ISLAMABAD: AGP refers report to PAC: Irregularities in PIA
By Arshad Sharif
ISLAMABAD, March 19: The government has referred to the Public Accounts Committee (PAC) a report by the auditor general of Pakistan (AGP) which identified financial irregularities worth Rs5.09 billion and accumulated losses amounting to Rs10.26 billion in the Pakistan International Airlines (PIA). The magnitude of financial irregularities and losses in the national flag carrier could have been more as the management did not provide the details of some of the accounts to the state auditors, sources said.
Pointing out the lack of transparency in the PIA affairs, the auditor general said the management did not submit audited accounts of PIA Hotel Ltd, Midway House, PIA Shaver Poultry Breeding Farms and Skyrooms for the year 2002-03. The government referred the report to the PAC after the AGP had already brought the serious financial irregularities to the notice of President Gen Pervez Musharraf.
The PAC would determine a suitable time to call the PIA chairman, Ahmed Saeed, to answer questions about financial health of the national flag carrier as well as the losses incurred by it.
Official record shows that Rs10 billion losses incurred by the PIA were in addition to the Rs23 billion injected by the government to keep the organization in good health during the tenure of chairman and managing director Ahmed Saeed.
According to the AGP report, titled “Audit Report on the Accounts of the Public Sector Enterprises 2002-03, the PIA had accumulated losses worth Rs10.26 billion on December 31, 2002, despite the fact that the corporation showed it earned a pre-tax profit of Rs1.8 billion during 2002 as against a pre-tax loss of Rs2.2 billion.
The report observed that the PIA did not charge depreciation on aircraft and spares according to revised useful life which would have reduced the fixed assets by Rs800 million and spares and inventory by Rs878 million “with corresponding effects on profits.
“The correct position is needed to be incorporated in the book of accounts, it said. The report observed that trade debts of the PIA increased to Rs3.36 billion by the end of 2002, registering an increase of 10.28 per cent.
PIA Managing Director Ahmed Saeed paid Rs22.606 million to daily wagers on account of bonus and production incentive without approval of the finance division, the report observed.
“The matter was reported to the management on June 26, 2003 and in August 2003, but without any response, it added.
The auditor general report noted that the PIA management did not take effective steps for recovery of Rs7.10 million from Duty Free Shop despite the fact that the corporation had been asked to do so on June 9, 2003.
The report said the matter was also brought to the notice of the management in August 2003 and discussed in Departmental Account Committee's meetings held on February 25, 2004. The committee recommended that the matter should be examined in light of the sales agreement. However, the report observed that no progress in this regard had been reported by the PIA.
The report said the Public Accounts Committee might be asked to give appropriate directives in the case of Euro Travel, Lahore, which was declared defaulter by the PIA “with an amount of Rs27.033 million outstanding against a bank guarantee of Rs9.3 million which was not encashed due to court orders.
DAWN
 PIA's Ahmed Saeed Finally Being Booted Out, Back to Manufacturing Boots
By M T Butt & M A Siddiqui
 ISLAMABAD/KARACHI, April 1: This is not an April Fool�s gig. General Pervez Musharraf and Prime Minister Shaukat Aziz have finally decided to appoint a new Chairman for Pakistan�s troubled national airline, PIA, as out-going and out of luck Chairman, Choudhry Ahmed Saeed, continues to make last ditch efforts to get an extension for his contract ending April 14, 2005.
The new man coming in is Mr Tariq Kirmani, Managing Director of Pakistan State Oil, (Left) the largest corporate entity in the country, which is shortly to be privatized and most likely to be handed over to Fauji Foundation to keep it under the wings of the Pakistan Army.
Kirmani is a friend of PM Shaukat Aziz and was recently appointed as the President of the Pakistan Hockey Federation, replacing General Mohammed Aziz, the famous Kargil General retired by Musharraf few months back in a shake up of top Army commanders.
�Kirmani�s appointment has been agreed between Musharraf and Shaukat Aziz,� a source in the PM�s office disclosed. �But Ahmed Saeed is still desperately trying to get an extension, using three retired Army colonels, Ahsan, Mahmood and Mudassar, who have been the major beneficiaries of Saeed�s extravagant policies.�
These retired colonels were inducted and given powers beyond their capacity while none of them had the experience and training to run the sensitive departments they were given. The result was a mess in everything they did and now they need Saeed to keep the cover.
Publicly claiming that he was not interested any more in the job, Ahmed Saeed has been lobbying hard through media interviews and his gang of three army colonels to impress upon General Musharraf and his close aides that only he could turn the airline around.
To lobby for his lost cause, Saeed had initially scheduled a detailed briefing for the Prime Minister today, March 31, 2005 in Islamabad, but that date was extended to April 8, 2005 as Saeed felt that his friends were not succeeding in getting the proper message to General Musharraf and he was not responding favorably.
