Why has PIA Leased Cargo Freighters to Dubious Backgrounds Punjabi's Qadianis related to Generals Musharaff from Cricket Back Ground like Ijaz Butt , Waseem Barri and Sajjad Pervaiz Ex-Employees of PIA.
A PIA Aircraft Cargo Bay
By M T Butt
ISLAMABAD, October 11: When South Asia Tribune reported two weeks ago that the PIA Chairman had awarded the entire cargo contract for Europe and UK, worth almost Rs 2.5 billion, to a crony, a former cricketer, we had just touched the tip of the proverbial iceberg. Now the real dirt has hit the roof and the scandal would match any of the big time block busters of the Musharraf era.
Pakistan’s leading newspaper ‘Dawn’ after some initial digging has done a report, as a follow up of our Sept 27 tip. Dawn comes out with many details of the scam which involves Chairman Ahmed Saeed and his ex-cricketer brother in law, Ejaz Butt, as well as many former Pakistani Test players including Pervez Sajjad and Wasim Bari, now enjoying top positions in PIA.
It is a sad commentary on how Pakistan’s leading lights of cricket have become cronies and instruments of making money under the table, serving masters without scruples. Click to readDawn Story dated October 10
The Dawn story begins with a devastating para: “Pakistan International Airlines could be losing millions in foreign exchange annually in cargo transportation revenues following the handing over of its entire cargo transportation in Europe to a firm at a higher commission, allegedly in violation of rules and despite serious objections by the internal auditors, documents available with Dawn reveal.”
It shies away from naming names, but says: “In March 2003, PIA renewed its agreement with Golden Star Aviation, a one-man firm owned by one of PIA ex-employees, as its cargo sales agent (CSA) for booking the entire cargo transportation in eight European countries - France, Italy, Netherlands, Belgium, Denmark, Norway, Sweden and Finland. Previously, the company was handling only France."
This ex-employee of PIA is former Test cricketer Pervez Sajjad, as South Asia Tribune reported on Sept 27 Click here for SAT Report He was posted to Paris as a PIA employee in 1994 and was given a golden handshake in 1998 when he opened a Cargo Agency in France by the name of Golden Star Aviation. It was a routine business venture but Sajjad knew he could make it a success, should his luck favor him in future. He hit the jackpot in 2001 when General Musharraf appointed Choudhry Ahmed Saeed as Managing Director of PIA, later making him Chairman of the Corporation.
Why Sajjad became lucky was because of his silent partner, another former Test player Ejaz Butt, brother-in-law of Chairman Ahmed Saeed. The Saeed-Butt-Sajjad trio could find no better partners to launch the biggest ever milking scam in PIA, focusing on its cargo operations as there were millions of dollars to be made quietly, away from the glare of the media and the Islamabad Generals, besides nosy bureaucrats.
In 1998, Sajjad’s Golden Star was an ordinary cargo booking agency in Paris. When Ejaz Butt moved his strings with brother in law Ahmed Saeed, Golden Star was made the General Sales Agent (GSA) the sole cargo agency for the whole of France. Now any one else who booked a cargo on PIA will have to pay a cut to Sajjad.
How this was achieved is another story. Cricketer Wasim Bari was the General Manager of Cargo in 2001 and his collusion was necessary to achieve this. Bari was bribed in a subtle way. The Cargo Division was turned into a Directorate and Bari was promoted from a GM to a Director.
Another hurdle, the concerned executive, the Director of Marketing, Farooq Shah, was also to be crossed. At that time he was only an "Acting" and not a confirmed Director. So he was told to help Sajjad and he would be confirmed as Director. That was easy.
But when Sajjad and his Golden Star were in place and settled as GSA, the newly created Directorate of Cargo at the Head Office was no longer needed. So it was conveniently abolished and Wasim Bari, now a Director, was posted as Director Administration, a much more powerful position.
Director Farooq Shah, who had complied with the scheme, was given another promotion and made a Deputy Managing Director for his quiet services.
The dividends started coming in and a couple of years passed. The Sajjad-Butt-Saeed trio decided that more should be done to get more dollars. In February/March 2003 a much bigger target was set --- to make Sajjad’s Golden Star the CSA for entire Europe, a monopoly.
This time the Director of Marketing was Kamran Hasan and he had to be made part of the deal. His brother, Sohail Hasan, was found to be the bridge to achieve this target. Sohail’s agency, Cargo Aids, was given 95 per cent of shipping rights for export of Mangoes and fresh fruits/vegetables to Europe and Middle East via PIA.
