CLIFFORD CHANCE 4136 200 ALDENSGATE STREES LONDON ECIA 445 TELEPHONE -4410)171 600 1000 FAX +44.0/17) 600 5555 TELEX 687847 LEGIS G OX 6G LONDON www hiipuwew clitorachance com FAX TRANSMISSION 0092 42 6303301 3 November 1997 St IXMIGIO7#/41A RL 0171 20 AIS 7RIT ‘Salman A Bott ‘Rae Lindsay/lan Mouldiog Cornelius, Lane & Mufti Clifford Chance, London Hassan Wasim Afzal 0092 51-920 1a2t ‘Ehtesab Celt, PM's Secretariat PRIVILEGED AND CONFIDENTIAL Dear Me Buit Govermnent of Pakistan Further w your telephone conversation with Jeremy Carver and ws last Friday, we thought it would be heipful if we set our briefly the actions/preparations we have been taking since we were instructed ‘by the Government of Pakistan at the beginning uf last uvomth First, as Jeremy said, we have been involved im preparing a formal request w the UK authoities for their assistance pursuant to dhe 1988 Vieana Convention against Mlieit Trafic in Narcotic Deugs and Hsychouopic Substances. The Home Ottice's response is still awaited. If they agree to take the matter up, at application must be made by dhe UK auabities uo dhe English Cowl for the vestraining and disclosure orders requested int relanon to UK hank accounts and properties. ‘The second line of stack we have been conshdering is through the Serious Praud Ortice, In brie, the SEO can exercise is powers uf search, seizure and interrogation on behalf of werseas fiminal A. authorities (here, the Pakistan criminal authorities) ifs, and the Home Office, are satisfied that the TP coater being investigated by the overseas authorities cancerns serious or complex traud involving 2] perms tad ne UK. Al cs as a pepe wih seks che dune IF YOU DO NOT RECEIVE LEGIBLE COPIES OF ALL THE PAGES PLEASE NOTIFY US IMMEDIATELY BY TELEPHONE (EXTENSION 5700) TELEX OW Fax BE at ase ie na an ae oe eetCLIFFORD CHANCE Page 2 in relation wo various baak accounts inthe UK and other matters, The final decision whether to make this request wil! be made once the outcome of the request wader the Vienna Convention is known. “The thind clement in preparation is English civil proceedings. The current intention is that these would only be resorted to if the UK criminal authowities cefuse to assist, We would ask the Pngtish Court to grant mareva injunctions, and disclosure orders, on a worldwide basis against Ms Bhutto, (Me Zardari and others. As Jecciuy explainad tast week, this could only be done if civil proceedings gains these same personslenities were launched in Pakistan, ‘The English mareys injunctions, and ‘snwillary disclosure orders, weld be sought on the basis that they would assist these substantive civil proceedings in Pakistan “Fo support ths proposed application, we ate putting wogether an Adfidavit explaining the background 'A copy of the lafest draft of this Alfidavit is atached. You will see that the claim focuses on the receipt of secret commissions ty Zardari and Bhutto in respect of the award of cesiain Stte coutracts. St appears that these commissions were paid int accoums held by British Virgin island companies which were beneficially owned by Zardari andlor the Bhuttos aad set up and administer! fi them by 4 Swiss lawyer. As we have said, it will be necessary w coordinate any English application with the issue of substantive civil praceedings in Pakistan focusing on the same rransactions. We do nit knaw whether iti mended wo instuct your firm i dsafs these prvseedings, ‘but Wasim Afzal hus asked us w brie! you o@ the current position. For our part, we have als proshiced a draft Plant which sets out che matlers we would expect wo be included sa dhe Plastis’ pleadings if the matier were proceeding substantially ia England. A copy of this draft Plait is itched. However, we understand that the requirements in Pakistan ate diferent ans that the Plaint ‘will ultimately draw mare heavily uc evidence (such as that set out in the draft Affidevit) Perhaps you could fet us know whether, following your discussions wah Mr Afzal, you will be pivalucing a draft of the Plaint for the commencement of civil proceedings in Pakistan (in respect of the claims described in the attachiems 4 dis fax). Yours sincerely — [An oe Rae Lindsay/lan MouldingPrmieged & Comfentiad IN THE HIGH COURT OF JUSTICE CHANCERY DIVISION DRAFT: 24.10.97 IN THE MATTER OF INTENDED PROCEEDINGS BETWEEN: wo @ wo a 8 @ 6 8 ® a0) « a) 3) as as a ‘THE ISLAMIC REPUBLIC OF PAKISTAN AGRICULTURAL DEVELOPMENT BANK Pisionitts MOHTARMA BENAZIR BHUTTO ASIF ALT ZARDARI NUSRAT [BEGUM] BHUTTO ROMINA PROPERTIES LIMITED OLTON CONSOLIDATED LIMITED PARSONAGE FARM LIMITED: WINKFORD FARM LIMITED MARISTON SECURITIES INC RICHARD HOWARD BOMER FINANCE INC MARLETON BUSINESS SA CAPRICORN TRADING SA ASSAM OVERSEAS INC DARGAL ASSOCIATED SA. AMER LODIS JENS SCHLEGELMILCH Defendants |, CHAUDHARY MOHAMMAD FAROOQ, of Supreme Court Builling, Islamabad, Pakistan MAKE OATH AND SAY as follows11 sen the Atiarney General of the Government of Pakistan. 