After reviewing the embezzlement and fraud case of the Bhutan Development Bank Limited (BDBL) for 11 months, the Office of the Attorney General (OAG), charged 12 people to Thimphu dzongkhag court yesterday.

The case, involving a BDBL official and 55 clients, amounts to Nu 576.469 million (M), where the BDBL official is accused of gaining about Nu 422M by fiddling with the system to enhance loans and collateral mortgage without the knowledge of the bank’s credit and legal divisions.

OAG charged the main accused, BDBL’s project officer, Pema Nidup, for 79 counts of embezzlement through illegal enhancements of loan amounting to Nu 403M.

He was also charged with three counts of embezzlement through forging cheques amounting to Nu 26M.

He was charged for embezzling public fund under section 52 of the Anti-Corruption Act of Bhutan (ACA) 2011.

Pema Nidup was charged for 60 counts of commission amounting to an abuse of functions involving about Nu 1.7B under section 58 (1) of the ACA Act 2011.

He was charged for 43 counts of forging disbursement memo and two counts of forging cheques under section 296 (c) and 297 (c) of the Penal Code of Bhutan 2004.

OAG charged him on nine counts of passive bribery amounting to Nu 1.5M under section 43 (a) of the ACA Act 2011.

He was charged for deceptive practice under section 309 (a) of the Penal Code of Bhutan 2004 for buying a Mahindra backhoe from Yargyel Earthmovers in the name of a client, Rinzin, for Nu 2.4M. “He inflated the invoice to Nu 4.8M to obtain 100 percent loan,” the charges stated.

Pema Nidup was also charged for unexplained wealth under section 60 (1b) of the ACA Act 2011 for Nu 76M.

The charges stated that while his annual gross income, including the allowance is about Nu 0.4M,there is an unexplained wealth of more than Nu 76M.

OAG submitted to the court for restitution of more Nu 4.2M from Pema Nidup with interest and forfeit the Toyota Hilux, red Veloster, three Enfield Bikes and the land he bought from the enhanced loan amount and the blue Veloster a client gifted him.

Although the ACC recommended the OAG to prosecute nine clients for alleged involvement in the crime, the OAG charged 11 people.

OAG charged Penden Dorji of Druk Lhayul Construction Private Limited based in Paro for eight counts of participation in embezzlement for illegally enhancing a loan amount to Nu 96.1M.

He was also charged with three counts of participation in forging cheque and embezzlement amounting to Nu 2.6M.

Penden Dorji was charged for violating section 52 and 75 (1) of the ACA Act 2011.

OAG charged Sonam Wangyal of T.T. Wangyal Automobile in Olakha for 21 counts of participation in embezzlement through illegal enhancement of loan amounting to Nu 3.2M and active bribery for gifting Pema Nidup a blue Veloster worth Nu 1M.

Sonam Wangyal’s brother Kinley Nidup was also charged for participation in embezzlement through illegal loan enhancement amounting to Nu 500,000.

OAG charged Zangla, who operates Bhutan Enterprise in Olakha, for 11 counts of participation in embezzlement through illegal loan enhancement amounting to more than Nu 129M and two counts of active bribery for giving Nu 150,000 to Pema Nidup.

A defendant, Karchung of Zombala Furniture and drayang, was charged with three counts of participation in embezzlement through illegal loan enhancement amounting to Nu 7M.

OAG charged Rinzin of Jangchub Builders Private Limited based in Thimphu for four counts of participation in embezzlement through illegal loan enhancement amounting to Nu 23M, active bribery for giving Nu 80,000 to Pema Nidup and participation in deceptive practice for his involvement in the backhoe purchase.

Rinzin’s younger brother Wangchuk was charged with five counts of participation in embezzlement through illegal loan enhancement amounting to Nu 20.5M and active bribery of Nu 55,000.

The office charged Tenzin Jamtsho of Yargyel Earthmovers for seven counts of participation in embezzlement through illegal loan enhancement amounting to Nu 63M, active bribery of Nu 100,000 and participation in deceptive practice for his involvement in the backhoe case.

A woman from Chang gewog, Thuji Zangmo, was charged with six counts of participation in embezzlement through illegal loan enhancement amounting to Nu 9.3M and active bribery of Nu 100,000.

OAG charged Nim Dorji of Speedway Grocery in Thimphu for 13 counts of participation in embezzlement through illegal loan enhancement amounting to Nu 15M and active bribery of Nu 30,000.

The office charged Jamyang Dorji of JYD for 10 counts of participation in embezzlement through illegal loan enhancement amounting to Nu 7.1M and active bribery of Nu 50,000.

OAG submitted to the court to order restitution from the 11 clients on the amounts they gained illegally with interest.

The ACC investigated the case on December 6, 2016, after police forwarded the case to the commission on December 5.

While the initial allegation was an enhancement of OD facility for 45 clients amounting to Nu 655.55M without the approval of the credit committee meeting (CCM) by Pema Nidup, it later increased to 55 clients amounting to Nu 576.469M.

The case was registered with the criminal bench I of the Thimphu dzongkhag court.

Modus operandi    

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 to access the loan process screen, loan and advances module. The username and password are common for all project officers.

Since the IT section has barred the enhancement from the additional loan, it shows ‘error’ but when the project officer accesses it through miscellaneous, he or she can punch in the enhanced loan amount in the additional loan column and save the amount using the username and password.

To enhance the additional loan without it being noticed, the project officer has to inflate the mortgage valuation. This way OD or term loan gets enhanced without having to get verified by a 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 up to Nu 1.5M

Knowing the weakness of the bank and following the modus operandi, Pema Nidup enhanced OD and disbursed loans without going through transaction approvals at credit and legal division. In case of the term loan, there is a requirement to prepare and sign disbursement memo by the 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.

Tashi Dema