PTCL Privatisation — Mega Corruption

PTCL Privatisation — Mega Corruption Article-6 | Dated: 10-11-2015 “MEGA CORRUPTION IN THE PRIVATISATION OF PTCL” Some time ago, news was broadcast that NAB (National Accountability Bureau) presented a list of 29 mega corruption cases before the Supreme Court, which also included the case of PTCL’s privatisation, in which mega corruption had been committed. NAB has been investigating this matter for the past few years. As far as the claim that mega corruption occurred in PTCL’s privatisation is concerned, I was not at all surprised — but I was certainly surprised that NAB is still only at the inquiry stage. Whereas one of the reasons for this mega corruption is as clear as glass and requires no special inquiry. There may be many other causes of this mega corruption for which the inquiry is ongoing, but the reasons I am about to mention are very prominent and visible to anyone who has even a basic familiarity with tender/bidding laws. Since I have done considerable work in this field during my career, I can confidently explain on what basis the law was ignored. NAB has caught many such cases and not only recovered the corrupt money but also handed out punishments. It is well known to everyone that around June 2005, when bids were invited for the sale of 26% shares of PTCL, the highest offer was made by Etisalat UAE, which offered $1.96 per share, amounting to $2.599 million for 26%. In reality, this was a very large offer — far exceeding the government’s confidential reserve price — and the government stood to gain enormously from it. Those who feast on commissions and kickbacks were overjoyed. However, within just a few days, Etisalat realised its grave mistake, which could have caused them considerable loss, and they flatly refused to purchase the shares. Instead of following the law — whereby Etisalat’s submitted Earnest Money should have been forfeited (typically 5% of the offered price) and fresh bidding arrangements made with new bidders — the Privatisation Commission began pleading with Etisalat to purchase at the same offered price. Etisalat refused. The matter eventually reached General Musharraf, who also had his own personal interest in selling the shares at the same price. Shortly thereafter, at a conference reportedly held in Jeddah, Musharraf met the President of the UAE and placed this matter before him, insisting that Etisalat purchase at the already-offered price. He promised that if Etisalat agreed, he was willing to accept additional conditions on their terms. These were the matters that became widely known in those days, and newspaper reports stated that Musharraf — by meeting the UAE President — had convinced Etisalat to purchase the 26% PTCL shares at the same price. It was also reported that PTCL’s management control would be handed over to Etisalat as part of the bidding Terms & Conditions — meaning that whichever bidder purchased the 26% shares at the highest offered price would also receive PTCL’s management. Here I would like to clarify an important point: Terms & Conditions are an extremely vital component of any tender or bid, which every bidder must accept before the tender/bid is opened — specifying under what conditions they must perform the work or sell/purchase an item. It is made clear to the bidder that if their bid is accepted and they hesitate or refuse to proceed, their submitted Earnest Money will be forfeited and they will be permanently banned from participating in any future tenders or bids from that institution. One thing must be clearly remembered: after a tender or bid is opened, the Terms & Conditions cannot be altered, amended, softened, or changed — especially in a manner that exclusively benefits the winning bidder. If such changes are made, they are not only illegal but also seriously irregular from an audit standpoint. However, the Privatisation Commission, setting aside all principles and laws, incorporated some of Etisalat’s own dictated conditions into the Share Purchase Agreement. Under one clause of this agreement, it was stipulated that Etisalat would pay for the 26% shares in three equal instalments only on the condition that 100% of PTCL’s properties — which were in the government’s name (originally government property when it was the T&T Department, and continued under the T&T name) — were transferred to Etisalat’s name. In my understanding, the real motive behind this clause was something else entirely — because Etisalat knew very well that transferring 100% of properties to their name was beyond the Government of Pakistan’s capacity. Many properties have no record whatsoever; some are held by provincial governments who claim them as their own with ongoing legal cases — meaning these properties have been in litigation for years. To date, the government has managed to transfer only around 94% of properties to Etisalat’s name, and Etisalat has withheld the second instalment of $800 million for nine years, on which millions of dollars in markup have now accumulated. The Government of Pakistan is pleading with them: “For God’s sake, deduct the value of the remaining 6% properties that cannot be transferred — but please pay the second instalment.” And Etisalat responds: “No — first transfer 100% as per the agreement, then we shall pay.” In reality, the purpose behind inserting this clause was precisely this: that