"Capitalism's Achilles Heel" by Raymond Baker : Corruption of

Bhutto/Zardari family
By: Bilal Khan Date: May 2012

This is the excerpt taken fromBOOK Capitalism's Achilles Heel by Raymond Baker,
which tells in detail how Benazir Bhutto/Zardari family looted the country in their
governments.
Pages 77-82:
Born in Karachi in 1953 and educated in private schools, Benazir Bhutto graduated from
Radcliffe College at Harvard University in 1973. Going on to Oxford for a masters
degree, she displayed her budding political skills and was elected president of the
Student Union in 1977. Meanwhile, her father had become prime minister of Pakistan in
1971, was ousted in a military coup in 1977, and was executed in 1979 on charges 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 returned to lead the democracy
movement two years later. Her fathers usurper, General Muhammad Zia ul-Haq, was
killed in a mysterious plane crash in 1988, which also took the life of the U.S.
ambassador Arnold Raphel, and the head of the U.S. military aid mission to Pakistan,
General H.M. Wasson. Benazir was elected prime minister that year, served until her
ouster in 1990 on charges of corruption and nepotism, was reelected in 1993, and
ousted again in 1996, amidst more charges of corruption. During her two terms in office
and since, what has come out portrays Bhutto and her husband Asif Ali Zardari as
world-class thieves.
Upon taking office in 1988, Bhutto reportedly appointed 26,000 party hacks to state
jobs, including positions in state-owned banks. An orgy of lending without proper
collateral followed. Allegedly, Bhutto and Zardari gave instructions for billions of rupees
of unsecured government loans to be given to 50 large projects. The loans were
sanctioned in the names of front men but went to the Bhutto-Zardari combine.
Zardari suggested that such loans are normal in the Third World to encourage
industrialisation. He used 421 million rupees (about 10 million) to acquire a major
interest in three new sugar mills, all done through nominees acting on his behalf. In
another deal he allegedly received a 40 million rupee kickback on a contract involving
the Pakistan Steel Mill, handled by two of his cronies. Along the way Zardari acquired a
succession of nicknames: Mr. 5 Percent, Mr. 10 Percent, Mr. 20 Percent, Mr. 30
Percent, and finally, in Bhuttos second term when he was appointed minister of
investments, Mr. 100 Percent.

The Pakistan governments largest source of revenues is customs duties, and therefore
evasion of duties is a national pastime. Isnt there some way to tap into this major
income stream, pretending to fight customs corruption and 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 pay the company about a one percent fee to
do price checking on imports, and get multimillion-dollar bribes paid to us upon award of
the contracts. Socit Gnrale de Surveillance (SGS), headquartered in Switzerland,
and its then subsidiary Cotecna, the biggest group in the inspection business, readily
agreed to this subterfuge.
Letters in 1994 promised consultancy fees, meaning kickbacks, of 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 accountsof the BVI companies. 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.
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 Zardaris 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.
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 FrenchDassault 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 Zardaris British Virgin Island companies. 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 PakistaniBULLION 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 familys attorney in Europe and close personal
friend for more than 20 years, 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. In other words, Citibank
was contracting to pay a finders 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 Capricorns
Dubai account by Razzak Yaqubs company, A.R.Y. International Exchange. 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.
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 Bhuttos 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. The documents appeared to have
been taken from the Geneva office of Jens Schlegelmilch.
In 2000 Pakistans 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. 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 by the Bhutto family for their
wealth relied on Western property companies, Western lawyers and a network of
Western friends.
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 dont think its addictive. You want to run away from it, but it doesnt
let you go. . . . I think the reason this happens is that we want to give love and we
receive love. Save your tears. In the global collection of displaced leaders, Benazir
Bhutto may be the least sympathetic character of all.