The journey of a ‘fugitive’ from Wall Street to Khayaban-e-Shahbaz

By Kazim Alam

KARACHI: From a government primary school in Karachi’s Sharafabad neighbourhood to the centre stage of high finance on Wall Street, the journey of self-styled investment guru Mir Mohammad Alikhan was unusual. But far more unusual has been his journey back from New York to Karachi.

After founding a full-service investment bank in early 1995 at the age of 29 and then running it as CEO from 110 Wall Street for about four years, Alikhan currently operates out of a small office located two floors above a Chinese restaurant on Khayaban-e-Shahbaz in DHA.

He spends most of his time uploading statuses and video messages for his 154,000-plus followers on Facebook. He publishes his “stock picks” frequently, trades shares for himself and dishes out (sometimes free) investment advice through social media. He also runs an “education company” and an online portal besides selling a training course on how to make “knowledge-based investments” in the stock market.

In short, the 50-year-old Wall Street veteran who claims to have owned $2.5 million worth of cars in the United States is now reduced to being a Facebook celebrity of sorts.

“I went from the most materialistic world to a world of raising my children for 15 years that changed me absolutely,” cigar-puffing Alikhan told The Express Tribune in an interview conducted in his Karachi office recently.

Taking quick and frequent glances over the computer screen during the conversation to keep track of the stock market, he repeatedly talked about raising his two children as a single parent, which has made him “a very content person, very happy person.”

The wheeler-dealer from New York, who rubbed shoulders with US congressmen and governors, is now living in Karachi as a ghost of his former self.

“After having swum in an ocean, you are recommending (that I should) swim in a well? You ask me what could be the next noble thing to do after having founded and run an investment bank on Wall Street. Nothing better than education. No investment bank I start could top that accomplishment,” he says.

So why did the first fully Muslim-owned investment bank on Wall Street, which was all set to go public as part of its holding company’s IPO in 1998, close down abruptly in February 1999?

“Wall Street is Zionist-ic. When you start doing things which are not conventional, it becomes very difficult,” he says.

He had to shut down his investment bank, Klein Maus and Shire (KMS), after he had an “absolute tussle” with New York State Attorney General Eliot Spitzer, he says. Refusing to delve into the specifics of the financial scandal that resulted into a sudden closure of his enterprise, he says the matter is “still sub judice.”

“I will fight this case at one point. I will fight one day the allegations that the (US) Securities and Exchange Commission has levelled against me,” he said while referring to the charges that the apex regulator of investment banking in the United States imposed on him back in 1999.

Alikhan left the United States 17 years ago. He has not gone back to his adopted country since then.

Road to America

Alikhan belongs to the royal family of Sir Mir Osman Ali Khan, the last ruler of the princely state of Hyderabad Deccan. His maternal grandfather, Syed Ali Asghar Bilgrami, was the governor of five provinces, he claims, proudly. “I come from a family of Urdu-speaking intellectuals.”

Alikhan’s sister, who was married and settled in New Jersey, sponsored him and the rest of the family members for immigration to the United States in 1984. He was 19 at the time.

He claims he graduated from Rutgers University (1984-88), majoring in economics and finance. He started working for Prudential Insurance Company in 1989. He joined a smaller firm afterwards and went on to become a partner there.

Alikhan established a full-service investment bank of his own within 10 years of moving into the United States – an enviable feat by all means.

But now he had his eyes set on raising about $31.4 million by listing his holding company, the United States Financial Group Inc (USFG), on Nasdaq.

USFG was a holding company for three subsidiaries, namely KMS, Sureal International and KMS Asset Management Group.

KMS was an investment bank. Sureal International sold nutritional and air-purification products in Russia and other republics of the former Soviet Union. KMS Asset Management Group came into being in 1997, but did not generate any revenues by the time the holding company initiated its bid to go public.

The downward spiral

Many setbacks took place one after another post-1998, leading to an early demise of Alikhan’s business empire.

Firstly, Alikhan was declared a “fugitive from justice” on May 17, 1999, for allegedly defrauding five of his clients out of more than $1.2 million in a “complex securities fraud scheme”.

A Manhattan grand jury has charged him with five counts of grand larceny in the second degree. If convicted, Alikhan will face up to 15 years in prison on each count, according to the office of the New York attorney general. An arrest warrant was issued for him, but he remains a fugitive to date.

“He is charged with using an elaborate scheme to artificially inflate the price of a number of securities by buying up shares, and then selling them to his clients without their authorisation,” according to the attorney general’s statement.

Secondly, Alikhan is also facing a lawsuit in the federal court in Manhattan filed by the US Securities and Exchange Commission that accuses him of a securities fraud. The commission has alleged that at least 55 investors were defrauded of more than $2.7 million.

It alleged that he made “material misrepresentations” about the financial condition of his businesses, such as overstating the assets of KMS and USFG by more than 20-fold and 200-fold, respectively.

The apex regulator of the US capital markets stated that Alikhan diverted company funds for his personal benefit and had exhausted KMS’ capital and closed its doors by March 17, 1999.

The commission has sought that he be ordered to repatriate all assets transferred abroad that were obtained from the illegal activities and be permanently barred from serving as an officer or director of a public company.

Alikhan’s holding company posted a basic loss per share throughout its existence from August 10, 1995, to September 30, 1998, according to a regulatory filing with the US Securities and Exchange Commission.

“No regrets”

Alikhan hobnobbed with the powers that be until the time he fled the United States. He had become “very much involved” in American politics and served as a member of New Jersey’s governor’s council under Governor Christine Todd Whitman, he claims.

