FIA reluctant to take action against corrupt officials in Rs12 billion scam

LAHORE: The Federal Investigation Agency (FIA), country’s premier investigating agency, has allegedly been showing reluctance for the last several years to register a criminal case against a powerful business group of Faisalabad even after its several inquiries have proved the group’s alleged wrongdoings and causing at least Rs12 billion loss to the national exchequer, BOL News has learnt.

The documents, available with the BOL News, have revealed that Sitara Group of Industries with the alleged connivance of the officials of the Faisalabad Electric Supply Company (Fesco), National Electric Power Regulatory Authority (Nepra) and Sui Northern Gas Pipelines Limited (SNGPL) through alleged fraudulent means and by circumventing facts have caused billions of rupees loss in selling electricity to the Sitara Chemicals Industries Limited (SCIL) at a very cheaper rate.

At the same time, Fesco purchased electricity from Sitara Energy Limited (SEL) at higher rates from 2006 till 2015.

Over six years have passed and so far several inquiries by the FIA have been held on the alleged loot and plunder on the sale/purchase between Fesco and Sitara Group.

Those inquiries found chief executive officers (CEOs) of SEL and SCIL Javed Iqbal, and Muhammad Adrees, respectively, as guilty.

Similarly, the FIA inquiries have also held Fesco, SNGPL and Nepra officials guilty but the premier investigating agency has been showing reluctance to register a criminal case against the business tycoons and their accomplices.

In 2015, the FIA Faisalabad led by its former additional director Sajjad Mustafa Bajwa conducted the first inquiry on the matter and found all accused as guilty. The then FIA team had calculated a loss of Rs11.96 billion (without interest).

The inquiry team had recommended that before registration of a case, a high-powered committee, comprising senior FIA officials, should verify the facts of the inquiry to avoid any discrepancy in the prosecution of the case.

Instead of moving ahead, another inquiry led by Chaudhry Muhammad Ashfaq (Additional Director FIA) was ordered at the FIA Lahore office but the same was transferred to the FIA’s Special Investigation Unit (SIU) Islamabad.

The FIA team at SIU Islamabad within no time completed the probe and recommended for its closure on the ground of a Nepra’s letter that Sitara Chemical Industries and Sitara Energy are two different legal entities; hence, no loss to the government exchequer had occurred.

Further, the SIU had concluded that as Nepra, which is the authority in the subject matter, has clearly said no violation has taken place in the sale/purchase of electricity by Fesco and SEL.

That was the time when Bashir Ahmad Memon had taken over the reins of FIA as its director general. Former DG FIA Bashir Ahmad Memon disapproved the SIU’s findings and referred the matter back to the FIA Lahore for again conducting an inquiry of the whole matter. The former DG FIA also ordered the dissolution of the SIU.

A team of FIA Lahore supervised by the then director of the FIA DIG Dr Usman Anwar conducted a thorough probe into the matter and after months of investigations concluded that a series of acts of omissions and commissions and gross violations of the Nepra Act 1997 have been found, which ultimately resulted in a loss of billions of rupees to the national exchequer.

According to the Case Final Report (CFR), a copy of which is available with the BOL News, Sitara Energy Limited (SEL) was only to sell surplus power but it sold costly electricity to Fesco and provided cheaper electricity generated on gas to its sister concerns, as well as to the private companies, i.e., bulk power purchasers.

According to the FIA Lahore’s report, Fesco and SEL entered into a power purchase agreement in violation of the rules and regulations of Nepra in 2006 for one year and in 2007 for three years without submitting a mandatory power acquisition request (PAR) for approval from Nepra.

In 2010 when PPA expired, Fesco and SEL extended the agreement for another year without even regularisation of the previous purchase from SEL.

“After 2011, Fesco and SEL continued sale/purchase even in the absence of any agreement. It is interesting to note that the mandatory requirement of PAR remained undecided at the end of Nepra for more than 10 years which was eventually approved by Nepra in 2017.”

It is another astonishing fact that the sale/purchase of electricity between SEL and Fesco ended in 2015, the report observed.

“The whole aspect/facts were in the notice of Nepra at the time of their strange decision of approval of PAR of 2017, which was apparently not a relevant decision.

The Nepra decision was in fact a tool/mode to regularise the illegalities, gross violations, etc, and SEL used it as a leverage of their defence.”

According to the report, a criminal inquiry was being conducted by the FIA since 2015 but neither Fesco nor SEL ever pointed out this fact in the hearings by the Nepra authorities. Moreover, it said, the Nepra authorities never bothered to take FIA onboard on the occasion of such hearings, whereas the FIA inquiry proceedings were in the notice of the Nepra authorities.

