto family’s attorney in Europe
and close personal friend for more than 20 years,”58 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 manager 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.”59 In other words, Citibank was contracting to
pay a finder’s 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 Capricorn’s Dubai account by Razzak Yaqub’s company, A.R.Y. International
Exchange.60 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. Additional deposits flowed into the Dubai and
Swiss Citibank accounts, and funds also were shifted to Citibank Channel
Island subsidiaries. The original ceiling on the accounts of $40 million was
reached quickly.61
Toward the end of her second term, the Bhutto case took a bizarre turn.
Representatives 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 Bhutto’s 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.62 The documents “appeared to have been taken from
the Geneva office of Jens Schlegelmilch.”63
In 2000 Pakistan’s National Accountability Bureau, with the thankless
task of investigating corruption, drew upon these documents and other
sources and released details 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 companies, and dozens of bank accounts.
A partial listing of only foreign holdings reported by the National Accountability
Bureau is provided in Table 3.4.64
Summarizing this and other documentation, the New York Times reported
that the material included “. . . letters from executives promising
payoffs, with details of the percentage 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 institutions. Apart from the companies that made payoffs, and
the network of banks that handled the money . . . the arrangements made byTABLE 3.4 FOREIGN ASSETS ALLEGEDLY BELONGING TO BHUTTO AND ZARDARI
Country Properties/Companies Bank Accounts
United Rockwood Estate, Surrey, 20 Barclays Bank, 3 accounts;
Kingdom room mansion, 355 acres, polo National Westminster Bank;
grounds; 4 London flats Harrods Bank; Midland Bank
France Normandy chateau, in Crdit Agricole, 3 accounts;
Zardari’s parents’ name; Banque Nationale de Paris; Banque
Cannes properties La Henin
Switzerland Union Bank of Switzerland;
Barclays Bank (Geneva); Citibank
(Geneva); Banque Nationale de
Paris; Swiss Bank Corporation;
Credit Suisse; Pictet et Cie; Banque
Francaise du Commerce; Cantrade
Ormond Burrus; Banque Pasha
United Wellington Club East, Florida; Barclays Bank, New York;
States India Mound, Florida; Citibank, New York;
3 residential properties, UBS, New York
Florida; Lapworth Investment,
Florida; Intro Food, Florida;
Dynatel Trading, Florida; A.S.
Realty, Florida; Bon Voyage
Travel, Florida
British Bomer Finance, Mariston
Virgin Securities, Marleton Business,
Islands Capricorn Trading, Dargal
Associated, Fargarita Consulting,
Marvil Associated, Penbury
Finance, Oxton Trading,
Brinslen Investment, Climitex
Holding, Elkins Holding,
Minterler Invest, Silvernut
Investment, Tacolen Investment,
Tulerston Invest, Marledon
Invest, Dustan Trading,
Reconstruction and Development
Finance, Nassam Alexanderthe Bhutto family for their wealth relied on Western property companies,
Western lawyers and a network of Western friends.”65
Even the Swiss finally had had enough. Seventeen bank accounts linked
to Bhutto and Zardari were frozen. The two were charged with money laundering
in connection 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 don’t think it’s addictive. You
want to run away from it, but it doesn’t let you go. . . . I think the reason
this happens is that we want to give love and we receive love.”66
Save your tears. In the global collection of displaced leaders, Benazir
Bhutto may be the least sympathetic character of all.