the Government of Pakistan would never be able to transfer 100% of properties, and Etisalat would never have to pay — “Neither will nine maunds of oil be gathered, nor will Radha dance” (a famous Urdu proverb meaning an impossible condition set to avoid fulfilment). I believe it was the hand of our own so-called “patriotic” people that caused this clause to be inserted — for how would Etisalat have known that 100% transfer was impossible? Our people were only interested in their own benefit — whether the nation gained or lost was irrelevant to them. Not only did they insert this illegal clause, but they drafted its contents in a manner that maximised benefit for Etisalat alone, and maximised their own commissions and kickbacks. I should also mention that the then-Privatisation Minister Hafeez A. Sheikh refused to sign this agreement, and it was signed instead by the then-IT Minister Awais Leghari — a fact that was widely reported at the time. Regardless, this illegal agreement was executed, and the government has been paying the price for it ever since. PTCL’s privatisation brought not a single benefit to the government. Before this privatisation, I well remember that PTCL’s annual profit was approximately Rs. 20 billion per year — and after privatisation, it steadily declined, as did the company’s share price. Regarding this privatisation, the current Privatisation Minister Mr. Zubair also stated that the agreement with Etisalat for PTCL’s privatisation was non-transparent. This was also presented to the Public Accounts Committee, which acknowledged it, as is clearly evident from the following news report dated May 20, 2015: Privatisation Commission admits illegalities and non-transparency in privatisation of PTCL Says Etisalat has not paid dues of $800 million since last seven years ISLAMABAD: The Chairman of the Privatisation Commission admitted before the Public Accounts Committee of the National Assembly on Wednesday that the agreement for the privatisation of PTCL was not transparent and was financially damaging to the country. He said that although the government was fully observing the agreement, Etisalat had not paid a single penny out of the remaining $800 million in the last seven years. The meeting of the Public Accounts Committee (PAC) was held under the chairmanship of Syed Khursheed Shah at Parliament House. The PAC directed NAB to submit a report on PTCL affairs within a month and directed an audit of the company’s accounts. During the meeting, the PAC was briefed by the Privatisation Commission regarding the privatisation of different enterprises. The meeting was told that the government had transferred 3,214 out of 3,248 installations and properties of PTCL to Etisalat, but the company is not paying its dues. Assets worth $9.24 million have not been transferred to Etisalat. It was further stated that 180 assets were transferred during the PPP tenure and 97 by the present government. On a question by members, PC Chairman Mohammad Zubair admitted that the privatisation agreement was not transparent. He said there were conditionalities that caused losses to the government, but despite that, the government was observing it. He said the agreement stipulates that 100% of assets are to be transferred to Etisalat. He said the case was sent to NAB in 2013, which responded that the matter had been investigated but there were lacunas in the agreement. He said the report is with the NAB Chairman. The PAC directed the NAB Chairman to submit the report within two weeks. Audit officials said there had been no audit of PTCL accounts since 1996. They said that after the 18th Amendment, letters were written to PTCL for audit, but the organisation has yet to have its accounts audited. At this, the PAC Chairman observed that no one can be allowed to violate the Constitution and directed an audit of PTCL accounts. He said if the company refuses, it should be brought to the notice of the PAC. Officials asked the PAC to order the withdrawal of assets under Etisalat that were not part of the agreement. The above admission by the Chairman of the Privatisation Commission before the Public Accounts Committee — that “the Share Purchase Agreement for PTCL’s privatisation was substandard and non-transparent” — corroborates my argument above about how deeply flawed this agreement was, as a result of which the Government of Pakistan has still not received the full payment for PTCL’s 26% shares from Etisalat after nine years — payment that was supposed to come in three equal instalments under this “non-transparent agreement.” Meanwhile, Etisalat exploits the very clause of this agreement to withhold payment, since the government has still not transferred 100% of the T&T properties to Etisalat’s name. Nine years have passed and the situation remains unchanged — “Dhak wahi teen paat” (same place, no progress). Etisalat keeps saying: “First transfer 100% of properties, then we will pay — as if they are doing this nation a great favour.” For the past nine years, the Finance Minister, before every June budget speech, announces: “We hope to receive $800 million from Etisalat this year, which will reduce the budget deficit…” — a hope that will perhaps never materialise. So how will the deficit ever reduce? This same mantra has been repeated in every budget speech for nine years — yet the money never comes. Etisalat every year waves