1 axa daly authorised on behalf of the Phaimiffs, the Islamic Republic of Pakistan [and the Agriculoural Development Hank), make this Affidavit om {is} {their} bebalf. 2. The facts und matters set out in this ASidavit are true w the best of my Kaowledge, iafurmation land belief. For the purpose of preparing this Affidavit I have been provided ty my officials with the inforanation and documents refered w below. which iafdemation | believe w be rue, and which documents 1 believe 1 be authentic. There is now produced and shown 19 me masked “CMF1* 4 bundle of copy docuinems to which I shall refer doring the course of this Aitidavit by ceférring w the page numbers of dis Exhibit INTENDED PROCEEDINGS 3. [have authorised these proceadings oo behalf of the Plaintiff wo assist io the tracing and recovery of the proceeds of serious frauds committed against the State of Pakistan by, amongst others, Benazir Bhutto, the former Prime Minister, and her husband, Asif Ali Zardari 4, make this Athdavit in support of an ex parte application for interlocutory injunctivns ast discovery orders for the purpose of freezing and tracing substantial assets in England and elsewhere. 5. ave also authorised the commencement of proceedings inthe High Court of Pastan apuiast Me Zardari, Ms Bhunw and others, claiming compensation and restitution in respect of the fraads which are referred to below. It & lated thst the proceodings will be sommeuced, substantially in the form of the deat [Pint at pages { |, a soon as practicable after the ‘commencement of these English proceedings. 6. Feonfiem dhat dhe claims made in those wniesed proceodings are justiciabte in the High Court cof Pakistan. 1 believe thatthe State of Pakistan has » guod case in those proceedings, and, save as discussed below, 1 do mot believe that there is any substantial defence 10 the claims. In particular, Ms Bhouo ant Mr Zardari wold not have a defence on the grounds of any immusity eojvyad as holders of an office in the Government or 4s messbers of te National Assembly, uname 72Priegad & Confientid SUMMARY OF CASE. 7. ‘The Sue of Pakistan has substantial claims against Mr Zardari and Ms Bhutto tor corruption ‘and misappropriation uf Stam assets for the periods Juring which Benazir Bhutws occupied the office of Prime Minister and Finance Ministec: first, between [date] October 1988 and {date} November 1990, and, second, between November 1993 and 4 November 1996, when Parliament was dissolved by the President. Mr Zardari, an elecied member of the National Assembly, was aot officially appoined as 4 Minister until he became Minister for the Environment and Economic Development on {date}. However, as the husband of the Prime Minister, he secured 4 position of considerable influence which enabled him to contral the awarding of State contracts, 5. Since their removal from olfice, evidence of substantial and widespread coccuption by Me Zardari ad Ms Bhuco has come w light. According w the Ehtesab Cell, a body established | tuader statute (the Ehtesab Act (997) by the preseut Government uy investigate allegations of ‘corruption (see paragraphs { | below), the amounts of alleged misuppropristions and bribes sxceed the equivalent of USS1.S billion 9. Ha this Afidavit 1 shall sot out evidence relating to the grazing of somne State contract, commission acrangements and paymenes made w offshore suites, t demousirate thatthe State has a powerful case against Mr Zardari and Ms Bhutto that they participated in and profited: from very substantial fraudulent practices under which secret bribes were paid u offshore catities acting on their behalf, in exchange fbr the award of State contracts on favourable werins. ‘The State will claicn restinution of those beibes and w wace and recover ihe assets acquired with them, 10. tn 1995, a substantial extate in Bagland, the Rockwood Estate in Surrey, was acquired by three sie of Man companies. The Stutz is not yet in 4 position to establish how the purchase of that ‘estate was funded, but, om the basie of the evidence referred wo below, it is clear that it was ‘sequired on behalf of Mr Zardari ani/or Ms Bhutio, The London solicites who acted for the Purchasers on that Wansaction were Lawrence Jones, of whom Mr Howard, the [tenth} Defendant, was then a partner (see paragraphs ___ below). 