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| Asif Ali Zardari |
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The examination of the life, values, achievements and failings of Benazir Bhutto that has followed her assassination has inevitably touched on the allegations of corruption and money laundering. However, commentators, still in a state of shock, have tended to play down these allegations, saying that they were no more than tools to besmirch her good name, and that of her husband, wielded by political foes. That underplays the significance of the evidence which is laid out below, as it relates to her and especially to her husband, Asif Ali Zardari. Zardari's activities cannot have failed to tarnish Benazir's name.
This article was written before her unfortunate assassination and before her return to Pakistan.
Citibank’s branches in Dubai and Switzerland provided the off-shore accounts and banking facilities that would enable Asif Ali Zardari to receive a questionable payment from a Dubai-based financier. Zardari is the husband of Benazir Bhutto, the former Pakistani prime minister.
Citibank opened three private bank accounts in Switzerland and a consumer account in Dubai for three corporations under Zardari's control between 1994 and 1997. Some of these accounts were allegedly used to disguise $10m in kickbacks for a gold importing contract to Pakistan.
The money was paid into an offshore account called Capricorn in two $5m chunks, one day after the other in 1994. The source was A.R.Y. International Exchange, a company owned by Abdul Razzak Yaqub, a fabulously wealthy Pakistani gold bullion trader living in Dubai. Razzak also owns a Pakistani television station. Benazir Bhutto’s government awarded Razzak an exclusive and very valuable licence to import gold just three months after the payment. Razzak used this to import more than $500 million worth of gold into Pakistan. Razzak has denied making any payments to Zardari.
Zardari approached Citibank in Dubai through his Swiss lawyer, a friend of the Bhutto family. The lawyer told Citibank that he was working for the Dubai royal family and he wanted to open an account at the Citibank branch office in Dubai. The account, domiciled in British Virgin Islands, was called M.S. Capricorn Trading. The lawyer had a Dubai residency permit; a visa signed by a member of the Dubai royal family gave credibility. |
| The account manager did know the beneficial owner. He was not required by Dubai law in force at that time to ask who was behind the account, and the lawyer did not reveal who owned it. In fact, the account manager later said that he assumed the beneficial owner was the member of the royal family who had signed the visa. The account, which would receive and transfer money to Switzerland was opened in early October 1994 – one day before the arrest of another Citibank client, Raul Salinas. |
| Citibank was sufficiently impressed by the funds deposited in its Dubai branch to encourage their new client to open an account the following year at its Swiss private bank. Zardari completed the Swiss Form A which required the ultimate holder of the account to identify himself but this information stayed within the Swiss branch. The Dubai account manager at Citibank was never told who stood behind Capricorn and continued to think the account’s beneficial owner was a member of the staff of the Dubai Royal family – some indication of the standing of Dubai within the Citibank hierarchy, perhaps. |
| The bank responded to the crescendo of concern about Zardari’s probity (especially in Pakistan, of course) by putting his accounts under a special regimen. He was told that the accounts were not supposed to be the ‘primary accounts’ for his assets, that the funds deposited in the accounts should not exceed $40m and that they were to be used as ‘passive stable investments, without multiple transactions or funding pass-throughs.’ Zardari ignored the strictures, and the bank retained the money. They also helped him buy some property in London. The matter attracted some publicity and when the bank involved went to his lawyer to inquire the source of the money, they were told it came from the sale of some sugar mills. |
| Accusations of corruption and graft in the run-up to Pakistan’s 1997 general election, followed by the claim that he had murdered Benazir Bhutto's only surviving brother, Murtaza Bhutto, led to an investigation of Zadari’s accounts. The accounts were closed in January 1997 on the pretext that he had infringed the restrictions imposed the previous year. |
| The existence of the accounts, and the way they were used to handle bribes, was disclosed in an article in the New York Times, and Citibank had to shamefacedly admit its role in the squalid affair. The bank reassured critics that the rules governing disclosure of beneficial ownership at its Dubai branch had been tightened up. Citibank’s chairman John Reed later wrote to his directors saying that ‘he was inclined to think’ that the bank had ‘made a mistake’ in taking on Zardari. |
| A Suspicious Activity Report on the Zardari accounts was hurriedly prepared and filed with the Financial Crimes Enforcement Network at the U.S. Department of Treasury. The filing was made fourteen months after the Zardari accounts were closed, thirteen months after Zardari was arrested a second time for corruption in November 1996, and nearly two months after the Swiss government had ordered four Swiss banks (including Citibank Switzerland) to freeze all Zardari accounts. |
| The shockwaves from Zardari’s business transactions continued to be felt in 1998 when Zardari’s Swiss lawyer (among others) was indicted for money laundering in connection with kickbacks paid by Swiss companies for the award of a government contract by Pakistan. The lawyer had benefited greatly from Zardari’s largesse, receiving a fifth of the funds deposited as a commission. Zardari and Benazir Bhutto were themselves indicted for violation of Swiss money laundering law in connection with the same incident. |
| Pakistan charged the cupiditous couple with accepting kickbacks from the two Swiss companies in exchange for the award of a government contract. They were sentenced to 5 years in prison and fined $8.6 million in 1999, after a long and bitter trial. Both were disqualified from holding public office. |
| Bhutto, who now lives in London, denounced the decision. Zardari remains in jail. Additional criminal charges are pending against both in Pakistani courts. |
The bank was left to face public and internal recriminations. Chairman John Reed told a meeting of the Senate subcommittee that the bank manager who took Zardari on ‘must have been an idiot’. Reed said he knew about Zardari’s reputation, and he was aware of ‘troubling accusations concerning corruption surrounding Mr. Zardari, that he should stay away from him, and that he was not a man with whom the bank wanted to be associated.’ By that stage, the damage had been done. The accusation of money laundering would attach itself not only to the client, but also to the bank that had handled his money.
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