Thursday, January 15, 2009

Pakistani-American: Mr. Thirty Percent of Silicon Valley

Most people are familiar with the moniker of Mr. Ten Percent bestowed on Pakistani President Asif Ali Zardari. Now meet Mr. Thirty Percent, Ausaf Umar Siddiqui, a Pakistani-American in Silicon Valley, who is accused of receiving illegal kickbacks of up to 31 percent from vendors of Fry's Electronics.

According to San Jose Mercury News, Siddiqui, the son of a Pakistani diplomat, was a computer salesman who rose through the ranks to help build Fry's Electronics into a giant retailer over the last twenty years. He is now facing allegations that he defrauded the San Jose company out of $65 million, much of which he used to pay off enormous gambling debts in Las Vegas.

Fry's Electronics is a specialty retailer of software, consumer electronics, computer hardware and household appliances with a chain of superstores headquartered in Silicon Valley. Starting with one store located in Sunnyvale, California, USA, the chain now boasts sales of $2.4B with 34 stores located in several Western states, two near Atlanta, Georgia, multiple locations in Texas, and one each in Illinois and Indiana. Often described as geek central, Fry's stores employ a large number of South Asians and other immigrants in various capacities throughout their stores in Silicon Valley, CA.

Siddiqui, who goes by "Omar" and was Fry's vice president of merchandising and operations, appeared in federal court in December, where prosecutors filed a complaint alleging he masterminded a "secret kickback scheme to defraud Fry's Electronics of millions of dollars."

Siddiqui persuaded Fry's that the company should eliminate sales representatives on his accounts, and instead, he would act as a middleman between vendors and Fry's. He promised that he would save the company a lot of money that way. But instead, the complaint alleges, he ended up charging exorbitant commissions — up to 31 percent, or ten times the usual amount — to the vendors, which he funneled to his own straw company, PC International, according to San Jose Mercury News.

A 42-year-old bachelor, Siddiqui has expensive tastes and a serious gambling problem. He was known around the office for driving fast cars, carrying wads of $100 bills in his pocket and boisterously rooting during sports events he watched on the four TV screens in his office. He spent $162 million in three years at the MGM Grand Casino and Las Vegas Sands Casino, according to his bank statements detailed in the complaint written by IRS Agent Andres Gonzalez. Siddiqui owns a luxury condo in Palo Alto, a Mercedes and a Ferrari, and he used to fly into Las Vegas frequently on Fry's corporate jet. He had a long list of demands for the hotel staff (who called him Mr. S) during his frequent visits to Las Vegas hotel casinos. He demanded Aramis cologne and badger hair shaving brush. Lint-free towels. Dom Perignon Rose champagne and Kurosawa Sake in the fridge. And never, under any circumstances, approach him from behind. If the hotel staff didn't want to face Mr. S's wrath, maids knew to arrange bowls of Glitterati Mentissimo peppermints adorned with a single rose throughout his suite, and to stock his shower with Nioxin shampoo for "fine and thinning hair." White vases were a no-no — he considered them bad luck.

There's a saying in America: Nothing is certain but death and taxes. No one can fool the Grim Reaper and the Tax Man. Like others before him, Siddiqui seems to have been nailed by the IRS, America's feared tax collectors who were tipped off by one of Siddiqui's colleagues at Fry's.

Allegations against Omar Siddiqui have been getting a lot of local media attention in Silicon Valley, California, since his arrest in San Jose a day after Christmas. However, with the exception of a few isolated instances of immigration and terrorism charges after 911, the news of Pakistani-Americans getting in trouble with the law is rare. There have been a few instances of white-collar crime involving alleged violations of the SEC rules. The vast majority of the estimated 500,000 Pakistanis in the United States are legal immigrants with about a half of them with citizenship status. Highly educated with many in professions such as medicine and engineering, Pakistani-Americans are a very affluent ethnic group whose median household income is 62% higher than the national average.

Related Links:

Atiq Raza Pays $3m Fine, Settles With SEC

NED Alumni Convention 2008 Draws 400 NEDians

Silicon Valley Summit of Pakistani Entrepreneurs

Mortgage Fraud Funds Bollywood


Anonymous said...

No No No... No Pakistani will do such things. It must be the CIA-RAW-Mossad evil axis trying to defame Pakistan!

Anonymous said...

Riaz - Hopefully this post makes Jadev, Ray, and many of those anonymous writers happy that you are a free writer indeed. Thanks for the post and facts.

Anonymous said...

