The Sunday Times
April 12, 1998

Britain was always Benazir Bhutto's safe haven. Will it now destory her? As British police seek damning evidence, Stephen Grey and Rajeev Syal uncover a scret, multi-million-pound treasure trail
The hunt for Benazir's booty

Zardari: faces murder trial

Robert Ranson, a Surrey farmer, watched as a dashing figure in a polo shirt and jodhpurs reined in his galloping Arab stallion and waved from the gates of his new country manor.

"It was the only time I saw the man who bought this estate," said Ranson last week. "I had been told to prepare a polo field in the grass because someone called Zardari was arriving. He was surrounded by a large group of other Pakistani men." The new owner of the Rockwood estate near Godalming - in one of the most expensive stretches of countryside in Britain - was Asif Ali Zardari, a small-time property developer from a family of modest means who had married one of the world's most glamorous women, Benazir Bhutto.

At the time of his visit, in the summer of 1996, she was the prime minister of Pakistan. Nearly two years later, Zardari, Bhutto, Rockwood and a web of other properties and financial activities are the focus of an inquiry that, according to Pakistani investigators, involves the disappearance of $1.5 billion (£900m) from the public purse.

These investigators accuse Zardari, and by complicity Benazir, of taking secret kickbacks from airline, power station and pipeline projects, rice deals, customs inspections, defence contracts, land sell-offs, even government welfare. They allege that while the kickbacks were organised by Zardari, Benazir knew what was going on. As prime minister and finance minister, she had to approve many government contracts personally.

Benazir and her husband have often been accused of corruption. She was twice dismissed from office on such charges. But she consistently denied wrongdoing and nobody produced any evidence that stuck. Now, however, the Swiss government has frozen about £8.7m in 17 Bhutto family bank accounts and the inquiry has shifted to Britain.

Ordered by the Home Office to investigate allegations by the attorney-general of Pakistan that British property may have been acquired from drug deals involving Zardari, police officers from the South East Regional Crime Squad are collecting statements for the Pakistani government. Friends and associates of the Bhuttos will also be brought before Bow Street magistrates to swear statements of evidence.

Inquiries by The Sunday Times have revealed that four separate properties worth more than £4m are under investigation, along with 12 offshore companies and six London bank accounts.

Zardari is on remand in prison in Pakistan, accused of murder, while Benazir is at liberty, facing a formal investigation for corruption. On Friday she received the permission of a Pakistani court to fly to Britain to prepare their legal defence.

She has many enemies here but also loyal friends, as Britain was always her second home. The Pakistani government believes that this is also where she and Zardari hid a treasure trove of corruptly acquired money.

IT WAS all so different when Benazir first came to power in 1988 as the first woman prime minister of the Muslim world. Oxford-educated, newly married and only 35 years old, she had a glittering international reputation. The world remembered her brave efforts to save her father, Zulfikar Ali Bhutto, who had been deposed from the premiership, jailed and then hanged in 1979.

Benazir declared war on the "avaricious politicians" who were looting the national finances of developing countries. Soon, however, her new husband had acquired the nickname "Mr 10%" as rumours spread that he was receiving kickbacks on contracts.

He was a man of limited wealth and limited education, having had a brief spell of business studies in Paddington, west London. The marriage had been an arranged union organised by Benazir's mother, Nusrat Bhutto. But, say many observers, Benazir quickly came to depend on him emotionally.

Dismissed on unproven corruption charges in 1990, she was none the less elected prime minister again in 1993. Now Zardari was not "Mr 10%" but "Mr 30%". Benazir made him investment minister. Power, say some of her former associates, went to her head.

"She no longer made the distinction between the Bhuttos and Pakistan," said Hussain Haqqini, Bhutto's former press secretary. "In her mind she was Pakistan, so she could do as she pleased."

Her political downfall was sealed in 1995 in a hotel room overlooking Hyde Park in London. Dressed in shalwar kamiz and sunglasses, senior agents of the Pakistan Muslim League, the opposition party, sat around a table, drinking glasses of mineral water with a team of private investigators.

An explosive offer was being discussed. A mystery source wanted $10m for a few photocopied pieces of paper. The source was not prepared to show the documents in advance but he claimed they were items from the office of Jens Schlegelmilch, a Geneva lawyer and the Bhutto family's agent in Europe. They proved, he claimed, that Benazir and her family had secretly been amassing a fortune in Swiss bank accounts by taking corrupt commissions on government contracts.

At first the Pakistanis were suspicious. The source refused to show the documents in advance and there was no way of proving their authenticity. "There was a lot of negotiation but the man was not prepared to bargain properly. He could not come to a deal initially, even if it all appeared exciting," said one person involved.

