hawala project

8/13/2019 Hawala Project

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Hawala(Arabic:, meaning transfer), (also known as hundi) is aninformal value transfersystembased on the performance and honor of a huge network of money brokers, which areprimarily located in theMiddle East,North Africa,theHorn of Africa,and theIndiansubcontinent.It is basically a parallel or alternativeremittancesystem that exists or operatesoutside of, or parallel to traditional banking or financial channels.

Origins Hawala has its origins in classicalIslamic lawand is mentioned in texts ofIslamicjurisprudenceas early as the 8th century.Hawalaitself later influenced the development of theagencyincommon lawand incivil laws,such as theavalinFrench lawand the avalloin Italianlaw. The words avaland avallowere themselves derived from hawala. The transfer ofdebt,which was "not permissible underRoman lawbut became widely practiced in medieval Europe,especially incommercial transactions", was due to the large extent of the "trade conducted by theItalian cities with the Muslim world in the Middle Ages". The agency was also "an institutionunknown to Roman law" as no "individual could conclude a binding contract on behalf ofanother as hisagent". In Roman law, the "contractor himself was considered the party to thecontract and it took a second contract between the person who acted on behalf of a principal and

the latter in order to transfer the rights and the obligations deriving from the contract to him". Onthe other hand, Islamic law and the later common law "had no difficulty in accepting agency asone of its institutions in the field of contracts and of obligations in general".[1]

Hawala is believed to have arisen in the financing of long-distance trade around the emergingcapital trade centers in the early medieval period. InSouth Asia,it appears to have developedinto a fully-fledged money market instrument, which was only gradually replaced by theinstruments of the formalbanking systemin the first half of the 20th century. Today, hawala isprobably used mostly for migrant workers'remittancesto their countries of origin.

How hawala worksIn the most basic variant of the hawala system, money is

transferred via a network of hawala brokers, or hawaladars. It is the transfer of money withoutactually moving it. In fact, a successful definition of the hawala system that is used is moneytransfer without money movement.

Hawala example transaction; see text for an explanation

The figure shows how Hawala works: (1) A customer (A, left-hand side) approaches a hawalabroker (X) in one city and gives a sum of money (red arrow) that is to be transferred to arecipient (B, right-hand side) in another, usually foreign, city. Along with the money, he usuallyspecifies something like a password that will lead to the money being paid out (blue arrows).(2b) The hawala brokerXcalls another hawala brokerMin the recipient's city, and informsM
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about the agreed password, or gives other disposition instructions of the funds. Then, theintended recipient (B), who also has been informed byAabout the password (2a), nowapproachesMand tells him the agreed password (3a). If the password is correct, thenMreleasesthe transferred sum toB(3b), usually minus a small commission.Xnow basically owesMthemoney thatMhad paid out toB; thusMhas to trustX's promise to settle the debt at a later date.

The unique feature of the system is that nopromissory instrumentsare exchanged between thehawala brokers; the transaction takes place entirely on thehonor system.As the system does notdepend on the legal enforceability of claims, it can operate even in the absence of a legal andjuridical environment. Trust and extensive use of connections, such as family relations andregional affiliations, are the components that distinguish it from other remittance systems.

Informal records are produced of individual transactions, and a running tally of the amount owedby one broker to another is kept. Settlements of debts between hawala brokers can take a varietyof forms (such as goods, services, properties, transfers of employees, etc.), and need not take theform of direct cash transactions.

In addition to commissions, hawala brokers often earn their profits through bypassing officialexchange rates.Generally, the funds enter the system in the source country's currency and leavethe system in the recipient country's currency. As settlements often take place without anyforeign exchange transactions, they can be made at other than official exchange rates.

Hawala is attractive to customers because it provides a fast and convenient transfer of funds,usually with a far lower commission than that charged by banks. Its advantages are mostpronounced when the receiving country applies unprofitable exchange rate regulations (as hasbeen the case for many typical receiving countries such as Pakistan or Egypt) or when thebanking system in the receiving country is less complex (e.g. due to differences in legal

environment in places such as Afghanistan, Yemen, Somalia). Moreover, in some parts of theworld it is the only option for legitimate funds transfers, and has even been used by aidorganizations in areas where it is the best-functioning institution.[2]

Furthermore, the transfers are usually informal and not effectively regulated by governments,which is a major advantage to customers withtax,currency control,immigration, or otherconcerns. In some countries however, hawalas are actually regulated by local governments andhawaladars are licensed to perform their money brokering services.

