Audit at Sonali Life Insurance: Ex-chairman, family pocketed Tk 187cr

Correction:
The 14th paragraph of this story had a factual error, and has been corrected.
The three directors -- Maya Rani Roy, A Rajeeb Samdani and Hoda Ali Selim -- referred in that paragraph bought the shares upon making full payment, and not without having to pay the share price, as our report mistakenly said. We apologise for the mistake.

Sonali Life Insurance Company's former chairman Mostafa Golam Quddus and his six family member directors have embezzled at least Tk 187.84 crore from the company, an audit has found.

The audit was commissioned by the Insurance Development and Regulatory Authority (IDRA) upon allegations from the company's now-suspended chief executive officer Mir Rashed Bin Aman.

Quddus, also former president of apex apparel trade body BGMEA, denied any wrongdoing.

The IDRA had appointed audit firm Hoda Vasi Chowdhury & Co on December 31 last year to investigate 17 claims of irregularities, including that over the appointment of Quddus as chairman in 2023.

Sonali Life subsequently suspended Rashed, who was once married to the eldest daughter of Quddus. Rashed is currently on bail in a case over embezzling money from the company.

In the wake of the audit, Quddus resigned on January 18.

Upon receiving the audit report, the IDRA is now considering appointing an administrator to run the company.

"We are taking legal actions in the interest of the company and the policyholders," IDRA Chairman Mohammad Jainul Bari told The Daily Star.

The audit found that Quddus and his six family member directors embezzled funds in different ways, including through issuing shares for themselves, illegal payment to companies owned by Quddus and payment of salary of his family member directors.

Huge money was also pocketed through illegal purchase of luxury cars and payment of additional dividends to the said directors as well as foreign travel and treatment bills. They also made large sums through Illegal commissions from group insurance policies.

Dragon Information Technology & Communication Ltd, Dragon Sweater and Spinning Ltd and Imperial Sweater Ltd – all owned by Quddus – received Tk 141.56 crore from Sonali Life in different times to purchase movable assets. Such payments require permission from IDRA, which the company did not take, according to the audit report.

In 2018, Sonali Life sought to increase its paid-up capital by issuing 1.5 crore shares of Tk 10 each, and the plan was approved by Bangladesh Securities and Exchange Commission.

But four family member directors -- Noor-E-Hafza, Fauzia Quamrun Tania, S Sobhan Chowdhury and S Mohammad Danial – were given shares worth Tk 9.16 crore at face value without realising the share price.

On the same day, on June 14, 2018, three other directors -- Maya Rani Roy, A Rajeeb Samdani and Hoda Ali Selim – received shares at double the face value. They are not his family members.

According to the audit report, Quddus got 6.25 lakh shares from his wife Fazlutun Nessa, 26.8 lakh shares from his son Mostafa Quamrus Sobhan and daughter Fauzia Quamrun Tania, 3 lakh shares from Sobhan's wife S Sobhan Chowdhury and 12 lakh shares from his son-in-law Danial.

Later, Quddus handed over 14.8 lakh shares to one of his daughters, 2.3 lakh shares to his wife and 6.5 lakh shares to his son and daughter-in-law.

Through this, seven members of the same family created opportunities for irregularities by establishing family authority in the company board, according to the audit report.

Currently, Sonali Life has 20 directors, seven of whom are family members. It has 7.88 lakh policyholders at the moment, with a paid-up capital of Tk 47 crore. Last year, the company earned Tk 832 crore in premium.

The audit report said Sonali Life is being run by some directors in violation of financial laws and regulations, creating scopes for embezzlement of large money and causing loss to insurers and policyholders.

For example, from July-December 2023, Tk 18 crore was illegally paid from the company's account to the account of Quddus's personal business, Dragon Sweater, without board's approval, which is illegal.

Also, between 2021 and 2023, the insurance company borrowed Tk 195.42 crore from Social Islami Bank Limited, South Bangla Agriculture Bank and First Security Islami Bank for business purposes. Of the sum, TK 83.99 crore was deposited in the bank account of a company owned by Quddus after several transfers to different accounts.

The audit report termed it "fraud, money laundering and embezzlement".

The audit also found that on an average, Tk 22 crore a year or about Tk 2 crore a month was spent as petty cash and many one-time large transactions were made with cash checks which are completely illegal and are often used as a means of money laundering.

Almost all signatories, including the company's senior executives, are family members, and so they did not raise any flag.

There are other corrupt practices in the company, but they were not reflected in this report as its scope of work was limited only to the claims at hand, the report said, noting that a detailed audit is necessary to get a complete picture of the company's ills.

"Incomplete information storage or concealment of information, opaque accounting procedures and absence of internal control system have created an environment conducive for embezzlement of the company money," the report said.

Contacted, Quddus said the findings of the audit report were "travesty of the truth" and that he will write to the regulator clarifying his position soon. "We are preparing for that."

"The company was doing well after former CEO Rashid Bin Aman joined the company. Then for some reason he hatched a long-term plan for a "hostile takeover" of the company. We have proof of this," he said.

Established in 2013, Sonali Life has 204 branches with 26,693 agents across the country. It settled 99.9 percent of its total claims in 2020, 99.92 percent in 2021 and 99.98 percent in 2022. In 2023, the company settled almost all its claims worth Tk 122.26 crore, according to IDRA data.