Beximco, IFIC do it again

In what is now thought to be the biggest financial scam of the country, the Bangladesh Bank(BB) has unearthed that the Dhanmondi branch of IFIC Bank has involved itself in illegally purchasing 261 inland bills to channel Tk 155.63 cr fund to companies linked with IFIC directors Salman F Rahman and Sohel F Rahman.

The BB has served a showcause notice on December 29 to IFIC Bank as to why action should not be taken against its board for activities against the interest of the depositors of the bank and to safeguard public interest.

According to the findings of the BB investigation team, the Dhanmondi Branch had purchased cheques and pay-orders between January 1, 1996 and August 4, 1997, to create 261 inland bills purchased (IBP) and provided Tk 155.83 cr advances in violation of banking laws and practices.

Of this amount, Tk 147.07 cr was given to companies linked with Salman F Rahman and Sohel F Rahman. According to banking laws, officials of a commercial bank of the rank of branch manager upto managing director can only create IBP worth between Tk five lakh and Tk 15 lakh. This they can do only by purchasing cheques of government corporations, autonomous bodies or 'first class' parties.

However, in the latest case of financial irregularities, it was found that only 104 cheques which the branch purchased were within the permissible limits of Tk 15 lakh. The rest were all above the limit.

The Dhanmondi branch of IFIC Bank has been repeatedly used by these two directors - Salman and Sohel F Rahman - in illegal financial dealings to their own benefit. It may be recalled that the Daily Star report on October 17, last year, also found the Dhanmondi branch of IFIC to be involved in similar irregularity dealing especially with Beximco.

The manager of the Dhanmondi branch, Jaytun Saif, has informed the Bangladesh Bank investigators in writing that these cheques and other pay-orders were purchased on the specific order of the head office of IFIC.

From her statement, it is now clear that the bank had been used by the Rahman brothers in improperly procuring funds and had involved officials ranging from the branch manager to high ups in the head office in cheque purchasing which goes against IFIC's own rules as well as existing banking rules.

Till date the IFIC has not taken any action against the officials involved in the IBP scandal.

In giving such favour to these two directors, the bank has violated a number of banking laws all of which are punishable as criminal acts.

According to clause 27(2) of the Bank Company Act, 1991, the Board of a bank must approve any loan or advance to companies related to any of the directors. However, in giving advances to companies of Salman and Sohel Rahman, no such board approval was taken in violation of the law. To stop insider loans, the BB had issued a circular in 1995 (letter no 15/95) instructing banks to take prior permission of the central bank while giving loans above Tk 10 lakh to companies linked to respective bank's directors. The articles of association of IFIC also contains a clause in its para 53 regarding such loans. All these rules and instructions had been violated in giving loans through IBP to companies in which the Rahman brothers have interests.

The BB showcause notice to the IFIC board said the Dhanmondi branch of the bank had been involved in such irregularities for a long time, but the bank authorities had never taken any action against the officials involved. This proves that these two directors (Salman and Sohel Rahman) and the bank's management authority were involved in this irregularities, the BB letter mentioned.

Moreover, a bank giving loans to anybody amounting to more than 15 per cent of its paid-up capital needs prior approval of the Bangladesh Bank. The IFIC Bank had earlier given loans and advances far above 15 per cent of its capital to companies in which the Rahman brothers have interests. On top of it, in the latest incident the same bank had advanced fresh money through IBP to companies of Salman and Sohel Rahman without prior approval of central bank violating clause 27(3) of Bank Company Act, 1991.

In the third case of breaking the law, IFIC had not taken any margin or collateral while purchasing cheques violating clause 27(1) of the same act.

What made the whole irregularity even more blatant is that 77 of the 261 cheques and pay-orders that the bank purchased were dishonoured because of insufficient deposit in the accounts of the cheque issuing companies. Eight companies had issued these 77 cheques and pay-orders for an amount of Tk 39.23 cr. Of these eight companies, Salman and Sohel Rahman have business interests in all of them excepting one. These seven companies issued the earlier mentioned cheques, for purchase by IFIC, in favour of four companies which are all owned either by these two brothers or closely linked with them. These companies are Beximco Investment Company Ltd (BICL), Beximco Textiles Ltd, Beximco Foods Ltd and Mallik Exports Ltd. The Dhanmondi branch of IFIC Bank had sent these cheques for encashment to Satkhira branch of Arab Bangladesh Bank. But these cheques bounced because of insufficient fund in the accounts making the whole process one of pre-planned fraud and deception.

Later, IFIC bank adjusted the money by debiting Tk 63.80 cr from accounts in the Dhanmondi branch of the party (?). It was also found that while adjusting the unpaid money of one IBP, more IBPs had been created through similar means.

These events clearly prove that the companies related to the interests of (IFIC)directors Salman F Rahman and Sohel F Rahman had deliberately issued false cheques knowing fully well about the insufficiency of fund in their accounts. This clearly tantamounts to fraudulent act, the Bangladesh Bank letter sent to Chairman of IFIC Sohel F Rahman stated.

The bank (IFIC) did not take any lawful action against those companies for issuing false cheques, it further said. Neither did it (IFIC) check with the banks concerned whether the accounts on which the fraudulent cheques had been issued had sufficient fund.

This proves that the head office and the Dhanmondi branch office of IFIC Bank were well aware of the fraudulent cheques issued by the companies related to the interests of its two directors and it (IFIC) purchased the fraudulent cheques to give loan facilities to these directors through irregularities, the BB said in its letter.

The Dhanmondi branch of IFIC bank had misused the IBP process mainly as a source of supplying short term fund through illegal means to different organisations relating to the interests of Rahman brothers.

The BB also came to the conclusion that the banking rules had been violated under the influence of Salman F Rahman and Sohel F Rahman to serve their interests.

It has also held responsible the board of the IFIC Bank for failing to ensure sound management of the bank and protect the depositors.

When contacted for comments MD Abbasuddin refused to say anything about the allegations. If any irregularities had taken place in the bank, the Bangladesh Bank and the board will take action. Nobody will be spared, he said.