Aziz released on bail following indictment on fraud charges

Aziz, accused along with his brother Warren Aziz by the Alabama Securities Commission of defrauding Retirement Systems of Alabama (RSA), manager of pension funds for the state’s employees and teachers, out of $650 million to finance a railcar manufacturing plant in the state, had been arrested 10 days earlier at Midway International Airport while trying to enter the United States from Canada via his private aircraft. Aziz was detained by the U.S. Immigration and Customs Enforcement Homeland Security Investigations unit on Nov. 12 at Midway. He was transferred to the Chicago Police Department, which contacted Alabama authorities. Aziz, a Canadian citizen, waived extradition to Alabama.

Bail was set at $1 million with a $250,000 cash deposit. Aziz was released after paying the $250,000 cash, with the remainder to be forfeited to the court should he fail to appear. If he fails to appear, he also stands to lose $35 million to $50 million in real estate. Conditions require Aziz to wear an electronic monitoring device; he must remain in Lauderdale, Colbert or Lawrence counties, Ala.

In the indictment, the Alabama Securities Commission alleges Aziz used false and misleading financial statements between September 2006 and July 2009 to convince RSA to put up to $625 million into the plant. Through a company called National Alabama Corp., Aziz promised to build a new freight car manufacturing plant in the state that would provide up to 1,800 jobs and produce 12,000 cars a year. The entire project, he allegedly told RSA officials, would cost just under $297 million. The indictment alleges Aziz knew that constructing just the shell of his proposed plant would cost more than $319.4 million, and that significantly more would be needed to equip the facility—far more than the original $350 million loan that RSA had agreed to provide for construction. The project involved hundreds of millions of dollars, including a revised agreement where RSA was going to loan National Alabama Corp. $625 million to complete the plant.

It was the Aziz brothers’ plan to keep the true cost of constructing the facility hidden until they had exhausted most of the original loan proceeds, the indictment says. “Aziz perpetrated a scheme to defraud the Retirement Systems of Alabama by knowingly supplying fraudulent financial information, and making false statements of material fact and omissions of material fact in connection with a loan and equity transaction between Aziz and the Retirement Systems,” the Alabama Securities Commission said in a statement.

Between 2006 and December of 2008, costs of the plant ballooned to more than $700 million. When Aziz admitted to the overruns, he allegedly told officials he didn’t understand why that had occurred. In 2010, RSA obtained total equity in the plant. In 2011, Navistar leased the facility from RSA, but by early 2013 only 180 workers were on site. By February 2013, FreightCar America had subleased a quarter of the plant from Navistar. FCA is now building new cars there.

In addition to up to 10 years in prison and fines if convicted on the charges, Aziz could be ordered to pay restitution to the RSA for any loss attributable to his actions.

Aziz’s legal counsel, Joe Espy of the Montgomery, Ala.-based law firm Melton, Espy & Williams P.C., released the following statement:

“Mr. Aziz is very proud of the efforts to create jobs he made in Alabama and the strong personal relationships he has established here in Colbert County. As you know, Mr. Aziz has operated in many places throughout the world and one of the main reasons he located here is because he found Alabamians to be some of the finest and hardest working people anywhere.

“Many, many business people had severe challenges during the economic collapse that started around 2008, and Mr. Aziz was no exception. No matter how hard he worked to make the original project work, they were simply unable to be successful because of the collapsing economy. This was very distressful to Mr. Aziz and all those involved because of the tremendous investment they had made but more importantly because of the many personal relationships they had built with community leaders and potential employees in Colbert County.

“Clearly this is a very trying time for Mr. Aziz and his family. We are confident that once all of the facts are provided this matter will be resolved in a positive way.”

Aziz acquired National Steel Car, located in Hamilton, Ont., from Canadian steel producer Dofasco in 1994.