Hawala scam

The Hawala scandal startled Indian public as it was the first case when the Prime ministerhimself was accused of corruption. Adding to it was the expose that Rajiv Gandhi held secretaccounts in Swiss banks. Hawala scam involved payments allegedly received by politiciansthrough hawala brokers, the Jain brothers. It was a US$18 million bribery scandal that implicatedsome of the country's leading politicians. There were also alleged connections with paymentsbeing channelled to Hizbul Mujahideen militants in Kashmir.
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The Scam

The case broke out on March 1991, with the arrest of two Kashmiri militants,ShahbuddinGhauriandAshfaq Hussain Lone,in March 1991. They had, in turn, led the CBI to high-profilehawala operatorsShambhu Dayal SharmaandMoolchand Shah.It was the testimony of the

hawala operators that led to the unfolding of the case.

Ghauri and Lone's complicity proved that militants were involved in international hawala deals.Ghauri who was doing aPhD at Delhi's Jawaharlal Nehru University at the time was believed tobe the ``international militancy coordinatorof the Hizbul Mujahideen. Lone was also suspectedto be a member of the group.

Investigations showed that the duo had links with militant groups all over the world, includingmany in Pakistan, Canada and the United States. Some cheques of Pakistani origin and a bankdraft of over Rs 15 lakh were recovered from them. On July 23, 1998, the two militants wereconvicted under the TADA and FERA. Sentenced to seven years' imprisonment, they were

released last month as they had already been in jail for about that period.The hawala operators,Sharma and Shah, told the agency during interrogation that they had been working for the Jainbrothers, N.K. Jain and S.K. Jain.

This led to the immediate arrest of the Jain brothers. In his 1995 confession,S.K. Jainallegedthat he had paid a number of politicians, including the then Prime Minister,P.V. Narasimha Rao.He also claimed that the names of allthose who had received money from him were recorded inthe now famous ``Jain diaries.

Prosecution

However, the CBI's entire case against the prominent personalities cutting across party linesnamed in these diaries collapsed in court. Special CBI JudgeV.B. Guptaheld that none of thestatements and confessions of the accused was admissible in court since they were given to theCBI. He also stated that he found there was nothing that could be converted into legal proofagainst the accused, and that the crucial diaries were ``inadmissibleevidence. Since then, thecases have gone out the door, one by one.

As for the Jains, they are still in trouble but with the Income-Tax Department. They have a taxliability of Rs 79 crore for five assessment years and their appeal is pending with the I-T tribunalin Nagpur. They were supposed to also pay a huge amount as interest, but the AppealsCommissioner waived it.

Interestingly, on 10th Feb 2000, Mr.BR Lal,DGP Haryana, (who was the then Joint Director,CBI incharge of Hawala investigations) told the nation on Prime Time show of Zee TV, that CBIhad sufficient evidence against Hawala accused politicians but there was tremendous pressurefrom its Directors and from above to conceal the same or file flimsy charge sheets, so that thepoliticians could be let off.
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Kashmir's hawala scandal

A tale of inept investigation and political apathy.

An investigation by Frontlineinto a marriage between financial sleaze and secessionism in Kashmir

exposes a crucial aspect of terrorism in Kashmir. Through documents and interviews, the following story

shows that two top leaders of the Hurriyat Conference, Syed Ali Shah Geelani and Abdul Ghani Lone,

were involved in the handling and transmission of enormous sums of money. They have no credible

explanation as to where it came from, or proper accounting of how it was spent.

Frontlinealso explored persistent allegations that the funds received by key Hurriyat leadersthrough hawala channels were intended to fund terrorist activity, but that they were oftensiphoned off for personal benefit. No tangible evidence was found to back up this charge.However, new evidence emerged that funds collected for the reconstruction of the Chrar-e-Sharief shrine and the town, destroyed in a confrontation between the Indian Army and forces

led by Mast Gul Khan in May 1995, had been mysteriously disbursed in cash, without even asemblance of record-keeping.

The Congress(I) is meanwhile seeking to expand its meagre strength in Jammu and Kashmir byallying itself with some figures in the Hurriyat hierarchy. This political fact may explain perhapsthe most startling discovery of this investigation: that despite a mass of evidence unearthed bythe Jammu and Kashmir Police and the Intelligence Bureau, the Central Bureau of Investigationappears less than serious about prosecuting those responsible for Kashmir's hawala racket.

The Congress(I)'s opportunism, whatever its short-term political outcome may be, is fraught withdanger. If it may serve to erode the authority of the National Conference and Chief Minister

Farooq Abdullah, those who recall the Congress(I)'s dangerous initial flirtation with theBhindranwale phenomenon in Punjab will be fully aware of the dangers.

