REFERENCE / COMPLAINT NO. X

Reference dated 27-11-2005 – Purchase of Weapons

The Chairman
National Accountability Bureau
Islamabad
  
Pakistan Peoples Party   - - - - - - - - - - - - COMPLAINANT
 
VS

 
1. General Tariq Majeed 
Chief of General Staff
General Headquarters
Rawalpindi
 
2. General Ahsan Saleem Hayat
Vice Chief of Army Staff
General Headquarters
Rawalpindi                      - - - - - - - - - - - - - ACCUSED / RESPONDENTS

Subject: COMPLAINT UNDER SECTION 5 AND 18 (B) SUB SECTION-II OF THE NATIONAL ACCOUNTABILITY BUREAU (NAB) ORDINANACE 1999, AGAINST THE HOLDERS OF PUBLIC OFFICE FOR PUNISHMENT UNDER SECTION 10 OF NAB ORDINANCE FOR CAUSING HUGE FINANCIAL LOSS TO THE NATIONAL EXCHEQUER BY CORRUPTION AND CORRUPT PRACTICES.

1.      The respondents in this complaint do fall within the ambit of NAB Ordinance 1999 for the purposes of investigation, trial and punishment. 

2.      The respondents are reportedly guilty of corruption and corrupt practices as defined in Section 9 of the NAB Ordinance 1999 and as such are subject to punishment under Section 10 of the NAB Ordinance 1999 based upon the following facts and grounds : 

Facts and Grounds: 

1.      That as per enclosed “South Asia Tribune” (SAT) report, the respondents were deeply involved in 21 Million dollar corruption in purchase of weapons for Pakistan Military.
 

2.      That according to details contained in the SAT report, a quick fire restricted tender No  1338/49 / TI Sight /DGDP/PC dated 17 June 2005 was floated by the Director General of Defence. Such large  purchase seeking to buy 900 Thermal  Image Sight (TIS) Fire Control System  Units for the main Pakistan battle Tanks – Al Khalid & Al Zarar , T-85 & T-80 U, and 21 June 2005 as the last date  was ( only four days ) given for submission of bids.

3.      That this was ostensibly done because the Weapons and Equipment Directorate (W&ED) of the Army GHQ had already pre-qualified and short listed two French companies through a long process of test, trial & final technical evaluation by the ITD Directorate and I & E Directorate in the 1st week of June, both the companies were practically ready to bid and these companies were Sagem & Thales.   

4.      That the test & trial had included draft contract, proposal including commercial and technical offers, which the W & ED sought on May 24 and 26, 2005 from these two companies, both gave their offers and both were Pre-Qualified / short listed by the GHQ.  

5.      That the first  technical offers were opened and evaluated by the technical departments, I&E & ITD  Directorates of GHQ and after two hours both were declared technically  qualified with 4 technical observations made on Sagem, offers and 35 technical observations on Thales bid . The most significant difference in the two offers was that Sagem bid for the Generation -3 (G3) TIS Units while Thales offered the older Generation -2 (G-2).The tender had asked for both types although G-2 is almost obsolete.

6.      That why G-2 units were put on the tender is a big mystery because Pakistan Army has already been using the G-3 which is mounted on Al –Khalid tanks. 

7.       That Thales was not qualified supplier until early 2004, General Tariq Majeed promoted the Vice Chief of General Staff by General Musharaf and he ordered that Thales also be included in trials and was later on qualified. 

8.      That on June 23, 2005 Lt, General Tariq Majeed took the decision with the connivance of the Vice Chief of Army Staff General Ahsan Saleem Hayat ,ruling out  all objections  after harassing , threatening and severe pressure on the following who matters.  Maj General Saeedullah Khan DG Armored Corps, Maj General Ijaz Bukhari DG weapons  & Equipment with his assistant Brig Sawar Shah,  Maj General Yousaf the incharge Military Operation Directorate and his technical director Brig Khalid Asgher was so terrorized  that he was almost crying and saving their service and pension,  to award the  contract to Thales,  the high bidder,  for it’s inferior G-2 equipment. 

