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Fugitive Financier Sought In Pakistan

Aseem Chhabra

Thirty-five year-old financial entrepreneur Mohammad Ali Khan had everything working for him. By thirty, he had a luxurious waterfront apartment in Jersey City, NJ, with a view of Manhattan, his own small brokerage shop on Wall Street, and his "charming personality and gracious manners" that won him major clients.

There were some clients of questionable reputation -- including members of the Gambino family. In recent court papers filed in the State Supreme Court of New York, the Gambinos (including Thomas F Gambino, who is serving a five-year prison term) have accused Khan and his associate Maurice Gross of swindling the family and using its money for "unauthorized trading".

Meanwhile, US prosecutors, the Securities and Exchange Commission and the New York state attorney's office have filed separate lawsuits against Khan, on charges of grand larceny and committing securities fraud, including lying and enticing at least 55 people to invest approximately $ 2.7 million in his brokerage firm.

For four years, starting with the 1995 opening of his Wall Street firm, Klein Maus and Shire, Khan had it really good. However when things started heating up last year, Khan, along with his wife and two sons, reportedly fled the country.

The New York Times recently quoted the Gulf Times from Qatar as saying that Khan had returned to his native Pakistan. In New York, Khan faces a trial and in the event of conviction, up to 15 years in prison.

"Mohammad was nice guy, a sweetheart of a man, who had nice manners; he never lost his temper and was an impeccable dresser," Gabriel Bernaschina, a former chief financial officer at Khan's brokerage firm told rediff.com

Bernaschina added that he left the firm after a 14 months tenure when he began to realize that "something was not on the up and up, something was wrong and about to change."

Khan's life in the US is a strange mix of facts and fiction. Reports indicate that he arrived in the US 19 years ago.

Tariq Al-Rifai, a Chicago-based Kuwaiti research consultant on Islamic finance, first met Khan three years ago through the Harvard Islamic Finance Information Program. Speaking to rediff.com, Al-Rifai said he was very impressed with the stories he heard from Khan about his early life in the US.

He said Khan had told him he had started in the US with nothing, that he drove a taxi as a student and then made his money by building up a chain of video stores, which he sold off to finance his move into investment.

"It sounded like the American dream," Al-Rifai added. "I know people like that so his story was believable. I thought he was a bright guy, very dedicated, very intelligent. But looking back at it I don't know what to believe. There was some truth to it and the rest of it wasn't true."

To SEC regulators, Khan said he worked for a couple of years as a video store clerk , while a student in the late 1980s at Rutgers University in New Brunswick, NJ. Others claims, some of which have been questioned by prosecutors and in recent news reports, include a stint as a trainee at the Magyar Savings Bank in North Brunswick, NJ, and a year selling insurance for the Prudential Insurance Company. In the 1990s he also reportedly worked at a couple of small brokerage companies, each of which ran into trouble and then folded.

Khan opened the office of Klein Maus and Shire on the 24th floor of 110 Wall Street. With the prestigious address the firm acquired reputable clients. The clients as well as employees were wined and dined, including a grand black tie Christmas party in Atlantic City, NJ, in December 1996.

"I remember Maurice Gross telling me that he was going to bring Willie Mays (the retired baseball player) as a client and make (Mohammad) Ali (Khan) rich," Bernaschina said, adding that Gross had earlier faced problems in his previous position at Gruntal & Company, a New York brokerage firm.

The Gambino family were Gross'ss clients at Gruntal. They followed him when he joined forces with Khan.

Bernaschina said Khan seemed to have grand plans, including that of opening a branch office in Dubai. Khan spent a substantial amount of his time trying to raise money for the Dubai office and was often traveling to the Middle-East, he added.

Al-Rifai said he met Khan twice -- once in New York and then in Bahrain.

"When I first went to meet him in New York, I never met him, since he canceled the appointment," Al-Rifai said. "He was well known for that, for not showing up, or changing his mind. He was invited to speak at Harvard University. He was on the conference brochure, but he never showed up. He was invited to speak at the annual Islamic Banking and Finance Forum at Bahrain, He attended, but never spoke."

Al-Rifai said Khan basically "lacked the depth of knowledge" about banking and finance.

"He was just there to make a quick buck," Al-Rifai said. "He did not understand the market. He was not really involved in it. He was looking for a niche market (such as Islamic finance) something he could use his name as leverage to attract funds."

Bernaschina said there were two things that made him leave Klein Maus and Shire. He once heard a bond trader make claims that the firm had assets worth $ 27 million. He later learnt that that was the company's official line.

"I knew that something was not right," Bernaschina said. "We didn't have that kind of money. We only had $ 400,000 in capital at that time."

He raised the issue with Khan, who shrugged it off as a "mistake" and that "everything will be straightened away".

Later the SEC came to investigate some of Khan's dealings, which Bernaschina said was a sign for him to leave the company.

According to the court documents filed, by early 1997 the Gambino family's accountant, Joseph Gluckman, began to notice improper activity in his clients' accounts at Khan's firm. Over the next several months Gluckman raised his concerns with Gross, even threatening to report the matter to SEC.

The SEC eventually caught up with Khan and Gross. By the fall of 1998 the regulatory body was investigating unethical ways in which Khan was raising money for a new venture, the US Financial Group. Meanwhile early last year the office of Eliot Spitzer, New York state's attorney-general office, intervened when it learnt that Khan was attempting to transfer approximately $ 2 million of his clients's invested money into a bank account in Dubai.

The money was eventually returned to the customers, and now state attorneys from Spitzer's office have managed to obtain an indictment from a Manhattan grand jury on grounds of second degree larceny.

There are federal and state arrest warrants against Khan, besides the Gambino family's pending lawsuit. Khan is said to have gone into hiding in Pakistan.

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