PRAVEEN SWAMIin Srinagar

TERRORISM is possibly Jammu and Kashmir's sole profitable enterprise; although 10 years ofviolence have ruined the State's people, the protagonists of the crisis appear to have transformedtragedy into sleaze. AFrontlineinvestigation has unearthed evidence that suggests that at leasttwo senior members of the All Party Hurriyat Conference (APHC), which is committed toKashmir's secession from India, have been siphoning off funds received for their struggle for yet

to be investigated ends. People's Conference leader Abdul Ghani Lone and the Jamaat-e- Islami'sAmir (chief), Syed Ali Shah Geelani, the investigation discovered, have used proxies anddummy bank accounts to harbour illegally obtained funds.Frontline's five-month investigationalso found hard proof that massive sums of money collected for the reconstruction of the Chrar-e-Sharief shrine, and for the relief of the town's residents, have vanished.

M.LAKSHMANANAbdul Ghani Lone (left) and Majid Dar in the


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former's residence. There has been no follow-up action on evidence that the Hurriyat

leader held, in the name of Dar, a bank account that has seen heavy transactions.

There is no hard evidence to show where the enormous sums of money received by the Hurriyatcame from; nor could it be established,Frontlinefound, that the leaders converted the funds into

personal assets. The mysteries of where the money came from, and what it was spent on, remain.The Central Bureau of Investigation (CBI) filed First Information Reports (FIRs) charging thetwo leaders with hawala offences earlier this year, but the Central investigative apparatus isdisplaying a curious reluctance to go deep into the matter.

V.SUDERSHANThe Chrar-e-Sharief shrine after it was gutted in 1995.

UNDERSTANDING the significance of these discoveriesrequires an understanding of the mechanics of fundingterrorism in Kashmir. Since the 1991 arrests of AshfaqLone and Shahabuddin Ghowri in New Delhi on charges

of channelling hawala funds to Kashmir terrorist groupsblew the lid off the Jain brothers' hawala scandal, it hasbeen known that illegal inflows have been central tosustaining terrorism in Kashmir. An internal briefingdocument of the Intelligence Bureau (I.B.) acquired byFrontlinesuggests that Pakistan's Inter-Services Intelligence (ISI) routinely uses the West Asian hawala network as well as "Kashmiripressure groups working from the U.K. and United States" to fund politicians affiliated toterrorist groups (see box). This money is then passed on by these leaders to armed organisations.The I.B. document suggests that much of this money is skimmed off by the Hurriyat leaders, aswell as their proxies, who include businessmen and journalists, for personal benefit. It is thenlaundered through the acquisition of legitimate assets like property and financial assets, which

are claimed to be organisational acquisitions rather than personal ones. Thus, international fundsarriving through hawala channels have served two purposes: they have not only paid for terror,but created a political vested interest in continued bloodshed.

The need to initiate a meaningful investigation into the Hurriyat's marriage of secession andsleaze should be evident. Hurriyat politicians have frequently been accused by their critics, albeitwith little proof, of acting as depositories for these funds and misappropriating them for personalbenefit. Although the CBI's FIRs were seen as a sign of the Government's intention to resolve thelast remaining strand of the Jain hawala case and to attempt to establish the I.B. proposition thatterrorism in Kashmir was sustained through hawala inflows, nothing of the kind has so farhappened. At a top-level meeting at the Union Home Ministry on May 5, 1997, the minutes of

whichFrontlinehas acquired, the Special Secretary in charge of Jammu and Kashmir affairs,V.S. Mathur, warned that any further delay in the investigations would "affect the credibility ofthe Government." Many officials believe that influential State Congress(I) leaders, who seek tosubvert the authority of the Farooq Abdullah Government by opening a dialogue leading to anelectoral arrangement with sections of the Hurriyat, are engineering the demise of Kashmir'shawala investigations. Prime Minister I.K. Gujral's recent revelation in Srinagar that the Hurriyatleadership consisted of his "old friends", too, has done little to enthuse investigators to discoverthe truth.


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1. The Jamaat-e-Islami trail

Syed Ali Shah Geelani's Jamaat-e-Islami has frequently been described as a state within a state,controlling schools, hospitals and charitable trusts, as well as a substantial network of politicalcadres committed to its fundamentalist politics. The Jamaat's armed wing, the Hizbul

Mujahideen, was, until the recent decimation of its top leadership by the Jammu and KashmirPolice, the State's most feared terrorist group. Intelligence officials have long believed, thoughwithout hard evidence, that the Hizbul Mujahideen's mysterious Amir-e-Jihad (supreme leader ofthe Jihad) was in fact Geelani himself. Although rumours that the veteran politician hadbenefited not inconsiderably from his political empire had for long been in the air, it was only inApril 1997 that the CBI acted against him.

