The Auditor General of Pakistan has confirmed over Rs5 billion financial irregularities in the National Insurance Company Limited (NICL) and recommended 10 times(Rs50bn) recovery from the guilty persons on the proven embezzlement in procurement of property as per PPRA Rules.
The 61 pages special audit report, exclusively available with Business Recorder, to be submitted to the Supreme Court of Pakistan on Monday (today), has also certified that the appointment of former Chairman NICL, Ayaz Khan Niazi, was illegal.
According to the record made available to the audit team, Prime Minister Syed Yousuf Raza Gilani appointed Ayaz Khan Niazi as Chairman of the company on the recommendations of Commerce Ministry. The Auditor General has recommended that responsibility should be fixed for the illegal appointment.
Though the Federal Investigation Agency (FIA) is recovering all the illegal payments and 802 Kanal land of Rs1.6 billion is returned to the seller and the amount paid was recovered, but it has been proved that crime has been committed and in such cases Integrity Pact is also applicable.
The audit report has also proved that the NICL sustained Rs225 million loss due to investment of Rs2 billion through Jehangir Siddiqui. It was observed from the report of an investment research house, M/s Invest Cap on July 16, 2010 that JS Protected Funds Series remained under performing during 2010 whereas returns on other income fund performance during first and second quarters of 2010 were ranging about 11 to 14 per cent.
The Auditor General is also of the view that the investment was made in irregular manner and without due diligence. The audit has recommended responsibility should be fixed on the person(s) at fault and recover the amount from the responsible officers.
Other paras are as follows; (i) Loss of Rs100 million due to imprudent investment in First Dawood Investment Bank limited;(ii) unjustified expenditure of Rs1.475 million on obtaining legal opinion regarding applicability of PPRA on land procurements;(iii) loss of Rs5,019 million due to non-utilisation of office space and other service changes ;(iv) Dubai property purchased at 32 per cent higher rates;(v) unjustified and in-fractious expenditure of Rs2.4 million on hiring the services of M/s Magnates Communications Solutions(Pvt.) Limited Islamabad;(v) overpayment of Rs0.46 million to M/s Osmani and Company on account of consultancy charges for replacement of lifts;(vi) appointments on top positions in violation of rules;(vii) irregular expenditure of Rs7 million on rented accommodation for Chairman ;(viii) unjustified expenditures of Rs4.071 million on paintings and ;(ix) loss of Rs19.759 million due to imprudent decision for purchase of generators. A number of other paras are also part of the special audit report.
Financial loss in procurement of 20 Kanal land in Lahore without due diligence at higher rates has been calculated at Rs502.8 million. Recoverable amount due under Integrity Pact signed by the seller of land is Rs800 million.
Rule-7 of Public Procurement Rules 2004 states that procurements exceeding the prescribed limit shall be subject to an Integrity Pact, as specified by regulation with approval of the federal government, between the procuring agency and the suppliers or contractors.
According to the "Integrity Pact" the seller/supplier/contractor agrees to indemnify GoP for any loss or damage incurred by it on account of its corrupt business practices and further pay compensation to GoP in an amount equivalent to 10 times the sum of any commission, gratification, bribe, finder's fee or kickback given by seller/supplier/contractor.
The investment committee of NICL in its 33rd meeting on June 11, 2009 recommended acquiring land located at airport road, Lahore measuring 20 Kanal 02 Marla at the rate of Rs53.00 million per Kanal.
Initially, NICL issued letters to M/s Medallion Services (Pvt.) Ltd and Tri Star International to evaluate Mohsin's land, which was finally recommended by the investment committee. The evaluators submitted their evaluation reports on June 20, 2009 and June 29, 2009 as Rs61.50 million per Kanal and Rs66 million per Kanal, respectively.
On the basis of evaluation report, the Board of Directors in its 59th meeting on July 01, 2009 gave the approval to purchase land located on airport road, Lahore measuring 20 Kanal 02 Marla at the rate of Rs53.00 million per Kanal.
Mohsin Habib Warraich signed the Integrity Pact on July 31, 2009 regarding sale of the said plot. The land was re-evaluated by NICL from M/s Ahmed Associates on December 20, 2010 and the value was assessed as Rs984.900 million at the time of purchase against the purchase price of Rs1,065.300 million. Accordingly, Mohsin Habib Warraich deposited the differential amount of Rs80.400 million (1,065.300 -984.900) on December 31, 2010.
Audit observed that the amount of differential paid back by Mohsin (the seller) was actually the amount received by seller in realisation of a doubtful transaction in violation of the integrity pact. Therefore, in compliance of integrity pact signed by Mohsin under Rule-7 of PPRA Rules 2004, he was liable to pay Rs800.000 million (Rs80.000 million x 10).
The matter was reported to the management through OM No 25 on March 09, 2011, but no reply was received till issuance of this report.
Audit would, therefore, suggest that the amount due on the signatory of the Integrity Pact should be recovered with costs and deposited with GoP.
FIA has also registered criminal cases against those accused of being involved in the Rs4.45 billion NICL land scandal. The FIA now says it has gathered evidence concerning another fraud and that it is planning to lodge a case against the accused in Karachi. Former NICL chairman, Ayaz Khan Niazi is alleged to have paid claim amounts to contractors in violation of the rules in the Rs640 million rupees scam.
Sources in the FIA said that Ayaz Niazi illegally paid huge claim amounts in connivance with his colleagues. They said that Ayaz and his colleagues paid the money to contractors after getting claims through fake surveyors.
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