The report uncovered that the department had sanctioned several loans amounting to Nu 15,025,000 to a single client within just 48 days. It was detected that CID had issued a cheque for Nu 10 million and Nu 20 million without sufficient bank balance.

The company had sanctioned six separate loans, three transport loans amounting to Nu 9,375,000, a business loan of Nu 3,200,000, a preferential financing scheme (PFS) of Nu 450,000 and a personal loan of Nu 2,000,000 all in 48 days to one of their clients, the owner of S T Construction, Sonam Tobgay.

This was against the company’s Credit Manual 2003, which states that all loans above Nu 5,000,000 could only be approved by the company’s board of directors.

The report said that the company’s management had been too liberal in granting too many loans of substantial amount in such a short period to a single client, violating RMA’s prudential guidelines, which cilities to a single borrower because of the risk involved.

PFS and personal loans were processed, approved and granted within a day and without proper documentation by two of the company’s senior employees, despite the presence of an authorized signatory to the loan agreement, stated the report.

The PFS was granted to Sonam Tobgay to purchase a vehicle (Grand Vitara) from Gyam Dhendup, the company’s general manager, general division. There existed no sale deed between the two parties and the authorization letter, according to which the buyer was supposed to pay Nu 450,000 to Gyam Dhendup, lacked a witness’s signature. The deed of hypothecation is still in Gyam Dhendup’s name.

Similarly, in the case of personal loan to buy land from Dhendup Norbu, the manager of credit and investment department, the authorization letter to Dhendup Norbu to withdraw Nu 2.69 million bore no signature of a witness. And while the authorization was for Nu 2.69 million, Dhendup Norbu withdrew only Nu 2 million. “This makes it clear that the approval of the loan had been taken for granted,” the report stated.

Both these cases, the report said, generated conflict of interest.

Delving deeper, the auditors found that of the Nu 1.875 million loans granted to Sonam Tobgay for purchase of three Eicher tipper trucks, only two such trucks were hypothecated with the company. The company, the report stated, did not raise any concern over the client’s not buying the third.

“The company financed almost 90 percent of the total cost of two trucks against the norm of financing up to a maximum of 60 percent,” the report read, adding that the company provided highly unsecured loan to its client.

Similarly, in purchasing two Kobelco excavators, RICBL had sanctioned Nu 5 million (60 percent of the cost of two excavators at more than Nu 4 million each). Only one was hypothecated with the company, and comprehensive insurance document revealed that the excavator cost only Nu 3.4 million against almost Nu 4.2 million reflected in the loan documents.

The excavator was later sold to another businessperson for Nu 3.150 million, of which the company was paid only Nu 2.7 million.

The report stated that Sonam Tobgay was not allowed to sell or dispose off the hypothecated machine to another person without prior consent of the company in writing. Had RICBL seized the excavator and auctioned it, they would have fetched more than the transacted price, the report read.

While granting the business loan to S T Construction of Nu 2.5 million sanctioned against Nu 2.25 million, 60 percent of the mortgaged value of 1.15 acres of land in Paro.

The business loan of Nu 2.5 million was later increased to Nu 3.2 million on the request of the client, who had, before the increase was approved, already withdrawn more than Nu 2.7 million.

A few days later , Sonam Tobgay managed to withdraw another Nu 5 million from the company, Nu 2 million from the Paro branch office and Nu 3 million from Phuentsholing.

The company officials, in particular, D P Adhikari, the head of finance and administration, although aware that Sonam Tobgay’s cheque bounced, made every effort to transfer money from RICB branches in Paro and Thimphu till he managed to arrange Nu 5 million for Sonam Tobgay.

The audit report pointed out that Sonam Tobgay had deposited a cheque of Nu 20 million from his own account with BoB, Phuentsholing to RICBL, Gelephu, and requested a release of Nu 10 million from RICBL, Phuentsholing the next day. “This was a clear indication of a premeditated attempt to defraud the company having succeeded in his previous attempts,” the report stated.

On the other hand, it stated that although all cheques finally routed through D P Adhikari, he made no attempts to stop the transaction, although he was fully aware of Sonam Tobgay’s insufficient bank balance.

“He neither informed the credit and investment department nor made any attempts to stop payments thereafter,” reads the report, adding that had he reversed the transaction, all payments made to Sonam Tobgay could have been stopped, including PFS, personal loan and transport loan.

The audit report further stated that Sonam Tobgay, in collaboration with company staff, had attempted to siphon off funds from RICBL and that they had tried to take advantage on those 48 days when the company’s former CEO was handing over his responsibilities to the new incumbent.

Sonam Tobgay is liable to pay Nu 25.257 million to the company, including the interest and penalty, as he had not paid any instalment since March 30, 2007.