Rebuffed, the source disappeared without a deal being concluded: "He disappeared off the face of the earth even though we were desperate to find him again until, out of the blue, he phoned up. This time we could do business."

It was two years later and Benazir's fortunes had been transformed. In September 1996 Murtaza Bhutto, her brother and political rival, had been shot dead. In November she had been dismissed from office by President Farooq Leghari, a former friend, after being accused of corruption on a grand scale. In December her husband had been incarcerated in a Karachi jail on a charge of murdering Murtaza. In February 1997, the Pakistan Muslim League had won a general election and had immediately launched an official investigation into Benazir. Teams of investigators, including agents from the British branch of Kroll Associates, the private detective firm, began scouring Europe for evidence against the Bhutto clan.

On cue, the missing Bhutto mole made contact. Sources say $1m was handed over in return for the documents. For Benazir's enemies, this Swiss dossier was cheap at the price.

IT HAD all started with corruption by Post It note: a little yellow paper slip attached to a contract or file that specified the pay-offs necessary for approval. A little note could be destroyed to hide the evidence; but, say investigators, when Zardari began collecting rake-offs from foreign companies the agreements and money transfers were clearly recorded on paper.

This is what the Swiss dossier contained. They made compelling reading: signed letters offering commission from multinationals in return for Pakistani government contracts; deeds of incorporation of secret front companies to receive the kickbacks; and transfers and deposits of millions of dollars between Swiss bank accounts.

The name "Zardari" was scattered throughout; so was "Nusrat Bhutto", and scribbled down in a handwritten cash ledger was also the famous "BB", the initials by which Pakistan knows Benazir.

At the centre of all the transactions were British offshore companies. Their ownership was disguised with the use of nominee shareholders but they were also traceable to the Bhutto family. The Swiss bank accounts of the same companies also showed a series of money transfers to London - including to Zardari's own bank accounts and to a close friend of Benazir.

Benazir says the documents in the Swiss dossier are forgeries, but they have been accepted as authentic by the Swiss government and by leading lawyers, including Clifford Chance in London, who act for the Pakistani government. Marc-Andre Salamin, the Swiss ambassador to Islamabad, declared that the Pakistanis had "provided enough reliable evidence" to freeze the Bhutto accounts.

Dr Audrey Giles, a handwriting expert, also provisionally verified crucial signatures in the dossier. She marked her conclusions as draft, saying that with Zardari's there was "nothing to suggest it was anything but genuine" but she needed to see original documents, and with Schlegelmilch they were "probably written" by him although again needed original documents. Only the signature of Nusrat Bhutto "cannot be accepted as genuine" without further samples with which to compare.

Schlegelmilch himself, who was doing no more than his professional duty and has not been involved in, or accused of, any impropriety, has made no comment on the affair and is now believed to have taken up residence in Dubai with the apparent blessing of the Swiss authorities. The Schlegelmilch dossier contains a series of letters of agreements between French, Swiss and Middle Eastern firms for the payment of commissions to the British offshore firms. At the centre of all the deals was Schlegelmilch, who incorporated at least five companies in the British Virgin Islands (BVI) between 1990 and 1995. Under the offshore islands' law, the true owners were legitimately concealed from public examination. But secret bank mandate documents and shareholder agreements, made available to The Sunday Times, indicate that, if genuine, the real owner was either Zardari or Nusrat Bhutto.

The most lucrative contract discovered was a $4 billion deal to buy 32 Mirage jets from the French company Dassault. The documents, which include letters from Dassault executives, indicate an agreement was reached to pay a 5% "remuneration" - about $200m - to Marleton Business, a BVI company controlled by Zardari.

A fax from Dassault specified that for "reasons of confidentiality" only one copy of the pay-off contract would be made, kept at the company's headquarters. Dassault has not denied the allegations. The deal fell apart after Benazir was dismissed in 1996.

Two Swiss companies, the Société Général de Surveillance (SGS) and Cotecna, its former subsidiary, are also implicated in $11.8m pay-offs for a $131m contract to supervise Pakistan's customs service. Last December SGS admittted it paid a substantial commission on this contract to Schlegelmilch, confirming the substance of the leaked documents which showed that the money was paid to the accounts of Bomer Finance Incorporated, owned by Zardari.

Further documents and bank transfers record details of another pay-off from Abdul Razzak Yaqub, a Dubai gold dealer who allegedly paid cash to Capricorn Trading, a Virgin Island company controlled by Zardari, in return for an exclusive licence to import gold into Pakistan. Banking documents show two transfers of $5m into Capricorn's accounts from Yaqub's company. He denies paying any kick-back and says the documents are forgeries. The final evidence of pay-offs is a series of invoices from Schlegelmilch to ZPC Ursus, a Polish tractor company.

