Named  - The people and companies behind Nepal’s multimillion dollar insurance fraud scam

TIFJ

Logos of 23-brands, under the umbrella of 18-companies, connected by only 10-people who control over 90% of Nepal’s insurance fraud.

Traveller Assist, an international medical assistance and cost containment company has been conducting a travel insurance fraud investigation in Nepal since August 2017.

Brief background:

In May 2018, Traveller Assist sent a letter to the Tourism Ministry to explain that foreign insurance underwriters would boycott Nepal if the government did not tackle a multimillion dollar insurance fraud scam that’s been happening since 2013. As a result, the Ministry formed an investigation committee who conducted their own investigation. They wrote a 700-page report and submitted it to the Tourism Ministry. As a result, they released the names of companies who were involved to the Kathmandu Post.

Emails sent on Jul 30 from the Tourism Ministry to confirm an investigation is underway, and to confirm the report was submitted.
Emails sent on Aug 9 from the Tourism Ministry confirming a report had been submitted, and Aug 23 asking for information from our investigation.

Soon after the names of companies identified by the investigation were announced, there was a meeting led by Nabaraj Dahal of the Trekking Agents Association of Nepal. He met with the co-Chair of the ruling Nepal Communist Party, Pushap Kamal Dahal who in-turn then put pressure on Minister Adhikari to drop the charges against the named companies. This according to a report in the Nepali Times.

Due to the governments lack of action, on January 25th, under direction of insurance underwriters, Traveller Assist sent a second letter to the Tourism Minister. This time, to issue an ultimatum. Take action against the fraudsters by February 15th (the start of Nepal’s busy trekking season) or risk insurers boycotting and blacklisting the country.

The Tourism Ministry fought back. Firstly, they claimed that measures they introduced had reduced the helicopter rescues during the Autumn 2018 season to only 186. The real number is close to 1,600. Then they claimed that Traveller Assist faked the insurance fraud to ruin the reputation of Nepal. Their own investigation found these companies to be fraudulent. In addition, there are public quotes made by several government officials who all admit that the fraud is happening and that ‘high-profile’ people are involved.

Joint Secretary of the Tourism Ministry, Ghanashyam Upadhyaya told AFP, “When we began our investigation we did not realise the magnitude of the problem.”

Despite promises being made by the government to bring those responsible to justice, not one single charge has yet been laid. In addition, the Ministry promised to implement changes to rescue procedures to stop the fraud, but has failed to do so.

One change the government did introduce, with devastating effect, was a ‘Restricted Area’ permit that helicopter operators had to apply for, in a lengthy process, that in some cases meant a rescue was delayed for several hours or even overnight. A report in Aviation Nepal directly blamed these unnecessary delays on the death of Canadian trekker, Randle Baker. According to the Pilot in Command at Simrik Air, these delays also likely led to the unnecessary deaths of other travellers.

Helicopter returning to base over Swayambhunath in Kathmandu, January 2019 (Traveller Assist / Danny Kaine)

On August 23rd, Danny Kaine, Head of Assistance at Traveller Assist received an email from a person claiming to be a government official and claimed to hold key evidence that government officials were taking payments from people implicated in the investigation. He requested complete anonymity through fear of retribution and advised not sending any names or evidence to the Ministry, or Investigation Committee, warning that it would be leaked to those people it named. Several measures were taken to confirm this persons identity and a secure method of communicating was established.

It’s worth noting at this point that several people have contacted Traveller Assist throughout this investigation to provide information. One particular person was very clearly trying to direct the investigation away from certain people and companies, and provided an abundance of what turned out to be misinformation. When an IP address search was carried out of this persons emails, two interesting results came back. The first was from an office in the Thamel region used to book trekking tours. The second was the exact IP address as emails sent to Traveller Assist by FCI Heli Charter Services.

The investigation

In total, six investigators, two forensic accountants, two lawyers and a crisis communications consultant have worked over 3,000 hours in 18-months.

Jonathan Bancroft, Managing Director of Traveller Assist said, “When we first started this investigation, we did not expect it to turn into such a mammoth task.

It has included: 11 separate visits to Nepal to carry-out sting operations, conduct surveillance, search company records, identify owners of IP addresses, meet with banks, interview witnesses and whistleblowers; and despite their public denial, to meet with three separate government officials, which were all recorded.

