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Issue No 21, Dec 16-22, 2002 | ISSN:1684-2075 | satribune.com

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The PAF Kickbacks Scandal Revealed by Mistake

Special SAT Report

ISLAMABAD: Strong evidence has surfaced of Musharraf regime's first major defense kickbacks scandal involving the Pakistan Air Force (PAF) last year when Pakistan purchased four CASA Transport aircraft from an Indonesian company for $50 million.

Amusingly the scandal broke when a senior PAF officer mixed up the look-alike names of the commission agents and called in the wrong guy to contact the suppliers and submit the offer.

All signs are that the kickbacks of four to five million dollars, were offered to the PAF high ups, and the role of the PAF Chief himself was so dubious many believe he could have been the ultimate beneficiary. Evidence, however, firmly establishes that his Dubai-based close friend was.

This is the first major defense purchase scandal of the Musharraf government though it may appear to be not so big compared to the one billion dollar submarines purchase or the purchase of several hundred million dollars worth of Ukranian Tanks, both highly controversial deals involving kickbacks. In the submarines case Admiral Mansoor ul Haq, the former Navy Chief, was arrested and tried but let off the hook after he paid some 7 million dollars. No one was touched for the Ukranian Tanks deal.

The evidence now available about the CASA CN-35 aircraft scandal reveals that the Indonesian supplier offered a 3 per cent normal commission and 5 per cent extra commission for "defence and finance personnel" on purchase of the 4 Transport Aircraft. The total cost was $49 million with commissions and kickbacks totaling four million dollars.

The man in the center of the deal has now come out on record after failing to evoke a response from the PAF authorities, which refused to acknowledge or reply even to a legal notice served by him through his attorneys to the Chief of Air Staff, Air Marshal Mushaf Ali Mir.

The original story of the CASA aircraft purchase was reported in a section of the Pakistani Press earlier this year but the dubious side of the deal was not highlighted and PAF spokesmen tried to bury it under strong denials and unofficial use of pressure to stop the story from catching wings.

The episode which could go down as a major blot on the Musharraf regime, started in December of 2000 when instead of Khalid Kashmiri, a PAF official based in Dubai and said to be a close friend of PAF Chief, Air Marshal Mushaf Ali Mir, officials contacted another ex-PAF officer, Khalid Khawaja, also in the same defense supplies business. The mix-up probably occurred because both had Khalid as their first name and all Khawajas are known to be of Kashmiri origin.

"I was approached by the PAF to get them the offer, whereas they could have directly approached the company. We got the offer and when I went to Deputy Chief of Air Staff (Operations) Air Marshal Kaleem Saadat, along with Air Vice Marshal (retd) Khudadad, to submit it, I asked AM Kaleem why after all had I been approached in particular," Khalid Khawaja said in an EMail interview to the SA Tribune.

"He laughed and said in fact the Air Chief had asked him to approach another retired officer, Khalid Kashmiri, who happens to be the Chief's friend, " Khalid Khawaja said.

“In the first place, Air Marshal Kaleem never contacted me directly. He had asked Air Commodore Ateeb, ACAS (Operations), to contact Khalid Kashmiri and Ateeb mistook it as Khalid Khawaja. Ateeb asked Group Captain Rizwan, Director Air Transport, to contact me and it was Rizwan who contacted me desperately. Later Rizwan and Ateeb followed it up and asked me to do them this "national favor".

“I met Air Marshal Kaleem first time when I handed him over the offer in presence of Air Vice Marshal Khudadad who was Director General of National Accountability Bureau. Later Khudadad was the one who met the Air Chief as well as AM Kaleem to resolve the issue,” Khawaja said, adding: "I do not find any reason to believe that AM Kaleem had any vested interest in the deal as he got me the Letter of Intent (LOI) and was very co-operative without any underhand understanding."

"I was conveyed by the Indonesian company, through my contacts in Indonesia, that they will give us 3 per cent commission as our processing fee and 5 per cent (kickbacks) for PAF authorities," Khawaja said.

As evidence Khawaja sent a scanned copy of an Email sent by Prima Niaga (ptpns@indosat.net.id), sent by one Vice President (Sales) Suryana Padma Abdurrehman which stated clearly that "They (PAF) have given us a confirmation about commission fee (off the record) - Agency Fee=3%, Pakistan Finance and Defense Department=5%.” The Email also asked Khawaja to "prepare the Technoman Company Profile completely which will (be) appointed as IAe (Indonesian Aerospace) Agency." Click to View E-Mail copy Technoman is the name of Khawaja’s company.

"The point here is that this was the offer which came from the suppliers, without any demand from our side. I could have bargained more by saying that people are demanding more, as I knew that there was enough margin in the price. Instead I called Air Marshal Kaleem and told him that they must get a good bargain and the extra 5 per should be deposited in the Government/PAF treasury," Khawaja said.

"A few days after that we were told that the suppliers had chosen Mr. Khalid Kashmiri as their agent, as required by the top authority of the Air Force. In between we were told that if we let this one go to Khalid Kashmiri we can be entertained in some other deal, but I refused as I was already fed up with the past experience," Khawaja said.

"Air Marshal Kaleem told me one day that it was not the PAF but the Indonesian company which had changed its agent but why would they do so, when I was doing a fine job. Why did the PAF want the deal to go through a friend of the Air Chief," Khawaja asked.

"When authorities in Indonesia were contacted they said that they could not afford to lose the business and if the PAF gave me a letter again they will be happy to deal with me."

As Khawaja was frustrated in the deal, he decided to take legal action and sent a notice to the PAF Chief. Air Marshal Mushaf Mir, stating these facts. Click here for Legal Notice The Notice also stated that the supplier was prepared to pay 3% to the agency and 5% to defence and finance personnel but "Our Client immediately conveyed this, (offer) inter alia, to Air Marshal Kaleem Saadat, DCAS (Ops) and informed him that as Our Client did not intend to indulge in any unethical business practices, therefore, the 5% would be taken from the Supplier and paid into the Government Treasury."

"It appears that Our Client's honesty and high moral standards were not appreciated and the Supplier was informed that the PAF would deal with the Supplier through a nominee of the highest authority. Consequently, the Supplier acting in flagrant violation of its obligations towards Our Client appointed an agent of your choice," the notice said.

When asked why he did not pursue the legal notice with a formal case, Khawaja said: "In fact some indirect communication started after the notice and the PAF Chief was too arrogant and confident that nothing can go against him. But somehow Air Marshal Khudadad after meeting the Chief and AM Kaleem could prevail upon my associates that pursuing the case will not benefit us. Rather we shall earn the wrath of the Chief and it will only damage our various business interests therefore the other directors of the company were of the opinion not to pursue the case any further."

There was no immediate response to the notice from the PAF authorities but PAF media managers, however, went into overdrive to control any damage in the media and when some persistent newsmen tried to ask questions, the full force and authority of a military government was used to keep them at bay. One journalist was told to give the questions in advance, in writing, and when a very strong questionnaire was handed over, there was no response. No Pakistani newspaper touched the story again.

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