And you made good reference to Mr. 10%. At least Mr. 30% turned an ordinary shop to a $3B business, whereas Mr. 10% is busy sucking the last drop of blood from the wonder its called the 'God Gifted State'.

Pakistani Tamil ;-)

Anonymous said...

That was an awesome story Mr Haq,I enjoyed this post what a con-artist.I respect USA, its really a conservative country, as contrary these things would have been perfectly fine and ethically ok in India and Pakistan really.Kind of a norm in Mumbai, Karachi, Dacca, Colombo, Dubai,buisness communities etc etc.

Riaz Haq said...

There's a saying in America: Nothing is certain but death and taxes.

No one can fool the Grim Reaper and the Tax Man.

Like others before him, Mr. S got nailed by the IRS, America's feared tax collector.

I don't know if you have heard of Al Capone. He was a Chicago gangster who was able to stay out of jail until the IRS got hold of him for not paying taxes on his income from extortion and selling moonshine. His accountant gave him away. He spent the rest of his life in jail.

Abdi said...

Well well well. it is really nice to know that commission and kickbacks can be used in something good to. Look at the company it rose from ashes to become one of the giants in US.

It was heartening to see that although he used all his money on wrong things at least he enjoyed it to the fullest.

Not like many of us who take it to their graves.

hi please visit

Riaz Haq said...

Anil Kumar, one of the Indian-Americans accused in the insider trading case, has pleased guilty, according to media reports:

Anil Kumar, a former director of global management consulting firm McKinsey, has pleaded guilty to fraud charges.

He says he made $2.6m (£1.6m) giving inside market information to one of America's richest men, Raj Rajaratnam.

Prosecutors allege a list of crimes, including that Mr Rajaratnam paid Kumar between $1.7-$2m for his tips.

Kumar entered the plea in a US District Court in Manhattan in a co-operation deal aimed at strengthening the government case against Mr Rajaratnam.

Secret tip-offs

The billionaire hedge-fund operator is said to have made $19m from investments after Kumar, a former senior partner and director at McKinsey & Co fed him tips between March and July 2006 about the acquisition of ATI Technologies by Advanced Micro Device.

But this week, John Dowd, Mr Rajaratnam's lawyer, said: "An analyst's prediction that AMD would acquire ATI was widely reported in the press more than seven weeks before the acquisition was announced."

The government filed papers this week in Mr Rajaratnam's case to say they planned to file additional charges against him after learning about the $19m, which prosecutors say raises the amount Mr Rajaratnam made from illegal deals to at least $36m in profits.

Riaz Haq said...

A Pakistani-American executive Kamal Ahmed has been caught in the Galleon financial scandal. Here's an excerpt from a San Francisco Chronicle report:

.. Kamal Ahmed, a Morgan Stanley managing director in Menlo Park. According to federal prosecutors, he provided inside information about Advance Micro Devices' July 2006 takeover of a Canadian firm, ATI Technologies, information that ultimately found its way to the captain of the pirate ship hedge fund, Raj Rajaratnam.

Ahmed's alleged involvement was revealed in a government court document Friday concerning Rajaratnam's trial, scheduled for Feb. 28.

The 42-year-old banker is cooperating with investigators, said his lawyer, Douglas Tween of New York's Baker & McKenzie in a statement. He is "confident that when the investigation is completed, and all the facts are gathered, it will be shown that he did nothing illegal or unethical."

According to securities filings and other sources, Ahmed works at Morgan Stanley's investment practice in Menlo Park. He was one of 241 new managing directors named by Morgan Stanley in December 2007.

On its website, OPEN Silicon Valley, a Pakistani American business organization, Ahmed, a Los Altos resident, is described as having "led a wide variety of financing transactions and has executed numerous mergers & acquisitions" for Morgan Stanley since 1999," according to information Ahmed provided to the organization.

Prior experience included stints at Merrill Lynch and Credit Suisse First Boston.

According to Institutional Investor, Ahmed was one of two Morgan Stanley managing directors advising Hewlett-Packard on its $2.7 billion takeover of 3Com last year, earning the investment bank tens of millions of dollars in fees.

He is listed on the advisory board of Folio3, a Redwood City organization with offices in Pakistan and Bulgaria, which is "focused on helping entrepreneurs and small enterprises successfully build and manage an offshore software development presence."

A Yale economics graduate and Cornell University MBA, with 383 connections according to his LinkedIn profile, Ahmed could have plenty to say if he's cooperating with the feds. Morgan Stanley advised AMD on the ATI deal, and provided a $2.5 billion loan to finance it.