Very early in the investigation, Traveller Assist was given the opportunity to review one-thousand invoices from 2017 and 2018 which had been submitted to 17 insurance brands from charter, helicopter and rescue companies, and hospitals in Nepal.

The intelligence picture that was built from those invoices identified companies who were not only over-billing, but also billing multiple insurers for the exact same helicopter. In one case, a total of USD$51,000 was charged to four insurers for what turned out to be one helicopter with six passengers onboard. In addition, there was a clear pattern drawn from the invoices of partnerships between charter and rescue companies, and hospitals.

Throughout this investigation, Traveller Assist initiated a red team strategy. An independent and qualified group who were not involved in the actual investigation, but were hired to review and challenge all of the evidence that had been collected. This enabled Traveller Assist to analyse the evidence objectively, and avoid any blunders.

Danny Kaine, Head of Assistance at Traveller Assist said, “There are more people in Nepal who want the fraud to stop than there are who want it to carry on. Whenever we asked industry sources who the people are- responsible for the fraud, the same names were mentioned time and time again.

Upon further investigating these people, it became evident that they were either an owner, shareholder or promoter of the companies that had already been identified in the investigation from the hard evidence of the fraudulent invoices, and some had already been named by our sources within the government.

This scam has cost foreign insurers millions of dollars in fraudulent claims, has claimed the lives of at least three travellers, and placed the health and safety of countless travellers in jeopardy.

Bancroft added, “These are criminal acts against international companies and citizens, and the people found responsible should be charged as criminals, not allowed to hide behind a limited liability company.

Failure by the Tourism Ministry to act will not only strengthen the protection these fraudsters are given, but it will also perpetuate the problem to the point where Nepal will become too risky for all insurers. It will be placed in the high-risk category, similar to traveling to Iraq or Afghanistan.

The mafia

Hospital staff and helicopter operators who have been willing to speak to Traveller Assist have admitted that they do pay commissions, but explained if they don’t, certain companies will make it very difficult for them to get any business. Ang Tshering Sherpa described it to the Telegraph in a recent interview as a ‘Rescue Racket’. In that same article, Speed Kaji Sherpa described the people responsible for the fraud as the Mafia.

Krishna Prasad Devkota, Secretary of the Ministry of Culture, Tourism and Civil Aviation told the Telegraph, “High profile people are involved in the scam and they are now being investigated by the police and the tax authorities.”

In a frank admission, Mr. Devkota explained that even his own job is on the line for investigating irregularities [within the government].

In an article by the Nepal Times, it quotes a Tourism Ministry official admitting that some of the [owners of] unscrupulous companies involved in the scam enjoy high-level political protection because they are party donors, offer free helicopter rides during elections, or provide complimentary hospital treatment.

The names of the primary people and companies who Traveller Assist believe has orchestrated and control over 90% of insurance fraud in Nepal, and has overwhelming evidence against, including: company registration documents, copies of shareholder agreements, details of offshore bank accounts, lists of assets purchased (in part) from ill gotten gains, copies of emails discussing commission payments and written statements from key witnesses, are:

1. Mr. Shyam Kandel

2. Mr. Jaya Ram Rimal

3. Mr. Ram Nepal

4. Mr. Prakash Chandra Lohani

5. Mr. Shreeram KC

6. Mr. Kumar Bandari

7. Mr. Ram Sapkota

8. Mr. Mingma Sherpa

9. Mr. Tashi Lakpa Sherpa

10. Mr. Bhanu Dhakal

In addition, the names of companies who Traveller Assist has staggering financial evidence against for billing exorbitant rates, over-billing and multiple-billing, are:

Flight Connected Domestic (P) Ltd., FCI Helicopter Charter Service (P) Ltd., Kailash Helicopter Services P. Ltd., Kailash Charter and Rescue Services Pvt. Ltd., Mountain Heli Charter Service Pvt. Ltd., Heli Everest Pvt. Ltd., Air Dynasty Heli Services Pvt. Ltd., Manang Air Pvt. Ltd., Altitude Air Pvt. Ltd., Easy Heli Charter Service Pvt. Ltd., Alpine Rescue Service Pvt. Ltd., Mountain Rescue Service Pvt. Ltd., Nepal Rescue and Medical Assistance Pvt. Ltd. (NRMA), First Assistance Nepal P. Ltd., Himalayan Social Journey and Trekking Pvt. Ltd., Seven Summit Treks Pvt. Ltd., Sherpa and Swiss Adventure Pvt. Ltd., 14 Peak Expeditions Pvt. Ltd., SWACON Hospital Pvt. Ltd., METRO Kathmandu Hospital Pvt. Ltd., ERA Hospital (P) Ltd., CIWEC Hospital Pvt. Ltd., Vayodha Hospital Pvt. Ltd.