It meant that out of an average cargo bill of between Rs 700 and Rs 800 million, Sohail’s agency would pocket a cool 10 per cent, whether it exported the goods or any body else did. The 2-3 month Mango season turned out to be much more fruitful than mere mangoes for the Hasans. They had almost a monopoly over fresh produce exports and they could use their clout by preferring some exporters over others.
Kamran Hasan never raised an objection to Sajjad’s Golden Star becoming the sole agent for Europe without any bidding, without competition and even without having proper financial and corporate credentials. The Sajjad deal was made even sweeter by allowing him more commission than the normal rules would allow.
The Dawn report confirmed this and disclosed much more. "The airline reportedly allows the firm 10 per cent commission as against five per cent which it gives to its various cargo agents in these countries. Even the General Sales Agent (CSA), which is the sole agent, appointed by the international airlines in any particular area, is given 7.5 per cent commission,” it said.
So Chairman Ahmed Saeed allowed his brother in law and Sajjad a 10 per cent commission on all cargo booked on PIA from Europe. It was a windfall or in simple words a jackpot hit without even buying a lottery ticket.
Yet the trio did not stop there. No rules were followed and no competitive bidding was done to make other cargo companies make better offers. When they first gave Golden Star the sole right to control all cargo from Europe, Sajjad and his firm were not even prepared for such a big deal as they had never handled cargo on such a large scale. “The firm did not have any office or establishment anywhere in Europe except in France,” Dawn reported.
But with the European contract under the belt, it was not difficult to find an experienced firm with a broader base. Sajjad quickly found one. Said Dawn: “A source at the PIA Headquarters told Dawn on the telephone that the Golden Star Aviation has entered into a so-called partnership with a firm, Kales Group of Netherlands, and was using the latter's facilities or outlets throughout Europe.”
When Dawn contacted the PIA management for answers to these troubling questions, they got a two-para corporate statement but even that was enough to confirm all the doubts.
This is how Dawn reported it: “On Oct 1, 2004, a detailed official comment was sought from PIA on these points. It sent a written reply, saying: "Golden Star Aviation was appointed in 1998 which resulted in yielding positive results. The sphere of operation of the CSA was increased in different phases to other countries of Europe. The accuracy of this section is corroborated by the substantial growth in loads and revenue from our European Stations."
It further said: "Golden Star (CSA) has affiliations with M/s Kales Group which is one of the largest freight forwarders in Europe working on modern lines and exercising effective control and coverage on the European market. M/s Kalas (Kales) Group due to their business agreement with Golden Star has submitted bank guarantees to PIA for M/s Golden Star which was accordingly accepted."
But this official confession contained many half-truths and misleading facts which were obviously hidden from ordinary Dawn readers. PIA’s statement that Golden Star was appointed in 1998 was basically wrong as in 1998 Sajjad had just set up his cargo agency after getting a golden handshake from PIA. He was one of the many such agencies, may be one of a few in Paris. His agency was appointed the sole agent in Paris in 2001, but this fact was glossed over in the PIA statement.
The official statement about Golden Star having affiliation with Kales Group was also misleading. It never had that affiliation when Sajjad got the big jackpot contract. It was done as a pure favor. But after he became the CSA, Sajjad then entered into an agreement with Kales.
This was also confirmed by the Dawn report which quoted an internal PIA audit memo, in its possession: “The audit memo also raised the objection that Golden Star in fact entered into a joint venture with Kales Group B.V. Netherlands in April 17, 2003 - a month after it was appointed the CSA by PIA.”
The most intriguing and incriminatory part of the official PIA statement to Dawn was about the bank guarantee. As CSA, Golden Star of Sajjad should have provided the guarantee before it was awarded the sole contract for Europe. This was ignored by Chairman Ahmed Saeed because of his brother in law Ejaz Butt. But somebody had to provide the guarantee as the documentation had to be completed.
That job was negotiated with Kales Group and PIA officially admitted that “M/s Kalas (Kales) Group due to their business agreement with Golden Star has submitted bank guarantees to PIA for M/s Golden Star which was accordingly accepted." The Sajjad-Kales agreement was signed in April but PIA had already appointed Sajjad as CSA in March 2003, without a bank guarantee. Why was this concession allowed to Sajjad was not explained in the PIA statement.
Dawn also quoted from many PIA documents. It said “a recent internal audit report of the PIA was said to have raised serious objections to the fact that neither a bank guarantee was provided by Golden Star Aviation nor was it a global bank guarantee as required under the agreement.”
"In our view, the bank guarantee should have been issued by a bank in France and should have been a global bank guarantee as set out in the agreement," according to an internal audit memo dated April 13, 2004. "Further it can also be argued that the CSA has not furnished its own bank guarantee issued by the bankers of the CSA based in France."