Similarly, the report also noted that SEL has been found involved in illegal sale of gas-based energy to the private industrial units/power purchasers, etc, instead of self-consumption in the industries of Sitara Group by violating gas sale agreement (GSA) and contrary to their own undertakings.

“It resulted in wrongful gain by SEL and heavy loss to the national exchequer.” Due to aforementioned violations, SNGPL couldn’t disconnect the gas connection until 2018 and kept its eyes closed allegedly to benefit the business group.

The FIA Lahore team had concluded that on the basis of available oral, as well as documentary evidence, it has been found that SEL and SCIL are not separate entities as both are associated companies with common directorship as per the Nepra and SNGPL records.

Also the Securities and Exchange Commission of Pakistan (SECP) has declared both associated companies with common directorship till 2011 and after that remained closely interconnected/interlinked with each other due to similarity in areas, i.e., both companies have common company secretary viz Mazhar Ali Khan; registered offices of both companies are the same and even the contact numbers are the same; email addresses of both companies are the same; residential addresses of some of the directors of both companies are almost the same.

The FIA team had also observed, on the one side, SEL was selling expensive electricity to Fesco and, on the other, SCIL was purchasing cheaper electricity from Fesco, resulting in the loss of billions of rupees.

By adopting this unique modus operandi, the report noted, SEL earned illegal profit of billions of rupees and its associated companies SCIL, etc, were running their industries by corresponding cheaper electricity purchased from Fesco.

“SEL sold power to BPCs, including its associated companies on Fesco rates, while expensive electricity was sold to Fesco. It is also added that when electricity at Fesco rates was available to SCIL and other associated companies of SEL, it was not obtained from SEL rather it was obtained from Fesco.”

“[The] owners of SEL with fraudulent intention changed its status in different government departments, i.e., Fesco, Nepra, SNGPL as CPP and SPP as and when required and suitable to them for extracting illegal benefits in the matters pertaining to these departments,” it observed, adding, Nepra granted generation and distribution licence to SEL as SPP but SEL had obtained gas connection from SNGPL as CPP.

According to the FIA’s report, the SEL chief executive officer had submitted undertaking in 2005 that electricity would be generated for self-use in Sitara Group of Industries within the area of its boundary walls and would not be shared, sold or provided to any other industrial processing unit or residential area but SEL supplied this gas-based power to multiple industries/companies outside Sitara Group and earned illegal profit.

They generated gas-based electricity without the approval of Nepra till 2013 when it incorporated the gas-based generation in their generation licence.

As per the report, SEL submitted a request to Nepra for Licensee Proposed Modification (LPM) in 2004 and 2011, matter remained undecided till many years at the authority’s end. The LPM was approved in 2013 in which Nepra modified the generation capacity of SEL from 47.68MW to 49.15MW (RFO-based engines 29.80MW + gas-based 19.35MW).

Similarly, the LPM was again modified in 2015 by Nepra by approving the generation capacity as 87.82MW, whereas the gas-based engines of 37MW generation capacity were already installed since 2005, which were first time declared in the LPM in 2013 and RFO-based engines of 47.68MW generation capacity were also present since 1995.

As per the letter and advertisement of Wapda authorities, which formulated the basis of PPA between Fesco and SEL, SEL could sell only surplus power to the distribution company/Fesco after meeting its own commitments/requirements of BPCs.

“SCIL’s (a BPC/associated company of SEL) requirement was made to be fulfilled by cheap electricity purchased from Fesco instead of fulfilling its requirements by SEL itself.”

Fesco sold electricity, which was supposed to be utilised to cater to the requirements of the associated companies of SEL and other BPCs, the report observed.

Fesco was never approved as the power purchaser by Nepra till 2013 but astonishingly, Fesco was incorporated as the power purchaser in the LPM of 2013.

“It is prima facie found that Fesco, Nepra and SNGPL officials failed to perform diligently as the government functionaries, discharge their duties and obligations in a fair manner.” Thus, the report noted that they miserably failed to safeguard the national interest as government functionaries, which resulted in heavy loss to the national exchequer and facilitated illegal heavy gains to the owners of SEL and SCIL.

The FIA team had concluded that acts of omissions, commissions, cognizable by the FIA and gross violations of the Nepra Act 1997 have been found.

Similarly, the authority regularised the matter wrongfully without considering all the facts, despite available records and criminal proceedings of the FIA inquiry.

“The issue of SEL and SCIL being separate entities by Nepra has been refuted by the SECP on the basis of record and has declared SEL and SCIL associated companies with common directorship till 2011 and after that remained closely interconnected/interlinked with each other.”