11. [The Ste iteads tn commence Zivil proceedings in the High Court of Pakistan and applies for imerion reliet Wy freeze assets of the Defendanus and discovery onders designed to establish the source of funds used for the purchase of the Rockwoxsd Estate, and any other assets, withia ur outside the jurisdiction, acquired with the proceads of frauds committed by the Defendants. Waar 312. Having reviewed the evidence of payments male w some of these oifshore companies, and assets held io the names of oder offshore cosnpanins, can conlism that neither Mr Zardari wor ‘Ms Bhuno could lawfully have acquired such assets by virwe of their former positions in the poveroment of from their legitimate private resources. My understanding is that both are likely (© deny that they have any interest in the offshore companies, payments and asscts which bave ‘een identified, and w claim thut these proceedings are politically motivated 13. The applications ia Koglaad are mage in proceedings w be issues: (1) by way of Originating Summons, socking interim relic in aid of the proceedings ts be commenced in the High Cour of Pakistan; and, 2) by Writ, claiming to trace and recover the assets, which the State seeks to trace in or through this jurisdiction, BACKGROUND Pakistan and the Bhutto Administrations 14. Pakistan is a parliamentary deaeracy with a written constitution There are two Houses of Parliament: the National Assembly, clecied by universal suffrage, and the Senate, elected by members of he Provincial Assemblies, There are four Provincial Asscinbiies, each of which ' headed by a Chief Euscutive, 15. The Prime Minister ‘is bead of the National Assembly, ‘Since February (997, the Prune ‘Minister bas been Mr Nuwar Sharif, ‘There are two main political panies, the Pakistan Peoples’ Party Cthe PPP") headed by Ms Bhutto, and the Muslin League headed by Mr Shari The Preside, who ix (describe constlatioual posidon), has, since 194, been Me Farvog Lega | Mr Logari was a member of the PPP, and was sppoioisd President on the nomination of the Government of Ms Bhan. 16. Ms but ix the daughter of Zultiqur Ali humo, who was Prime Minister from 1971 wy 1977. 12 1977, Me Suro was deposed by General Zia, and was subsoquenly executed after having, been Kound guilty of murdering 3 political opponeot. ‘The constiutioa was then suspended wat 1985, when elections were held Slowing which a Mr Jutoi, 2 former PPP leader, became Prime Minister. Ms Dhutio subsequently becaine head of the PPP and, in 1988, was elected Prime Minister a the bead of « minority government. Shorty prios us being elected, she munceaisaeno “4Privileged & Confibensid ‘married Me Zardari... In the 1988 elections Mr Zardari was also clasted a Member of the Natiogal Assembly ani Ms Bhutto's mother, Nusrat Bhutto, the Third Defendast, was appointed Sealoe Minister, the equivaleat t» Deputy Prime Minister. 17, ta November 1990, the PPP, lod by Ms Bhutin, last 2 general election and Mr Sharif, who had previously been Chief Executive of the Punjab province, came w power ss head of a Muslim ‘Leagoe goverummeat. Upon Me Sharit's accession to power, criminal charges were brought ‘against Mr Zardari, and others, alleging tage scale corruption. Mr Zardari denied the charges, claiming that they were politically mutivaisd. However, before the charges were heard, the thea Presieut exercised his power under Anicie S8&(2X) of the Constitution (now rewke) (page UW) w dissolve Purlamest with 2 view 1 bolding new elections, on the basis thac Mr Sharifs government war corrupt. Under ihe Constitution, Pakistan's highewt Court, the Supreme Court, has the right wo adjudicate oa constitutional matters. Mr Sharif male an application to that Court to challenge the President's decision. "This application