From the Archives: The impending return of PK Halder — A great learning moment
The scandal involving Prashanta Kumar Halder, also known as PK Halder, a former managing director of NRB Global Bank, Reliance Finance and other companies, has been in the national news for almost a decade. Since 2014, he has been reported to have gone into hiding in Canada with billions of Taka of investor money in his pockets. I have personally received communications from friends and relatives about the destitution and hardship brought about by Halder and his pyramid schemes.
Newspapers recently reported that PK Halder has sought the government's assistance in ensuring a safe return to face the courts in Bangladesh and straighten out business. In the first week of September, The Daily Star reported that Halder filed an application before the High Court (HC) through his attorney, seeking a HC order for ensuring "legal security of his life" should he return to the country to return the money and settle the transactions and liabilities with the company, International Leasing and Financial Services Limited (ILFSL).
If true, Halder is indeed a rare exception in that a so-called "robber baron" has voluntarily offered to return to the law-enforcing authorities to answer questions regarding shady business practices. He owes it to the people who trusted him and the employees he left in ruins. Not many of the world's modern-day tycoons do that. In Malaysia, former Prime Minister Najib Razak is being tried for stealing funds in the 1MDB political scandal. One of his collaborators, Jho Low, is still in hiding and the Interpol is working hard to track him down.
The case of Halder and his cohort possibly involves corruption, tax evasion and abuse of power, which enabled him and his family to amass a huge sum of money through both legal and illegal means. The Anti-Corruption Commission (ACC) met with officials of People's Leasing and Financial Services to probe into graft allegations. Subsequently, at the ACC's request, the Bangladesh Financial Intelligence Unit (BFIU) has frozen the bank accounts of PK Halder and 82 other persons for their alleged involvement in money laundering and fund embezzlement.
The return of Halder will indeed herald a new beginning in the decade-long effort to develop our financial sector in a sustainable manner to enable it to support the growth of industries. Our citizens have been the victim of many previous frauds and shakedowns leading to enormous losses. The banking sector in Bangladesh has been plagued by financial scams, non-performing loans and weak monitoring problems, which might cause a macroeconomic risk in the near term, says a UN report. The Bangladesh Bank scandal where millions of dollars were siphoned off under its former Governor is yet to be solved. In another case, Hallmark Group Managing Director Tanvir Mahmud and 26 others were accused of misappropriating around Tk 4,357crore from the state-owned Sonali Bank through various means, including fraud and deception. In other words, Bangladesh is earning the reputation of being a land where you can make money legally or otherwise, and get away with it. There is obviously an abundance of fraudulent and non-transparent practices.
According to media reports, PK Halder, who is residing in Toronto since July 3, 2014, recently sent a letter to the ILFSL indicating his willingness to return to Bangladesh should he be granted protection by law enforcement and the courts. The board of directors of ILFSL has approved the letter and it placed the letter, along with an application, before the HC on September 7, 2020.
After a hearing, a HC bench granted the application to allow him to return to the country under its protection. It also indicated that further orders will be issued in the presence of the attorney general and the lawyers of the ACC, Bangladesh Bank and ILFSL. Halder will remain in the custody of the court after his return, and the HC bench asked ILFSL to inform it about his arrival time, date, flight number etc, enabling it to issue further orders.
This is a high visibility case and has created much national and international interest. It can be hoped that the authorities will comply with the HC, taking adequate precautions to ensure Halder's safety and creating the proper environment for the truth to come out. It was reported earlier that Halder was assisted by numerous bank and other officials.
All this is great news for the stakeholders in this sordid affair. Halder's family, the investors, his staff, and anyone touched by the case have been spending the last few years in a state of uncertainty. It is said that Halder, who managed four financial companies, was running a pyramid scheme and his investors knew very well the risks involved in these so-called multi-level marketing companies. This will be a golden opportunity for all involved in the various financial companies to highlight the risks involved in these investment instruments, including stocks, bank deposits, Sanchay Patra, personal loans and others, and the associated risks and rewards.
On investigation, I discovered that the pyramid schemes have been around for many years, and has offered a lucrative avenue for retirees to earn income higher than those offered by the more traditional avenues. Some 34 non-bank financial institutions (NBFI) are now operating in Bangladesh after securing licences from the central bank, but many of them are struggling to survive in the absence of corporate governance. Earlier in 2018, the central bank also sought approval from the finance ministry to liquidate another NBFI—Bangladesh Industrial Finance Company (BIFC)—which was also facing severe liquidity crunch stemming from loan scams.
The Halder-run NBFI's problems first came to the surface in 2013-14, when some of its directors made off with more than Tk 1,000 crore by way of submitting fake documents, according to the Bangladesh Bank's inspection report. The NBFI called People's Leasing last paid dividends in 2014. But the question that still remains a mystery is, how did the regulators miss the early warning signs?
On its website, the Federal Trade Commission (FTC) of the US government declares that multi-level marketing (MLM) or network marketing is a business opportunity that involves selling products to family and friends and recruiting other people to do the same, but warns that some MLMs are illegal pyramid schemes. Since childhood, we have known that these pyramid schemes or "hai hai companies" raise their heads after laying low for a period and manage "to fool some people, some of the time". The return and possible trail of Halder and his fellow co-conspirators provides an opportunity for civil society to learn how the likes of Halder and others have been able to fool investors for such a long time. It might also establish that the other part of Lincoln's famous saying is true: "You cannot fool all people all the time."
Most people who join legitimate MLMs make little or no money. Some of them lose money. People who become involved in a pyramid scheme may not realise they've joined a fraudulent venture and end up deeply in debt.
The trial and publicity after Halder's return will bring closure to a traumatic experience for the thousands who are hurting. It will also allow the investors an opportunity to share the hardships they underwent with others and warn the general public of the modus operandi of the scamsters. Finally, we need to know if PK Halder really is the con artist as portrayed in the media, or a scapegoat for the well-connected elite and other master criminals. Undoubtedly, his return and trial will bring back some much-needed transparency and uphold due process, providing a great learning moment.
Dr Abdullah Shibli is an economist and currently works in information technology. He is also Senior Research Fellow, International Sustainable Development Institute (ISDI), a think-tank in Boston, USA.
(This article was first published in The Daily Star on October 12, 2020)