NAC wide-body controversy: Rs 1.47 billion corruption in wide-body, 32 defendants including ex-minister Shahi


The Commission for Investigation of Abuse of Authority (CIAA) on Thursday lodged a charge sheet against 32 persons, including former Minister for Culture, Tourism and Civil Aviation Jeevan Bahadur Shahi, on the charge of corruption in the procurement of wide-body aircraft for the national flag carrier- Nepal Airlines Corporation (NAC).

Other officials facing the charge sheet include then General Manager of NAC Sugat Ratna Kansakar, the government secretary and Chairperson of NAC Board of Directors Shankar Prasad Adhikari, then Director General of Customs Department and then NAC Board of Directors Shishir Kumar Dhungana, Civil Aviation Ministry’s Joint Secretary Buddhi Sagar Lamichhane and others.

The CIAA has sought Rs 1.471 million in recovery for their alleged involvement in the misappropriation in the procurement of the wide-body aircraft.

Similarly, others implicated in the case are the Board of Directors Teknath Acharya, Jiban Prakash Sitaula, Achyut Raj Pahadi, Nima Nuru Sherpa and Muktiram Pandey, according to the CIAA. The anti-graft body has also sued aircraft suppliers’ representatives, and citizens from Germany, Romania and Moldova.

AAR International INC’s chief and four others have also been named as the alleged ones claiming Rs 1.471 billion in compensation, CIAA Spokesperson Narahari Ghimire said.

What is the case?

wide body airbus

Nepal Airlines Corporation had decided to purchase two wide-body aircraft for market expansion. In that process, the corporation selected a company called AAR International of the USA. After one company was selected, German Aviation Capital and Hifly Arrows Portuguese Company were joined by AAR during the purchase agreement (MoU).

A consortium of three companies was formed to purchase and sell aircraft. All three companies established a company called HiFly X in Ireland. The corporation had entered into an agreement with it for the purchase of aircraft.

After the aircraft was ready, an agreement was made with a German company called Northern Rose Fulbright to pay the amount. Payments were made by placing funds in a third-party account, known as an Escrow account, trusted by both parties as per the agreement. The Airline Corporation purchased two wide-body aircraft for around Rs 24 billion.

The company established on February 21, 2017, purchased two wide-body aircraft from Europe’s Airbus company and sold them to the corporation for Rs 24 billion.

On March 1, 2017, the corporation paid one million US dollars in the form of a bond, and on June 19, 2017, another payment of $79 million was made. On June 28, 2018, and 26 July 26, 2018, two wide-body aircraft were brought to Nepal.

After selecting one company in the tender and paying the amount to another account through an agreement with a consortium of two more companies, the wide-body aircraft procurement process fell into controversy. After the question was raised, a subcommittee under the Public Accounts Committee of the House of Representatives was formed to investigate alleged irregularities in the purchase of two wide-body aircraft for Nepal Airlines Corporation.

In the report submitted by the sub-committee under the coordination of MP Rajan KC in 2019, it is concluded that there was an irregularity of Rs 4.35 billion in the purchase of two wide-body aircraft.

He pointed out that if the business transactions between Airbus and Nepal Airlines Corporation called HiFly X could made transparent, the irregularity would be revealed clearly.

The audit committee claimed that there were irregularities based on preparations done in the maximum take-off weight, price increase ratio, and incorrect cost estimates. It was pointed out that the purchase was not done directly from the manufacturer.

It was concluded that the capacity of the aircraft was reduced, an intermediary company was set up, there was a suspicious transaction, the product number was changed, the purchase law was violated and the declared price was increased.

At that time, the Public Accounts Committee had published the graph of irregularity by specifying the title itself. According to the committee’s claim, the corporation suffered a loss of around Rs 92 crore million due to the purchase of aircraft with a weight capacity less than the specified weight. The sub-committee said that it would be a long-term loss to the corporation as it would not be possible to take a direct flight to destinations including Sydney in Australia due to low weight.

Who is accused of what?

The Commission for the Investigation of Abuse of Authority has filed a corruption case against 32 individuals, including the then-Tourism Minister Jeevan Bahadur Shahi, alleging corruption in the procurement process of wide-body aircraft.

