The Royal Insurance Corporation of Bhutan Ltd’s (RICBL) management board yesterday suspended its top two executives for investigation of a case concerning collusive practices surrounding the investment of RICBL fund in Nubri Capital Private Ltd.

Chief Executive Officer (CEO) Namgay Lhendup and Executive Director (ED) Sonam Dorji were suspended after the Anti-Corruption Commission (ACC), which is investigating the suspected fraud and collusion, directed the insurance company’s board of directors to suspend them from work with immediate effect.

Soon after receiving the suspension order from ACC, the board chairman called for an emergency meeting where the board of directors discussed on the commission’s directives. “After following due process and based on the suspension order issued by the ACC, the board decided to execute the order,” RICBL’s board chairman, Topgyal Dorji told Kuensel.

Topgyal Dorji also said that with the suspension of the CEO and ED, a vacuum has been created at the top, and to fill this leadership gap, the board will sit with the management within the next few days to decide the way forward. “However, the company will continue to function smoothly, and RICBL’s clients can expect the best of services as in the past,” the chairman said.

ACC commissioner Jamtsho said the commission has grounds to believe that there is likelihood of available evidence or witnesses being influenced, removed or tampered with, thereby impeding the investigation proceeding.

The commission began probing into the allegation of an irrational investment made in the country’s first private fund management company, Nubri Capital, in October last year. The investigation was based on an audit report of 2015 forwarded by the Royal Audit Authority (RAA) and a complaint the commission received through an anonymous letter.

RAA report stated that due to illogical conversion of bond redemption fund as investment into Nubri Capital had led to revenue loss of Nu 16.814 million (M) and irregular borrowing from Nubri Capital had resulted a revenue loss of another Nu 2.449M.

The report also stated that RICBL had invested Nu 100M as bond redemption with Nubri Capital on February 5, 2013 at an annual interest of 9.25 percent. Three days later on February 8, RICBL borrowed Nu 108M from Nubri Capital at a monthly interest of 11.75 percent per annum. “This has resulted in avoidable interest expense of Nu 2.449M,” the audit report stated. “The RICBL had paid an interest of 11.75 percent on its own money which was not in line with the investment policy of the company.”

Later, instead of cancelling the initial contract and revising the terms of investment as advised by the Royal Monetary Authority (RMA), the Asset Liability Committee meeting on June 11, 2013 had discussed and considered other investments. “Had the RICBL cancelled the contract with Nubri Capital and invested the amount to loans and advances (card loan bearing the highest interest), it would have earned an interest income of Nu 16.814M,” the report stated.

The audit report also stated that RICBL did not furnish contractual agreement to the audit team pertaining to the funds borrowed from Nubri Capital amounting to Nu 11.309M. “In absence of legal documents, the authenticity and legality of the interest rates charged, terms of borrowing could not be ascertained. Therefore, the case was forwarded to ACC,” the report stated.

The complaint letter also alleged that Nubri Capital made several investments with RICBL at varied interest rates, the highest being 12.25 percent per annum, and there was no fixed borrowing or lending term between RICBL and Nubri Capital.

According to sources, it is alleged that Sonam Dorji devised the idea of Nubri Capital. The board has suggested that Sonam Dorji dissociate himself from Nubri Capital on the grounds of conflict of interest and promised him the post of executive director if he did. The board appointed Sonam Dorji as the ED in 2012. However, Kuensel learnt that Sonam Dorji had not dissociated himself from the company. Instead, he has been alleged to enjoy a portion of interest from investment, which was allegedly used to clear his card loan.

In an earlier interview to Kuensel, RICBL CEO said that there was no conflict of interest. “Whatever RICBL invested in Nubri Captial was redemption fund in the form of bonds to be paid to investors on maturity,” Namgay Lhendup had said.  “In case of Nubri, we had the provision to withdraw the fund before the maturity period where as other financial institutions don’t allow such options.”

The RMA approved Nubri Capital Pvt Ltd to be fully owned and operated by Bhutanese as Bhutan’s first Fund and Assets Management Company in 2012.

The suspension will remain in force, unless otherwise rescinded by the commission.

Rinzin Wangchuk