9.      That the Final signing ceremony had been decided to be held on 30th June at 22 hours or 10 PM at the GHQ with Thales company. The whole day documents were being prepared for the final award. But at 9.53 pm the telephone rang up and the C-IN-C was on line and ordered to ink the contract to call off the deal and within a few minutes the said entire room was empty and $ 37 million of Pakistan Army was saved. It was due to leakage of the said deal and published in the press.  

10. That the next day the said company Thales was declared defaulting company by the DG of Defense Production because it had not fulfilled its contractual obligations on the submarine deals. 

11. That the question arises how and why  a defaulting company was included in bidding, why its higher bid with inferior technology had been accepted and which senior officers were involved in the scam  in pre-qualifying for the contract  and C-IN-C had to interfere and ordered to call off the contract after reading in the Press. 

12. That why the Ministry of Defense had been kept totally out of the loop in the deal. All the files were kept under control of the GS Branch headed by General Tariq Majeed. But there were other Generals heading other Directorates involved, who had to agree. 

13. The above facts have been taken from the following reference : 

      The “South Asia Tribune” dated 30-6-2005 and 3-7-2005 (Copies enclosed).

Conclusion:
 
Based on the above facts and grounds respondents have shown willful indulgence in corrupt practices under Section 9 of the NAB Ordinance. Such persons are subject to punishment under Section 10 of the Ordinance 1999. 

As such, the Chairman of the National Accountability Bureau is called upon to initiate investigation in connection with matters set out herein above and further proceed to file a reference against respondent for violating the provisions of Section 9 of the NAB Ordinance 1999 punishable under Section 10 of the Ordinance in competent court of law and proceed against those concerned for violating Section 9 of the NAB Ordinance.
 
Complainant :

Pakistan Peoples Party

Through :

Amir Fida Paracha, MPA
Advocate High Court 

Islamabad - dated : 7 September 2005  

Musharraf's Last Minute Phone Call on SAT Report, Saves Army $37M Loss
By M T Butt

WASHINGTON DC, July 3, 2005 | ISSN: 1684-2057 | www.satribune.com

RAWALPINDI, July 3: General Pervez Musharraf intervened just 7 minutes before the signing of the final contract between Pakistan Army and the French Company, Thales, on the night of June 30, to stop what would have been a straight loss of over 37 million dollars to the country.
 
Within 24 hours of the South Asia Tribune report that top Generals of the Pakistan Army had decided to award a Thermal Imaging Units (TIS) contract for Al-Khalid tanks to Thales, despite the French company had offered a higher bid for low quality equipment, so much pressure built up that Musharraf had to personally call the GHQ late at night, just minutes before the signing ceremony, to stop the deal.

Sources revealed that the Tender floated on June 17, 2005 had now been cancelled and within two months a new Tender would be floated in which new bids would be invited.
 

Angry Army officers had revealed all the details of the on-going scandal to the South Asia Tribune in a bid to stop the award of the contract for 900 Thermal Imaging Units sought by the GHQ through a restricted tender on June 17. Only two companies, both French, were pre-qualified to bid and Sagem had offered a price of 59,000 Euros per unit for latest technology units while Thales had bid 78,000 Euros for Generation-2 technology. Click to Read earlier story.

The Chief of General Staff of the Army, General Tariq Majeed, had ordered that the contract be awarded to the highest bidder to buy obsolete technology and many GHQ officers were angry at the decision. For the first time some of them picked up the courage to leak the entire scam to the media to save the image of the Army.
General Majeed had left Pakistan after issuing the orders that the contract be signed with Thales and June 30 was the last date for signing the document.

In the meantime, Sagem, the losing bidder, made another cut in its price and brought it further down by Euro 16,000 per unit from 59,000 to 43,000 or raising the difference between with the price offered by Thales to Euro 34,500. That would have meant that for 900 units Pakistan would have paid over US$37 million more.

Concerned insiders kept a tab on the developments on June 30 and informed the South Asia Tribune that the final signing ceremony had been decided to be held at 22 hours or 10 pm at the GHQ. The whole day documents were being prepared for the final award.
 

