December Issue 2015
Fraud by Fatwa
Jamia Binoria, SITE, Karachi has been in the news for various reasons recently, from the controversial opinions expressed by its principal, Mufti Muhammad Naeem, on everything under the sun, to charges levelled against the seminary of featuring at the centre of a multi-billion rupee modaraba scam. This allegation has found greatest coverage in a Karachi-based Urdu newspaper, which Mufti Naeem accuses of vested interests and blackmail tactics.
The scam came to light in mid 2013, when the National Accountability Bureau (NAB) started receiving complaints from people who said they had been deprived of their life-savings by religious clerics who claimed to be working for modaraba companies which promised them hefty returns on investments. As those who succumbed to these promises discovered later, these supposed modarabas had no official records; they were not even registered at the Securities and Exchange Commission of Pakistan (SECP).
Finally, NAB took action. It arrested the mastermind and chief perpetrator of the scam, Mufti Eshanul Haq — who reportedly had links with the infamous Lal Masjid in Islamabad — from Rawalpindi. Resultantly, Haq and his accomplices/associates agreed to a plea bargain, whereby they pledged to return 45 million rupees to the victims. However, thereafter it was learnt that this sum does not even amount to one per cent of the money amassed in the scam. Furthermore, the Karachi modaraba venture — essentially a Ponzi scheme — it emerged, was only the tip of the iceberg. Similar fake modaraba schemes were being operated simultaneously in urban centres like Karachi, Faisalabad, Islamabad, Rawalpindi and Peshawar, and also in the distant parts of Khyber Pakhtunkhwa, Gilgit Baltistan, and the bordering districts of Balochistan. Gradually, the number of complainants crossed 7,000, and it was discovered that the amount involved, which Haq and the other scam operators gathered via hundreds of commission agents appointed by them — most of them, ironically, religious clerics, prayer leaders, teachers at religious seminaries and Tableeghi Jamaat affiliates — was in the vicinity of a whopping Rs. 280 billion.
These ventures operated under different names but their modus operandi was similar. Most prominent among these were the Faizi Group of Industries, the Speedex Company, MM Qureshi, Elixir Group of Companies, Alwasay Group, Mezban Group, Asif Javed Trading, Al-Hashir group, Al-Muslim Trading Company, Zaid Shahan Siddiquee, Ineqad association, Al-Barakah Modaraba, Maseeha Enterprises and Shafeeq Cable Merchant.
The officials of the SECP clarify that the modaraba scheme is a legitimate business, but only after approval from the SECP, and its accounts have to be audited by a certified auditor. None of the listed companies were authorised to conduct such business. The Elixir Group of Companies was registered with the SECP, but only with a mandate to operate dairy, housing, and beverage trading businesses, not any sort of modaraba enterprise.
The Elixir group led by Mufti Osama Zia and his other partners included a member of the Lalika family, Maulana Umar Lalika. There are claims this group secured over 20 billion rupees from their modaraba operation.
In the last three years since the scam was unearthed, details of NAB action, the names of those who have escaped to the Gulf States, Thailand and Malaysia, vows from officials to bring the culprits back, stories of the victims, and reports of court proceedings against those who have been apprehended in these years, have been reported in assorted newspapers. But little has been written on the Karachi segment of this affair.
In Karachi, Shafeeq Ur Rehman, a petty businessman affiliated with the Tableeghi Jamaat, Zaid Shahan Siddiquee alias Memon, Mufti Abdullah Shaukat and Maulana Sajid Mehmood have been cited as the central characters of the modaraba scam. The latter two were members of the Jamia Binoria academic staff. Shaukat has since fled to Australia, and Sajid Mehmood has escaped to the United Arab Emirates.
A former student of the Jamia Binoria, who leads the prayers in a mosque located in the industrial zone and teaches at a local seminary, narrates the story of how the modaraba affair took root in Karachi.