All Zardari's offshore companies had Swiss bank accounts, many of them simply numbers. The weekly interest he was receiving was more than the annual income of $13,100 he had declared on his 1996 Pakistani tax return. (Benazir admitted owning no foreign bank accounts or properties that year; she had paid no income tax at all as prime minister in 1993 and 1994.)

The true ownership of these accounts was discovered through banking mandate documents in Switzerland bearing the signatures of Zardari and Nusrat Bhutto. These show that Bomer Finance, one of the Virgin Islands companies that received money into its Geneva numbered bank accounts, was owned by Zardari. Another, Mariston Securities, which received money from customs kickbacks, was allegedly owned by Nusrat Bhutto.

As a result of these investigations the money trail can be followed to Britain, which was not only the Bhutto clan's refuge but also apparently its shopping mall.

After Benazir's first removal from office in 1990 the emphasis was on property. In December a letter from Tarlo Lyons, solicitors, records the purchase for £245,000 of a flat at Palace Mansions, Hammersmith Road, west London, by Mariston Securities. Money for the deal also came from Nassam Overseas, another offshore company set up by Schlegelmilch.

A year later, a flat in Queensgate Terrace, South Kensington, changed hands for £500,000 from one offshore company owned by an Iraqi to another apparently linked to Zardari. Rumoured by the neighbours to be Benazir's emergency "bolt hole", the flat has been empty for years. The bills are settled by a friend of Benazir in London.

In October 1994, a year after Benazir returned to power in Pakistan, there appears one of the biggest transfers of money to London: £50,000 was sent directly from the numbered account at Union Bank of Switzerland (UBS) into Zardari's own personal account at Barclays Bank, Knightsbridge, in October 1994.

On the same day, October 8, a customer walked into the showroom of David Morris, a Bond Street jeweller, and bought a single piece of jewellery for £100,000. The identity of the customer remains a secret. "It is a matter of client confidentiality," said a senior member of staff last week. No matter: the bill was settled by transfer from account 552343UK of UBS, which belonged to Bomer Finance Incorporated, Zardari's Virgin Islands company.

Exactly what was bought also remains a secret; but at the time Pakistan was alive with rumours that Zardari had bought Benazir a diamond "considered too expensive by an Arab prince". Another payment of £50,000 went to an account belonging to an A Ali with a NatWest branch in Aldwych, central London. According to private investigators, "confidential sources" have revealed this was Zardari's account. Related accounts at the same branch stand in the name of an "Asif Zardari Ali", they allege.

A further bank transfer to Britain records $48,000 spent on buying horses from Horsewalker Ltd, an Ipswich company, in March 1995.

In August 1995, Zardari's parents, Harkim and Zarrin, who had little apparent wealth before his marriage, appeared to acquire a London property in Wilton Crescent, Belgravia, worth at least another £500,000. The lease is registered with another British offshore company in Jersey. Harkim and Zarrin are also registered owners of a manor in Normandy known as the House of the White Queen.

A MONTH after the purchase of the Wilton Crescent lease, Zardari arrived in London to stay at the Lanesborough Hotel at Hyde Park Corner. His mind was on bigger things: the purchase of a £2.5m country manor in Surrey.

Between May and September four new companies were formed on the Isle of Man, the owners concealed by nominee shareholders; on October 19 they acquired together the 355-acre Rockwood estate.

Detailed evidence seen by The Sunday Times demonstrates what extraordinary lengths were taken to conceal the Bhutto family's connection to the property. But Zardari could not keep himself away from the place. Within days he was wandering into the local pub, the 14th-century Dog and Pheasant, and ordering a cup of coffee. He liked the pub so much that he wanted to buy it. "He said, 'How much and when can I have it?'," said Chris Morris, the licensee, who then worked as a barman.

Rebuffed, Zardari sent workmen to measure the oak beams and the bar so they could be recreated in his mansion 300 yards away. "We all thought it was funny that this millionaire wanted to recreate our pub not a stone's throw from the original," said Morris.

The purchase of Rockwood opened up the village to an influx of Pakistani tourists. Every few weeks a group of Asians in a convoy of cars would arrive to stare at the three-storey mansion. One local claims to have seen Benazir herself get out of a car. She and Zardari have consistently denied owning the estate but evidence has been gathered by the Pakistani government which contradicts that claim.

