Coming To America – Junta Banking Edition

[Cross posted at E-Bangladesh]

The head of Bangladesh’s military government, General Moeen U Ahmed, is coming to America. He is accompanied by the Air force chief Air Marshal S M Ziaur Rahman and by the other man instrumental in the January coup, Lt. General Masududdin Chowdhury. Last week Bangladesh’s Navy chief was also visiting the United States. It seems like the entire ruling junta is coming to America.

General Moeen, for his part, will be visiting Harvard University on October 21st. I am told that the General wanted to speak at the Kennedy School of Government (KSG) but wanted to restrict questions. Harvard refused. So, instead, the General will be speaking to a class rather than in a KSG sponsored public event.

On his way to America General Moeen stopped over in London, where he also had a chat with Britain’s Chief of the General Staff. In London, he once again dismissed persistent rumors that he wants to become President of Bangladesh. He also spoke out strongly in defense of the military’s "anti-corruption" drive:

In reply to a question, the army chief said those arrested and jailed were "corrupt". Throwing a challenge, he posed a question: "Can anyone find any honest person among those arrested and jailed?"

Indeed this "anti-corruption" drive has resulted in the jailing of most of Bangladesh’s top political leaders. Some notable convictions of politicians were 13 years imprisonment for incorrectly stating one’s net worth in the so-called "wealth statements" and 5 years imprisonment for having 21 bottles of alcohol in one’s home. In addition, two former Prime ministers, and leaders of the two leading political parties, are being held without bail on corruption charges.

General Moeen’s army has gotten tough on the politicians "in the nation’s forward march." The age of honestocracy is upon Bangladesh.

So it comes as a surprise to learn that General Moeen and his brother Iqbal U Ahmed are Chairman of the board of directors and Managing Director, respectively, of the same bank in Bangladesh – The Trust Bank. Ltd. The Trust Bank recently IPOed and its stock skyrocketed on its first day of trading on the Dhaka Stock Exchange, setting a new record for volume traded in a single day. Before the IPO, the owner of Trust Bank was the Army Welfare Trust. As such, the army chief, General Moeen, was appointed the Chairman of the board of directors. However, having two members of the same family on the same board of directors apparently violates the Bangladesh Bank regulations governing the constitution of the board of directors of a bank:

1. Constitution of the Board of Directors:-

a) The board of directors of the bank-companies shall be constituted of maximum 13 (thirteen) directors. However, the directors of the banks, where the number of directors is more than this number, shall be allowed to complete their present tenure of office.

b) This restriction shall apply to appointment/reappointment of the directors against retirement or filling casual vacancy subject to section 15 Ka Ka of the Bank Companies Act, 1991. –Not more than one member of a family will become director of a bank. For this purpose family members shall include spouse, parents, children, brothers and sisters of the director and other persons dependent on him/her. [Emphasis added]

One of the responsibilities of the Chairman and the board of directors is to appoint the Managing Director of the bank. Having family members on the same board of directors can lead to conflict of interest and nepotism. In November 2006 General Moeen was the Chairman of the board of directors when his brother was reappointed Managing Director of Trust Bank.

Not only are General Moeen and his brother, Iqbal, on Trust Bank’s board of directors, they are also borrowers of large sums of money from the bank. According to a prospectus filed by Trust Bank before its IPO, General Moeen had a loan with an outstanding balance of Tk. 9,969,215 at the end of 2005. By the end of 2006, the outstanding amount had been reduced to Tk. 3,315,323. His brother, the Managing Director, had an outstanding loan balance of Tk. 1,775,242 at the end of June 2006. At the end of 2005 General Moeen’s loan amount was by far the largest loan given to any director or senior executive of Trust Bank.

Bangladesh Bank regulations restrict lending to directors of banks. The regulations state:

1. Any loan facility or guarantee or security provided to a Director of a bank or to his relatives must be sanctioned by the Board of Directors of the bank and approved in the general meeting and has to be specifically mentioned in the Balance sheet of the bank. However the total amount of the loan facilities extendable to a Director or to his relatives should not exceed 50% of the paid-up value of the shares of that bank held in Director’s own name. [Emphasis added by me.]

The ownership of Trust Bank, before the IPO, consisted of 7,000,000 shares, with 6,999,920 shares held by Army Welfare Trust. Of the remaining shares, General Moeen owned 10 shares. His brother, Iqbal, owned no shares. Each share was valued at Tk. 100. Therefore General Moeen owned Tk. 1000 worth of shares. According to Bangladesh Bank regulations he was entitled, with the approval of the board of directors, to get a loan for an amount up to Tk. 500. In other words, at the end of 2005 General Moeen had a loan Tk. 9,968,715 in excess of the amount allowed by the law.

The reason the Bangladesh Bank regulations are in place is to guard against abuse of power by directors of private banks – that is to say, to prevent corruption.

It appears, from looking at the available public information on Trust Bank and its loans to its directors, that the loan to General Moeen exceeds that which is allowable by the law. In an environment where the Bangladesh military has been jailing politicians for failing to accurately recount from memory their net worth, it is extremely important that the man in charge of the military clear up any confusion arising from his tenure as the Chairman of Trust Bank.


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11 Responses to Coming To America – Junta Banking Edition

  1. Rumi says:

    So much of The fight against corruption and so much of our, (the educated elites), mind boggling support of him!