“But at exactly 9.53 pm, the telephone rang and General Musharraf was on the line. He ordered the Defence Production officials ready to ink the contract to call off the deal. Within a few minutes the entire room was empty and the Pakistan Army saved some $37 million,” one officer reported after watching the scene.

The next day on July 1, the Director General of Defence Production declared Thales as a “Defaulting Company” because some years back it had not fulfilled its contractual obligations on the submarines deal, the officers revealed on July 1.
 

It was an amazing success for the officers who had leaked the whole scandal just in time to save the damage. But details of what happened on June 30, specially in the evening are startling.

According to one version Lt. Gen. (Retd) Tariq Wasim Ghazi, who was appointed Secretary of the Ministry of Defence after he was superceded and retired by Gen. Musharraf, when he appointed Lt. General Ahsan Saleem Hayat as Vice Army Chief, moved in quickly on June 30 to intervene and declare Thales as a Defaulter.
 

"Gen. Ghazi spoke directly to Musharraf and briefed him about the details of the case as well as the past performance of Thales and other companies which had merged into Thales, and asked him to stop the deal before it was signed," said an insider.
 

In the view of an expert: "Gen. Ghazi was trying to get even with the junior officer (Gen. Ahsan) who superceded him by not allowing him to make easy millions. Gen. Ghazi was the fittest candidate to become the Vice Army Chief but he was bypassed."
 

This episode also reveals that the authority of the Vice Chief and Chief of General Staff has now been challenged by a retired General who is still close to General Musharraf. "This grouping on a matter involving corruption of 35 or 40 million dollars is a much more serious development," the defence expert said.

But all eyes are now on Thales as it is a major French exporter of sophisticated war equipment to the world and disqualifying it as a Defaulter means Pakistan is asking for a lot of legal and financial trouble. Thales has already signed two earlier contracts this year and what happens to those is not clear yet.

An expert on defence purchases disclosed to the South Asia Tribune that Thales was actually a new company set up in 2000 after merger of several French companies including Thomson-CSF which had been supplying Pakistan with a lot of weaponry for years.

“It is just possible that one of the many companies which merged into Thales or were acquired by it in corporate takeover had some history of not meeting its contractual obligations with Pakistan which was now being used by Pakistan not to award it the TIS units contract,” the expert said.

The cancellation of the Tender has given rise to many questions now that the damage has been controlled, the expert said. “General Musharraf should now start an investigation as to how and why a Defaulter Company had been pre-qualified, why the higher bid with inferior technology had been accepted and which senior officers were involved in the scam.”

But, the expert said, there is also a possibility that instead of the senior officers who pushed the deal, an inquiry may be launched to find out who leaked the details to the media and some scapegoats may be hunted to appease the Generals who apparently lost their big chance to make a few million dollars on the side.

The South Asia Tribune tried to get the official version of Thales on the latest developments but Emails sent to their Press contacts remained unanswered. Thales was asked to confirm whether Pakistan Army had declared it as a “Defaulter” Company and the said contract which was due to be finalized on June 30, 2005 had been canceled.

Army's Budding Mansurul Haq Pays Extra $21m in Hush-Hush French Deal
The Sout Asia Tribune
By M T Butt 

ISLAMABAD, June 30: For the first time in Pakistan Army’s history, intimate details of a multi-million dollar weapons deal have been leaked to the media by angry middle ranking officers who point to a massive scandal which has already left the Ministry of Defence and most of the senior officers in the GHQ wondering how bold and blatant some people can get.
 
These officers have released all the details, including names, places, time and dates about the deal, raising a plethora of questions about the manner in which specialized defence equipment is being purchased in a blatantly roughshod manner, without any financial oversight. They say if no action was taken now, more details of many more scandals would also be made public including some personal scandals of Generals which many would not like.

According to an expert, who has studied Pakistan military purchases for years, such deals and over-payments are a very common occurrence in the Pakistan Army but what is new and different in this case is that the details have been leaked to the media for the first time while the deal is still in the process of being wrapped up.