And to add public pressure for his extension, Saeed gave a full length interview to �Blue Chip� a corporate magazine, making all kinds of tall and mostly conflicting claims about his intentions, his performance and the future of the airline.
Yet the free media has been reporting Saeed�s failure with relish and even conservative newspapers like �Dawn� have joined the exposure of Saeed�s follies and the negative impact of his decisions, taken almost single handedly as the Chairman and Managing Director of PIA, a position which militates against the PIAC Act which clearly states that the Chairman and MD would be two separate persons and the MD would be appointed in consultation with the Chairman.
In one week at least four very damaging news items have appeared in the mainstream Pakistani media, including Dawn, The News and Daily Ummat, highlighting Saeed�s failures and focusing on the bad image and costly damage the airline had suffered.
Now when Musharraf and Aziz have agreed on a replacement for Saeed, the April 8 briefing is again being pushed further to give Saeed more time for lobbying.
A credible source in Islamabad said Saeed and his men were asking for April 30 as the briefing date for the PM, two weeks after Saeed is supposed to retire with the expiration of his contract on April 14, 2005.
�This is a clever ploy as he will get a whole month to approach General Musharraf, although Shaukat Aziz has almost put his foot down and convinced Musharraf that Saeed must go, if PIA was to get back its financial health under control,� sources close to the PM told the South Asia Tribune.
As a first step of his skillful maneuvering, Ahmed Saeed recently transferred all powers of the Managing Director to Farooq Shah, a recently promoted Deputy MD, who has now been authorized to handle all PIA affairs.
This again is a clever move to cover up for the mismanagement and wrong decisions, fudging of figures and corruption in purchases amounting to billions of dollars. A man who has been a partner in all this corruption with Saeed would be the best suited to protect his own and Saeed�s interests.
Knowing that his tenure was coming to an end, Saeed has been trying his best to provide corporate and legal cover to his major blunders.
Minutes of a recent meeting of the PIA top brass, chaired by Ahmed Saeed in Lahore on March 7, 2005, obtained by the South Asia Tribune, disclosed many such belated attempts to cover up his failed decisions. Click to view minutes Page1 | Page2 | Page3 | Page4 | Page5
The minutes reveal the details of the briefing which was to be given to the Prime Minister today, but have since been put off to April 8 and may even be extended further as a tactical ploy. The points to be discussed included the latest status of the sale of New York�s Roosevelt Hotel, the critical Reservation systems, the IT system and PIA�s engineering department.
But the most revealing point was a proposal by the PIA Chairman to raise another Rs 20 billion as loans from the market, provided the Government of Pakistan gave guarantees. Click to View Page
This revelation makes all the claims and figures of profits made by Chairman Saeed in the last thre years doubtful because if now he is asking for another Rs 20 billion in loans, that too under Government guarantees, it means all his projections and statistics were manipulated and misleading.
PM Shaukat Aziz was unlikely to agree to provide such government guarantees as PIA had already been given a Rs 20 billion grant two years ago and now Saeed claims he needs another Rs 20 billion. Shaukat Aziz had already turned down other requests by Saeed to provide funds to buy replacement aircraft for the Fokker Fleet.
Another major admission of failure and an attempt to cover it up, has been revealed on Page 3 of the Minutes wherein it is stated that two PIA Directors had now told the Chairman that US-based company SABRE was unable to handle the new Revenue Accounting System QUASAR. This admission shows that Ahmed Saeed had forced the decision without making proper enquiries and homework and had even spent more than 10 million dollars for preparing a whole building to be allotted to SABRE for the Accounting System.
After all the expenses and all the wastage of time, now PIA is trying to wriggle out of the SABRE deal and the top Directors are being used by Saeed to provide the justification to do so. But who is going to account for the millions of dollars lost by such a huge wrong decision is not clear.
Page 4 of the Minutes also reveals a massive deception carried out by Chairman Saeed in the PIA budget. The last para says an �extra� Fuel Cost of Rs 500 million �over the budget� will be needed in the first quarter of 2005. The budget was finalized towards the end of 2004 and there was no mention of this extra cost, just to keep expenses low and show profits. Once that was done, within a few weeks an extra Rs 500 million is being added to the budget. This is manipulation of figures at its worst, or best.
While the Minutes reveal so many of the wronged decisions, Chairman Saeed himself has been speaking about his tenure, his successes and failures and has been indirectly lobbying for an extension of his contract.
In his interview with �Blue Chip� he makes so many contradictory and confusing statements, it baffles the readers. Either Saeed thinks every body else is a moron or he considers himself a super intelligent person who can get away with anything he says or does.
