TERM : SPRING 2020

CEOs AND DIRECTORS ARRESTED AND PROSECUTED IN PAKISTAN AND INDIA

COURSE: CRIMINAL LAW - I INSTRUCTOR: SIR SOHAIB SALEEM SLOT: TUES/THURS 4th (2492)

SUBMITTED BY:

ABDUL QAYYUM 12318

Table of Contents

Executive Summary ...... 3 PAKISTAN ...... 4 Shoaib Ahmed Shaikh ...... 4 Dr. Asim Hussain ...... 5 AKD Securities ...... 6 Ahad Cheema ...... 7 INDIA ...... 8 Background ...... 8 Byrraju Ramalinga Raju ...... 9 Abdul Karim Telgi ...... 10 References: ...... 11

Executive Summary

In this report, I will be highlighting the charges faced by CEOs and Directors of various companies in Pakistan and India who were arrested and prosecuted for committing criminal offences under Pakistan Penal Code and Indian Penal Code respectively. The focus of the report will be on the particular offences committed, the applicable law and the punishments involved.

However, a major limitation faced in Pakistan is the extremely slow legal process which often takes more than a decade to pass the final judgement on the case, and very often political forces are in play throughout the legal proceedings. Hence, I have also included the cases where these culprits were arrested but a formal legal proceeding has not taken place until today. The cases covered spans over a variety of professionals, including politicians and media giants.

PAKISTAN Shoaib Ahmed Shaikh

Shoaib Ahmed Shaikh is a Pakistani businessman who founded a company named Axact, which claims to be one of the world's largest IT companies and is the parent company of one of Pakistan’s biggest media groups, BOL Network.

On 17th May 2015, The New York Times published an in-depth report exposing the fake degree business run by Axact, and he was quickly arrested. It is alleged that Axact charged more than 200,000 people in 197 countries for these services. Axact was founded back in 1997 by Shoaib Ahmed Shaikh in Karachi and registered with SECP in 2006.

The report exposed that Axact ran at least 370 degree and accreditation mill websites. Federal Investigation Agency of Pakistan begin inquiry and the cyber crime team found plethora of evidence from Axact’s office during a raid. Further investigation revealed that Shoaib Ahmed owned several shell companies in US and other Caribbean countries, which were used for money laundering. However, due to lack of evidence, he was acquitted of money laundering charges. The criminal charges were tried in a Sessions Court in Pakistan.

Additional district and sessions judge (ADSJ) Pervaizul Qadir Memon acquitted Shoaib Ahmed and 27 others in the fake degrees case on October 31, 2016. However, a twist to the story came when the judge was sacked on February 15, 2018 due to his admission of receiving Rs. 5 million bribes for acquitting the accused.

Later, Islamabad High Court remanded the case back to the Sessions Court for a retrial, run by District and Sessions Judge Islamabad Chaudhry Mumtaz Hussain. The 16-page judgement authored by IHC division bench comprising Justice Athar Minallah and Justice Miangul Hassan Aurangzeb was issued.

The particular crimes carried out by Shoaib Ahmed Shaikh and 22 of his employees included the following:

34. Acts done by several persons In furtherance of common intention: When a criminal act is done by several persons, in furtherance of the common intention of all, each such person is liable for that act in the same manner as if it were done by him alone.

109. Punishment of abetment if the Act abetted committed In consequence and where no express provision is made for its punishment: Whoever abets any offence shall, if the act abetted is committed in consequence of the abetment, and no express provision is made by this Code, for the punishment of such abetment, be punished with the punishment provided for the offence.

419. Punishment for cheating by personation: Whoever cheats by personation shall be punished with imprisonment of either description for a term which may extend to seven years, or with fine, or with both. 420. Cheating and dishonestly Inducing delivery of property: Whoever cheats and thereby dishonestly induces the person deceived to deliver any property to any person, or to make, alter or destroy the whole or any part of a valuable security, or anything which is signed or sealed, and which is capable of being converted into a valuable security, shall be punished with imprisonment, of either description for a term which may extend to seven years, and shall also be liable to fine.