“I came to know about the business in 2009 from a friend, also a cleric. The scheme was run by Shafeeq Ur Rehman aka ‘Shafeeq Cable Merchant.’ Initially I invested 200,000 rupees for a period of three months. He returned the invested amount with a profit of 36 thousand rupees — ie six thousand rupees per month on an investment of 100,000 thousand rupees. It was almost double the salary I was making for teaching four hours a day in the seminary. So I invested the entire amount again for another three-month period, and continued doing the same for more than two years with no problems. Because it all seemed so profitable, I also asked many of my friends and relatives to invest in the business, and in the process managed to get a raise in the profit I accrued from my investments, as well as a commission of two per cent a month on the amount invested with Rehman through my references. Over time the investment increased, reaching the 200 million rupee mark. My share was by then almost half the whole amount, but I did not withdraw any money from the business, except to cover my expenses. Eventually, I lost it all.”
Through word of mouth, the scheme’s fame reached the Jamia Binoria in 2011, and clerics associated with it started brokering for Shafeeq Ur Rehman. They used their contacts in the business community and in the city, through a network of prayer leaders in mosques and other seminaries — most of whom were the disciples of these senior clerics — to get customers to invest in Shafeeq’s modaraba business with the incentive of generous shares in the profits.
The Punjab-based Elixir group was most successful in luring affiliates of the Tableeghi Jamaat as Maulana Yusuf Jameel, the son of famous Tableeghi Jamat orator Maulana Tariq Jameel, would sing the praises of Elixir group director, Mufti Osama Zia. He would say of Zia, “Allah ka dya maal kharch karna koi Osama Zia se seekhey” (People should learn from Osama Zia, how to spend the wealth given by Allah).
Business boomed, as people engaged in small, informal businesses like purchases and sales of scrap items, and former employees of assorted government departments and corporations, pulled out their savings — sometimes money they had received through golden handshakes, or the provident fund they earned after retirement — and invested it in this scheme. They felt they could believe in it, since it was operated by clerics who they thought were credible and could be trusted.
Ziarat Khan, a former K-Electric employee shares his story: “When I left K-Electric, after the company offered the voluntary separation scheme (VSS), I got almost a million rupees as a golden handshake. I was confused about what to do with it. The options were either to start a business but I have no experience of that; to purchase property and rent it, but I recognised that is a risky affair due to the falling prices of properties and tenants who don’t vacate; or to keep the money in the bank and receive monthly interest on it. My family members opposed this last idea due to religious issues.
“Eventually I asked the Imam Sahib of my area what he suggested I should do. I was considering putting the money in an Islamic bank; he suggested another investment option: Shafeeq Ur Rehman’s modaraba scheme. I had already heard about the business run by Jamia Binoria clerics, but was a bit skeptical of it due to the unbelievably high profit ratio — almost a 100 per cent per year. But Imam Sahib waved a fatwa (religious decree) in front of my eyes which carried the signatures of three clerics of Jamia Binoria’s Darul Iftaa (fatwacentre) endorsing the scheme, and assured me that they had investigated the business thoroughly and were satisfied with it. The next day I handed my money to Imam Sahib in cash, the way he had insisted.”
The fatwa Ziarat Khan read had been issued by the Jamia Binoria in September 2012, and was signed by Mufti Abdullah Shaukat, Mufti Saifullah Jameel and Mufti Nadir Jan. In it they answered questions about the veracity of Shafeeq Ur Rehman’s business and attached a whole set of questions and answers from him on various aspects of his transactions. Little known to anyone, the three signatories of the fatwa had invested millions of rupees of their own and other people’s money in the business, and then proceeded to issue a fatwa in its support.
Mufti Saifullah Rabbani, a member of the Jamia Binoria’s administrative staff rubbished the claims made by people that they had invested in the business only after they saw the fatwa.
