Corruption Allegations Haunt Pakistan's Zardari

Asif Ali Zardari, the Pakistani politician considered a front runner to become the country's next president, remains under criminal investigation in Switzerland over allegations that he received kickbacks from two Swiss-based companies while his wife, the late Benazir Bhutto, served as the country's prime minister in the 1990s, a Swiss judge and two Swiss lawyers close to the case told NEWSWEEK.

But Zardari, who has always claimed that corruption allegations against him were politically motivated, may be using his growing political clout in Islamabad to pressure Swiss authorities to curtail, or even close, their long-running investigation into his affairs, say Swiss legal sources, who requested anonymity discussing sensitive matters.

Zadari, through a spokeswoman, maintains that the probe is already closed. "Mr. Zardari feels that you have been misinformed and that the case that you are referring to is closed," wrote Farah Ispahani, in response to an e-mail from NEWSWEEK. "Please be careful about reporting something that may have been planted."

Zardari, who co-chairs Bhutto's political movement and was one of her closest advisers when she headed Pakistan's government, has emerged as perhaps the most powerful figure in Pakistani politics following the resignation this week of President Pervez Musharraf. U.S. officials say they already view Zardari as one of most important Pakistani officials the U.S. deals with on sensitive issues such as the hunt for Al Qaeda and Taliban leaders in volatile tribal areas along the country's border with Afghanistan.

But U.S. officials remain wary of Zardari because of corruption allegations that have swirled around him for years. In the 1990s, when Bhutto served two terms as prime minister and her spouse served a stint as investment minister, Zardari earned the nickname of "Mr. Ten Percent" because of allegations that he had received kickbacks on state contracts. He spent more than eight years in jail in Pakistan during corruption investigations, though he was never convicted of any crime.

Zardari, Bhutto and their supporters have always maintained that the corruption allegations against the couple were trumped up by powerful political enemies, including both Musharraf and Nawaz Sharif, a former prime minister who is now Zardari's principal rival for power. Lawyers for Bhutto and Zardari say they always maintained their innocence of any corruption or other criminal accusations. "For most Pakistanis this is a matter that is now closed," said a senior Pakistani government official who spoke on condition of anonymity. "The primary motivation [behind the investigations] was political."

The Swiss investigations were opened years ago, during Sharif's tenure as prime minister. His government requested official legal assistance from Switzerland, where Pakistani authorities suspected that the couple had stashed proceeds from alleged corrupt activities. The Pakistani government hired its own lawyers in Switzerland to gather evidence against Bhutto and Zardari and help Swiss investigators with their inquiries.

In 2003, these investigations resulted in a series of court orders against Bhutto, Zardari and one of their Swiss lawyers, Jens Schlegelmilch. The orders, akin to misdemeanor guilty findings by a U.S. justice of the peace, were issued by Judge Daniel Devaud, an investigating magistrate in Geneva who has handled many high-profile investigations into the alleged laundering of corrupt payments through Switzerland by foreign politicians.

Devaud's orders found Bhutto, Zardari and Schlegelmilch, a Swiss lawyer who had represented them for many years, guilty of minor money-laundering offenses under Switzerland's penal code. Devaud's orders alleged that, via obscure companies in the British Virgin Islands, Bhutto, Zardari and members of their family had received improper payments from two Swiss companies that were seeking contracts with the Pakistani government. (Pakistan wanted to hire the companies, Cotecna and SGS, to inspect cargo shipments before they arrived to ensure that appropriate import duties had been assessed).

In his rulings, Judge Devaud quoted an internal SGS document in which an official of the company—who had visited Pakistan after Bhutto returned to power in 1993—characterized Zardari's standing: "In his view, Asif Zardary [sic], BB's husband, is deputy PM officially with a lot of pwr [sic] ... The influence of Asif Zardary is real and he has in the past always helped and favoured his friends and cronies ..." In 1997, after Zardari had been imprisoned in on suspicion of corruption, Devaud alleged that Bhutto herself had purchased a necklace worth 117,000 British pounds from a London jeweler—using cash and a bank transfer from the account of Bomer Finance, a British Virgin Islands company, which the magistrate said was jointly controlled by Bhutto and Zardari. (Her supporters claimed this allegation was based on trumped-up evidence supplied by her political enemies. Bhutto herself reportedly claimed her husband had bought the necklace but never told her about it).

Devaud ordered suspended prison terms for the defendants and directed them to pay restitution and compensation to the Pakistani government. Under Swiss legal procedure, Bhutto, Zardari and their lawyer were allowed to appeal the judge's convictions to a Geneva police tribunal. They did appeal, resulting in the dismissal of Judge Devaud's guilty findings against them. The case was then referred for further investigation to the office of Geneva's local prosecutor, Daniel Zappelli, who decided to continue the investigation, only this time with a view toward possible charges of "aggravated" money laundering under Swiss law.

Neither the prosecutor nor a spokesman for his office could be reached for comment. But Judge Devaud confirmed to NEWSWEEK that the prosecutor's office was still investigating "aggravated" money-laundering offenses. Likewise, Jacques Python, a Geneva lawyer hired by Pakistan to work with Swiss authorities on the corruption case, said he had every reason to believe that the Geneva prosecutor's investigation was still open. And Alec Reymond, a lawyer who had represented Bhutto in connection with the Swiss investigation, also says the case is still open.

Devaud said that a Pakistani government anti-corruption agency had posted on its Web site what he described as competent English-language translations of the original orders he had issued against Bhutto, Zardari and Schlegelmilch in 2003. Around the time Bhutto and Zardari returned to Pakistan from exile last year, however, the documents outlining the charges against them disappeared from the government Web site, Devaud said. But the document outlining the case against Schlegelmilch, the couple's Swiss lawyer, includes key elements of Devaud's findings against Bhutto and Zardari, and can still be read here.

Python disclosed that several weeks ago, after Zardari and his political archrival Sharif assumed control in Islamabad earlier this summer, the Pakistani government fired Python as its Geneva lawyer, effectively withdrawing its complaint.

Zardari's allies believe the Pakistani government's withdrawal from the Swiss investigation will soon lead to the termination of the probe. Pakistani officials say the amnesty order in effect undermined any continuing Swiss investigation by declaring there was no corruption on the part of Zardari and Bhutto, and therefore no corrupt payments could have been laundered in Switzerland or anywhere else.

Earlier this year, Zappelli, the prosecutor now in charge of the case, was quoted in the French-language press saying: "The future of the case depends on Pakistan, who initiated this investigation ... if it withdraws its complaint, there will no longer be a victim."

However, two other Swiss legal sources close to the case, who asked for anonymity when discussing sensitive information, said they believe the Geneva prosecutor could continue to pursue the case, given that the investigation did turn up evidence, which was not exclusively supplied by Pakistan, of violation of Swiss money-laundering laws. Ultimately, said one of the sources, Swiss prosecutors have three possible courses of action: close the case entirely, prosecute it by bringing it into a superior court or arrange the Swiss version of a plea bargain, in which money seized by Swiss authorities during the investigation probably would be confiscated or handed over to charity, but charges would be settled without any prison sentences.