a dismissive hand and says: “Where is our 100% property? Why should we pay for the shares without it?” And our poor government is left red-faced. The government has so far transferred 94% of properties — only 6% remains — but Etisalat simply will not budge, even after having 94% transferred to their name. And they have been handed a golden opportunity: to enjoy and profit from PTCL’s earnings without paying the full share purchase price. The real grief is that our decision-makers, motivated purely by personal gain, made a shameful, illegal, and non-transparent agreement after the bid was already opened — inserting this disastrously harmful clause — solely to ensure that Etisalat would not back out of its attractive offer for the 26% PTCL shares, and that their own millions in commissions would not be lost. This clause is extremely dangerous. The loss it has caused — and will likely continue to cause to the government (until this agreement is terminated and PTCL’s privatisation cancelled) — is deeply regrettable. The entire purpose of PTCL’s privatisation has been defeated. Instead of benefiting the government, it has brought nothing but ongoing loss. Etisalat will never pay the full share purchase price without 100% property transfer, and achieving that 100% transfer is, for the government, no less than bringing the lion’s milk (an impossible feat) — in fact, perhaps impossible altogether. I can state with confidence: had this same harmful clause been included in the Terms & Conditions before the bid was opened, the offers received would have far exceeded Etisalat’s bid — because every bidding company would have reasoned that billions of dollars’ worth of PTCL properties would be coming into their name, plus they would have to pay the share price in three instalments only after 100% property transfer, and they would immediately receive PTCL’s management control and earn enormous profits — so the offers would have been far higher. As I mentioned at the outset, NAB has been sitting on the PTCL mega corruption case for nine long years and is still in the inquiry stage. If from the very beginning they had focused their attention on investigating how such a non-transparent agreement came to be — an agreement that has caused billions of dollars in losses to the government — I am confident they would have discovered much from the very start, and would have been in a position to take action against the following: 1. Those who approved the agreement with the winning bidder — on the bidder’s own terms — after the bid was already opened. 2. Those who failed to respect the validity of offer period and did not forfeit Etisalat’s Earnest Money when they failed to pay the full 26% share price within that period — and who is responsible for this failure? 3. Under what law were Etisalat’s dictated conditions — which were clearly and seriously harmful — incorporated into the agreement? 4. Whether the person who signed this non-transparent agreement was even authorised to do so. These are what are called “serious floating irregularities” in English. NAB has taken action against numerous institutions and individuals for similar irregularities — flouting tender/bidding laws and awarding contracts to favoured bidders in violation of all rules. But why the silence here? Why is no action being taken against those whose corruption is visible without any shadow of doubt? The primary responsibility for this mega corruption lies with the Musharraf and Shaukat Aziz government, which gave Etisalat undue favour, setting aside all laws and principles, causing enormous and ongoing loss to this beloved nation through such a flawed privatisation. The governments that came after had the duty to immediately cancel the Share Purchase Agreement and save the institution from further damage: • The Zardari government failed to recover the $800 million in five years and could not take any meaningful action — nor could they, since their personal interests were tied to the UAE government. How could they antagonise the UAE when they had extensive personal interests there, and many of them lived there permanently — as they still do? • When Nawaz Sharif’s government came in 2013, they too could neither recover the money nor take any effective steps — because they too have substantial personal interests linked to the UAE and its government. Finance Minister Mr. Muhammad Ishaq Dar stated: “The previous government made a gravely wrong agreement regarding PTCL’s privatisation. But since the agreement has been made, it is our duty to honour it.” If an agreement was made in violation of the law, can it not be annulled through the courts, especially when it has caused enormous harm to the Government of Pakistan — an agreement given to Etisalat in flagrant violation of all laws? Did the Supreme Court not cancel the Rental Power agreements made during Zardari’s tenure that were beyond the law? If a truly bold, patriotic government had come to power, it would have immediately had this illegal, non-transparent PTCL privatisation Share Purchase Agreement cancelled through the courts, de-nationalised PTCL, and sent Etisalat packing without delay. But perhaps Pakistan is incapable of producing such a government. Many constitutional petitions have been filed in the Supreme Court and High Courts against the mega corruption in PTCL’s privatisation, seeking immediate