was successful 18, Notwithstanding this success, fresh elections were held, and Ms Bhatt, was returned w power in November 1993 at the bead of another minority PPP administration. Ms Bhutto not only held the olfice of Prime Minisier, but also Finance Minister. Once again Mr Zardari held no official position, except im the last four mouths of her administration (jmenth] 10 November 1996) when be was appointed Minister for the Eavirooment and Economic Development. {Shorty after Ms Bhatt was renurned wo power, the charges against her husband were droppad.1 19. Although Me Zardaci had lite formal power, he wielded great de facto power, controlling the appointment of key posts ia the Civil Service, Police and Security Services and State-controliel industries. Although not a Minister be attended, by special invitation, meetings of the Economic Coordination Committee, an important comumitice of ministers chaired by the Prime Minister. He was able 10 exercise comrol over the Establishment Secretary, who is responsible ‘be all Civil Service appolmments, and is answerable to the Prime Minister. Senior civil servants who did not co-eperaie with Mr Zardari were threatened oF dismissed. He procured ‘he appointment of a friend, Me Rehman Malik, as deputy head of the Federal Investigation ‘Authority ("FIA"), the authority charged with investigating major crimes of corruption {sources ‘of information for this paragraph} { Ehtesab Ceit 20. The Government's case is that during Ms Bhuno’s second administration, Mr Zardari engaged {in corruption on a systematic basis and on a massive scale far greater than that la which he had wamumiame aa‘beea involved during Ms Bhutto's first administration. Although investigations in Pakistan sontique, as I have said, preliminary estimates made by Ehtesab Cell indicate that Mr Zardari and/or those acting om his behalf, have received bribes and secret comunissions in the region of USS1.S billion, and further that the result of their activities has been a loss w the Pakistani (© Bachequer somewhere in the region of USSIO w 12 billion. A schedule of estimated losses appears at page of | L 21. Wis contended that Ms Bhurto knowingly acquiesced in, and in some cases actively participated in, her husband's corrupt activities. 1k is further contended that vecy large sums of money, the Proceeds of corruption, have beea concealed in an elaborate web of offshore bank accounts and corporations. Those proceeds include the land and assets the subject matter of dese proceedings, 22. Corruption is a criminal offence in Pakistan under section 161 of the Pakistan Penal Code, as well as giving rise w a cause of action at common law. In addition, Parliament recently passed the Ehuesab Act 1997 (a copy of which appears at pages { } | }), an Act “w eradicate ‘corruption and corrupt practices from public offices”. This Act sets out what are déemed w bbe corrupt practices (sectioa 3) by persoas holding public office (which would Include the offices held by Ms Bhutto and Mr Zardari: section 2()). Corrupt practices include all offences under section 161 of the Code (s.3(a)) und also extend 10 possession of property which cannot reasonably be accounted for (6.3(¢)). ‘The Act confers upon the Chief Ehtesab Commissioner Various remedial and freezing powers over assets alleged to be the proceeds of corruption, as well as the power to direct that an accused shall be arrested and the case referrad to the Courts for tial (Section 16(2)), 23. As have sald, the Act also establishes, om a statutory basis, the Ehtesab Cell (also known by its English translation, “the Accountability Celi"), Initially the Cell was set up on an ad hoe basis under general executive powers, but the Act invests in the Cell statuuory investigative and remedial powers. Ehtesab comprises a small team of civil servants, accountants and Investigators who work from oitices in the Prime Minister's Secretariat in Islamabad. Dissolution of Purtiament 24. On 4 November 1996, President Legari exercised his power under Article 58(2)(b) of the Constitution w dissolve Parliament, giving seven grounds for doing so which included (but were ‘ot limited to) the fact that cocruption and nepotism had become so widespread that tie orderly function of government in azcordance with the Constitution had became impossible. A copy woatuare 6 6