M.LAKSHMANANSyed Ali Shah Geelani.

An FIR registered in New Delhi by the CBI's Special Investigation Cell II allegedthat Geelani had violated Section 23 of the Foreign Contributions (Regulation) Act

by receiving 2 million rials (Rs. 19.4 crores at current exchange rates) from SaudiArabia and a separate donation of Rs. 10 crores from the Kashmir American Council.

These payments, the FIR alleged, were collected from hawala dealers in New Delhi. While partof these payments were sent on to terrorist groups, investigators believed, substantial diversionstook place to buy property.

Geelani's defence is as follows: he does not deny the allegation that he has been involved inproperty purchases, but insists that the purchases were made with party funds for the use of theJamaat-e-Islami.

DOCUMENTS available withFrontlineshow that on May 4, 1997, the Army's 20 Grenadiers

unit stumbled on information that could have explained how funds received by the Jamaat werechannelled to terrorist groups on the ground. Abdul Ahad, a Srinagar shopkeeper, was found inpossession of 12 bank drafts worth Rs. 5,95,000, all issued in favour of a Sopore company, Riyaz& Co. Army officials discovered that the account was held by Riyaz Ahmad Lone, an employeeof the Sopore head office of the Kamraz Rural Bank.

M.LAKSHMANANThe Jammu and Kashmir Bank branch in New

Colony, Sopore.

Investigations led to the recovery of more drafts, worth a

total of Rs. 11 lakhs. Each had been purchased againstpayment of cash. One of these drafts (all of them weredated April 24) was worth Rs. 3 lakhs - in violation of therule that no draft for over Rs. 50,000 can be purchased byany means other than a crossed cheque (Frontlinehas inits possession copies and details of some of these drafts.)

Abdul Ahad told officials of 20 Grenadiers that the drafts were handed over to him by theJamaat-e-Islami's office clerk, Qazi Ahadullah, and Geelani's predecessor as chief of the Jamaat-


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e-Islami, Ghulam Mohammad Bhatt. Such drafts, he claimed, were routinely made to betransferred onwards to Jamaat- e-Islami sympathisers across the State. An FIR was filed by thepolice on May 10, 1997 and Bhatt was arrested. The former Jamaat- e-Islami chief claims tohave in fact been picked up earlier, which, though not implausible, is irrelevant to the hawalatrail. (Frontlinehas a copy of the 'Handing Over Certificate' issued by 20 Grenadiers to the

Jammu and Kashmir Police, the legal instrument issued by the Army when it fulfils itsmandatory duty to turn over all persons it arrests to the local police. It also has a copy of the FIRfiled by the police against G.M. Bhatt.)

Subsequent developments can only be described as passing strange. The May 10 FIR made nomention of the recovery of bank drafts from Abdul Ahad, and no FIR was registered against theirintended recipient, Riyaz Ahmad Lone. Although Army officials in Srinagar insisted that RiyazAhmed Lone was "absconding",Frontlinefound him at his desk at the Kamraz Bank in Sopore.He toldFrontlinethat he had indeed been receiving the drafts on behalf of a Hizbul Mujahideenunit. "Their leader Irshad Wani approached me," Lone said, "saying that two consignments ofcash the Jamaat-e-Islami sent from Srinagar had been captured by the Army. He wanted a safer

route for the money to be sent, and told me I would be given drafts to pay into my account."M.LAKSHMANAN

The head office of the Kamraz Rural Bank in Sopore.

In April, Riyaz Ahmad received drafts for Rs. 11 lakhsbut says that he continued to stall as far as he could."Before I could encash these drafts," he claims, "Irshadwas killed and I decided to hold on to the drafts, because Iwas afraid I could get into trouble later." Thisexplanation, however, leaves open the question of whythe second set of drafts was prepared for him on May 3,

for his reluctance to encash the first set should by then have given the Jamaat-e-Islami sufficientreason to look for other conduits. Riyaz Ahmad had no answer to this question, but the Armywas satisfied. "They picked me up on May 6," he says, "and I stayed in their camp in Sopore for40 days. Finally they asked me to write out a cheque for the total value of the drafts and let mego."

Facsimilie of a draft favouring 'Riyaz and Company'.

The Army was presumably convinced of Riyaz Ahmad'sinnocence. It had reason to be. The Rs. 16.95 lakhs that hehad received,Frontlinelearnt from local banking sources,

was paid by cheque number 1431466 from Riyaz & Co.'saccount into account number C-4/8041 of the State Bankof India's Palhalan branch on July 3, 1997. This account is

held by the Commanding Officer of 5/9 Gurkha Rifles, the unit operating in Sopore. This actionconstitutes, on the face of it, an impropriety if not an offence, since all material evidence seizedin the course of an investigation belongs to the trial court, and can be altered in any way onlywith the court's permission. The Army had obtained no such order, for it is not empowered bythe Code of Criminal Procedure to carry out investigations in the first place. By law, the Army


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should have handed over the drafts to the local police after they were recovered and left thebusiness of further investigation to them.

