Uttara Bank faces Tk 62 crore rent fraud allegations

Uttara Bank’s head office is located in Motijheel, Dhaka, housed in its own 18-story building. Aftab Group is a tenant occupying four floors of the building, housing five entities, including the group’s head office. The space was rented out 14 years ago at a “dirt cheap” rate.

According to the agreement, the lease was supposed to be renewed every two years with a condition to increase the rent. However, that renewal never took place to this day, and the offices continue to operate uninterrupted.

As a result, allegations have surfaced regarding the embezzlement of at least Tk 62 crore over the past 14 years through rent fraud. Yet, there is no one to raise a voice because Md Azharul Islam, the executive chairman of Aftab Group, is himself the chairman of the bank, while the bank’s Vice Chairman Iftekharul Islam serves as the managing director (MD) of the group.

Influenced by these two top officials of the bank management, the authority remains virtually helpless, and even Bangladesh Bank (BB) has failed to take effective measures despite repeated efforts. These details came to light through an analysis of the central bank’s inspection report and an investigation by Agamir Somoy.

The report by BB says due to the influence of Azharul and Iftekharul, the bank management authority could not impose any new rental rates for a long time, resulting in not a single penny being raised even after 14 years.

In the commercial hub of Motijheel, at least 8,000 square feet of floor space in the building adjacent to the metro rail has been rented out to the group. Essentially, lease agreements were executed for five entities associated with the interests of those two top bank management officials at a rate of just Tk 65 per square foot.

This comes despite rent being collected at up to Tk 280 per square foot from other entities occupying relatively inferior positions in the same building. This means the difference in monthly rent between Aftab Group and other tenant institutions stands at Tk 215 per square foot.

Based on this calculation, the monthly loss incurs Tk 17.20 lakh, amounting to Tk 2,06,40,000 annually, which accumulates to a total loss of Tk 28,89,60,000 over 14 years.

Officials from the internal accounts department of Uttara Bank said if the rental rates had been updated every two years according to market value as per the agreement, the bank’s losses on the space rented to Aftab Group entities would have exceeded Tk 62 crore, a figure that was kept off the books during external audits by taking advantage of various loopholes.

The inspection team of BB had also raised objections on several occasions. However, the bank repeatedly requested time extensions and ultimately failed to submit the actual rental accounting to the central bank.

In other words, Uttara Bank squandered at least Tk 62 crore over 14 years across these five entities. Stakeholders alleged that such arrangements were made solely to protect the interests of the bank’s chairman and vice chairman.

The BB report mentions that the building formally began operations in 1989 under a long-term plan keeping the bank’s prosperity and expansion in mind. Over time, various floors of the building beyond the bank’s own operational requirements were leased out. On 7 February 2012, space was leased to five entities affiliated with the bank’s director and chairman and vice chairman.

These entities are M/S Aftab Fertilizer & Chemicals Limited and the head office of Aftab Group on the 5th floor, M/S Sea Trade Fertilizer Limited and M/S Millners Pumps Limited on the 6th floor, and M/S Delta Life Insurance on the 10th and 11th floors. Among them, M/S Delta Life Insurance vacated the building in October, according to bank authorities.

An analysis of documents reveals that the lease for the building began on 1 July 2012, and was said to be effective for six years until 30 June 2018. The lease stipulated that rent should be re-determined every two years through mutual consultation based on prevailing market rates. The lessee was required to pay government-mandated VAT at a rate of 9 percent on the monthly rent.

Provisions were kept to extend the lease term for subsequent periods under mutually agreed conditions between the lessor and lessee. The lessee was required to provide written renewal notice to the lessor at least 60 days before the lease expiration, while the lessor was to convey written consent or refusal at least 30 days prior to the end of the term.

However, the central bank’s inspection team found no record of any subsequent rent increase for these floors.

The central bank’s inspection report explicitly said, “Leasing to entities associated with Uttara Bank’s Director and Chairman Md Azharul Islam and Vice Chairman Iftekharul Islam constitutes gross irregularity and negligence.”

BB spokesperson and Executive Director Arif Hossain Khan told Agamir Somoy on Tuesday, “According to the law, no bank can lease out a building to an organization. If the situation becomes exceptionally dire, it may lease out space temporarily with the approval of BB to overcome the crisis.

“Once the situation improves, space or floors leased for a specific period can in no way remain rented out. If any bank leases out space in violation of regulations, it is a punishable offense under the Bank Company Act. If the chairman or vice chairman of a bank leases space to any group or institution tied to their interests, it is a direct violation of the law.

“If the bank authority fails to comply after Bangladesh Bank directs them to remove these entities, Bangladesh Bank will be forced to take action in accordance with the law.”

Uttara Bank Managing Director (MD) Md Abul Hashem acknowledged the various irregularities regarding the building lease to Agamir Somoy, saying, “We are taking a strict stance. Measures have been taken to put locks on some spaces to have them vacated. Everything will be completely vacated by next December. No further concessions will be made.”

The BB report further says entities under Aftab Group were leased space at a rate of Tk 65 per square foot. However, on the rooftop of the same building, Grameenphone was charged Tk 158.33 per square foot, Ranks IT Tk 280, and X-Net Limited Tk 258.82.

Then, under instructions set out in Section 44(5) of the Bank Company Act, 1991, Inspection Department-1 of BB sought an explanation from the bank on 30 June of the same year, following an inquiry initiated on 18 June 2014, titled irregularities in leasing floor space of the Uttara Bank building.

Pursuant to Section 10 of the Bank Company Act, 1991, no bank may hold immovable property not required for its own use for more than 7 years. Under Section 10(2) of the same act, BB may extend the rental period by a maximum of five years in the interest of depositors. In the case under review, several floor spaces at the bank’s head office were leased to eight entities, and in some instances, this rental period exceeded seven years.

The report noted that approval from BB was not obtained in accordance with the provisions of the Bank Company Act.

The report noted that on 12 November 2014, the Banking Regulations and Policy Department of BB granted permission to remain until the expiration of the lease agreement, while explicitly instructing that under no circumstances should space be leased to a bank director’s own business enterprise in the future; following this, on 22 January 2015, letters were issued instructing the entities associated with chairman and vice chairman to vacate the floor space upon contract expiration.

Moreover, BB issued letters to Uttara Bank on 14 January, 7 February, 21 March, and 26 June 2018, requesting that the entities vacate the floor space at the end of their lease terms. Despite several reminders, Azharul and Iftekharul ignored all notices, failing to vacate the floor space even after the lease agreements had expired. In 2019, a lawsuit was filed in court on behalf of Uttara Bank to prevent the evacuation of the leased floors.

To obtain comments regarding the aforementioned irregularities, the reporter visited the office of Uttara Bank Chairman Azharul on 2 November. His staff officer said, “Chairman will not speak to any journalist. He is busy.”

Following that, the reporter visited his office again on 8 November. After revealing the reporter’s identity, security personnel did not permit entry inside the floor. Later, on 9 November, when a phone call was placed to the chairman’s mobile number, he answered.

However, upon hearing the reporter’s identity, he disconnected the call. A text message detailing the matter was then sent to the same number via WhatsApp. As of 10 pm Tuesday, he did not responded.