The Office of the Attorney General (OAG) is reviewing an investigation report on embezzlement and suspected fraud amounting to Nu 576.469 million (M) at the Bhutan Development Bank Limited (BDBL) in Thimphu.
“We have assigned two lawyers to review the report,” OAG’s chief prosecution officer Kinley Tenzin said.
The Anti-Corruption Commission (ACC) forwarded the report on unauthorised enhancement of overdraft (OD) and term loan fraudulently between 2013 and 2016 by the project officer of BDBL, to the OAG on June 22. ACC has recommended the OAG to prosecute nine accused involved in the fraud.
After reviewing facts and evidences transpired during the course of investigations, the commission reportedly established that Pema Nidup as a project officer allegedly enhanced loan of 55 clients amounting to Nu 576.469M. The project officer was alleged to have fiddled with the system to enhance the loan and collateral mortgage without the knowledge of credit and legal divisions.
Pema Nidup is accused of forging signatures of two legal assistants in the disbursement memo while enhancing term loans. The report stated that various office orders from the BDBL management let such illegal practices to occur.
The commission also found that a similar case involving another project officer in 2013. The court judgment had directed to review and improve the system to prevent such setbacks from employees in future. “However the BDBL management failed to correct the system and continued functioning as was the process,” the report stated.
The ACC categorised 55 clients into three kinds – those involved in fraud, those not involved (perceived innocent) and those who could not be contacted for verification.
In one of the fraud cases, Penden Dorji of Druk Lhayul Construction Private Limited based in Paro, has an OD loan of Nu 37.900M sanctioned legally and Nu 96.100M enhanced eight times allegedly by Pema Nidup without approval from the Credit Committee Meeting (CCM).
The commission found that Pema Nidup had withdrawn number of transactions from Penden Dorji and his wife’s OD accounts to favour enhancing Penden’s OD of Nu 96.100M. He allegedly forged the signature of Penden Dorji’s wife and withdrew a total amount of Nu 1.321M from two cheques on August 2, 2015 and Nu 1.341M from Penden’s OD account by forging his signature on September 16.
ACC’s report stated that Penden Dorji even after knowing the withdrawals did not make any issue as he was allegedly benefitting by enhancing his OD whenever he was in need of money. Pema Nidup is also alleged to have lent Nu 5.25M to Penden using Rinzin Dema’s OD account. “This circumstantial evidence has proven enough that the money was willfully offered to Pema Nidup as gratification for not following the due process and expediting the loan enhancement,” the report stated.
Pema Nidup also allegedly enhanced loan without approval 15 times in some occasions and two enhancements a month. For instance, Rinzin Dema of Olakha, Thimphu was sanctioned housing loan of Nu 8.7M legally and Pema Nidup had allegedly sanctioned Nu 24.3M illegally.
Rinzin Dema’s son Sonam Wangyal availed service and tourism loan of Nu 3M legally and Nu 0.35M illegally. Pema Nidup and Sonam Wangyal of T.T. Wangyal Automobile, Olakha, operated Rinzin Dema’s OD account jointly. Sonam Wangyal’s brother Kinley Nidup also availed a loan of Nu 1.5M legally and Nu 7.7M without approval. However, Nu 7.7M was used by Sonam and Pema Nidup for various investments and jointly bought 12.19 decimal plot in Babesa at Nu 5.360M.
Pema Nidup allegedly bought a Toyato Hilux, red veloster, three Enfield Bikes and land from the loan amount. Sonam Wangyal bought a blue veloster for Nu 1M and was gifted to Pema Nidup in favour of loan enhancement.
Zangla, who operates Bhutan Enterprise in Olakha, is also one of the beneficiaries. He availed a loan of Nu 1.5M with committee approval and Pema Nidup allegedly enhanced it thrice amounting to Nu 11.5M. His wife also availed general trade loan of Nu 1M, which was managed by Zangla himself, and Pema Nidup enhanced it twice to Nu 24M. The report stated that Pema Nidup allegedly benefitted with Nu 1.15M as favour from Zangla.