A page from the bank ledger pertaining to Majid

Dar's account No. 191/2 at the Jammu and Kashmir

Bank's Rawalpora branch in Srinagar. These recordsestablish the scale of funds that Dar handled for

Geelani, and the fact that enormous withdrawals were

made in cash.

Details of bank drafts seized by 20 Grenadiers from

Abdul Ahad, allegedly Jamaat-e-Islami funds to be

passed on to the Hizbul Mujahideen.

The Criminal Investigation Department of the Statepolice, which should have monitored the affair, founditself helpless in the face of the challenge of pursuinghawala cases outside the State's boundaries. The CBI, too,made no effort to use the evidence on offer in the bankdrafts case to substantiate its allegations against Geelani.Just why all these agencies acted as they did,Frontlinewas unable to ascertain: officials agreed to speak only offthe record and then offered nothing of substance.

The Army's inept management of the demand draft affairand the State CID's incompetence have in effect crippledany real chance of arriving at the truth of Geelani'sfunding sources and their deployment. There was no realevidence to back the central charges in the CBI's FIR, thatGeelani received hawala funds from overseas sponsorsand that these funds were converted into personal assetsin a corrupt manner. Abdul Ahad's bank drafts, properly

investigated, might have thrown light on that point. "We could have pursued the leads againstQazi Ahadullah and Bhatt," says a senior State police official, "and tried to establish just wherethe money had come from, and precisely what it was intended for." "Now," he concludes, "the

lack of coordination between investigative agencies has created a situation where even if we findout the truth, our case will most likely be laughed out of the trial court." Syed Ali Shah Geelani,though he may strenuously deny the proposition, could owe his political future to the IndianGovernment.

2. Abdul Ghani Lone and funds for Chrar-e-Sharief


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If the mishandling of the drafts case illustrates the lack of purpose in the Kashmir investigations,recent revelations of proxy accounts allegedly held by People's Conference leader Abdul GhaniLone illustrate the CBI's apparent proclivity to let otherwise solid hawala cases die through sheerneglect. In April 1997, the CBI Special Investigation Cell II in New Delhi filed an FIR allegingthat Lone had, inter alia, received Rs. 30 lakhs a month from the ISI, accepted payments for an

overseas trip in 1995 from the Kashmir American Council, and used part of the cash that hereceived to build homes in Rawalpora and Delhi.Frontline's investigations led to someinteresting findings. Although there was substantial evidence that Lone, along with othermembers of the Hurriyat Conference leadership, had siphoned off or mishandled funds intendedfor relief and reconstruction at Chrar-e-Sharief, the allegations made by the CBI that these fundswere used to acquire personal property and to travel abroad have not been substantiated.Critically, there has been no follow-up action by the CBI on evidence that Lone held a bankaccount in the name of a neighbour, Majid Dar, into which lakhs of rupees were credited anddebited in cash without even an effort at accounting.

Majid Dar, who owns a cloth store opposite Lone's Srinagar home, was arrested on July 9 by the

crack Special Operations Group of the Jammu and Kashmir Police. (Majid Dar's bail order, acopy of which is withFrontline, mentions charges of sponsoring terrorism.) One key documentwas recovered from him. It was the passbook of his account, bearing the number 191/2, at theJammu and Kashmir Bank's Rawalpore branch in Srinagar. The account showed an exceedinglycurious pattern of activity. From October 1994, the period from whichFrontlinecould obtaindocumentation, large sums of money began to be paid in through demand drafts and in cash.

On October 12, 1994, for example, Rs. 1 lakh was paid in by demand draft, and two chequewithdrawals of Rs. 50,000 were made days later, leaving a balance of just Rs. 455. Heavydeposits and withdrawals continued regularly. These withdrawals and deposits reached a peak in1995, with Rs. 13,00,000 being deposited in cash on a single day, June 13. Dar told curious bankstaff that the money was for the reconstruction of Chrar-e-Sharief. No further questions wereasked, even when Rs. 14,10,000 was paid in just weeks later - on August 8. Dar's withdrawalswere equally heavy. Self cheques of Rs. 5 lakhs and Rs. 10 lakhs were routinely presented andmoney was withdrawn, with the quantum of transactions topping a crore of rupees in just sevenmonths of 1995. (See a part of Majid Dar's bank account record reproduced in facsimile.)