“These officers cannot reconcile with the fact that an extra 21 million dollars are being paid to a French company in extra-ordinary haste and that too to buy inferior quality equipment already discarded by most countries, including Pakistan Army itself,” an E-Mail received by the South Asia Tribune disclosed.

The details of the deal are bizarre and the two top most Army Generals under General Musharraf are being named as the interested parties who are forcing the violation of all rules and regulations. Both are due to retire in 2007 and one of them may survive to become the Army Chief as well.

“This violation is happening in the Army Headquarter right now and can possibly be stopped if General Musharraf or the helpless politicians occupying the posts of the Defence Minister or the Prime Minister, intervene and stop these Generals from making quick money at the expense of national defence and even country’s exports,” a concerned official said.

According to the details, a quick fire, Restricted Tender was floated on June 17, 2005 by the Director General of Defence Purchases seeking to buy 900 Thermal Image Sight (TIS) Fire Control System Units (Pix Above) for the main Pakistani battle tanks – Al-Khalid and Al-Zarrar, T-85 & T-80U.

Surprisingly for such a large purchase through Tender No: 1338/49/TISight/DGDP/PC-3B Dated 17th June, 2005, only four days were given for submission of bids. June 21 was set as the last date.

This was ostensibly done because the Weapons and Equipment Directorate (W&ED) of the Army GHQ in Rawalpindi, had already pre-qualified and short-listed two French companies, through a long process of tests, trials and final technical evaluation by the ITD-Directorate and I&E Directorates in the first week of June, 2005. So both the companies were practically ready to bid.

These companies were Sagem and Thales, the first being Europe's third largest defence and security electronics company, while Thales is France's largest military company. Adnan, son of late Maj. Gen. Jamsheed Malik represents Sagem in Pakistan while Thales is represented by a Colonel Wazir and Mr Shibli from F.A. Enterprises.

The tests and trials had included draft contract proposals, including commercial and technical offers, which were sought by the W&ED on May 24 and May 26, 2005 from these two companies. Both gave their offers and both were pre-qualified/short listed by GHQ.
Then the W&ED sent the files to DGDP for final purchase contract before June 30, 2005. DGDP floated the tender asking for bids in 4 days. Both Sagem and Thales separately submitted their technical and commercial offers on June 21 in the presence of DGDP and their own representatives.

First the technical offers were opened and evaluated by the technical departments, I&E and ITD Directorates of GHQ and after two hours both were declared technically qualified with 4 technical observations made on Sagem’s offer and 35 technical observations on Thales bid.
The most significant difference in the two offers was that Sagem bid for the Generation-3 (G-3) TIS Units while Thales offered the older Generation-2 (G-2). The Tender had asked for both types although G-2 is almost obsolete.

Why were G-2 units put on the tender is a big mystery because Pakistan Army has already been using the G-3 which are mounted on Al-Khalid tanks being manufactured by Pakistan for which Islamabad and the GHQ have been trying hard to secure export orders from the Gulf, Saudi Arabia and other countries.

The angry Army officers say G-2 units were not being mounted on Al-Khalid tanks because of integration, stabilization and target identification problems. In all the demonstrations to potential foreign buyers, the GHQ has been displaying Al-Khalid tanks with G-3 units.
Side by side, the Pakistan Air Force has upgraded all the F-16, Mirage and Helicopter Gunships with G-3 units bought in 2001 or thereafter. These were purchased from Sagem in 1997. Sagem is also the main contractor in collaboration with Kamra Avionics Company. It introduced Kamra to the international export market for which General Musharraf is said to be very proud and keeps referring to.
 

All NATO armies and Russians are using G-3 because it is light weight, has no payload problems on air and is more reliable than G-2. In 2002 the Pakistan Army GHQ and Weapons and Equipment Directorate decided to install G-3 in all its main battle tanks.
Sagem was also offering transfer of technology which is included in the quoted price along with state-of-the-art Technical Ugradation Package to upgrade all the existing tanks from G-2 to G-3. That in itself promises a huge export market.
 

