This paper illustrates one of the worst financial scams of 1990s, the Mehrangate Scandal. It shows how a senior army official withdrew a substantial amount of public money from Mehran Bank and directed it towards an ‘intelligence fund’. The scandal subsequently broke out after the new senior army management decided to transfer the intelligence fund back to state-owned bank as per official rules. It was discovered that large sums of money had been siphoned off to 39 fictitious parties/people. Mehran Bank was unable to return the money to the depositors due to its poor financial state and thus collapsed. This paper offers scope for a compelling discussion on the usual causes, events, and possible solutions of such failures of corporate governance in the context of the misuse of public money by influential people with political motivations as at the scandalous Mehran Bank.

This paper presents the most horrific failure of corporate governance in the history of Pakistan. The scandal commonly known as Mehrangate Scandal is one of the worst financial scams of 1990s that rocked the financial pillars of the country (Ahmad, 1994). This paper also offers an understanding of the corporate governance framework of the country and whether or not it has been successful in its objectives.

Using the quantitative research method in the form of a case study, enables the researcher to specifically analyze the research areas within its own contexts (Stake, 1995). If this approach is carefully applied, it can generate valuable information to develop theories, evaluate the effectiveness of programs and to draw inference (Miles and Huberman, 1994). This paper uses case study approach to focus on the ‘how’ and ‘why’ aspects of the problem.

Corporate Governance Journal, Mehrangate Scandal, Corporate Governance Failure, Mehran Bank, State Bank of Pakistan (SBP), Dollar Bearers Certificates (DBCs), Mehran Bank Limited (MBL), Securities and Exchange Commission of Pakistan (SECP).