Saratoga resident Anil Kumar, a McKinsey consultant since fired by the firm, pleaded guilty and was fined $2.8 million last year for providing insider information to Rajaratnam, including the planned AMD takeover of ATI.

Riaz Haq said...

Indian-Americans are being scrutinized by the IRS for tax evasion, according to a NY Times report:

Last July and September, the Justice Department mailed “target” letters to around 50 Indian-Americans with offshore bank accounts, telling them that they were under scrutiny for suspected offshore tax evasion through accounts in India, Mr. Horn said.

Credit Suisse and Swiss cantonal banks are also under scrutiny. Robert Katzberg, a white-collar criminal defense lawyer in New York, said that the pressure on HSBC showed that “the fallout of the UBS scandal, which still has far to go within Switzerland, has spread to other countries.”

The request, made in court papers filed in the Federal District Court in San Francisco, seeks to force HSBC’s main United States affiliate, HSBC Bank USA, to turn over details of accounts held by wealthy Americans from 2002 through 2010 through the bank’s affiliate in India, HSBC India. Approval from a federal judge is required before the Internal Revenue Service can issue the summons.

HSBC Bank USA operated representative offices for HSBC India under the name N.R.I. Services — N.R.I. stands for Non-Resident Indian — in New York and Fremont, Calif., according to court documents. The offshore private banking services were offered to people of Indian origin living outside of India.

In a statement, HSBC said that “while we haven’t seen the summons, HSBC does not condone tax evasion and fully supports the U.S. efforts to promote appropriate payment of taxes by U.S. taxpayers.”

It continued, “While complying with the law in all the jurisdictions in which it operates, including India, HSBC cooperates with requests from U.S. authorities.”

The statement added: “We have been engaged in a constructive dialogue with U.S. authorities. We hope any ‘I.R.S. Summons’ issues can be resolved expeditiously.” A bank spokeswoman, Juanita Gutierrez, declined to comment further.

HSBC is one of the biggest banks for clients from India, China, Hong Kong, Singapore and elsewhere in the East, according to top tax lawyers. In 2007, the bank said in a press release announcing the opening of its N.R.I. office in Fremont, Calif., that it served more than 160,000 non-resident Indians worldwide.

The release announced a “new banking solution” for nonresident Indians “that allows the N.R.I. community to conduct cross-border banking transactions.” In 2003, after the technology bubble, Merrill Lynch estimated that there were 200,000 millionaires of Indian origin in the United States alone, part of the explosion of wealth among Indians in recent years.

In January, federal prosecutors indicted a former HSBC client, Vaibhav Dahake, who was born in India and became a naturalized American citizen in 2006. Mr. Dahake, according to court papers, told prosecutors that HSBC had sought out wealthy Indian-Americans for undeclared offshore banking services through N.R.I. Services. The bank was not identified in the papers but was confirmed at the time as HSBC by people close to the matter.

Mr. Dahake, according to his indictment, told prosecutors that his banker had told him that no United States disclosure forms were required, that the account was not taxable in India and that no forms reporting the interest income would be filed with the I.R.S.

Holding a foreign or offshore account is legal, but American citizens and residents must file annual disclosures with the I.R.S. for accounts with more than $10,000.

Riaz Haq said...

A disgraced former Fry's Electronics executive has pleaded guilty to two felony charges in a wide-ranging criminal Internal Revenue Service case and could face up to six years in federal prison, according to a SJ Mercury News report:

A plea agreement unsealed this week in the case of Ausaf "Omar" Siddiqui shows the Palo Alto resident, once a vice president at Fry's, pleaded guilty to one count of wire fraud and one count of money laundering. He is expected to be sentenced before U.S. District Court Judge Jeremy Fogel on Dec. 8.

In exchange for the plea and agreeing to cooperate in any further government investigations, federal prosecutors dropped seven other felony charges against Siddiqui that were contained in the original indictment that accused him of wire fraud and money laundering totaling $6 million.

As part of the agreement, which had been under seal since February, Siddiqui admitted that from 2004 to November 2008, he set up a scheme to defraud Fry's "in order to induce Fry's vendors to pay money to me and not Fry's."

He admitted to setting up sham companies for vendors to pay kickbacks to him, and said that vendors had secret agreements to pay him kickbacks to do business with Fry's, the agreement states. Siddiqui admitted that on numerous occasions, vendors sometimes gave "loans" "amounting to millions of dollars" to his sham companies, the agreement states.