IN custody, Dar told his interrogators that he had merely held account No. 191/2 on hispolitician-neighbour's orders, handing over signed blank cheques as and when they were askedfor. Lone merely told him that the heavy transactions of 1995 were for Chrar-e-Sharief and theshopkeeper made no further enquiries. Shortly after a national newspaper carried this story, Darwas released. Speaking toFrontlineat Lone's house, he said that his confessions had been madeunder duress, following sustained torture by the Special Operations Group. The newspaper'scorrespondent, he said, had interviewed him while he was being tortured. "I did deposit Chrar-e-Sharief money in the account," Dar said, "which we collected from people in Rawalpora andadjoining areas. We collected Rs. 8.5 lakhs between 10 a.m. and 4 p.m. on the first day, andwhen we asked the Hurriyat leaders what to do with it, they asked me to keep it in my account, tohand over to the Alamdar Fund that had been set up to provide relief."


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During his tape-recorded interview withFrontline, however, Dar made several inconsistentstatements. One was that while there was a deposit of Rs. 8.5 lakhs in cash into the account, thishad been preceded by the larger deposits in cash, of Rs. 13,00,000 and Rs. 14,10,000. Asked howpublic collections came in such neat figures, rounded off to five zeroes, Dar had no answer.Finally, there is little to explain why residents of middle class Rawalpora were so generous.

Frontlineobtained records of donations to the Alamdar Fund by professionals from thePsychiatric Diseases Hospital in Srinagar by way of comparison. The highest donor was Dr.M.A. Chesti, who gave Rs. 215.

THE most curious fact about Dar's account is that most of the money deposited in it was not infact deposited into the Chrar-e- Sharief Alamdar Fund in the first place. Three cheques were paidto the Alamdar Fund in January 1996, months after the money was collected, worth a total of Rs.30 lakhs. Two other cheques for Rs. 10,00,000 each were encashed in November, and thoughDar claims that these too were for the fund, he could provide no proof. Dozens of other selfcheques, and cheques to various parties, notably Ghulam Nabi and Ghulam Mohammad, theKashmiri equivalent of Joe Ordinary, were written out for sums ranging from just a few thousand

to several lakhs of rupees.

Lone toldFrontlinethat these cheques, unlike the direct donations to the Alamdar Fund, werewithdrawals to meet the immediate cash needs of Chrar-e-Sharief victims (see interview). Askedfor proof of these disbursals, he first reacted with hostility, saying that he did not have to answer"the Indian Government and its press." When this correspondent pointed out that as a publicfigure he did have to answer to the people, he said that the Hurriyat's accounts were deliberatelyhidden to avoid official reprisals against donors and recipients. The politician also claimed thatseveral of Majid Dar's transactions were undertaken with his own business funds. Thisproposition, however, is problematic, since business revenues would have seen a steady growthin the account, rather than a pattern of massive deposits followed by equally massivewithdrawals.

Despite the breakthrough provided by the discovery of Dar's account, the CBI appears to havedone little to investigate the case. Lone dismisses its FIR with more than some degree ofconviction: "They say I bought this house with hawala funds, but that's nonsense. Anyone cantell you I bought it in the late 1970s and rented it out for many years."

BY way of evidence, Lone providedFrontlinea copy of an income tax notice served on him in1982-1983 by the Income Tax Officer, Srinagar B ward. The notice pointed out that his returnsfor that year showed an income of Rs. 5,690 from property, the first such income his returns hadever shown. It demanded details of the consideration for which the property had been purchased,its cost of construction, and the sources from which the investment was made. Lone did notprovideFrontlinethese details, but his case is prima facie plausible. "The CBI also says," herubs in the point, "that I went abroad in 1995, when the Government they serve took away mypassport in 1993. They say I have property in Delhi. Let them point to one and they are welcometo have it, free of cost."

3. The Hurriyat corporate: Milking the people


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If there had been an elaborate financial swindle, it would be of a piece with the HurriyatConference's collective handling of the Chrar-e-Sharief relief. Internal Hurriyat correspondenceobtained byFrontlineshows that the supposedly autonomous Alamdar Fund set up by theMuslim Auqaf Trust to administer relief was in fact functioning on the instructions of thesecessionist body. Of Rs. 1,50,00,000 disbursed through the Alamdar Fund's account bearing

number 7356/74 at the Gole Market, Karan Nagar, Srinagar branch of the Jammu and KashmirBank, just Rs. 20 lakhs were actually paid directly to the Sheikh-ul-Alam Relief Committee,which was organising ground-level relief work at Chrar-e-Sharief. (Frontlinehas obtained detailsof debits from the Alamdar Fund account.) A sum of Rs. 60 lakhs was paid by cheque to theCommittee through People's Conference leader and Lone's deputy, Dr. G.M. Hubbi. Hubbireceived three further cheques between October and December 1995 for a total of Rs. 30 lakhs,while his fellow Hurriyat politicians, Ghulam Qadir and Ghulam Nabi Sumji, received Rs. 10lakhs and Rs. 35 lakhs respectively. None of the recipients of cheques from the Alamdar Fundwas a trustee or was formally associated with the organisation.

