The Karachi Stock Exchange (KSE) is nowadays abuzz with rumours that the top management of the country’s largest bourse in 2008 had embezzled at least Rs 51.5 million in the procurement of IT software imported by then KSE management to upgrade the exchange’s trading system.
KSE’s former managing director Adnan Afridi, with the connivance of likeminded officials of the exchange, had allegedly embezzled the said millions through over-invoicing in a procurement scam that, some ex-directors and members of the bourse wonder, took five long years to surface.
Afridi is accused of having manipulated the procurement bill, reportedly, of an imported IT software consignment back in 2008 by first quoting the price of the software at $0.75 million and then over invoicing the same at $1.2 million.
The issue, according to sources, also came under discussion in a recent meeting of the KSE Board of Directors. Also, there are reports indicating that some senior members of the present KSE management want to hush the scam up.
Terming the embezzlement reports as “unsubstantiated”, KSE Managing Director Nadeem Naqvi said that an internal audit of the exchange was probing the matter.
“I don’t think any such thing has taken place. We have a proper whistle-blowing policy in the company (to check all such irregularities),” the MD told Pakistan Today.
For procurement, he said, the KSE had a “very proper process” under which the committees concerned propose the procurement of a particular consignment which is authorised by the KSE board. Then competitive bidding is called to shortlist the best bidder. The Board’s nod again is sought for awarding a contract to the qualified bidder, explained Naqvi.
“They say the software was earlier priced at $0.75 million and was then procured at $1.2 million,” the managing director said and claimed that: “We have not seen yet this $0.75 million figure quoted anywhere”.
“The auditors have not alerted us to any such anomaly,” he said.
Then there are “ancillary devices” that come to the procuring side under a complete package, said the KSE top official.
Given the rampant rumours, Naqvi, however, has ordered an inquiry into the matter. “An internal audit is investigating it,” he said. He, he said, had asked the investigators to find out what was the then procurement process, minutes of the then board meetings, extracts from the technical and financial committees views and so on.
“I have asked for a complete report detailing each and every aspect of the procurement then made,” he said.
The KSE MD said the audit would furnish its report after Eid.
Naqvi contradicted the reports that any IT software was procured in 2008. Instead, he said, the procurement was that of some storage hardware.
Asked what action the KSE would be taking if the investigators found some substance in the accusations, the managing director said: “I can’t preempt it with personal assessment as the matter is under probe.” The Board, he said, would decide the fate of the issue. The 11-member KSE board comprises six independent directors nominated by the SECP, four elected TREC-holding directors and the managing director.
While Naqvi tends to move safely with the matter some of the former directors and members of the KSE think otherwise. “We used to be surprised on the past procurements which always seemed to be costlier than the price quoted,” said a former member of KSE board. He said the scam had damaged the reputation of the Exchange and should therefore be interrogated thoroughly. The ex-director also questioned the role of the KSE’s auditors saying why the latter did not pinpoint the irregularity when committed in 2008. A senior board member said the matter was out of his domain and should be dealt with by the management. “That man (Afridi) was involved in several irregularities here,” he alleged.
However, a well-placed official at the KSE management said that the fresh allegations against Afridi and others seemed to be result of the “personal grudge” some hidden opponents of the former MD were harboring against him.
