Pakistani bank's ex-chief fights extradition

Sought by Pakistan in fraud case

By: Jeffery Anderson

Published in: The Washington Times

March 15, 2010

The former president of Pakistan's sixth-largest bank, who holds dual citizenship in that country and the United States and was a U.S. government employee, faces extradition to Pakistan under an 80-year-old treaty to face corruption charges in a $10 million fraud case with international political overtones.

Hamesh Khan, who worked as a financial analyst for the U.S. Agriculture Department until January, is expected to admit today during a hearing in U.S. District Court in Alexandria that there is sufficient evidence to bring charges against him in a scheme to defraud the Bank of Punjab, which he headed.

But Mr. Khan has denied any wrongdoing and said he will fight efforts to return to him to his native country, which he left in 2008. The U.S. State Department must decide whether to send him back to Pakistan or resist the pending extradition request.

A 1931 treaty between the United States and Britain was the basis for his arrest last December by the U.S. Marshals Service in his Washington, D.C., Agriculture Department office. Pakistan inherited the treaty in 1947, when it and India became independent from Britain, and signed its own extradition treaty with the U.K. in 2007.

In court papers, Mr. Khan, who also headed Pakistan's second-largest stock exchange, contends he is a victim of political persecution. He said the U.S. treaty with Pakistan unfairly limits his ability to present evidence to rebut the charges.

"We are not confident that the State Department will halt the extradition, but we hope they give us time to share with them what we know about Mr. Khan's involvement in this case, and to impress upon them our concerns about what could happen to him upon his return to Pakistan," said Stuart Sears, Mr. Khan's attorney.

The State Department did not respond to numerous requests for information about the case or its pending decision in the matter.

Mr. Khan was fired from his Agriculture Department job after his arrest, an action he is now appealing. Agriculture Department officials declined to comment.

Pakistan's National Accountability Bureau (NAB), an anti-corruption organization with broad enforcement powers, and the U.S. Attorney for the Eastern District of Virginia, have charged Mr. Khan with forgery and fraud against the Bank of Punjab and of leaving the country while restricted.

Sheik Muhammad Afzal, director of Haris Steel Industries in Lahore, Pakistan, has made sworn statements to the NAB that he and Mr. Khan were co-conspirators in a scheme, in which Mr. Afzal borrowed $10 million from the bank by opening more than two dozen loan accounts with false identities and worthless collateral.

In statements filed in court in Pakistan and in Virginia, Mr. Khan said he never sanctioned the loans to Mr. Afzal, that he referred the case to the NAB and took action against his own bank employees who allegedly aided in the scheme, and that he informed authorities that Mr. Afzal should be prevented from leaving the country.

A spokesman for the U.S. Attorney in Alexandria referred questions to the Justice Department, where spokeswoman Laura Sweeney said, "We do not comment on matters of extradition."

Mr. Khan, who was born in Peshawar, Pakistan, in 1967 but moved to the United States in 1985, landed in trouble after a precipitous fall from grace that began with a regime change in Pakistan. At the Alexandria Detention Center last Wednesday, he told The Washington Times he met on several occasions between March 2008 and April 2008 with Shahbaz Sharif, who had returned from years of exile imposed during the regime of former President Pervez Musharraf and had reassumed his post as chief minister of Punjab. Mr. Sharif is the brother of former Pakistani Prime Minister Nawaz Sharif.

Mr. Musharraf and Mr. Khan have a lengthy history and are longtime golfing partners.

In 2002, it was Mr. Musharraf - as Pakistani president - who approved of Mr. Khan to head the Bank of Punjab, which was ranked near the bottom of the country's banks at the time. Mr. Khan's stature rose quickly as the bank, which is in part state-owned, enjoyed a strong recovery. It was during this same period that Mr. Khan was named chairman of the Lahore Stock Exchange, the country's second-largest, and was appointed director of 10 bank boards and marketing and agricultural companies.

In 2008, Mr. Musharraf resigned under impeachment pressure, and Mr. Khan found himself dealing with a new set of political leaders. In his statement to the Supreme Court of Pakistan, Mr. Khan contends that Pakistan's new ruling party urged him to act as an "approver," one who denounces the previous regime and accuses it of corruption.

After Mr. Musharraf left office, according to Mr. Khan, Mr. Sharif, whose family owns sugar mills, also wanted the Bank of Punjab to loan his sons $8 million to acquire an additional sugar refinery. A few years earlier, Mr. Khan said, he had refused a similar request by Mr. Sharif and his brother because they had defaulted in the past.

"'No' is not taken very nicely by powerful people like them," Mr. Khan said.

Confronted with these requests, Mr. Khan said he told Mr. Sharif he could not denounce the previous regime. "Tomorrow another Pakistani in power could ask me to do the same to you and you wouldn't like it," he said he told Mr. Sharif.

