Roll no.

15221001
Name: Huma riaz
Business Ethics
EXECUTIVE SUMMARY

Due date: 1-06-2016

The Crescent Standard Investment Bank Limited (CSIBL) was the largest investment bank
quoted on all the stock exchanges in Pakistan, so when it declared a huge loss of Rs2.1 billion
(US$35.5 million) for the year December 31, 2005 the market was taken by surprise. There had
been some rumors that all was not well and that the investment banking regulator, Securities and
Exchange Commission of Pakistan (SECP), had sent a team to investigate the affairs of the bank.
Since the main shareholders were individuals or companies of the well-known business group
known as the Crescent Group, there was enormous interest in the CSIBL affairs by financial and
political circles as well. The case describes the various types of entities that were merged to form
the CSIBL, principally to protect the stakeholders by creating an entity with a large
capitalization. The bank had reported in its annual reports that all the internal control
mechanisms for good governance stipulated by the SECP were in place and the auditors (internal
and external) had reported that these were satisfactory. Yet, when subjected to an investigation, it
was revealed that the internal management was involved in a variety of acts of misrepresentation
and concealment. The case focuses on the weaknesses in the structure of the corporate
governance regime in Pakistan. The fact remains that no amount of internal or external checks
can stop the internal management from colluding to perpetuate a fraud.
PROBLEM STATEMENTS
Problem 1:
The entire board of directors and CEO Anjum Saleem of Crescent Standard investment bank were legally stopped
from running their offices on evidences of suspected fraud and irregular accounting.
Problem 2:
External Auditors had predicted a missing amount of over Rs.6 Billion, apart from illegal maintenance of parallel
accounts, concealment of bank assets, un-authorized massive funding of group companies, unlawful investments in
real estate and stock market, etc. the SECP took legal action against the companies officers, although much of the
actions taken were criticized as insufficient
Problem 3:
Their focus on merger with big company is so much focus that they ignore other problems

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Problem 4:
KET analyst felt that these frauds occur due to internal management of the CSIBL. KET wanted
analyses of fraud CSIBL that how fraud is occur in CSIBL.
Long term problem: crescent starting to lose most of their investors, they are losing their value
and money
Short term problem: The company internal conspiracy and fraud turn out to be a cooperate
governance issue
Key Persons involved
Company CSIBL
CEO Anjum Saleem
Shareholders
CAUSES OF THE PROBLEM:

In the market competition is very high they did not change policy and they focus only
mergers and acquisition with other companies.
They merge free company but this company has paid up capital 310 million and loses 275
million.
Chief executive of CSIBL receives notice from SECP the bank was maintaining parallel
books of accounts.
The inspector found that the bank had involved into violation of various accounts which
is against the rule companies ordinance 1984 and non-banking financial ordinance.
The parallel book of account showed a placement amount 1.817 billion made by 20.896
million share of PICIF-DFI.
It also violation of prudential regulation issued by the SECP under 230 sections. The
main purpose of prudential regulation provides new way to investment in leasing
companies and they provide operations company guideline.
In December 2005, they did not circulate audit accounts even till august 2006.

ALTENATIVE SOLUTIONS:
They are more focusing on the merger and acquisition with the companies even did not
realize that this is causes their own company many problem, I suggest them to stop future
acquisition and merger and have a policy among who to acquire. The company which are
giving losses have to stop contract with them
The fraud will be taken as a serious action and a internal audit would be conducted to
check hows within the company is responsible for fraud
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 The violation of the laws and rules should be prohibited and the person responsible for
that should be thrown out from the company
EVALUATION OF OPTIONS:
Pros:
The following problems which are discuss above in the heading of problem statement following
pros

People didnt starting leaving his company

Less company with proper standardization
Easy to handle up the problems
If defines certain rules and laws people know they have to follow them maintain
discipline

Cons:

Stopping contract with the companies responsible for loss they will have a reaction
against this action

DECISION CRITERIA
Corporate governance is the set of processes, customs, policies, laws and institutions affecting
the way a corporation is directed, administered or controlled. Corporate governance also includes
the relationships among the many stakeholders involved and the goals for which the corporation
is governed. The principal stakeholders are the shareholders, management and the board
of directors. Other stakeholders include employees, suppliers, customers, banks and other
lenders, regulators, the environment and the community at large. Good and proper corporate
governance is considered imperative for the establishment of a Competitive market. There is
empirical evidence to suggest that countries that have implemented good corporate governance
measures have generally experienced robust growth of corporate rectors and higher ability
to attract capital than those which have not. The positive effect of good corporate governance on
different stakeholders ultimately is a strengthened economy, and hence good corporate
governance is a tool for socio-economic development.
All parties to corporate governance have an interest, whether direct or indirect, in the
effective performance of the organization. Directors, workers and management receive salaries,
benefits and reputation, while shareholders receive capital return. Customers receive goods and
services; suppliers receive compensation for their goods or services. In return these individuals
provide value in the form of natural, human, social and other forms of capital

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Solutions

They are more focusing on the merger and

acquisition with the companies even did not
realize that this is causes their own company
many problem, I suggest them to stop future
acquisition and merger and have a policy
among who to acquire. The company which
are giving losses have to stop contract with
them

The fraud will be taken as a serious action

and a internal audit would be conducted to
check hows within the company is
responsible for fraud

Reasons:

50%

This will not create the

problem of the huge
losses which they are
suffering right now

30%

The person who is

responsible for that
much amount for fraud
should be punished

20%

The violation of the laws and rules should be

prohibited and the person responsible for
that should be thrown out from the company

Rules and regulation

should be strictly
maintained to avoid this
kind of losses

RECOMMENDATION
CSIBL bank shows growth in starting but they do not merge more companies. According to
market situation they should be change strategy because environment is very difficult. Books of
accounts show true picture. They also give power subsidiary companies. Higher management
keeps on eye and checks and balance daily basis. They did not merge with those companies
deficit or loss. Make strict policies about which shows wrong accounts and implement strictly to
prevent violate the policies
REFRENCES
Business ethics book by Daniel Albuquerque (external source)
http://bohatala.com/crescent-standard-investment-bank-failure-case-study-review/ (article)

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https://www.scribd.com/doc/30524941/Corporate-Governance-in-Pakistan

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