Bhandari behind FSRP corruption scandal: WB report

KATHMANDU, May 22:

A confidential report of the World Bank reveals that banker Rajan Singh Bhandari is the main man behind the corruption scandal that led to suspension of then Nepal Rastra Bank Governor Bijaya Nath Bhattarai in 2007.

The World Bank had launched an investigation after the central bank governor was allegedly involved in the corruption scandal while appointing consultant for the second phase of Financial Sector Reform Program (FSRP) which was initiated in 2004.

The investigation report had recommended to NRB to not give any responsibility to Bhandari in the financial sector. However, the central bank concealed the report for five years instead of taking action against Bhandari.

Bhandari is now the CEO of Citizens Bank International Nepal and the president of Nepal Bankers´ Association.

A high-level source at the World Bank has questioned the central bank´s silence in the case.

The second phase of FSRP started on June 10, 2004 and completed on September 30, 2009.

NRB had hired consultant for the project through global bidding when Bhandari coordinating the project from the Nepali side in his capacity as the executive director of NRB´s Regulation Department. The Bid Evaluation Committee (BEC), led by Bhandari, had selected the bid of US-based firm IEF Incorporated by preparing fake documents that suggested IEF was association with Sri Lankan firm KPMG, the report states.

“The bid evaluation committee relied upon and was misled by the forged and fabricated documents contained in the IEF´s proposal and was influenced by the vested interest of the then BEC chairman,” the report states.

The report further states the BEC didn´t reject the proposal despite knowing that KMPG was not involved with IEF.

Bhandari had selected KPMG as part of a carefully hatched plan. Forged documents were prepared in association with the IT chief of KPMG Krishnan R who is a US citizen of Sri Lankan origin. “Krishnan Nepali wife had frequent family-level hobnobs with Bhandari and few political figures,” the report said, adding, “She also asserted that there was bargain for heavy trade-offs just to award the contract and also an understanding for continuous payments during subsequent execution of the same. She also claimed that some payments were already made in advance.”

NRB had allocated US$ 2.65 million to hire consultant for strengthening its supervisory and regulatory capacity. According to the report, NRB signed the contract with IEF on February 6, 2006, on condition that it will work with KPMG.

However, the contract was breached when the then governor Bijay Nath Bhattarai replaced Bhandari with another executive director Surendra Man Pradhan. Bhandari, who was taking undue advantage from that contract, then started saying that Bhattarai brought his close aide to his post because of vested interests. He was also furious with Bhattarai for not appointing him as deputy governor.

As BEC had not put any condition on breach of contract while signing contract with IEF, the contract made NRB liable for paying all the amount to the consultant even after the contract is breached. As it put huge financial burden on NRB, the Commission for the Investigation of Abuse of Authority (CIAA) filed cases against Bhattarai and Pradhan.

The report also states that Bhandari, who was taking undue advantage from the consultant, provoked other bankers who were dissatisfied with Bhattarai, including the promoters of NB Group, to file a case against Bhattarai and Pradhan at CIAA.

After finding fake contract documents while signing contract with IEF, the World Bank had recommended to the central bank to take necessary action against Bhandari and issue red corner notice against Krishnan. But the World Bank recommendations were not implemented.

Bhattarai and Pradhan later got clean chits from the Supreme Court and were reinstated to their posts in July, 2009.

Bhandari couldn´t be reached for comments despite Republica´s repeated efforts.

Source: Republica