468. Forgery for purpose of cheating: Whoever commits forgery, intending that, the document forged shall be used for the purpose of cheating, shall be punished with imprisonment of either description for a term which may extend to seven years, and shaft also be liable to fine.

471. Using as genuine a forged document: Whoever fraudulently or dishonestly uses as genuine any document which he knows or has reason to believe to be a forged document, shall be punished in the same manner as if he had forged such document.

Based on the above sections of Pakistan Penal Code, Shoaib Ahmed was sentenced to 20 yeas for the scam along with 22 employees, and a fine of Rs. 1.3 million was imposed on all employees in September 2018.

Further break-down of the punishment is as follows:

• 3 years rigorous imprisonment (RI) along with a fine of Rs100,000 under Sections 419/109/34 • 3years RI along with a fine of Rs200,000 under Sections 420/109/34 • 7 years RI along with a fine of Rs500,000 under Sections 468/109/34 • 7 years RI along with a fine of Rs500,000 under Sections 471/109/34

However, since all the sentences will run concurrently, the maximum time each convict would have to spend in jail is 7 years.

Dr. Asim Hussain

Dr. Asim Hussain is the Chairman of Ziauddin Group of Hospitals and former advisor of Prime Minister for Ministry of Oil and Natural Resources. He also serves as the Chairman of Higher Commission of Sindh and Chairman of Petroleum Institute of Pakistan. He has also been conferred with several awards including Sitara-i-Imtiaz and Hilal-i-Imtiaz.

On 26th August 2015, he was taken into custody by the paramilitary forces and detained under a 90-day preventive detention for questioning related to his involvement in terror financing and advancing funds for supporting criminal activities. Later, the case was taken forward by National Accountability Bureau (NAB) for alleged corruption of more than Rs. 460 billion through a variety of corrupt actions including fraudulent allotment of land, money laundering, land encroachment, receiving illegal commission for curtailment of gas supply leading to unjustified exploitative increase in gas prices, and fraud with public in the name of charity hospital. Dr. Asim has also been accused of allegedly misusing his authority and fraudulently awarding contracts of 5 gas fields in Sindh to a privately managed gas processing company, the Jamshoro Joint Venture Limited (JJVL), that had caused a loss of Rs. 17.338 billion to the exchequer.

As of now, legal proceedings are continuing, and no final judgement has been released. Several court sessions have taken place, and there is a significant political string attached to this case as Dr. Asim is a close aide of former President and PPP Co-Chairman, Asif Ali Sardar. AKD Securities

AKD Securities Ltd. is one of the leading securities firms in Pakistan, providing a comprehensive range of investor focused services, including equity brokerage, economic and securities research, investment banking and financial advisory services.

In 2016, Federal Investigation Agency arrested the firm’s CEO, Fareed Alam and 2 directors, Tariq Ghumra and Mohammed Iqbal over charges of fraud leading to a loss of Rs. 290 million to Employees Old-Age Benefit Institution (EOBI). It was alleged that AKD Securities issued a favorable research report of a textile company, Amtex recommending the purchase of company’s stock. Based on this report, EOBI bought Rs. 330 million worth of shares and the share price dropped from Rs. 29 to Rs. 2 within 3 months. The case was registered under the following section of Pakistan Penal Code:

34. Acts done by several persons In furtherance of common intention: When a criminal act is done by several persons, in furtherance of the common intention of all, each such person is liable for that act in the same manner as if it were done by him alone.

109. Punishment of abetment if the Act abetted committed In consequence and where no express provision is made for its punishment: Whoever abets any offence shall, if the act abetted is committed in consequence of the abetment, and no express provision is made by this Code, for the punishment of such abetment, be punished with the punishment provided for the offence.

409. Criminal breach of trust by public servant, or by banker, merchant or agent: Whoever being in any manner entrusted with property, or with any dominion over property in his capacity of a public servant or in the way of his business as a banker, merchant, factor, broker, attorney or agent, commits criminal breach of trust in respect of that property, shall be punished with imprisonment for life or with imprisonment of either description for a term which may extend to ten years, and shall also be liable to fine.