As for the loan, he said he told Mr. Sharif he would see what he could do. Later, the bank denied the loan because the Sharifs had exhausted their credit, he said.

On April 23, 2008, Mr. Khan received a note at his Lahore home telling him not to report for work. Pakistani police raided the home that night, he said, and those of three family members over the next several weeks. Local and federal law enforcers warned him he could be in danger, he said.

Mr. Khan, who became a naturalized U.S. citizen in 1988, said he met with Bryan Hunt, the principal officer at the U.S. Consulate in Lahore, and that his father, Aslam Humayun Khan, a retired air force pilot, also met with U.S. Consul General Michael Chang in Islamabad. The message was the same: It was no longer safe for Mr. Khan and his family to remain in Pakistan.

With his personal assets frozen, Mr. Khan left Pakistan in May 2008 and arrived in Colorado with his wife, two children and $700 to his name. By February 2009, he had accepted the position of financial analyst at the Agriculture Department.

"I was morally aided and abetted by the State Department to come here," he said last week. "This was a new beginning for me."

On Dec. 10, acting on a warrant for his arrest by Pakistani authorities, U.S. Marshals took him into custody at his office. Relying on affidavits and charges filed in Pakistan, the U.S. Attorney's Office opposed Mr. Khan's requests for conditional release and for more time to gather evidence to defend himself.

In court papers, Mr. Khan said an investigative group led by a former U.S. Foreign Service officer was unable to get full cooperation from potential witnesses in Pakistan that claimed they feared retribution from the Punjab government if they aided him in any way.

U.S. District Magistrate Judge John F. Anderson in Virginia ordered continued detention. He will preside today as Mr. Khan agrees to submit to the State Department's jurisdiction without first going to an evidentiary hearing.

"Although the court has ultimate discretion over what to allow into evidence, it is likely that most if not all of our evidence that might demonstrate Hameshs innocence would [not be admissible]," Mr. Sears said in an e-mail.

The case against Mr. Khan in Pakistan revolves primarily around the sworn statement of Mr. Afzal, the Haris Steel director, who said Mr. Khan took bribes in exchange for aiding in the scheme to defraud the bank.

"Mr. Khan told me that he wished to settle in the U.S.A. and to have $50 million in his accounts and to play golf a free man," Mr. Afzal said in his NAB statement. "I promised him that if he cooperates with me, I would make his dreams come true."

Internal bank documents submitted to the court in Pakistan show that the loans were extended to Haris Steel on the approval of the bank's central credit committee and the board of directors without Mr. Khan's approval. In the detention center interview, Mr. Khan said the large number of loans was designed to keep the amounts below the level where his authorization would be required.

While he was on vacation in the spring of 2006, he said, the board approved a final lump sum loan that effectively quadrupled Haris Steel's line of credit on the signature of the bank's general manager and risk manager.

"It was a fait accompli," Mr. Khan said, noting that the funds had already been disbursed. "The only choice I had was to implement more security checks and to call for an audit of Haris Steel."

In the spring of 2007, he said he ordered an internal bank audit, reported the results to the NAB, and recommended to the bank board that the general manager and two other managers be fired. He said he also recommended that Mr. Afzal be prevented from leaving the country.

Meantime, he said he worked with Haris Steel to restructure the loans so the company could repay them.

"I had to protect the bank's assets," he said, contending that the loan was being repaid according to schedule. "First, we want to get the money back. Then we hang them."

However, Mr. Khan soon found himself in the crosshairs of an investigation instigated by his successor at the bank, Sajjad Hussain. As for the statements by Mr. Afzal, he said, "I always made life difficult for him, and because he has government protection, he is now coming forward with fabricated statements."

Though he said he cannot establish a link between Mr. Afzal and the Sharifs, Mr. Khan said Mr. Sharif wanted him to publicly admit that the Bank of Punjab made illegal loans to Haris Steel in exchange for bribes that could eventually benefit opponents of the current regime.

"I received calls from government officials and a messenger of Sharif came to see me," Mr. Khan said of his last days in Pakistan. "The clear implication was that they were going to teach me a lesson I would remember."

According to a court declaration of Patricia E. McDonough, State Department legal adviser, the Pakistani Ministry of Foreign Affairs formally requested the Khan extradition on Aug. 27, 2009. The request was certified by U.S. Ambassador to Pakistan Anne W. Patterson on Oct. 1, 2009.

In a sign the State Department might look favorably on the extradition request, a certificate of full faith and credit for Pakistan was signed by Secretary of State Hillary Rodham Clinton on Oct. 13. 2009. Two weeks later, she visited Islamabad and Lahore to support economic development and tamp down anti-American sentiment in the wake of one of the worst terrorist attacks in two years.