    Second Lieutenant Moeen joins the armed forces in 1975. Same year Mr Xy joins the civil service of Bangladesh, suppose, Bangladesh postal department.

    By 2007, after all 30 years of hard work, smart effective service to the republic, Sec Lt Moeen is a 4 star general and lives in a palatial many acres compounded home with staffs, orderlies and fresh milk yielding cows. He also is very rich by this time, thanks to the tens of million Taka land in DOHS and another multi million taka multi story flat on that same land plot. He also is the chairman of a Bank while his brother is the MD of the same bank.

    On the other hand, Mr Xy, has also reached the pinnacle of his career, after all 30 years of hard work, smart effective service to the republic. He is now the post master general of Bangladesh. In sharp contrast to the other general, he lives in a multi story government flat cross the street from ever noisy and crowded new market’s south gate. He is retiring soon and due to the meagre compensation he got fromn the government all his life, he even does not know where he will be staying once he has to hand over this 3 room government flat after his retirement.

    Its so easy to lecture about corruption and we are so fool in hushing each other in listening to the Godly words of the General!

  2. tacit says:

    Nice article, Mash. Of course, it’ll be for a while until we get some straight answers from U. Ahmed instead of the inane, infuriating platitudes he delights in mouthing nowdays.

  3. Mash says:

    Rumi, the good General is behaving very much like the politicians that he so famously despises.

    What I want to know is why are all the generals suddenly rushing to the United States? Even Iajuddin is heading to the US at the end of this month. I wonder if they are buying real estate here so they can retire :d

    Tacit, thanks for the info on your blog about the generals’ trip. I am curious about Moeen’s visit to KSG. Amader Shomoy also reported that Moeen might meet with US military officials in Washington on the 18th (today). I wonder if that meeting is still on.

  4. tacit says:

    I\’d be quite happy if they were actually buying real estate up in the US, it\’d tell me that they\’re aware themselves of the magnitude of their criminal folly. The pessimist in me tells me things are going to get worse before they start getting better and we see a return to democracy. And also, from what I hear, Malaysia is the favored destination for second homes nowadays amongst our generals.

  5. Sid says:

    Great exposé of the General’s corruption and rank hypocrisy thereof. In Bangladesh, Scratch the ‘leader’, of a certain class, and the see the criminal within.

    But, as we know all too well, political corruption in Bangladesh is pervasive, endemic and deep-seated.

    However, from reading your blog, it seems you’ve chosen to elide the full extent of the corruption, the property and wealth (and their misbegotten source) of the previous democractic leaders and their apparatchiks over the last 25 years.

    Anyone unfamiliar with the extent of the rot of corruption in Bangldesh would come away with the unrepresentative, and false, opinion that the corruption in Bangladesh starts and ends with the military junta of the last 10 months.

    Surely you wouldn’t want that?

  6. Cujo359 says:

    I looked at the prospectus of that bank, and noticed that eight of the nine directors of it were generals. Is this normal? Are generals in Bangladesh engaged in business the way Pakistani generals are? Or is this a relatively new thing?

    It certainly appears from the other comments that it’s not a new thing.

  7. Mash says:

    Sid, I think I’ve made it clear in other posts that corruption in Bangladesh did not start with this regime. However, the point is that this regime claims to be rooting out corruption and their methods resemble a political purge. In that context, this story is very relevant. Besides, if you want to hear about the great “anti-corruption” drive, the entire Bangladeshi press as well as the Bush administration is happy to parrot the same talking points.

    Finally, the notion that the way to root out corruption in democratically elected governments is to replace them with unaccountable military regimes who institutionalize corruption is just too silly and I’m surprised Bangladeshi “civil society” holds on to that belief.

    Cujo, the Bangladesh military is slowly getting into business like the Pakistan army. This started happening a while ago while the last military regime was in power. This is a very dangerous trend and it promises to accelarate under a military regime. The Trust Bank is owned by the Army Welfare Trust – atleast until it IPOed last month (now I believe the majority shareholder is the army). It is bizarre that the army makes money off of a commercial bank. A military which has an interest in business cannot wholly be under civilian control because it has interests apart from that of the civilian leadership of a country.

  8. Cujo359 says:

    Yes, Mash, it’s hard to imagine our country’s generals owning or running other businesses while they’re still serving. It’s definitely not permitted for them to have any interest in defense businesses, and I can’t think of a single example of them running anything other than their own commands while they’re active.

    You’re right that it’s a danger because the generals have more power that way. It’s also a problem of divided loyalties. If they have to make a decision that would either hurt their business interests or their units’, which would they choose?

  9. hiron says:

    Dear Mash,
    Thanks for the great work.Your hard work and intelligent finding will be more meaningful if some action is taken by appropriate authorities.
    The Supreme commander cannot sit idle when the army chief has been found involved in corrupt practices.
    An officer cannot tell a lie.By telling lie General Moin has broken his military oath and code of conduct.
    Moin must be given the discharge letter as soon as he lands.In the meantime arrest warrant should be issued and he should be arrested straight from the airport.
    I hope Mr president will show some guts now and save the nation from total disaster.

  10. syed says:

    “What’s wrong with putting that guy for
    5 years term for having 21 bottles of alcohol in home”
    That guy with 21 bottle also need some lashes in his but one a day for those 5 years.
    Were any of you in high court building during the happenings of first caretaker govt.?


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