Bangladesh Bank dismissed SM Shamsul Arefin from his position as managing director in June this year for financial irregularities and activities harmful to depositors
The High Court on Sunday asked relevant authorities to explain why Uttara Finance and Investments Limited – a listed non-banking financial institution (NBFI), which has come to prominence for financial fraud and embezzlement – will not be liquidated.
Following a petition for liquidation filed by SM Shamsul Arefin, the institution’s former managing director, the single bench of Judge Muhammad Khurshid Alam Sarkar asked the company’s board of directors to provide its answers within four weeks.
At the same time, the court asked the Bangladesh Bank to explain why it should not be asked to appoint an NBFI administrator and an auditor to carry out a comprehensive audit in all sister companies of the Uttara group to detect any irregularities in the disbursement of loans by the financial institution.
In 2019 and 2020, there were irregularities in loan disbursements from Uttara Finance and Investments. Later, a central bank commission of inquiry uncovered irregularities of Tk 5,100 crore.
Bangladesh Bank dismissed SM Shamsul Arefin from his position as managing director in June this year for financial irregularities and activities harmful to depositors.
Earlier, following a petition for liquidation of the People’s Leasing and Finance Company due to a scam of around Tk 2,500 crore, the High Court ordered the central bank to appoint a liquidator to the institution .
Later, the court ordered the reconstruction of the board of directors to revive the non-banking financial institution.
However, Shamsul Arefin appealed to the High Court for the liquidation of Uttara Finance and Investments and appointed an independent auditor for the company, calling the investigation into the irregularities one-sided.
On Sunday, lawyer ASM Shahriar Kabir filed the petition on behalf of SM Shamsul Arefin. Then, lead attorney Rokanuddin Mahumd made submissions on this.
In the petition, 23 people including Secretary of Financial Institutions Division, Governor of Bangladesh Bank, Bangladesh Stock Exchange Commission, Registrar of Shares and Companies, Dhaka Stock Exchange, Chittagong Stock Exchange and the chairman and managing director of Uttara Finance were implicated.
SM Shamsul Arefin told the Business Standard, “The court has been persuaded by the institution’s liquidation petition and has requested explanations from the relevant authorities.”
He said there should be an impartial investigation into the irregularities of the institution. “Because I’m confused about an impartial investigation with the company’s board members. I don’t trust them.”
“Let there be a full audit in the institution, let the truth come out, let it come out through an impartial investigation to identify who is responsible for the troubles, irregularities or anomalies of the institution,” he added. .
The Bangladesh Financial Intelligence Unit (BFIU) found evidence of fraud as Uttara Finance allegedly disbursed loans from 2016 to 2021 without proper valuation.
In the BFIU investigation, there was evidence suggesting direct involvement of President Rashidul Hasan and former Managing Director SM Shamsul Arefin in the embezzlement of Tk 3,800 crore. He also mentioned that several company directors and officials were also involved in the scam.
On September 26, nine company officials were banned from traveling abroad after the BFIU submitted a 34-page report to the Anti-Corruption Commission (ACC) recommending legal action against the culprits.
Citing the BFIU report, ACC claims to have traced Tk 3,000 crore of the amount defrauded in the name of the loans.
The ACC said that 1,800 crore Tk against 20 companies in the first phase, 483 crore Tk against 34 companies in the second phase, 45 crore Tk against 16 companies in the third phase and 445 crore Tk against 12 companies in the fourth phase have been diverted.
The BFIU report states that Tk 1,800 crore from Uttara Finance was misappropriated in the name of loans to 20 companies that fall under the Uttara Group or serve the interests of senior executives of Uttara Finance. Loans did not follow board approval, collateral and required documents.
According to the BFIU, the fraudulent loan they took out from Uttara Finance was double the amount of deposits they accumulated with the institution.
Another Tk483 crore from Uttara Finance was embezzled in the name of loans to 34 other companies without proper approval. Also in this case, the necessary guarantees and documents were not presented against the loan.
Some Tk 45 crore loans against 16 companies were transferred to other bank accounts and the money was subsequently embezzled.
Another 445 crore was taken from Uttara Finance against 12 companies and the money was diverted by transferring it to other accounts.
Uttara Finance was listed in the capital market in 1997 after starting operations in 1995. The company had paid good dividends to its shareholders since the IPO due to its good financial condition. But financial irregularities pushed the company into trouble thereafter.
According to the latest financial statements of 2019, the profit of the company was Tk 118 crore as it paid 15% cash and 5% bonus dividend to shareholders in that year. The company did not release any financial statements thereafter.
The loan disbursement from Uttara Finance till June 2022 was Tk 2,317 crore. Of which classified loans amount to Tk 1,248 crore – or 53.86% of total loans.