According to the FIA, prima facie accused persons, including Javed Iqbal, CEO of Sitara Energy Ltd, Muhammad Adrees, CEO of Sitara Chemical Industries Ltd, Imran Ghafoor, CEO of Sitara Per Oxide and Sitara Spinning Mills, Muhammad Anis, CEO of Sitara Textile Indsutries Ltd, Mukhtar A Sheikh, Director of SEL, Ahmad Saeed Akhtar, CEO of Fesco, Tanveer Safdar Cheema, former CEO of Fesco, Khurshid Alam, former CEO of Fesco, and Rashid Ahmad Aslam, former CEO of Fesco have been found involved in causing a loss of billions of rupees to the national exchequer.

The role of the accused persons, including Brig Tariq Rasool (Retd), former CEO of Fesco, Iftikhar Ahmad, former CEO of Fesco, Dr Rana Abdul Jabbar, former CEO of Fesco, Imtiaz Hussain Baloch, ADG Nepra, Muhammad Ramzan, deputy registrar Nepra and other directors of SEL, SCIL, board of directors/officials of Fesco and Nepra would be determined during investigation, the report noted.

The FIA team, in its report, had also recommended that to rectify the loss to the national exchequer and to ensure recovery, a meaningful deliberation should be arranged at the FIA Headquarters Islamabad with all the stakeholders; owners of SEL, SCIL, officials of Nepra, Fesco, SNGPL, SECP and the Wapda authority for the evaluation of exact recoverable loss, acts of omission and commission and gross violations of the Nepra Act, rules and regulations thereto before taking legal actions on the matter.

The FIA team had also pointed out that the matter of heavy reductions/deductions in fortnightly electricity bills of SCIL have been noticed and a separate inquiry into the matter may be registered at the FIA Faisalabad.

According to the FIA, the issue of gas-based generation/sale of electricity and grant of gas connection by SNGPL should be addressed separately, as it warrants separate legal action.

Similarly, the FIA noted that to ensure across-the-board accountability, forensic audits of all such captive power producers/small power producers (CPPs/SPPs), agreements, and processes should be carried out.

Following the recommendations of the FIA Lahore, a committee was formed having representation of the FIA, Nepra, and the Ministry of Water and Power.

The then additional secretary power Waseem Mukhtar confirmed to BOL News that the Ministry of Power had conducted an inquiry on the FIA report.

After going through the FIA report, the federal power secretary had referred the matter to the National Accountability Bureau (NAB) for probe. According to Waseem Mukhtar, the NAB Lahore is investigating the matter at its end.

Sources in the federal capital told BOL News that a few months ago, when the new FIA DG Sanaullah Abbasi took over the charge, a presentation of high-profile cases was given to him and the matter of Sitara Group of Industries also came under discussion. The DG then referred the matter to the Director FIA Faisalabad DIG Athar Waheed.

The sources said three weeks ago, a meeting of top FIA officials was held at the FIA Headquarters on the matter in which some senior officials argued against registration of a criminal case against Sitara Group of Industries, citing reaction from the business community, as well as the economic condition of the country but Waheed and his team passionately argued in favour of the registration of the case.

The sources also said FIA DG Sanaullah Abbasi after hearing arguments from both sides agreed with DIG Athar Waheed and gave him a go-ahead to register the FIR against Sitara Group of Industries and their alleged accomplices.

In a surprising move, after a few days of the meeting, the FIA Headquarters not only barred Athar Waheed from registering the FIR against the business tycoons but also transferred him from Faisalabad and appointed DIG Syed Fareed Shah in his place to look into the matter.

FIA Director Syed Fareed Shah told BOL News that he has just taken over the charge and doesn’t aware of earlier investigations of the FIA on the matter.

“I will be in a position to comment on the matter only after I go through the file,” he said, adding that within a week, he would submit his opinion on the matter to the FIA Headquarters.

FIA Director Syed Fareed Shah also said that he doesn’t know the actual reason behind the transfer of his predecessor Athar Waheed and termed the transfer of any public officer a routine matter.

Talking to the BOL News Nepra Legal Adviser Irfan Gill has said that as per his knowledge, the FIA report was not conclusive and a separate inquiry was held at the Ministry of Power. He said the ministry had forwarded a complaint having certain queries to the NAB to find if there was any liability that could be fixed in the matter.

According to Nepra law, they’re attending the NAB investigation, which according to him, is at the very early stage.

The NAB is still trying to figure out the matter, he said, adding that so far no action has been taken against any former or incumbent Nepra officials for his alleged role in the electricity sale/purchase matter between Sitara Group and Fesco.

Questions were also sent to Sitara Energy Limited CEO Javed Iqbal and Sitara Chemical Industries Limited CEO Muhammad Adrees on Monday, August 23, but they preferred not to respond till the filing of this report.

Similarly, efforts were also made to reach incumbent Fesco CEO Bashir Ahmad but he didn’t respond till the filing of this report.