The CIAA has filed a case against 24 Nepali citizens and eight foreigners. The CIAA has demanded Rs 1. 47 billion from all of them. However, each faces different allegations of corruption. 

Jeevan Bahadur Shahi

The then tourism minister Shahi has been accused of being involved in the decision to increase the price and reduce the carrying capacity of the aircraft. He is accused of corruption of Rs 1. 47 billion. He is accused of providing the facilities without bank guarantee in collusion with officials of Nepal Airlines Corporation.

Sugat Ratna Kansakar

Sugat Ratna Kansakar, the then managing director and member of the board of directors of Nepal Airlines Corporation, has been accused of ill intention since the tender documents were prepared. The CIAA has claimed that it was wrong to prepare the terms of the contract through negotiation, stating that the cost estimate was unnaturally increased. 

Shankar Prasad Adhikari 

The CIAA has accused the chairperson of the NAC Board of Directors Shankar Prasad Adhikari of his involvement in unnaturally increasing the flight cost. He is also accused of not being transparent. The CIAA has demanded a fine on him, claiming he reduced the aircraft’s carrying capacity from 242 tons to 230 tons.

7 members of the Board of Directors

The CIAA has accused Nepal Airlines Corporation president Shankar Prasad Adhikari, members of the Board of Directors, Shishir Kumar Dhungana, Tourism Ministry Joint Secretary Budhisar Lamichhane, Teknath Acharya, Nima Nuru Sherpa, and Muktiram Pandey of proceeding aircraft procurement process without amending the regulations. The CIAA has also demanded fines against Joint Secretary Jeevan Prakash Sitaula and Achyutaraj Pahadi. Lamichhane was about to be promoted to secretary.  

 6 top officials of the corporation 

The CIAA has also accused the acting director of cooperation Ramhari Sharma Sedai, Janakraj Kalakheti and deputy director Prabhash Kumar Karmacharya of working suspiciously in the procurement sub-committee and proposal evaluation sub-committee. The CIAA has also made the same accusation against three more officials including director Ganesh Bahadur Chand, acting director Karna Bahadur Thapa and acting director and senior captain Subas Rijal.

8 employees on the subcommittee

The CIAA has accused eight more officials of NAC of corruption. Deputy general manager of the corporation Ramesh Bahadur Shah, acting director and senior captain Ravindra Kumar Sherchan, Ravindra Shrestha, Upendra Paudel, Shravan Rijal, the then acting deputy director Paras Paudel, Umesh Paudel and Brihatman Tuladhar are accused of working with ill-intention in the aircraft procurement sub-committee.

The CIAA has additionally filed a corruption case against them for augmenting the obligation to pay an additional amount, asserting that there was no provision for a price increase in the initial document, but a condition was later added. They stand accused of fabricating false documents.

3 suppliers

The CIAA has also filed a corruption case against British citizen Deepak Sharma, president of AAR Corporation of USA. The company, which was chosen to supply wide-body aircraft for NAC, later collaborated with two other companies and entered into a purchase agreement.

Christian Nhulen, a German citizen, is associated with three companies involved in the wide-body aircraft procurement process. The CIAA has also filed a corruption case against Romanian citizen Oleg Kalistru. 

These two people established a dollar capital company called HiFly X in Ireland. It was found that the company was set up for the sale of aircraft. Established on February 22, 2017, the company purchased two wide-body aircraft from Airbus and sold them to NAC for Rs 24 billion.

The CIAA has accused them of entering into a contract for the purchase of a wide-body aircraft, which resulted in a loss for NAC and served as a source of corruption due to the payments received.

5 companies linked to wide-body

The CIAA has also filed a corruption case against five companies and their representatives involved in the wide-body aircraft procurement case. The CIAA has initiated a case against AAR Corp and its president and CEO John Holmes, who initially entered into a contract with the corporation. 

Similarly, a corruption case has been filed against Germany’s German Aviation Capital and its managing director Ana Topa, Portugal’s Highfly Transport Arrows and its president Paulo Mirpuri. So on, the CIAA has also filed a case against Ireland’s HiFly X, and its directors, Gerald Thornton and Christian Nhulen.

The CIAA has also filed a case against Norton Rose Fulbright Germany, for being involved in the purchase and sale of wide-body. The company’s Markus Radbruch and senior consultant Ralph Springer were also prosecuted.

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