In their defense, Chairman of the AKD group, Akeel Kareem Dhedhi came on media and claimed that the research report prepared by AKD Securities recommended the purchase of stock at Rs. 9/share, whereas EOBI officials bought it at Rs. 19/share. He further added that they are regulated by SECP who did not penalize them on this research report.

After spending 2 years on the case, FIA admitted that it could not find any evidence against AKD Securities, and that any re-investigation might be a futile exercise. Ahad Cheema

Ahad Cheema is the former Director General of Lahore Development Authority (LDA). He was alleged with his involvement in fraud and misuse of authority.

During the hearing, the investigation officer revealed that that the LDA did not consult an expert to evaluate and ascertain the impact of alterations terms and conditions for Paragon City. It was revealed that the Punjab government had already developed Ashiyana Housing Scheme, whereas changes in the Ashiyana Iqbal scheme were made to sponsor Paragon City. It’s also alleged that LDA awarded the contract in violation of given rules and regulations.

He was initially arrested for Ashiana Housing Scam, on charges of embezzlement of funds, misuse of authority and illegal award of project contract worth Rs. 14 billion to Lahore CASA developers, which was ineligible. It was revealed that Cheema had received Rs. 30 million worth in the form of gratification from the owners of Paragon City. During investigations, properties worth millions was found under the name of Ahad Cheema. On 14th April 2020, an accountability court adjourned the case hearing until May 6. The current case is of simple ‘assets beyond means’ as NAB has traced 22 properties belonging to Ahad Cheema, comprising of a significant kanals of agricultural land.

Ahad Cheema is currently in jail and facing trial in both references.

INDIA Background

Regulatory provisions and authorities

The primary statute governing criminal offences in India is the Indian Penal Code 1860 (IPC) and the procedural law for conduct of proceedings is prescribed by the Code of Criminal Procedure 1973 (CrPC).

The Companies Act 2013 (Companies Act) also contains provisions that aim at preventing fraudulent activities by and in companies.

Offences used to prosecute corporate or business fraud

Related offences under the IPC include dishonest misappropriation of property, criminal breach of trust, forgery, falsification of accounts and cheating.

Forgery (S. 463): Forgery is defined under the Penal Code as making any false documents or false electronic record or part of a document or electronic record, with the intention to either:

• Cause damage or injury, to the public or to any person.

• Support any claim or title, or to cause any person to part with property, or to enter into any express or implied contract, with intent to commit fraud.

Falsification of accounts (S. 477A): An employee is guilty of falsification of accounts if he wilfully and with an intention to defraud either:

• Destroys or falsifies any book, electronic record, paper, writing, valuable security or account that belongs to or is in the possession of his employer, or has been received by him for or on behalf of his employer.

• Wilfully, and with intent to defraud, makes or facilitates the making of any false entry in, or omits or alters or facilitates the omission or alteration of, any material particular from or in, any such document.

Dishonest misappropriation of property (S. 403): A person commits the offence of dishonest misappropriation of property if he dishonestly misappropriates or converts to his own use any movable property.

Criminal breach of trust (S. 405): Criminal breach of trust is when a person who is entrusted with property or any dominion over property is dishonestly misappropriating, converting the property to his own use, or dishonestly using or disposing of that property in violation of any direction of law or legal contract.

Cheating (S. 415): This offence consists of deceiving any person and either:

• Fraudulently or dishonestly inducing the deceived person to deliver property to a person or allow a person to retain property. • Intentionally inducing the deceived person to do or omit to do anything that he would not do or omit if he were not so deceived, and that causes or is likely to cause damage or harm to that person in body, mind, reputation or property.

Sanctions for participating in corporate or business fraud

The Indian Penal Code, 1860 also prescribes penalties for participating in corporate fraud. Under Section 403, a person who dishonestly misappropriates property is liable to be punished with imprisonment for up to two years and/or fine. Criminal breach of trust is punishable under section 406 with imprisonment of up to three years and/or a fine. The penalty for falsification of accounts is given under section 477A where the offender may be imprisoned for a term up to seven years and/or with fine. Section 417 holds a person liable for cheating with imprisonment of up to one year and/or a fine. Byrraju Ramalinga Raju

Byrraju Ramalinga Raju is the former chairman and CEO (from 1987 until 7 January 2009) of Satyam Computer Services, an Indian IT services company offering software development, system maintenance, packaged software integration and engineering design services. Raju stepped down following his admission to embezzlement from the company to the tune of approximately US$1.5 billion.