The Hurriyat Conference's direct involvement in the supposedly apolitical Alamdar Fund began

in late May 1995. On May 26 and 27, nine trustees of the Muslim Auqaf Trust, a historic bodyhijacked by secessionist parties during the years of the Kashmir insurgency, met to discuss thehandling of the Alamdar Fund. The trustees decided to maintain a separate bank account for thetrust, but only after "a long discussion and persuasion by the executives of the APHC"(according to a resolution of the Muslim Auqaf Trust on the Alamdar Fund, a copy of whichFrontlinehas obtained). The Hurriyat's "persuasion", Lone toldFrontline, was merely theinsistence that "the Alamdar Fund carry on its relief work separately from the Hurriyat, since wewere waging a larger battle for freedom."

In the event, the Alamdar Fund did not maintain even a measure of independence. Large sums ofcash were handed over by the Fund to Hurriyat functionaries on the basis of scrawled slips fromthe organisation's office. On April 12, 1996, for example, the Auqaf Trust's G.Q. Drabu sent ahastily typed note to Hurriyat chairman Mirwaiz Umar Farooq. "Haji G.M. Sumji," the notereads, "appeared in this office today, the 11-4-96, asking for issuance of a cheque for ten lacsfrom Alamdar Fund. He was asked to produce a letter of authority from your good self, insteadof producing a letter of authority he asked me to contact you on phone." In the note, Drabuproceeds to plead for a letter of authority to be issued. (Frontlinehas obtained a copy of thenote.)

Similar casual slips of paper were the basis for several lakhs of rupees being issued out of trustfunds. One of them is a letter issued by the Hurriyat office to Drabu on December 2, 1995instructing the Auqaf Trust chairman to "hand over" Rs. 6 lakhs to the bearer of the letter, G.M.Hubbi, acting for the Sheikh-ul-Alam Relief Committee.

Geelani flatly refused to discuss the Hurriyat's role in Chrar-e- Sharief relief. "I had nothing to dowith it," he asserted. "I kept out of it from the beginning." Speaking toFrontline, Lone attemptedto defend these transactions: "The funds that were paid by cheque directly to the Alamdar Fundwere for the reconstruction of the shrine itself. But the bulk of the money was to provide relief tothe victims of the Indian security forces, who destroyed Chrar-e-Sharief. This task, because ofthe disturbed situation, simply could not be carried out by the Alamdar Fund's trustees. Those


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discovered with money by the security forces risked having their houses blown up. So theHurriyat had to become directly involved in the process. The money was taken in cash and givenaccording to a sliding scale to the victims."

Lone, however, acknowledged that no detailed accounts had been kept of disbursals. Asked why

many people at Chrar-e-Sharief complained that they had received no compensation, he said:"Ask a Congress supporter there, and he'll tell you the Hurriyat- wallahs are thieves. Ask aNational Conference supporter and he'll tell you we ate it all up. Ask our supporters and they'lltell you the truth about how much each one got."

THE truth must be established. The FIRs filed by the CBI's Special Investigative Cell II rest ontwo central propositions: first, that hawala funds were received by Hurriyat leaders, andsecondly, that they misappropriated large parts of these donations. Yet the investigative handlingof the Abdul Ahad drafts and the Majid Dar account gives little reason to believe that the CBIintends to follow up its FIRs with prosecutions. In the case of Abdul Ahad, the agency failed tomonitor a key discovery and to ensure that the financial point of origin of the drafts and their

intended end use were established with evidence that could be introduced in a trial court. InMajid Dar's case, little has been done to establish that the money was received through hawalachannels and that Lone had consistently misappropriated funds received in this way.

At the May 5 Union Home Ministry meeting, the CBI, represented by Joint Directors M.L.Sharma and Sharad Kumar, blamed the absence of progress on the lack of "meaningful inputfrom other agencies at this juncture". This argument was evidently designed to deflectresponsibility from the organisation in the face of Special Secretary V.S. Mathur's wrath.