Siddiqui admitted that "as a result of the kickback scheme, Fry's overpaid for merchandise from the
vendors by at least the amount of the kickbacks paid to me" and the sham companies, the agreement states.

Fry's has repeatedly claimed no knowledge of this scheme, denied customers were ever affected negatively and fired Siddiqui shortly after his December 2008 arrest by IRS agents. Tuesday, Fry's spokesman Manuel Valerio was not immediately available for comment.

In addition to possibly receiving a maximum of six years in prison, Siddiqui also agreed to pay $65 million in restitution; he's allowed to subtract out what the government has already taken from him, including about $54,000 in bank accounts, $30,000 in cash, a 2006 Mercedes and a 2002 Ferrari.

It's unclear how he'll pay the restitution in light of his July bankruptcy filing listing $137 million in debt -- much of that owed to casinos around the world. He was once a prized "whale" in Vegas, a high roller who demanded that casino butlers and bellboys call him "Mr. S" and fill his room with golden raisins, bottles of Dom PĂ©rignon and Glitterati Mentissimo peppermints adorned with a single rose.

Siddiqui also faces several civil lawsuits from vendors, totaling at least $10 million. The lawsuits name both Siddiqui and Fry's as co-defendants, arguing that the company was aware of what Siddiqui was doing. Fry's has denied any wrongdoing.

Much about this case has been kept private and some of it has been under seal. Siddiqui himself has refused to speak to this newspaper, as have his defense attorney, Paul Meltzer, and assistant U.S. attorney Thomas Moore.

Siddiqui's agreement in February was sealed for unknown reasons, and in a surprising turn, Moore's office requested that the judge unseal the deal in late August, which the judge did Friday.

Riaz Haq said...

Mrs. Pakistan defrauded homeowners in Silicon Valley, reports San Jose Mercury News:

With "almond-shaped eyes," "flawless skin" and ''full beautiful lips," Saman Hasnain easily took first place in the 2008 Mrs. Pakistan World beauty pageant, according to the group's president.

But the same physical assets that snared Hasnain that top title also helped her lure South Bay homeowners into a loan modification scam she and her husband Jawad operated from 2008 through October 2010, prosecutor Victor Chen contends.

"She was really pretty," said Korina Diaz, a Gilroy waitress who lost her ranch after paying the couple $11,500 to lower her mortgage payments. "She wore a skirt suit, high heels, nylons -- like a real good-looking professional lady."

Saman's striking appearance was crucial, Chen said, because the couple didn't know their victims and had to make a good first impression. They attracted homeowners by word-of-mouth and through fliers passed out at ethnic supermarkets after the housing market tanked, according to Chen.

Now the Santa Clara County deputy district attorney has charged them with ripping off 17 people -- just a fraction of the 80-100 families he says they defrauded. The Hasnains each face 19 felony counts of conspiracy to commit grand theft in the loan-modification scheme, and Jawad also has been charged with nine additional counts of felony grand theft for allegedly enticing victims from 2006 through July 2010 into investing in a fraudulent 10-unit condominium development in Fremont.

However, there is one big problem: Earlier this month, the couple fled with their two young sons to Lahore, Pakistan -- a country that has no extradition arrangement with the U.S.
Friends hurt, too

Jawad faces a maximum of 19 years and four months in prison, and Saman at least four years. But it is rare for white-collar criminals to serve that much time; often, they serve far less, especially if they pay their victims back.

Diaz, 38, said she and her husband were not behind in their payments when she picked up one of the couple's loan-modification fliers at a Mexican supermarket in Gilroy.

But they were worried that her husband's concrete business would drop off after the housing crash, making it difficult for them to keep up with the $6,000 a month mortgage on their 2.5 acre, $1 million ranch. Diaz said after she paid the Hasnains the $11,500, the couple advised her to stop making the mortgage payments, otherwise the bank wouldn't have an incentive to renegotiate the terms of the loan.

Diaz was so impressed by the couple that she invited about 30 friends to her house to listen to their pitch. About 20 also forked over thousands, she said, and most lost their homes.

Diaz didn't figure out she had been bilked for about 10 months -- too late to stop a Florida bank from taking their home. Now, she and her husband and three kids live in a cramped apartment.

Her advice to others to avoid being duped?

"Not to believe anybody," she said, "who comes knocking on your door, even if they look nice."

Riaz Haq said...

#Pakistani-American Zafar Haider "Bling King" Pleads Guilty in Scam That Affected Miami Heat Players via @nbc6 #Pakistan #America