On 7 January 2009, Chairman Raju resigned after publicly announcing his involvement in a massive accounting fraud, in which he had inflated the company's cash assets by over $1 billion. In a letter to the Securities and Exchange Board of India, he explained that "what started as a marginal gap between actual operating profit and the one reflected in the books of accounts continued to grow over the years ... It has attained unmanageable proportions as the size of the company operations grew significantly".

Fake invoices and bills were created using software applications such as 'Ontime'. A secret program was allegedly planted in the source code of the official invoice management system creating a user id 'Super User' with the power to hide or show the invoices in the system.

Judge B.V.L.N. Chakravarthi ruled that the case involved “grave offences affecting the reputation of the corporate system of the country as a whole and the economy of the country". On 9 April 2015, Ramalinga Raju and his brothers were sentenced to 7 years in jail and fined INR 5.5 crore. Central Bureau of Investigation charged him for charges of inflating revenue, fabricating invoices, falsifying accounts and income tax returns, and forging fixed deposit receipts to paint a rosy picture of the company’s financials to deceive the public. The court found Ramalinga Raju and former vice-president of finance, G. Ramakrishna guilty of destroying evidence. Ramalinga Raju was also found guilty of criminal breach of trust (S. 405).

Others convicted and sentenced in this case were Vadlamani Srinivas, then chief financial officer at Satyam, and former Price Waterhouse auditors, Subramani Gopalakrishnan and T. Srinivas. The court also convicted Satyam’s then internal chief auditor, V.S. Prabhakar Gupta and employees G. Ramakrishna, D. Venkatapathi Raju and Ch Srisailam. The eight were ordered to pay a fine ranging from ₹ 27 lakh to ₹ 33 lakh each. Abdul Karim Telgi

Abdul Karim Telgi was a convicted Indian counterfeiter. He earned money by printing counterfeit stamp paper in India.

He appointed 350 people as agents who sold the fakes to bulk purchasers, including banks, insurance companies, and stock brokerage firms. The size of the scam was estimated to be more than ₹100 billion (US$1.4 billion). One aspect of the scandal that caused much concern was that it required the involvement of many police officers and other government employees.

Under Section 28 of Indian Penal Code, Counterfeiting is defined as:

"Counterfeit"-A person is said to "counterfeit" who causes one thing to resemble another thing, intending by means of that resemblance to practice deception, or knowing it to be likely that deception will thereby be practiced.

*[Explanation 1--It is not essential to counterfeiting that the imitation should be exact.

Explanation 2.--When a person causes one thing to resemble another thing, and the resemblance is such that a person might be deceived thereby, it shall be presumed, until the contrary is proved, that the person so causing the one thing to resemble the other thing intended by means of that resemblance to practice deception or knew it to be likely that deception would thereby be practiced.

On 17 January 2006, Telgi and several associates were sentenced to 30 years rigorous imprisonment. On 28 June 2007, Telgi was sentenced to rigorous imprisonment for 13 years for another aspect of the scandal. He was also fined ₹10 billion (US$140 million).

References:

https://www.dawn.com/news/1418156 https://www.dawn.com/news/1230731 https://www.pakistantoday.com.pk/2019/03/30/deo-jailed-for-seven-years-in-illegal-recruitment-case/ https://www.pakistantoday.com.pk/2018/04/17/nab-officer-claims-ahad-cheema-involved-in-fraud/ https://www.thenews.com.pk/print/644586-ahad-cheema-case-adjourned-until-may-6 https://indiacode.nic.in/bitstream/123456789/4219/1/THE-INDIAN-PENAL-CODE-1860.pdf https://blog.ipleaders.in/white-collar-crime/ https://www.mondaq.com/india/white-collar-crime-anti-corruption-fraud/696380/corporate-frauds-an- analysis https://uk.practicallaw.thomsonreuters.com/w-009- 8768?transitionType=Default&contextData=(sc.Default)&firstPage=true&bhcp=1#co_anchor_a551612