Karachi: A big scandal came to light in the Bank of Punjab earlier this year. The share price of the bank was manipulated in order to offload shares and take control of the bank due to the 70 percent rights issue, causing billion of rupees losses to shareholders.
This was allegedly done on the basis of inside information, questions had been raised on possible involvement of the president of the bank.
The Senate Standing Committee on Finance and Revenue chairman had taken notice and described the scandal in the following words, “A day light robbery has been unearthed in the sale of Bank of Punjab where the share price was brought down to gain benefits of billions”. Senator Saleem Mandviwalla, chairman of the committee, noted that Bank of Punjab’s share price had fallen significantly since the announcement of the board meeting for rights issuance.”During the period i.e. post rights announcement (from March 29 till April 14), the market fell by 2 percent whereas the BOP’s share price plunged by 17 percent,” he observed, during a press conference.
Mandviwalla said that ‘market players especially those who may have inside information about the right issue would have short sold the stock to make a quick gain. The announcement of 70 percent rights issue at a price of only Rs 12 does not seem to be justified; while the stock had seen a high of Rs 20.37 on Nov 9, 2016,” the share price is down 35 percent from its recent high.
The senator noted that the BoD should have dealt with the rights issuance when market conditions were conductive, during 2016. He held that by delaying the matter, the BoD had acted against the interest of minority shareholders.
The majority shareholders had also alleged that the BoP president was himself involved in insider trading, and that he made huge money by offloading shares before the bank advertised for seeking consultancy services for the right Issue.
Earlier the BoP had also been involved in a loans scam when owners of three steel mills – Haris, Prime and Haider -took huge loans from the BoP with the connivance of its former head, Hamesh Khan, and other senior officers. The lender extended loans worth Rs 8.4 billion to Haris Steel Mills and it had had to face a financial crisis in late 2008 and which prompted the Punjab government to come up with a bailout package of Rs10 billion in early 2009.
A subsequent investigation revealed that loans of around Rs 9 billion had been cleared through 23 accounts using forged NICs from 2005 to 2007.
The National Accountability Bureau (NAB) had seized bank accounts, properties and 22 luxury vehicles worth Rs5 billion as Hamesh Khan managed to flee the country despite his name on the exit control list. However, he was brought back but in April 2015, Hamesh Khan was granted bail.
All executive appointments in the bank and its board of governors are made by the Punjab government.
Billions of rupees remain unaccounted for in these fraud cases, putting a question mark on the state of affairs.
In the backdrop of huge corruption and misappropriation of public funds in 2011, BoP posted a net loss of Rs10 billion, and of Rs4 billion in 2010 and 2009, respectively.
The stock’s perception has remained negative since 2007 on account of limitation of the scope regarding determining provisions on Rs 8.6 billion loans to three companies.
Published in Daily Times, December 18th 2017.
