Introducing Darik Elwan
“While at the bank, Elwan orchestrated a $250 million loan and a $240 million loan guarantee that made the utility project, called Hubco, possible … officials say they have evidence that Elwan and the others benefited personally… Elwan resigned … and started a Washington-based company called Infrastructure Capital Group (ICG).”
Located in Washington DC, ICG Properties lists Ibrahim Elwan’s son Darik as co-founder and indicates that his two partners are David Stern and Stylianos Christofides.
World Bank Probes Pakistani Project
Former Staffer a Focus of Investigation
Ibrahim I. Elwan was a World Bank energy technocrat who lived in a plain house on a small lot in Arlington. One summer he moved to a $1.3 million Georgian residence on a street of gated estates.
He resigned from his job a year later and within months he was an influential player in the rapidly developing utility industry of South Asia.
Now, Elwan’s life is taking another abrupt turn. The World Bank’s recently created internal fraud team has been investigating him since July as part of a larger effort to clean up possible corruption, sources familiar with the probe said. Last week Pakistan’s government filed criminal charges accusing Elwan of fraud and misappropriation of funds in a World Bank utility project he masterminded. Charged with him were top utility executives and Asif Ali Zardari, the husband of former Prime Minister Benazir Bhutto.
The case has thrust Elwan, 55, an obscure utility expert, into a consumer and financial scandal playing out overseas. While at the bank, Elwan orchestrated a $250 million loan and a $240 million loan guarantee that made the utility project, called Hubco, possible. But Pakistan officials say they have evidence that Elwan and the others benefited personally from sweetheart deals that forced the government to pay exorbitant electric rates and left consumers unable to afford electricity. Hubco has denied the allegations, saying the government is using criminal charges to strong-arm the company.
The World Bank’s corruption squad is examining the roles played by Elwan and others in managing Hubco and other huge international energy deals. The energy sector comprises about 20 percent of the bank’s total lending. The bank lends billions of dollars annually to support development projects intended to alleviate poverty around the world. The Washington Post reported in July that World Bank President James D. Wolfensohn had set up a special team from the bank’s Internal Audit Department and hired PricewaterhouseCoopers LLP auditors to investigate possible corruption.
So far, bank investigators have tried to trace Elwan’s international holdings and examine the vast financial records of the Pakistan projects. Ann E. Elwan, reached at her husband’s Washington business, said he was out of the country and unavailable for comment. She declined to comment on his behalf.
A World Bank spokesman would neither confirm nor deny that Elwan was under scrutiny. Bank officials acknowledged, however, that the internal team is investigating the Hubco project. “The bank is concerned about these reports and has requested further information as to the nature and scope of the allegations” in Pakistan, said World Bank spokesman Mark Malloch Brown. “It is inappropriate at this stage to comment on the nature or status of the inquiry.”
Who is Darik Elwan?
Elwan is an Egyptian national. He graduated from Oklahoma State University with a degree in industrial engineering and management in 1965 and earned a master’s degree in economics from the University of Oklahoma, bank records showed. Before joining the bank in 1976, he worked in Canada, teaching at the University of Toronto, and working for Shell Oil Co. and Ontario Hydro, an electric utility. For 10 years he was a mid-level expert on power and transportation projects. In 1986 he was promoted, becoming a manager on energy projects in South Asia, Work Bank spokesman Paul Mitchell said. At the time, the bank was trying to stimulate investment in Pakistan’s underdeveloped energy sector. But private investors were frightened by Pakistan’s instability.
By 1991 Elwan appeared to have found a way around those fears: a World Bank guarantee that protected lenders against political risks. His innovative work was widely praised in the energy trade press. Through the 1990s the bank played a role in financing 12 energy projects in Pakistan. The bank’s guarantees also effectively made stock in Hubco, which is now traded publicly on the Karachi stock exchange, a risk-free investment. Elwan also guided planning for the $1.8 billion Hubco power station, built by an international consortium. The plant, located near the Hub River in Balochistan, northwest of Karachi, supplies 13 percent of Pakistan’s electricity. In August 1993 Elwan’s personal fortunes appeared to improve dramatically.
He sold his $115,000 Arlington home for $585,000 and took out an $800,000 mortgage on a $1.2 million, 6,500-square-foot home in the District’s Spring Valley section, real estate records showed.
Bank spokesman Mitchell would not disclose Elwan’s salary. Mitchell said Elwan was not promoted in 1993; his only promotion occurred in 1986. On Nov. 30, 1994, the bank approved the final piece of the Hubco loan package. Elwan resigned a month later and started a Washington-based company called Infrastructure Capital Group (ICG).
In interviews at the time, Elwan said the company would finance, build and run power projects in South Asia. Two other World Bank officials who had worked on Hubco joined the new firm. In July 1995 Elwan’s company made its first deal, putting together investors to start Liberty Power Ltd. It promptly received a letter of support from the Pakistan government to build a $500 million power plant near Dharki in the Sindh province. The action was unusual because Pakistan had placed a moratorium on such letters of approval, which allowed companies to finance and operate energy plants. The project had no World Bank loans or guarantees.
Invalid Loan Guarantees
Around the same time, the bank’s loan guarantees were achieving their purpose and investors’ money inundated the country. But the Pakistan government was awash in corruption. On Nov. 5, 1996, Bhutto was ousted and her husband was accused of exploiting hundreds of government transactions — including defense contracts, awarding of broadcast licenses, and power plant deals — to pay for his lavish expenditures and investments. The Hubco plant became operational in late 1996, and a few months later, newly elected Prime Minister Nawaz Sharif called its rates, negotiated by the Bhutto regime, exorbitant, demanding that they be cut in half. The companies maintained that the new government must honor the contracts. Hubco filed a suit, which is pending. Sharif’s government, which itself has been accused of corruption by Benazir Bhutto, notified Liberty Power in May that it had found irregularities in its contracts and threatened to cancel them. The dispute has caused Hubco’s stock prices to plunge more than 80 percent since January. On Wednesday, the International Monetary Fund indefinitely delayed scheduled talks in Pakistan, saying the government must resolve its conflict with the private utilities before discussions can resume. Thus far in the World Bank probe, the bank has filed a civil lawsuit against a former official, Fritz Rodriguez, who allegedly awarded a $434,000 contract in Algeria to a friend’s company. Two unnamed bank employees were fired in September for allegedly misusing $110,000 in a Japanese government sponsored fund for personal gain, the bank disclosed. The team also has looked into alleged misuse of two loans totaling $1.3 billion that were intended to restructure the Russian coal industry. Bank sources said that those charges remain unresolved.This review (Fraud and Corruption Surround ICG Properties Founder) was originally published at The Skeptic Tank. To read the full review, go to – www.skeptictank.org/darik-elwan/