Thales, on the other hand, was not even a qualified supplier until early 2004 and only Sagem was in the run. Then came General Tariq Majeed, the Chief of General Staff with his background of Military Intelligence (MI). He ordered that Thales should also be included in trials and tests which continued until November last year. More trials were done in February/March this year until Thales was pre-qualified, although it was offering only G-2 Units.
 

The big envelopes of bids were opened on June 21, 2005 after the technical offers of both the companies were approved. Lo and Behold, Sagem had offered each G-3 TIS unit for 59,000 Euros or a total of 53.1 million Euros (US$64.5 million) for 900 units. The price of Thales was an unbelievable 78,000 for each G-2 unit or a total of 70.2 million Euros (US$85.3 million).
 

On Thursday June 23, 2005, Lt. Gen. Tariq Majeed, Chief of General Staff took the decision, with the knowledge of the Vice Chief of Army Staff, General Ahsan Saleem Hayat, ruling out all technical and other objections to give the contract to Thales, the highest bidder, for its inferior G-2 equipment.

His decision was given on the last day of his work as Gen Majeed proceeded the very next day on an official trip abroad.

The decision stunned many who were involved with the project. There were so many angry officers who found it unpatriotic to keep quiet. Some of them believe the use of brute authority to reward a company which did not offer competitive technology has created a big problem for General Majeed who is being likened to Admiral Mansurul Haq of Pakistan Navy, the convicted former Navy Chief who made millions in submarine purchase deals and paid off a tiny percentage to get off the hook.

The Ministry of Defence has been kept totally out of the loop in the deal. All the files were kept under control of the GS Branch headed by General Majeed. But there were other Generals heading other Directorates involved, who had to agree.

These Officers and Directorates included Director General Armored Corps, Maj. General Saeedullah Khan, DG Weapons & Equipment Directorate Maj. Gen. Ejaz Bakhshi who was assisted by Brig. Zawwar Shah. The Military Operations Directorate under Major General Yousuf and his Technical Director Brig. Khalid Asghar also had to approve the purchase. The ITD Directorate was also involved.

The angry officers of the Army say all these Generals and Brigadiers were put under severe pressure to approve the deal. “Maj General Ejaz Bakhshi was under tons of pressure, so was Major Gen. Yousuf but Technical Director Brig. Khalid Asghar was so terrorized he was almost crying, but he had obey the orders to keep his job and secure a pension,” one officer recalled.

The reason is that General Majeed is the senior most General after the current Vice Chief of Army Staff, General Ahsan Saleem Hayat, who retires in October 2007. General Majeed has the outside chance of becoming the Army Chief as he is due to retire on December 30, 2007 and could thus be a possible replacement of General Musharraf, if he is not kicked out earlier.

The Editor of the South Asia Tribune contacted the Thales company through its given Email on its web site to confirm the deal. An Email sent to 'tosasales@fr.thalesgroup.com' asked Thales whether it had finally got the contract from Pakistan Army of 900 Thermal Imagers at Euro 78,000 per unit for Pakistan’s Main Battle Tanks.

Thales was also requested to confirm whether the TIS Units were of Catherine-QW type, whether the imagers were Generation-2 or Generation-3 and whether Transfer of Technology (ToT) was also part of the contract. No response was immediately available from the company.

The decision to buy G-2 units from Thales has many implications for the Army and Pakistan as well. Firstly Pakistan will be paying an extra US$21 million to buy inferior grade technology which is being phased out by all the armies the world over, including the Pakistan Army.

Secondly by putting in these old Generation units, Pakistan is seriously going to compromise its export potential for Al-Khalid and other tanks as all buyers are looking for the latest technology when they purchase weapons at such a scale.

Thirdly after a few years Pakistan will in any case have to upgrade these tanks and install the new technology which would again cost a bundle to the Army and the country.
Why all this blatant favoritism is being done by some Generals is obvious but no one is still ready to give out a guess of what will happen to the new Admiral Mansurul Haq in the making.

What it, nevertheless, proves is that General Musharraf has turned a totally blind eye on whatever his key position holders in GHQ may be doing because he wants them to stay happy, healthy, wealthy and content and not challenge his authority as the Army Chief, although he has crossed his retirement age years ago.

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