“How to Rob a Government Controlled Bank” – A Hall Mark Group Story

October 13, 2012

The law in every land states “innocent until proven guilty”. The case against Hall Mark group (based in Bangladesh and should not be confused with other similar names) is of course one of forgery because the money obtained as a loan was obtained with fake documents and accounts which the company could never return because it does does not have that kind of asset in value to be able to return the borrowed sum.

A bank usually will investigate the assets used as guarantors before releasing a loan. This involves senior management if the loan is for large amount. In fact, the large sum borrowed would require approval of the Board or at least their knowledge, anyone who knows a little bit about borrowing from a bank in Bangladesh will confirm this, yet we see the blame being passed onto junior level staff – managers and assistant managers. Are they escape goats ? All these questions are disclosed slowly and gradually by the man (leader) charged for this incident. He is slowly starting to point his fingers to the Banks involvement as he discloses who was paid what to get his loan. Of course we should not automatically assume that the Directors are guilty but simply trying to hear the full story – his side of the story – how it was all possible. However, in background we need to note that the Directors are Government appointed, if they are guilty then blame could fall on the government.

In fact on Oct 2, Mahmud had admitted before a Parliamentary Sub-Committee on the Ministry of Finance that they took loans from Sonali Bank flouting rules.

Background story:

Sonali Bank Limited, the largest bank in Bangladesh, recently suspended 17 of its officials for their alleged links to the biggest financial forgery of Tk 35 billion by textile company Hall-Mark Group and some other firms.  Sonali Bank’s Ruposhi Bangla Hotel branch had given Hallmark Group and five other companies Tk 3,547 crore in loan between 2010 and May this year on fake documents.

The suspended officials of the state owned bank include deputy general manager ANM Hedayet Ullah, assistant general manager Golam Nabi, Ashraf Ali Patwari and Wahid Uddin Ahmed of the bank’s general manager’s office. The bank also wrote to the finance ministry to take action against three of its top officials, a bank official said.

On August 26, Bangladesh Bank (BB), the central bank of Bangladesh, directed Sonali Bank to suspend 31 of its officials, including two deputy managing directors, on charges of their involvement in the scam.

The BB also asked the bank to take steps against the officials under the criminal laws. The BB has also requested the government to reconstitute the Sonali’s board of directors. But Finance Minister AMA Muhith turned down the proposal saying that making such suggestions was not the duty of the central bank. He blasted the BB officials for failing to monitor things. Bangladesh Bank had asked the managing director of the bank for taking action against those officials so that they could not hinder the bank’s activities.

Sonali Bank earlier sent seven senior officials into retirement in connection with the scam. The bank has decided to request the ministry of finance to take legal action against them.

The businesses allegedly embezzled the whole amount that belonged to depositors in collusion with some bank officials. Of the Tk 3,547 crore, Hallmark Group alone took away Tk 2,686.14 crore, T and Brothers Tk 609.69 crore, Paragon Group Tk 146.60 crore, Nakshi Knit Tk 66.36 crore, DN Sports Tk 33.25 crore and Khanjahan Ali Tk 4.96 crore.

On March 28 this year, Hallmark opened local letters of credit worth Tk 500 crore in favour of Anwara Spinning Mills, Max Spinning Mills and Star Spinning Mills to buy yarn. The three companies are also clients of the bank’s same branch. Following Hallmark’s guarantee to repay the LCs, the bank purchased the acceptance bills and disbursed the money to the accounts of the three spinning mills. A few days later, the three mills asked the bank branch to transfer the money to the account of Hallmark Group and the branch duly obliged. Later, Hallmark transferred the money to a current account of Century International, a concern of the group. The probe found that the three spinning mills are non-existent.

Tanvir Mahmud had disclosed to the Anti Corruption Commission that he had already acquired assets worth 20-times [US$ 6.6 billion] of the amount that he borrowed from the state owned financial institution.

However, state-owned Sonali Bank, apparently, is not interested to get back the entire amount from the borrower right now. One of the directors of the bank, a political appointment by the government, had told the media that the management of the bank would ask the Hallmark Group to repay 50 per cent of the loan amount within next 15 days. Commenting on Mahmud’s claim of owning huge wealth, economists in Bangladesh raised questions as to why the government is not confiscating all such properties until the entire amount of loan has been recovered from Tanvir Mahmud’s company Hall Mark Group, why targeting 50%.

Bangladeshi finance minister AMA Muhit has violently reacted at media’s role in exposing this huge financial scam. Expressing anger, the finance minister said, “”… banking crisis, which is not a crisis at all. It is a matter of TK. 3000 crore [30 billion] or 4000 crore [40 billion]. Nonsense! But you (media) are harming the banking sector by publicizing it. Banking sector is confronted with questions whether all of it has crumbled down.”

Finance Minister A M A Muhith later apologised and withdrew his remarks that the sum of money involved was not significant.

It may be mentioned here that, Prime Minister’s advisor Syed Modasser Ali has been accused of collaborating with Hall Mark Group in siphoning such large sum of money from the state owned bank. A front-ranking Daily published report stating the advisor bought a piece of land at Dhaka’s Uttara residential area with the money he received from Hall Mark Group.

While Hall Mark Group scam is getting prominent coverage in Bangladeshi and international media, sixteen members of fraudulent multilevel marketing company, Destiny Group comprising, Destiny Multipurpose Cooperative Society Limited, Destiny Tree Plantation Limited, Best Air Limited, Destiny Bank Limited, Diamond Builders Limited, Destiny Medical College and Hospital Limited etc obtained bail from the court of metropolitan magistrate in Dhaka, while the issue of bail granted to five more members of the same fraud racket has been challenged by the Anti Corruption Commission and hearing into the matter is due for September 12. It was earlier reported in local and international media that, an advisor to the Bangladeshi Prime Minister is holding shares in this fraudulent MLM racket, who had been playing key role in salvaging the masterminds Destiny Group from facing severe legal consequences.

Whoever is responsible for this scam, it is clear that this could not have happened with a private bank in Bangladesh. It would have also been impossible with banks like Grameen – imagine how the hammer of the government would fall on the head of the Noble Prize winner.

Whilst the group leader and his team are in custody and being questioned more information is being revealed that casts doubts on the procedures and involvement of higher authority than those sacked.

Bangladesh Bank has very stringent procedures in place for all banks. The Audit is a very tough one when it comes to the private sector and which would make this kind of fraud of such large in nature an impossibility. A loan of this nature cannot be processed without authority of the Board (Board resolution), as many businessman familiar with the banking procedure in Bangladesh would tell you. Yet the Board has not taken the blame of any knowledge or liability.

On the other hand, the Opposition, BNP,criticised the Bangladesh Bank’s stance over the irregularity and reappointment of chairmen of the state-run banks, including Sonali Bank.  They alleged that despite the scam, the government extended tenures of the Boards of Directors of the state-run banks by two years, suggesting that it revealed that government supported the corruption. They highlighted several other scams, including those involving Destiny 2000 and Unipay2U, had been allowed to go untried.

Summary

Someone somewhere at that level must have been part of all of this, as has been the allegations of the media in Bangladesh. The interrogations also are revealing that many within the bank have been paid  to process these loans.

Therefore, this article is not complete as yet, and we need to wait and see who else was  bribed or paid to help with this scam. To complete the full picture there needs to be more pressure in revealing who was paid what – something the government might show reluctance in.

By Abdul Ahad

 



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