Rockwood House was refurbished under the supervision of Shabnam Pasha, wife of Javed Pasha, a college friend of Zardari, says the Pakistani government. Javed Pasha said: "I have been hearing these allegations [against Zardari and Benazir] for the past 1 1/2 years . . . The Pakistani government is guilty of victimisation."

There have long been rumours that much of Zardari's frenzied commercial activity may have been to feather a nest not for Benazir but for some other girlfriend. Benazir, in a tearful moment, told a reporter last year that Zardari might have bought Rockwood for "some other woman".

"I don't know whether my husband has had an affair or not. He tells me he didn't. I don't know if he bought Rockwood or not," she said. But Pakistan's investigators believe responsibility lies with Benazir herself. The strongest proof of joint ownership of Rockwood is the consignment of furniture sent there from Benazir's house in Karachi in 1996. It contained 23 guns, 10 swords and dozens of pieces of furniture that were dispatched in eight crates under cover of diplomatic immunity and without duty. They were claimed to be the personal effects of Wamjid Shamsal Hasan, the then high commissioner of Pakistan. But they were collected by a Bedfordshire businessman involved in Rockwood's refurbishment and delivered to the estate. Faxes, air bills and packing documents all clearly show that the goods came from Benazir's home.

The investigators also want to know why Benazir's personal friends had access to Zardari's money if she herself was not involved. One of them, Farida Ataullah, alleged by the Pakistani government to be a "confidential private secretary" of Benazir, received a transfer of £100,000 into her Harrods bank account from Bomer funds.

The Pakistanis allege that Ataullah was involved in setting up property deals for Benazir. Ataullah, who is now in Dubai, confirmed last week that she is a close associate of Benazir but said the allegation of receiving a £100,000 cheque was "too personal to comment on".

She was repeatedly asked if she wished to deny any of the allegations, which she did not. Leila Khan, her sister, said it was likely she was doing shopping for Benazir in Harrods. "They are very dear friends, that's it," said Khan. "I don't think she knows where the money came from, no way. She's very close friends with Asif [Zardari] and she probably used it to do some shopping for Benazir. Simple as that."

Another close friend, Victoria Schofield, a journalist who was at Oxford with Benazir, has also been drawn into the investigation. The Pakistani government is to ask British police to ask Schofield why she is a co-signatory of a Zardari London bank account, the same one that was paid money from the Bomer offshore account.

Schofield said last week that as the matter was under investigation, she could not comment. Zardari also uses her address for his bank statements and Schofield keeps an eye on Benazir's property in South Kensington and pays its electricity bills.

A further crucial indicator seized on by the investigators is that, although the Bomer company was in theory owned 100% by Zardari, the money log for its bank account, handwritten by Schlegelmilch, records "50% AAZ = 50% BB" - suggesting a division between Zardari and Benazir. Schlegelmilch has not denied the authenticity of this document.

Najam Sethi, a former close friend of the Bhuttos and editor of the Friday Times in Pakistan, who was asked by the caretaker government to evaluate the corruption allegations when Benazir was deposed, continues to insist that she was implicated.

"I looked through projects where the prime minister's approval was necessary for the project to go through. I said to Benazir: 'This could not have gone through without your knowledge and approval.' She denied it and ranted and raved. But there is no doubt in my mind that husband and wife were working as a team."

THE attempts to prove a Benazir connection with the London accounts and offshore companies has involved frenzied surveillance and investigation in Britain. Surveillance during a visit to London in April last year was so intense that Kroll withdrew its watchers "when our surveillance team identified another team operating in the same area".

The Pakistani government campaigned hard for the British government to investigate. Nawaz Sharif, the Pakistani prime minister, pressed Tony Blair for action at the last Commonwealth leaders' conference in Edinburgh. But Britain has no criminal co-operation treaty with Pakistan.

The Serious Fraud Office has powers to intervene if it and the Home Office are satisfied that the matter being investigated by the overseas authorities concerns "serious or complex fraud involving persons located in the UK". An application from Pakistan submitted last October is still outstanding.

A peg for an investigation has been found, however, in a new United Nations convention that provides for mutual assistance over drug inquiries. As a result, the inquiry is focusing only on whether the UK assets were purchased from the proceeds of drugs. Any evidence gathered can be used only in bringing drugs charges in Pakistan and not for the corruption inquiry.

The Pakistani authorities insist there is a strong possibility that the property and bank accounts may be the result not only of political corruption but of drug trafficking.

Benazir herself is adamant about her innocence and denounces the "irreparable damage to my standing in the world". She says her family is rich, but certainly not by European standards. "Most of the documents are fabricated and the stories that have been spun around them are absolutely wrong," she has stated.