Besides, it said, the guarantee, "even if considered to be valid", was applicable to France only and does not cover its cargo sales relating to other countries like Netherlands, Belgium, Italy, Norway, Sweden, Finland and Denmark.
Another big favor given to Golden Star under the agreement, Dawn reported, is that the firm is allowed commission on 'Charges Collect' shipments also known as CC shipments. These shipments are mostly made by the government, including the defence ministry. Since the government or the defence ministry has to bring in goods through PIA and no other airline, no marketing effort is required by the CSA as this is mostly done by PIA itself.
”Golden Star was also allowed to claim commission on CC shipments at the time of delivery in Pakistan, although, previously, it was a well-established practice that the commission, if ever given to a cargo agent, was given only when government dues were received by the national airline.”
This concession, according to experts consulted by the South Asia Tribune, meant that on all government-to-government cargo, including the all-important Defence equipment, spares etc, shipped to Pakistan from Europe by PIA, Sajjad and his firm would get a commission as CSA. This was a simple bonus, in addition to the jackpot.
Yet these concessions were not considered adequate enough and the Sajjad-Butt-Saeed trio went for an over kill in the scam. The agreement with Golden Star provided that the CSA was to be given a 7.5 per cent commission “plus 2.5 per cent on achieving the target.”
This target mentioned in the agreement was never fixed or explained and according to PIA officials what is stands for is even lower than the average cargo carried by PIA from Europe in the last 5 years. So to justify an additional 2.5 per cent commission, a very soft target which includes government cargo, was set. In effect, the whole target business was included to make the agreement look like a rational deal whereas it was a direct bonus to Sajjad and his firm.
Dawn report mentioned that the Audit Department of PIA had objected to this rate of commission, asking the airline for a 'downward revision' of the percentage allowed to the CSA. "It is felt that 7.5 per cent commission is even too high."
”The audit report also found that the firm failed to report airway bills amounting to Rs 16.2 million. "During audit, we have noted instances of lift of unreported airway bills pertaining for the period January 2002 to January 2003 amounting to Rs16,193,850. The sale of above-mentioned airway bills not yet received from the CSA," the April 2004 audit memo said, suggesting that the money be recovered from the CSA.
Dawn continued: “It is alleged that when the irregularities were pointed out by the audit reports, a meeting was called of all country/cargo managers from European stations in the first week of May 2004 at Cargo Division, Karachi, and they were asked to "regularize the irregulars". Despite audit objection on the higher rate of commission allowed to Golden Star for Europe, a PIA minute, also called M-1, issued after the meeting said that "the CSA will be paid commission of 7.5 per cent either on net rates or on published rates", whichever is applied.
"Another 2.5 per cent over and above will be paid if the CSA meets the assigned target for the territory," the M-1 said. The Chairman had stood firmly by his crony.
The report said: “Under the rules, the CSA or any cargo agent of the airline can seek special freight rates by applying to the country/cargo managers, who in return send their request with their recommendations to the head office for approval. But these special freight rates are allowed in rare cases and only on the recommendation of the country/cargo managers, who are well aware of the prevailing market conditions. But, the source said, Golden Star used to sending its requests for special concessional freight rates to the country/cargo managers in the respective European countries, and also send a copy of the same to the head office.
"The special rates were approved by the head office without consulting the country manager concerned," it concluded.
The last two paragraphs of the reports hide a much bigger scandal. What these concessional rates mean, according to a PIA expert, is that while Golden Star would be charging the customers the normal PIA freight, it quietly asks and gets a rebate from the Head office on the same cargoes.
This in other words means cheating the customers as they do not get the benefit of the discount allowed by the Head Office and the CSA keeps the entire amount.
Calculated in rough terms, if an additional 5 per cent discount is allowed by the Head Office on an average, the Sajjad-Butt-Saeed trio would be taking home not just 10 per cent as their legitimate Commission but another 5 per cent as discount as well.
These disclosures and details, as revealed by Dawn and sources of the South Asia Tribune raise many questions which Prime Minister Shaukat Aziz and General Pervez Musharraf have to answer.
Why has PIA been allowed to appoint a middle man when it has basically to get the services of a European firm. Why not have a direct contract with the European company and save millions in commissions?
Why all these special favors have been ignored and how long will PIA be allowed to serve as the milking cow for the current top managers?
No wonder after all this mismanagement, the Chairman publicly says PIA needs up to Rs 5 billion in subsidy every year to stay in the air. What will Aziz and Musharraf do now that billions have already been pumped into and have disappeared into thin air?
sources: http://antisystemic.org/satribune/www.satribune.com/archives/oct04/P1_butt.htm