To quote an example in his interview he talks about making the largest ever corporate purchase in Pakistan�s history --- that of B-777 aircraft from US for US$1.5 billion although he admits that at that time the finances of PIA were fragile. Click for the Magazine quote
Saeed claims that after September 11 terrorist attacks, �free planes were readily available, but we as a Management decided that we already have old planes and there is no point in buying more old planes, even if they are for free. We took a decision to go in for brand new planes and that is how these 777s came in. For the last decade there was no induction of any new planes in PIA. In the year 2004, we have inducted nine wide-bodies planes � three new 777s and six Airbus 310s.� Click to View Quote
This statement raises huge questions about maturity of decisions. If finances of PIA were fragile and �free planes� were available, who decided to spend the money PIA did not have on buying brand new aircraft and why? Saeed elsewhere claims in his interview that PIA�s Engineering Department was now approved by EAFA and aircraft repaired and maintained by PIA were acceptable all over the world. So if this is the case, why could PIA not get some free aircraft and repair them to run them on domestic and international routes?
But the last part of Saeed�s statement, saying that PIA had inducted nine wide-bodies planes, three new 777s and six Airbus 310s, contradicts his earlier claim in the same paragraph, that new planes were needed and old ones were not acceptable, even if available for free. What he has done, as against what he is saying, is that in 2004 he bought six "old" Airbus 310s and only 3 "new" 777s. Is this what he means by inducting new aircraft? And if he was not ready to take old planes for free, why pay for six old 310s is beyond understanding. This is just a matter of misleading the authorities and Generals by deceptive statements.
Not only that the 310s were old, there have been serious maintenance problems and warnings have been issued by the Civil Aviation Authority to PIA but Chairman Saeed has been using his influence to get provisional Airworthiness Certificates to keep them flying.
In fact serious problems were also encountered in the new 777s as six of these planes� landing gear have so far caught fire when landing. Out of these six accidents, four took place at Manchester Airport alone while one at Lahore and another at Toronto. The latest accident took place on March 1, 2005 at Manchester on Flight PK-789.
In a detailed report, the CAA said it had been established that brake assemblies were not taken out as per the specifications of the manufacturers. Moreover, the chief engineers were not cautious to use grease and solvent for the service as per the specifications. The most pinching matter was that despite the occurrence of six identical fire incidents, the PIA was not ready to accept its failure.
The CAA report also said: "Although six fire incidents have taken place on these aircraft but it was observed that involvement of quality control staff was highly inadequate. Had the quality control staff critically gone through the whole procedure at the early stage at least half of these fire incidents could have been avoided."
The CAA also asked the PIA management to take action against Chief Engineer Quality Services for his failure to carry out timely investigation of such serious incidents. But all those responsible are enjoying life without any fear of punitive action, thanks to protection given by Saeed.
The funniest part of the desperate claims made by Chairman Ahmed Saeed has been about the Engineering Department and its potential. In his �Blue Chip� interview, Saeed makes that unbelievable, almost utopian, claim that his Engineering Department could earn �from $15 billion to $20 billion in one year.� Click to view quote
This looks like a major typo but the mistake has been repeated again and again, as if Saeed was actually saying that billions could be earned by repairing aircraft of other airlines. If so why is he asking for Rs 20 billion as loans from the Pakistani market.
The most incriminating evidence of Saeed and his family benefiting from PIA comes from both the Minutes of the March 7 meeting and Saeed�s interview to �Blue Chip� Magazine. In Para-2 on Page-3 where SABRE is discussed, two companies are mentioned by Saeed�s Director of IT, a former car show room manager who was brought in PIA at an exorbitant salary of Rs 450,000 per month, as replacements. These companies are: Messrs Mercotor of Emirates and Lufthansa. Likewise in Para-3 on the same page it has been stated that a company �Aeroexchange� would submit a proposal to the Engineering Department. Click to view Minutes
Who is behind these companies and why these companies are being given such a preferential treatment, is not explained. But South Asia Tribune has learnt on good authority that two companies mentioned above are fully or partly owned by sons of Chairman Ahmed Saeed. Hence they are to be rewarded without any open bidding or competition.
Saeed himself admitted at the end of his Blue Chip interview that his two sons Arif and Omar, an Oxford and the other a Harvard graduate, were �venturing into IT projects�. Click to view quote
But the way he praised an ex-car show room manager, now his IT guru, was significant because the same IT guru was now going to award IT projects to his two sons.
Given all this mess and personal involvement of Chairman Saeed, it is hard to believe his claim that he was not interested in an extension of his contract as PIA Chairman.
Yet the new Chairman will have a daunting task at hand to deal with all the Saeed�s men sprawling all over the airline. He will have to clean up the management, bring back all the qualified and experienced professionals who have been shunted out on personal reasons and start picking up the pieces faced with a task of managing an airline burdened with huge debts and unable to generate revenues to meet its costs.
Saeed had abolished the purchase and stores department altogether so that he could himself handle everything. He had authorized his hand picked directors to manipulate figures and present the stats to mislead the government. He had run the company as he runs his shoe company.
The new Chairman will have to run the airline like an airline not like an oil company, where he comes from, or like a shoe factory where the outgoing chairman will go.
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