“I was on the Republican Presidential Task Force,” he says, adding that he was “one of the largest donors of the Republican campaign” within New Jersey.

According to Alikhan, there was no charge against him when he left the United States. But he earned global notoriety when The New York Times published a story about him on January 2, 2000, about 10 months after the closure of his investment bank.

Alikhan says the article was actually aimed at hurting the credibility of General Pervez Musharraf who had assumed power in Pakistan in October 1999. Alikhan says he was serving “as an adviser to Musharraf” when The New York Times story appeared.

“It is very easy to write an article indirectly targeting the dictator of the time. Musharraf had said that he had brought only honest people to work with him. By single-handedly attacking me, they indirectly attacked his (Musharraf’s) credibility,” he says.

Alikhan believes somebody must have paid $18 million to The New York Times for the full-page news story because “advertisement rates, some say, were $18 million for the page” at the turn of the millennium.

“After you see the (Facebook) video, you will realise what happens to a Muslim who rises through the glass ceiling,” he says while referring to his online video post in which he “proves” he is innocent.

But why does he not simply go back to the United States and fight his case?

He says his case is in District 10, which is the district where the World Trade Centre collapsed on 9/11. Trial in the United States is by jury, not by judge, he says. “Would I ever in a billion years with a name Mir Mohammad Alikhan find a (neutral) jury where two towers had come down 600 yards away?”

He vehemently denies any wrongdoing, saying the US authorities should produce the person whose money he had stolen and have them sue him. “One person should at least come out,” he says.

In fact, The New York Times story, which Alikhan believes was paid content, mentions some of the victims of his alleged fraud: the Gambinos. The members of the Gambino organised crime family did file a lawsuit against the absent financier and one of his top brokers, the story says.

Moreover, a corporate regulatory filing called “Form S-1” that Alikhan’s holding company submitted to the US Securities and Exchange Commission as part of its unsuccessful attempt at public listing states that KMS had been accused of selling securities “through fraudulent sales practices, misrepresentations and omissions and that certain trades were unauthorised.” It says KMS agreed to repurchase the preferred shares for $110,000, payable in five equal monthly instalments commencing April 1998.

The same regulatory filing reveals that the US Securities and Exchange Commission had also issued an order directing a private investigation of certain activities of KMS, including a private placement of KMS securities in 1996 and 1997, the firm’s operational capability and the qualifications of the firm and certain of its personnel to do business as broker-dealer, record-keeping, and transactions in penny stocks.

Alikhan says the US authorities have not convicted him in absentia in the last 17 years, implying they could not adequately back up the charges against him with evidence. “I have not gone to America (in 17 years). I have lived in London, Paris and Dubai. If evidence is strong, extradition treaties exist in all these places,” he says.

Highlighting the fact that then Attorney General Spitzer had to resign as governor of New York in later years when he faced a prostitution scandal, Alikhan says his principal foe was “morally bankrupt”.

“I have no regrets,” he says, defiantly.

Shady degrees

The New York Times story claimed that Alikhan had acknowledged in interviews with the regulators he never earned a Rutgers degree. According to Rutgers University, either the student identity number or the social security number is necessary to establish the credentials of a former student.

Alikhan refused to share either of these IDs with The Express Tribune, saying he was “absolutely beyond the point of proving anything to anyone.”New York

The regulatory filings from the late 1990s show Alikhan also holds a bachelor’s degree in physics and mathematics from the University of Karachi in addition to his Rutgers qualification.

However, he did not acknowledge his bachelor’s degree from the University of Karachi when The Express Tribune asked him about his educational qualification during the interview.

The University of Karachi did not get any mention in his Facebook page entry on July 17 titled “From Sharafabad to Wall Street” that says he attended Sharafabad Government Boys School and St Patrick’s High School before leaving for the United States at the age of 19.

Adviser to PSX MD

Alikhan says he has been advising the Pakistan Stock Exchange (PSX) for several years unofficially. “I have been advising (PSX Managing Director) Nadeem Naqvi. Market regulations, innovations in the market. This new small-to-medium exchange, I played a role in it,” he says.

However, Naqvi wrote in an email to The Express Tribune last week that “Ali Khan’s assertion is incorrect.”

The PSX MD said Alikhan interviewed him for a TV programme a long time ago. After the interview, Naqvi said the two men “casually discussed” stock market dynamics.

“I stated we were planning to launch a small and medium enterprises (SME) market and he said he would like to assist. Thereafter, there was no discussion with him on any subject and although he said he would like to advise the exchange, his offer was not taken up,” Naqvi added.

Day job

In addition to his online advisory services, Alikhan also runs AMZ MAK Capital, which makes financial technology-related investments. The company was in the news recently after Alikhan got his former staff locked up in a police cell in an intellectual property dispute. The case is pending before a judge.

In his “education company” called Mind and Markets, Alikhan employs one CFA and two graduates of Lahore School of Economics. He picks stocks based on their fundamentals and has hired a separate analyst to carry out technical analysis. Alikhan also conducts company management interviews and uploads them on his Facebook page.

He recommends stocks to the general public through Facebook as well as a log-in portal, but calls them his “personal picks”. He says he does not have any registration with the Securities and Exchange Commission of Pakistan (SECP).

A spokesman for the SECP confirmed Alikhan is not registered with the commission as a regulated person. But the spokesman did not clarify whether sending out investment advice on a public forum while possibly having undisclosed holdings in the same stocks would constitute any conflict of interest.

“Pakistan needs education in financial markets. Pakistan has zero requirements for even a stock broker,” he says. “I want to educate Pakistani youth about financial matters.”

Originally appeared on The Express Tribune on The Express Tribune on September 1, 2016.    

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