Hollowing out of People's Leasing: An insider job

Individual depositors on Wednesday rushed to the office of People’s Leasing and Financial Services (PLFS) to withdraw money following a government move to liquidate the non-bank financial institution.

They, however, did not find anyone to meet, as no high official was present.

The company owed Tk1,242 crore to individual depositors as of December 2018.

On June 27, the finance ministry in a letter asked the Bangladesh Bank (BB) to take necessary steps to liquidate the institution.

It also directed the central bank to file a complaint with the Anti-Corruption Commission (ACC) against all officials involved in the money embezzlement of PLFS.

The instruction came after BB on May 21 proposed the ministry to lay off PLFS, which failed to pay back money to depositors.

This is the first financial institution that has been put in liquidation in the country’s history.

The total loss of PLFS stood at Tk 2,324 crore at the end of December 2018. Its capital shortfall stood at Tk 2,013 crore. PLFS owed Tk 798 crore to different banks and financial institutions.

The size of its total loan portfolio was Tk1,145.18 crore, of which 67.46 percent was classified as of December last year.

Who is responsible for the downfall of PLFS?

An investigation by the central bank in 2014 revealed massive corruption by directors, involving Tk670 crore.

They embezzled the money from the institution in different ways between 2004 and 2013, when M Moazzam Hossain was its chairman.

Later in 2015, the central bank removed five board members.

Of them, Humaira Alamin, Arafin Shamsul Alamin and Nargis Alamin are also directors of Shamsul Alamin group.

The two others are Motiur Rahman and Khabir Uddin Miah.

Moazzam was identified by the central bank as one of the main culprits for dragging the institution into collapse.

Moazzam, in collusion with other directors swindled Tk123 crore from PLFS in the name of purchasing a disputed land at the city’s Green Road.

The land was purchased from two dubious companies - Jenith and Jefair.

The money was used for adjusting default loan accounts of directors, according to the BB findings.

The central bank had asked PLFS to file a case with money loan court as well as a criminal case against Moazzam.

The company filed a case only with the money loan court against its former chairman.

PLFS neither got registry of the land nor got back the money.

Moazzam, who resigned from PLFS in November 2015, is now a director of a new generation bank - South Bangla Agriculture and Commerce (SBAC) Bank.

Motiur Rahman, who was among the five PLFS directors removed for their involvement in irregularities, has a defaulted loan of around Tk100 crore with the firm.

His wife is now a director of SBAC Bank.

Shamsul Alamin group took over Tk100 crore from PLFS when its three directors were in the board of the financial institution for 10 years until 2015.

Moreover, the group was involved in bringing out Tk123 crore in the name of purchasing land in collusion with Moazzam, according to central bank’s findings.

Alamgir Shamsul Alamin, who is also president of the Real Estate and Housing Association of Bangladesh (REHAB), is the managing director of the business group.  

Besides, he holds the post of managing director of Paramount Properties, where Moazzam is a director. PLFS had a loan of Tk65 crore to the group as of May last year.

Of the three directors of Shamsul Alamin group, who were in the PLFS board, are Almagir’s family members. Humaira is his wife, Arafin is his younger brother and Nargis is Arafin’s wife.

Contacted, Alamgir said they were repaying the money regularly and ready to pay the full amount.

The group was in the board of PLFS for 10 years, he said.

Asked who are responsible for the current situation of PLFS, he said ‘off course who ran the company’.

Former PLFS director Khabir defaulted with a loan of above Tk100 crore with the company.

He took the credit against 11 unknown names between 2009 and 2010, when he was on its board.

Khabir has a jewelry business named Al Hassan Jewelry and Diamond.

During a visit to his jewelry shop at Gulshan in the city, he refused to talk to this correspondent.

Some influential clients who did not repay their loans have intensified the deterioration of PLFS.

For instance, Md Syful Islam, who was holding directorship of Islami Bank Bangladesh Ltd (IBBL) - the largest private bank in the country - even a month ago, is among the PLFS defaulters.

He took Tk4.5 crore from the institution in 2009 and in the last eight years, he turned defaulter for three times, taking the total outstanding loans to over Tk10 crore.

Syful - also a managing partner of an audit firm named Syful Shamsul Alam & Co - was holding the directorship of IBBL as the representative of Blue International.

The company he was representing in IBBL board has 2 percent holdings with the bank worth around Tk100 crore.

He quit the IBBL directorship a month ago citing personal ground.

Syful took the loan from PLFS in 2009 for purchasing a 98-katha land in Savar on the outskirts of the city and for constructing a building on his own land at Bashundhara Residential Area in the city where he owns a 15-katha land worth some Tk8 crore.

Just two weeks before taking the IBBL directorship on May 30, 2016, he rescheduled his loan for a second time by compromising required down payment with special consideration of the central bank.

The first installment payment started in June 2016 but he did not pay regularly and eventually turned defaulter again in February 2017.

PLFS then served him a notice through the central bank to vacate his directorship with the Islami Bank as bank company act does not allow a defaulter to hold a directorial position.

Contacted Sami Huda, managing director of PLFS, said Syful did not pay his loan despite repeated commitments with the company.

“As he failed to pay back the money, we marked him as defaulter and wrote to the central bank to vacate his directorship from the Islami Bank,” he said.

Intraco Group

The Chittagong-based business conglomerate started business with PLFS in 2005 by taking working capital of Tk26 crore for five years.

However, it did not repay the loan in 13 years even after availing special facilities including interest waiver beyond the banking norms.

In 2016, the company was allowed for a third time to reschedule its loans with special benefits. PLFS waived all the interest amount of Tk13 crore to get back the money fast to meet up its liquidity crisis at that time.

The company was given five years to pay off only the principal amount of Tk 25 lakh. Even during the period, no interest would be charged against the principal amount, which completely beyond the banking practice.

Despite getting such unique offer, the company did not continue the payment and turned defaulter in March last year. As the company could not continue the installment payment, the special facility was cancelled by PLFS.

As a result, all the interest from the year 2016 was calculated and the outstanding loan amount stood at around Tk 50 crore as of March last year, according to PLFS. 

Hakim Ali, who is known for establishing first four-star hotel named Hotel Agrabad in Chittagong, is chairman of Intraco group.

His son, Mohammed Riyadh Ali, is managing director of the business group, while his wife Monowara Hakim Ali is a director.

Monowara is also president of Chittagong Women Chamber Of Commerce and Industry. Monowara and Riyadh both have personal guarantee against the loan accounts with PLFS.