“How can anyone claim that one fatwa could motivate him to get involved in this business when they could have just as easily listened to many others who were skeptical of it,” he said. “In fact, it was the high profit ratio that people could not resist, ignoring all calls for caution.”
Maulana Zainuddin, a cleric associated with a seminary in Baldia Town recalls the time he visited Jamia Binoria with a friend who wanted to invest in the business. “I talked to a member of the Jamia Binoria academic staff, who was brokering on behalf of Shafeeq Ur Rehman, about the details of this business. His answers to my queries were unsatisfactory. So I told my friend not to invest in it. He didn’t, and is now grateful to me,” said Maulana Zain with a laugh.
Another cleric disclosed that most other teachers of the Deobandi School’s several hundred seminaries had not been that fortunate. “Except for a very few, and that too probably only due to their inability to arrange the funds, most of the seminaries’ teachers had invested their money in this venture,” he said.
During the peak of the scam in early 2012, the profit ratio had reached the exceptionally high amount of 18,000 rupees per month on an investment of 100,000 rupees, and many other individuals had emerged in competition with Shafeeq Ur Rehman. One of these, Zaid Shahan Siddiqui, who offered the highest returns, did not even have an office of his own. He received most of the money people brought for investment in eateries by the seaside, or in his car parked at different locations in the city. And people flocked to him.
“He had no fatwa to bolster his position, but he still got billions in a few months — almost double of what Shafeeq Ur Rehman managed to pull in over several years,” said Mufti Saifullah Rabbani.
Meanwhile, after the story broke, the Jamia Binoria issued notices and denials through advertisements in newspapers and through word of mouth, denying all involvement in the modaraba scheme and dissociating itself from Shafeeq Ur Rehman. None of the victims, however, has bought into this, even as Jamia Binoria chancellor Mufti Naeem continues to challenge those accusing his institution of involvement in the scheme, and ask them to bring proof of such allegations. He has even offered to reimburse their losses if they can prove his involvement.
“If the owners and directors of other companies can be nabbed, why has a single associate of Shafeeq ur Rehman not been apprehended?” asked Qari Fayaz Tanoli, one of the scam’s victims. He continued, “Shafeeq Ur Rehman managed to get bail from the courts after submission of securities worth eight hundred million rupees. But he has not returned a single penny to the victims. When he defaulted on payment in August 2013, I was left with nothing except a few thousand rupees, and those who had invested through my reference now keep demanding their money from me.”
Shafeeq Ur Rehman had stopped paying profits in July 2013, continuing to defer the date for further payments when investors started demanding returns. The delay had already caused concern, but when he suddenly disappeared from the scene in August, and no one knew of his whereabouts, real panic set in.
“He was picked up by a security agency on suspicion of financial transactions with people detained for having links to the Tehreek-e-Taliban Pakistan (TTP) leadership. There was a cleric from Lahore who was arrested for transferring funds to some TTP commanders, and on further investigation it was revealed that the cleric has also transferred to and received funds from Shafeeq Ur Rehman,” said a close associate of his. “When his alleged links with the TTP were disclosed, those who had business dealings with Shafeeq Ur Rehman were alarmed and fear of action against them compelled them to stop further dealings with him. As the incoming funds dried up, Rehman’s outgoing profits were seriously curtailed, and he defaulted. Meanwhile, others who worked with him managed to flee to the UAE and Australia with millions of other peoples’ monies.
There are a few who had direct interaction with Shafeeq Ur Rehman, who still believe that he will return their money. They visit his home and receive new dates for payment of dues each time. But most of the investors know their life savings are lost, with little or no hope of recovery. Some have
fallen into deep depression. And at least one individual has taken his own life. Mufti Khalid, Jamiat Ulema Islam (JUI-F) prayer leader and former Naib Nazim of Union Council number 7, Frontier Colony, District West, committed suicide on November 11 by taking poison.
This article was originally published in Newsline’s December 2015 issue.
Ali Arqam main domain is Karachi: Its politics, security and law and order