Nepal's anti-graft body files case against 30 individuals and two firms for corruption during 2017 Airbus purchase

Kathmandu [Nepal], April 4 : The Commission for Investigation of Abuse of Authority (CIAA), the anti-graft body of Nepal, filed a case on Thursday against 30 individuals and two firms in connection with the 2017 purchase of two wide-body aircraft for the Nepal Airlines Corporation (NAC), the national flag bearer.
"24 Nepalis, six foreigners, and two supplier firms have been filed as defendants by the CIAA in the case registered today," Yagya Raj Regmi, spokesperson at the CIAA, told ANI.
The CIAA registered the case at the Special Court, claiming Jeevan Bahadur Shahi, former Minister for Culture, Tourism and Civil Aviation, Sishir Kumar Dhungana and Shankar Prasad Adhikari, both former aviation secretaries; and Sugat Ratna Kansakar, former managing director of Nepal Airlines Corporation, of embezzling around 1 billion 478 million Nepali rupees during the procurement of two Airbus A330s.
In addition, Joint Secretary at Tourism Ministry Buddhi Sagar Lamichhane, former NAC director Ramesh Bahadur Shah and former board members of the national flag carrier- Teknath Acharya, Nima Nuru Sherpa, Rishi Ram Pandey, Achyut Raj Pahadi and Jivan Prakash Sitaula have been named as defendants.
However, the CIAA didn't charge-sheet former ministers Jitendra Narayan Dev and Dil Nath Giri, who had also been accused in the corruption case, citing a lack of evidence to prove their involvement.
According to the CIAA, the corruption allegedly caused the government a loss of over Rs 1.4 billion in the purchase of A330-200 aircraft by Nepal Airlines Corporation.
The national flag carrier had borrowed an amount worth Rs 24 billion from the Citizen Investment Trust and Employee Provident Fund to purchase the two wide-body aircraft for which the process had started in 2015.
As per the chronology of the corruption in the biggest aircraft purchase deal of Nepal, Sugat Ratna Kansakar, named in the charge-sheet filed on Thursday, got reappointed as Managing Director of NAC for a four-year term.
Under Kansakar's leadership, the NAC, in August 2015, started the process to acquire two wide-body aircraft from the European plane maker. In September 2016, the Finance Ministry agreed to act as a guarantor on behalf of NAC to procure loans for the purchase of two wide-body aircraft.
A unanimous decision was made by the board of Nepal Airlines Corporation in September 2016 to approve management's plan to procure two Airbus A330-200.
Following it sealed requests for proposals (RFP) were announced in the same month from aircraft manufacturing companies, airlines, aircraft leasing companies and bankers for the purchase of two A330-200 jets.
The NAC stated in the notice that the minimum age of the proposed aircraft cannot be more than 1,000 flight hours and that the date of manufacture should not be before January 2014. The national flag carrier had opted for the European aviation giant Airbus from Boeing to reduce maintenance and crew training costs.
Upon the closure of the RFP in November 2016, 11 international firms submitted bids to supply two long-range wide-body passenger jets to the Nepali national flag carrier.
The suppliers were Rolls-Royce, KL AeroParts, Aircraft Investment Group, Crown Commercial Services, Synergy Aerospace, ST Aerospace, Le Group Delta, AAR Corporation, Surya Air Support, KJT Investment & One World Closeouts and Ron Motta Associates Aircraft Sales & Parts. Rolls-Royce had applied to supply the aircraft engine.
In April 2017, NAC signed the final purchase agreement for two Airbus A330-200 jets from US-based AAR Corp. The day marked the largest-ever jet purchase deal in Nepal's aviation history, which at the time was worth 209.6 million USD.
However, the delay in payment to the company resulted in the delay of the arrival of the aircraft.
The NAC had to wait for the loans from the Citizen Investment Trust (CIT) and Employees Provident Fund (EPF), which resulted in its failure to bring the earlier planned planes.
The Nepal Rastra Bank also delayed the foreign exchange facility for the national flag carrier, while Tourism Minister Jeevan Bahadur Shahi also delayed the recommendation for the foreign exchange facility.
Shahi is now being charged with the corruption allegation, suspecting his intention to delay the recommendation for facilitation.
Meanwhile, the leasing company did not wait for the NAC due to the delay in releasing the money and the jets with earlier specifications were sold.
The plane took months to arrive in Nepal after revisions in dates from September 2017 to January 2018 but the first plane actually landed on June 28.
Kansakar at the time had claimed that NAC was lucky enough to receive brand new planes instead of its earlier plan to buy old aircraft. The Office of Auditor General back then had questioned Kansakar's motive behind bringing new planes while it had ordered old ones.
The Auditor General blamed NAC for breaching its own financial bylaw while procuring the aircraft.
As per the law, NAC was required to invite proposals only from the aircraft manufacturers to purchase brand new aircraft as per Clause 236 (1) of its financial bylaw. But Clause 236 (2) of the bylaw, which allows the NAC to procure an old plane, was used for the purchase.
According to Clause 236 (2), the carrier could get a supply of aircraft from a leasing agency, banker or airline operator besides manufacturers.
In the proposal request, the NAC allowed bidders to supply Airbus aircraft having flown not more than 1,000 hours. This enabled the US-based AAR Corp. to participate in the bidding process.
The American aviation support company AAR had quoted an 'offer price' of USD 104.8 million for each jet. The cost of the jets at the time would not have exceeded 109 million USD or Rs. 22 Billion.
But the NAC had borrowed Rs. 24 billion as a loan, exceeding Rs. 2 billion, which gave the ground for possible corruption in the purchase.
The arrival of A330-220 jets in 2018 had given wings to the hope that Nepal would now be connected to European and Australian destinations. This hope arose amidst the ban by the EU on Nepali fliers, which is still in place.
A year after the grand celebratory ceremony, the deal became embroiled in corruption allegations in Nepal and also in the United States.
Nepal's parliamentary committee in 2019 initially raised the issue of corruption, followed by AAR Corp., an Illinois-headquartered aviation service company, reporting to US authorities about violations of the Foreign Corrupt Practices Act in Nepal and South Africa.
An investigative report published last year by the Centre for Investigative Journalism, Nepal and Finance Uncovered brought up more names of key players in the purchase agreement between Airbus and Nepal Airlines.
"At the heart of this tortuous deal is a simple fact, Nepal did not buy these planes directly from Airbus. The USD 216.38 million transaction was seemingly designed so that the French aerospace giant didn't participate in the bidding process. Instead, a group of companies came to serve as intermediaries to sell the planes to Nepal," the CIJ report stated.