cancellation of this non-transparently executed privatisation. However, due to strong resistance from the government and Etisalat, the courts have not yet had the opportunity to hear these petitions, and they remain pending to this day. In 2009, some such petitions came before the Supreme Court for hearing, and the then-honourable Chief Justice Mr. Iftikhar Chaudhry gave his observations that the corruption in PTCL’s privatisation constituted one of Pakistan’s biggest mega corruption cases. Subsequently, all these petitions were adjourned — on the grounds of the government’s lawyers and Etisalat not being prepared — and have not been heard since. Around May or June 2012, newspaper reports stated that Chief Justice Iftikhar Chaudhry had announced he would take up all these petitions for hearing in October 2012, but October 2012 passed without any hearing, and the honourable Chief Justice retired on December 12, 2012 upon completion of his tenure. All these constitutional petitions remain pending to this day. As far as I recall, Haji Khan Bhatti (former President of the Line Staff Union, PTCL) filed a well-argued constitutional petition with solid evidence in the Sindh High Court, which was reportedly admitted for hearing but remains pending. Why? Only Haji Khan Bhatti himself can answer that. This PTCL privatisation mega corruption case is also under investigation by NAB — as I mentioned at the outset. Constitutional petitions pending in superior courts, pending with NAB for nine years with no inquiry — and only when the Supreme Court took notice was an inquiry finally initiated. Such is the performance of NAB. The government remains cowardly and indifferent — afraid to speak or act against its foreign masters. The media too is silent and insensitive — the same media that raises the roof over trivial corruption reports, yet remains completely silent on this mega corruption. Why? Could they not see the mega corruption in PTCL’s privatisation? They surely could. So why this meaningful silence? Why not raise their voice? Why not comment? The saddest aspect is that on one hand, Etisalat — exploiting the clause it had inserted into the Share Purchase Agreement — refuses to pay even a single penny of the $800 million first instalment of the share purchase price without conditions being met to the letter. On the other hand, Etisalat is also not honouring the agreement’s provisions regarding the protection of PTCL employees’ interests, which the Government of Pakistan had also guaranteed — yet the government too remains inexplicably silent. PTCL’s management under Etisalat has deprived all transferred employees — those who were transferred from T&T to PTC, and from PTC to PTCL when the company came into existence on January 1, 1996 — of their rightful benefits. The rights, applicable laws, salaries, and pensions of all such transferred employees are exactly as those of civil servants of the Government of Pakistan. This was clearly stated and written in the laws establishing PTC and PTCL: “The service terms and conditions of any transferred employee cannot be altered to their detriment.” In fact, the Supreme Court, in the Masood Bhatti case, even noted that the Government of Pakistan itself does not have the authority to alter these conditions, and that they shall remain permanently under the government’s guarantee. Despite this, the biased Etisalat management of PTCL began, from 2009, paying these transferred employees salaries and pensions according to its own discretion — rather than what was being paid to them as civil servants of PTCL since the company’s inception. Against such actions, PTCL pensioners approached the courts, which granted them relief and ordered PTCL and PET to pay pensions and increases in line with what the Federal Government pays its employees. However, the management appealed to the High Court, which also ruled in favour of the pensioners — yet these individuals, who came through corrupt and illegal means, have still not complied with the High Court’s judgment and continue to make excuses. They have even filed a review appeal against the High Court’s decision. But God willing, their review appeal will also be dismissed — because I know the High Court’s decision in our favour was based not on any personal consideration but on a proper legal interpretation of the laws that grant transferred PTCL employees the rights of Federal Government civil servants. The deepest grief is that the Government of Pakistan — to which Etisalat has not paid even the first instalment of $800 million for nine years, showing a dismissive hand every year and causing the government millions of dollars in losses — is siding with Etisalat even in this matter, apparently wishing that these PTCL pensioners not receive their rightful dues — as is evident from the government’s participation as a party in Etisalat’s review appeal. These pensioners have been protesting, striking, and rallying for six years, yet not a single media outlet or news channel dares to cover their story or speak in their favour. News channels that broadcast live coverage of the smallest strikes — whether by sanitation workers, nurses, lawyers, or clerks — do not have the courage to show even a glimpse of these PTCL pensioners’ rallies or even report their news. They are all sold out to these foreign masters —and the national interest be damned. Whatever