From the Los Angeles Times

Attention back on allegations against Bhutto's widower

Several cases in Europe keep alive concerns about the financial dealings of Asif Ali Zardari, known by critics in Pakistan as 'Mr. 10%.'

By Sebastian Rotella
Los Angeles Times Staff Writer

January 4, 2008

LONDON — During the stormy years Benazir Bhutto ruled Pakistan, her husband was a top power broker and a prime target of corruption allegations that toppled her.

The assassination of the former prime minister has pushed her husband, Asif Ali Zardari, back into the heart of the storm. Their political party this week named Zardari to run its day-to-day affairs while appointing the couple's 19-year-old son to the ceremonial role of chairman.

Even though Zardari has said he will not run for parliament in upcoming elections, attention has focused once again on the corruption cases that have swirled around him at home and abroad and made him a polarizing figure even within the Pakistan People's Party.

The political strife of the moment makes it especially difficult to assess the allegations against Zardari in Pakistan. But several cases in Europe offer insight into the longtime suspicions that have haunted him and, to some extent, his late wife. The cases raise questions about the sources of the family's vast wealth and the elaborate, secretive way in which the couple allegedly moved money around the world.

The accusations center on the dapper Zardari, 51, a former polo player whose critics nicknamed him "Mr. 10%" because of his alleged taste for bribes. After Bhutto's second government fell in 1996, authorities imprisoned Zardari on charges of graft. Pakistan's anti-corruption agency pursued investigations overseas, and authorities in several countries opened their own inquiries.

Zardari was released in 2004 and went into exile. His defenders say Pakistani authorities framed him with fabricated evidence and abused him while in custody, an experience that inflicted lasting damage on his health.

Some of Bhutto's supporters have said the investigations were politically driven attempts to destroy her. In October, President Pervez Musharraf approved an amnesty for Bhutto, allowing her to return home and launch her ill-fated campaign.

The most significant European cases are a Swiss money-laundering inquiry and a British civil case. They remain open, but prospects were uncertain even before the assassination. Lawyers for the couple had won court skirmishes and, in interviews before Bhutto's death, predicted that the amnesty in Pakistan would cause the accusations to be shelved. Spanish prosecutors recently closed a three-year investigation of Bhutto, citing lack of evidence.

But in 2003, a Swiss investigative magistrate decided he had the goods on Zardari and Bhutto after pursuing a money trail from offshore companies in the Caribbean to banks in Geneva to a jewelry shop here.

Judge Daniel Devaud took advantage of a Swiss law allowing investigative magistrates to issue a summary verdict if they think the evidence is strong, and convicted Zardari and Bhutto of money laundering. The judge ruled that Swiss firms had bribed the couple in return for a Pakistani government contract. He froze about $12 million in suspected kickbacks.

But a Swiss appeals court promptly set aside the verdict. A new magistrate reopened the investigation on charges of aggravated money laundering, a more serious offense based on the suspicion of systematic criminal activity.

Zardari's Swiss lawyer declined to comment on the specifics of the case. But he said his client, who served as a legislator and environment minister for Bhutto, had done nothing wrong.

"Mr. Zardari denies having committed any crime whatsoever," the lawyer, Saverio Lembo, said in an interview before Bhutto's assassination.

In his 2003 verdict, the Swiss judge connected Zardari to a chain of corruption that began with two Swiss companies, Cotecna and SGS. Starting in 1994, company executives courted Zardari in hopes of landing a contract to provide container inspection equipment and expertise to the Pakistani customs agency, according to Swiss court records.

A Swiss advisor of the Bhutto family, lawyer Jens Schlegelmilch, acted as an intermediary for executives who, according to internal SGS memos, saw Zardari as Pakistan's unofficial "deputy prime minister."

After talks with Zardari, the two companies won the contract in 1995 "upon the decision of Benazir Bhutto" and "despite the opposition of the customs service," the judge found.

As part of a secret deal, the judge found, the Swiss contractors funneled $11.9 million in bribes into three offshore firms in the British Virgin Islands and ultimately into bank accounts in Geneva. The nominal owners of two companies were Bhutto's mother and brother-in-law, according to the records.

The judge found that Zardari owned the third company, Bomer Finance, which received about $8 million, and that "Bhutto shares with her husband the assets" and "has power of disposition" over the company, according to the documents.

Bhutto denied in testimony that she had anything to do with Bomer, according to her lawyer in Geneva, Alec Reymond.

Nonetheless, Judge Devaud portrayed the former prime minister as a knowing participant. He wrote in his verdict: "Bhutto thus knew that she was acting in a criminally reprehensible manner by abusing her role in order to obtain for herself or her husband considerable sums . . . at the cost of the Islamic Republic of Pakistan."

In addition to rejecting the allegation of Bhutto's involvement, Reymond said the judge erred in depicting payments as bribes.

"The money is there; commissions were paid," Reymond said. "I do not think Mr. Zardari disputes that. But they were like the commissions that are paid to hundreds of businessmen. There was nothing irregular or illegal about them."

The judge gave Zardari, Bhutto and Schlegelmilch suspended six-month sentences, but the appellate court set them aside. In the new inquiry, another investigate magistrate submitted his conclusions in October to the prosecutor general of Geneva, who must decide whether to pursue a trial.

Bhutto testified in the new investigation, but Zardari has not, according to lawyers and court documents.

In Britain, the decade-old civil proceedings focus on Zardari. In a lawsuit, the Pakistani government accused him of using illicit funds to acquire the 365-acre Rockwood estate, a $6.5-million property featuring a Tudor-style mansion and two adjoining farms in the Surrey district. The estate was bought and refurbished in 1995 through trusts in the Isle of Man and Liechtenstein and the Caribbean firms linked to Bhutto, Zardari and the alleged kickbacks, according to the lawsuit.

Zardari steadfastly denied ownership until January 2006, when he acknowledged he owned the property, according to British court records.

A month later, a court on the Isle of Man concluded that it did not find evidence that proceeds of corruption were used to buy and refurbish the estate, according to the records.

British lawyers representing the Pakistani government then filed a lawsuit in the High Court in London seeking the proceeds of the sale of the estate. Zardari challenged the jurisdiction of the court, which rejected his motion in October 2006.

In his ruling, Judge Lawrence Collins emphasized that he was not making legal findings about the facts, but instead issuing a preliminary assessment of the case. He said that "there was no direct evidence" the estate was bought with illicit funds, according to the records.

On the other hand, the judge did rule that Pakistan has a "reasonable prospect" of proving that funds used to refurbish the estate were "the fruits of corruption," according to the documents.

The allegations of corruption have yet to be proved in court. A civil trial had been expected to take place in London sometime this year. But the assassination has left that possibility, like so much about the future of Pakistan and the Bhutto clan, in limbo.