Rinzin of Jangchub Builders Private Limited based in Thimphu has two transport loan accounts, one account each for OD of service and tourism. His OD of Nu 3.5M was sanctioned on September 12, 2014 and Pema Nidup allegedly helped him in enhancing his loan thrice to Nu 25M. His transport loan was also enhanced from Nu 1.5M to Nu 3M.
Rinzin’s younger brother Wangchuk’s OD amount of Nu 1M approved on March 17, 2015 was enhanced to Nu 16M without approval.
Pema Nidup also allegedly favoured Tenzin Jamtsho of Yargyel Earthmovers by enhancing two housing loans from Nu 1.5M to Nu 30M and three enhancement of OD from Nu 1.5M to Nu 25M. Tenzin Jamtsho also helped Pema Nidup inflate the invoice in return of the favour for his unauthorised enhancements. The backhoe was given on hire to one of the clients which he first enhanced the loan for and has maximum enhancements.
Thuji Zangmo of Chang gewog, was sanctioned Nu 9.5M as housing loan on May 8, 2016. Pema Nidup allegedly enhanced her loan six times amounting it to Nu 9.34M without approval. She allegedly offered Nu 100,000 to Pema Nidup as gratification for quick processing of the loan.
Nima Dorji, who operates Speedway Grocery in Thimphu, has a transport loan and two OD in BDBL. His initial legal sanction of loan was Nu 1M and with the help of Pema Nidup, it was allegedly enhanced seven times amounting to Nu 8.6M. The other OD was sanctioned for Nu 0.37M and Pema Nidup helped enhance illegally summing up to Nu 7.8M.
Pema Nidup reportedly gained favour of Nu 4.227M, a Veloster and a Mahindra backhoe. The backhoe was allegedly bought impersonating Rinzin with documents provided by Jangchub Builders Private Limited and inflating the price to 100 percent. The actual cost of the machine was Nu 2.4M but the invoice was inflated to Nu 4.8M to ensure 100 percent finance on the machine through loan.
The commission has charged Pema Nidup with 85 counts of commission amounting to abuse of functions, 59 counts of omission amounting to abuse of functions, 11 counts of passive bribery, 53 counts of forgery, three counts of deceptive practice and possession of unexplained wealth.
Among the other eight accused, Penden Dorji is charged for three counts of active bribery; Sonam Wangyal with one count of active bribery; Zangla with two counts of active bribery while Rinzin, Wangchuk, Thuji Zangmo, Nim Dorji and Tenzin Jamtsho are implicated for active bribery. Tenzin Jamtsho and Rinzin are also charged for participation of offence.
The commission also recommended the OAG to restitute Nu 4.227M received as gratification from various clients, red Veloster (bought for Nu 1.4M), blue Veloster (Nu 1M) 12.19 decimal land (Nu 5.360M) in Babesa, Vigo Hilux (Nu 2.2M), three Royal Enfield bikes (Nu 625,400) and Mahindra backhoe (Nu 4.8M) from Pama Nidup.
The investigation began on December 6, 2016, after police forwarded the case to the commission on December 5. The allegation was enhancement of OD facility for 45 clients amounting to Nu 655.55M without approval of the credit committee meeting CCM by Pema Nidup.
BDBL uses Absolute Banking System (ABS) as their banking software and the project manager can access the system by logging in the office username and password. The username and password is common for all project officers.
To enhance the additional loan unnoticed, the project officer has to inflate the mortgage valuation. This way OD or term loan gets enhanced without having to get verified by supervisor. It can be acted alone and the supervisor does not get any notification during loan enhancements.
The only limitation here is, the loan account must be active. However, this didn’t stop him from creating and enhancing loans, as a project officer can be involved significantly to create loan accounts by approving loans below Nu 1.5M.
The Main Branch Credit Committee chaired by credit manager can approve loans upto Nu 1.5M
Knowing the weakness of the bank and following the modus operandi, Pema Nidup enhanced OD and disbursed without having to go through transaction approvals at credit and legal division. In case of term loan, there is a requirement to prepare and sign disbursement memo by legal and chief manager before it is credited to the client by cash or cheque from the back office processor. He prepared disbursement memos and forged signatures of two legal assistants 42 times.
Pema Nidup admitted to forging and also stated that those documents were not submitted to the legal division.