Citibank
controls all financial matters: Planes Leased
Secret
Documents Reveal PIA Owns No B-777 Aircraft
By
MA Siddiqui & Shaheen Sehbai
KARACHI/WASHINGTON:
Top bosses of PIA, Pakistan’s national carrier, are in a
thick hot soup as more than 100 pages of top secret company documents,
containing explosive information about recent PIA aircraft deals
with Boeing and Citibank, have been leaked to the media by frustrated
officials.
A set of these 118 pages, received by the South Asia Tribune,
proves these politically appointed PIA executives have been making
an utter fool of the ruling military Generals and the Pakistani
people at large by making totally false and misleading claims
about PIA deals, specially the recent “purchases”
of Boeing 777 aircraft from US.
PIA has not purchased any aircraft, as repeatedly claimed by PIA
Chairman and other executives, these documents reveal. Pakistan
has actually paid US$ 150 million as 15 per cent of the down payment
so that a One-Dollar company in Cayman Islands could own these
aircrafts on behalf of the Citibank.
The B-777 aircraft, which PIA is now claiming to own, actually
belong to Taxila Limited, a Cayman Islands
firm, owned by the biggest law company in Cayman Islands with
the financing and liquidity coming from Citibank North America
(as Paying Agent), Citicorp North America being the Administrative
Agent and Citigroup Global Markets Inc. as Placement Agent of
the deal.
Taxila
Limited, set up on December 4, 2003, just 11 days before the signing
of the deal, has only one shareholder who has invested just one
US dollar to become its owner. The entire share capital of Taxila
Limited is $250 divided into 250 shares of one dollar each and
the only shareholder is Maples and Calder Inc, the law firm based
in Cayman Islands. Click to View Memorandum
of Association Page1 | Page2
PIA has signed all agreements to lease the B-777 aircraft with
this one-dollar firm.
Click to View Intercreditor Agreement
Page1 | Signature Page
“Basically Citibank controls all the corporate and financial
strings. The footprints of Finance Minister Shaukat Aziz, now
on leave from Citibank, are visible all over the deal,”
a former World Bank official who saw the PIA documents observed
in Washington.
In effect, so far PIA has leased the three B-777 aircraft through
a “Master Lease Agreement” with Taxila Limited for
12 years. The text of Master Lease Document has not yet been leaked
to the media but it holds the answers to many key questions which
now arise after all the wrong claims and misstatements made by
the PIA bosses about the 777 deals.
Why has PIA been claiming that it has purchased the B-777 aircraft
is an important question but the vital part of it is at what price
the aircraft have been leased from Taxila Limited.
No resolution adopted by the PIA Board has authorized PIA to purchase
the aircraft. The latest resolution circulated by PIAC Secretary
Ghazanfar Mashkoor on December 9, 2003, authorizes and empowers
PIAC “for the acquisition of 3 Boeing 777-200 ER Aircraft.
Its clause (b) (ii) authorizes and empowers PIAC to sign a Master
Lease Agreement with Taxila Limited. It nowhere mentions any purchase.
Click to View Resolution
PIA Chairman Choudhry Ahmed Saeed has been blowing his trumpet
worldwide that PIA had obtained a very favorable deal in buying
the aircraft but it now becomes clear that PIA has not purchased
anything. “If the deal was good, the buyer, which is Taxila
Limited, has got the benefit and it is yet to be seen at what
profit-added rate the same aircraft has been leased to PIA,”
a financial expert said.
The expert was asked to comment on whether there was any possibility
of kickbacks and wrongdoing in the B-777 deal in view of the availability
of the documents. According to his view the sale of the aircraft
to Taxila Limited by Boeing was transparent and above board as
US companies cannot offer any under the table kickbacks.
But
the deal between Taxila and PIA could include anything as that
was not covered by US laws and PIA could have agreed to pay any
amount as lease to Taxila, which in turn could recycle some of
it to anyone agreed upon, the expert added. This will only become
clear when PIA releases the Master Lease Agreement with Taxila
and when the document and rates are compared with the original
sale price by Boeing.
PIA Chairman has claimed many a time that he paid $105 per piece
for buying each B-777. But already the documents reveal that EXIM
Bank of USA had issued a guarantee of $351.3 million for the first
three B-777. The net contract price for the 3 B777-200ER is: $422,410,685.
So each of the three aircraft will cost $140,803,561. Exim's Guarantee
Amount is (85% of net-net prices) or $351,313,900. Click
to View EXIM Letter Page1 | Page2
The documents available with South Asia Tribune include
a 34-Page Intercreditors Agreement between PIA, Taxila
Limited, Citibank and other companies providing financial and
corporate support.
Other leaked documents include a 23-Page PIA Guarantee
between all these parties signed on December 15, 2003, 10 pages
of PIA Board of Directors resolutions giving the go-ahead
of the deal, , a 25-Page Guarantee issued by the Export-Import
(EXIM) Bank of USA on February 20, 2003, a 15-Page Participation
Agreement between Taxila Limited, Citibank et al as one party
and EXIM Bank as the other, the Incorporation Certificate
and Memorandum of Association of Taxila Limited filed in
Cayman Islands, a State Bank Letter, and a 3-Page letter
by Boeing written to PIA.
Surprisingly even members of the PIA Board of Directors were not
informed about the details of the deal and they had no clue about
Taxila Limited, the offshore company owned by Maples and Calder
which owns the B-777 aircraft, until February 26, 2004 when the
PIA Board met for its 276th meeting, even after the first plane
had been delivered. All the resolutions of the Board were approved
by the management through a system of “Circulation”
which is another way of avoiding any serious discussion about
the agenda.
The confidential notice of the 276th PIA Board of Directors meeting
on February 26, 2004, issued by PIAC Secretary, Ghazanfar Mashkoor,
on Feb 17, stated clearly that “some Board members, whilst
signing the aforementioned Resolution had desired for a briefing
on Taxila Limited as Lessor in the Participation Agreement, Master
Lease Agreement and Intercreditor Agreement..” Click
to View Letter
The most striking revelation has been made by the Boeing Company
itself, admitting that the B-777 delivered to PIA earlier this
year was not up to the required specifications and PIA had expressed
concerns about the quality.
In
a letter addressed to General Manager, Fleet Planning of PIA,
on February 13, 2004, Boeing’s Attorney-in-Fact, who signed
the letter, admitted that the first B-777 delivered to PIA earlier
this year “does not meet the configuration requirements
of the reference Detail Specification or with which PIA has expressed
concern regarding the quality of the Aircraft.”
“Resolution of such conditions will be accomplished by Boeing
as described in the Attachment,” the letter said but forbade
PIA from making the Attachment public as “Boeing considers
the commitments to PIA described in the Attachment to be privileged
and confidential information.”
But Boeing promised in the letter to meet its commitments and
provide parts, service and labor free of charge. Click
to View Boeing Letter Page1 | Page2
| Page3
South Asia Tribune will place the entire 118 pages on
its web site next week after obtaining the point of view of PIA
and other parties on the contents and meanings of these documents.