The minutes of the meeting, recorded by Under Secretary Chandan Singh in file 13026/54/96-K(M) (Volume II) dated May 13, show that I.B. Deputy Director Kulbir Krishan rebutted the

CBI's position, pointing not only to "additional information which has been shared with the CBIin early April," but also to the fact that "several documents which could be useful had beenrecovered which the CBI may follow up."

The CBI's evident lack of desire to do so was apparently shared by others. All that theEnforcement Directorate's P.K. Roy could contribute to knowledge of the issue was the claimthat while his organisation had identified "some properties, telephone numbers and bankaccounts," these were "not in the names of the persons charged". Paragraph 10 of the minutesrecords that the Income Tax authorities - who despite being invited had not sent a representativeto the meeting - had earlier sent notices to several banks asking for "information on suspiciousaccounts," to which the banks "had not responded".

THE lack of progress in the Kashmir cases is of a piece with the CBI's marked lack ofenthusiasm in pursuing the Jain hawala discoveries. In a political climate where aggressiveinvestigation of corruption at the top has been labelled a "witch-hunt" by I.K. Gujral himself,CBI officials are evidently unwilling to engage with the possibility that their work may generateunwelcome discoveries. If hawala dealers are indeed behind the cash inflows that Hurriyatleaders have siphoned off, a possibility which, though not established, is certainly probable, their


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arrest and prosecution could well lead to embarrassing revelations about politicians who havenothing to do with Kashmir or terrorism.

In the short run, the exposure of Hurriyat politicians would also sabotage the electoral strategiesof the Congress(I) under State party leader Mufti Mohammad Sayeed; the party has premised its

future in Jammu and Kashmir on recruiting second-level secessionist politicians to its ranks. Thisopportunistic agenda is clearly an insult to the people of the State, who risked death to voteoverwhelmingly for the secular-democratic National Conference in last year's elections.

Many in Kashmir, at various locations in the political landscape, frequently argue that the realproblem is not that Kashmiris do not consider themselves Indian, but that Indians have nevertreated Kashmir as a part of India. The apathy and political cynicism evident in the Hurriyatinvestigations suggest that they may just have a point.

CBI sure of hawalascam charges against Advani, Shukla

There is enough admissible evidence to frame charges against Bharatiya Janata Party President LK Advani and former federal minister V C Shukla in the Rs 650 million Jain hawalacase andthese chargesheets were not filed to launch ''malicious or frivolous'' prosecution, the CentralBureau of Investigation told the Delhi high court on Monday, March 3.

Opening arguments on behalf of the investigating agency, senior counsel Gopal Subramaniamsubmitted before Justice Mohammad Shamim that the special hawalacourt of V B Gupta hadnot erred in framing charges of criminal conspiracy and corruption against the two leaders lastyear.

At the stage of framing of charges, the trial court has to satisfy itself that there is enough material

to form a prima facie case against the accused and to send the matter for trial.

''The principles of charge are not the same as the principles of conviction. At the stage of framingof charge, the court does not have to examine in detail whether the evidence of the prosecutionwould be enough to secure a conviction after trial,'' Subramaniam added.

If there is ''strong suspicion'' of the accused having committed the offence, the trial court cannotdischarge the accused at the stage of framing of charge and the matter should be sent up for trial,he quoted the Supreme Court as holding.

In the cases against Advani and Shukla, the CBI had enough evidence to show that a prima facie

case existed and this was not a case of ''innocent politicians'' being roped in a ''groundless,baseless'' prosecution, as alleged by their counsel, he added.

Turning to the admissibility of the Jain diaries as evidence, Subramaniam averred that these werenot just loose sheets of pages strung together. ''I will show to the court that there is internalconsistency in the diaries, a method in making the entries and these are consistent with otherpieces of evidence.''


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In example, the counsel cited that the CBI had recovered Rs 5.8 million from a balance of Rs 6.8million shown in the diaries. This money was recovered in raids on the premises of the Jainbrothers and their employee following the interrogation of a ''certain gentleman'' who confessedto having dealt in hawala money at the behest of the Jains, he added.

The senior counsel appearing for Advani, Shukla and the Jains had contended before JusticeShamim that the CBI had filed ''politically motivated'' cases. They also averred that the diaries inwhich the entries about the alleged payments to top politicians and bureaucrats were made by theJains were not admissible as evidence.

In light of this, the court should discharge the accused at the stage of framing of charges and notmake them go through the process of trial, they submitted.

According to the CBI chargesheets, Advani allegedly received Rs 3.5 million from the Jainbrothers and Shukla Rs 3.8 million while they were serving as public servants.

Subramaniam further submitted that under the 1988 Prevention of Corruption Act, members ofParliament were public servants and were thus liable to be prosecuted under it.

hawala project

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