It was also found that CIWEC Hospital, SWACON Hospital and ERA Hospital misdiagnosed patients, over treated patients and billed exorbitant rates. In one case, a patient was diagnosed with Dengue Fever, a virus spread by mosquitoes. Except, this patient was at 16,000 feet at the time she became sick, at temperatures below zero degrees Celsius. Dengue Fever is not usually seen at altitudes over 6,000 feet, and especially not in such cold conditions. After already being admitted for four days, the hospital emailed to say they were keeping the patient for three more days, but when it was suggested that an independent doctor would be sent to evaluate the patient, she was discharged early the next morning without warning. An investigation by an independent Harley Street doctor in London tested the patient within 24-hours of being discharged from hospital. She tested negative for ever having Dengue Fever. The hospital presented a medical bill of over USD$2,500.

There are certainly more people and companies involved, but those names have been omitted due to lack of verifiable evidence. Suspicion alone is not enough to name them. It is hoped that the governments own investigation will find sufficient evidence to name and charge the other people involved. Due to the sheer amount of people and companies who are associated, the focus of the investigation has been to identify the kingpins — those responsible for a vast majority of the fraud.

Names of government officials who are also closely connected to some of these people have also been omitted, not due to lack of evidence, but due to the fact that they were not the focus of the investigation.

Evidence ‘string map’ that shows two networks in Nepal (with some crossover). The arrows show the flow of commissions, paid from and to.

Click Here to expand above 'string map'

The names of trekking companies and hotels that some of these people also own or own shares in, have also been omitted from this string map. There is definitely a clear connection between trekking companies who have requested unnecessary helicopters, and who have purposely made travellers sick by putting baking soda and rat droppings in food. One guide who spoke to Traveller Assist said that the company he works for gave him a quota of helicopter rescues he must request.

From the outside, the evidence string map seems to contradict itself, for example, with multiple commission payments being made from different hospitals to the same person/company. There are several reasons for this, chief among them is that the insurer sometimes dictates where the patient is sent, therefore multiple agreements are made with hospitals to ensure that a commission is still paid. In addition, different injuries/symptoms require different hospitals, so again, the more hospitals a company promotes, the more chance they have of collecting a commission. Also, in the spring of 2018, there were so many patients being ‘rescued’, that some of the smaller facilities were at full capacity, so travellers were taken to different hospitals.

On the face of it, there is a conflict of interest between Networks A & B, so why would commissions be paid between the two? One major factor for this is Alpine Rescue Service’s membership with International Assistance Group. For example, if a trekking company who promotes FCI Heli Charter Services, requests a helicopter, but it turns out that it is an Alpine Rescue Services case, then a commission is paid from Alpine Rescue to FCI. This is so FCI don’t miss out on the commissions from helicopter companies and hospitals. The same scenario works the opposite way when Alpine Rescue are called to assist with a traveller from an FCI client company.

Many people who were spoken to in the investigation were quick to speak out against Mr. Shyam Kandel and Mr. Ram Nepal. One particular government official described them as “masterminds” [of fraud] with “friends in high places.” Sources also spoke out to explain that there is a power struggle between the two. This is in part due to Alpine Rescue’s membership of International Assistance Group and a business rivalry created due to the amount of cases that Alpine Rescue receive as part of their IAG membership. From the results of this investigation, the evidence certainly points to there being two clear networks (see string map), with Shyam Kandel heading one and Ram Nepal heading the other. In a recent Nepal Times article, Alpine Rescue was described as representing ‘half the foreign insurers.’

The numbers

It is estimated that 1.3 million travellers visited Nepal in 2018, and of those 60% travelled with insurance, so 780,000. Statistically in Nepal, 2% would require medical assistance, so a total of 15,600 cases. 80% of those cases would have been outpatient, with bills less than USD$250 and no reason to involve an assistance company. That means in 2018, there were 3,120 inpatient medical cases, and close to 3,000 of those involved a helicopter rescue. Based on a thorough investigation of 1,000 invoices, foreign insurers were over-billed an average of USD$1,876 per invoice. That’s a grand total of USD$5.8 million that foreign insurers were defrauded of in 2018 alone.

This is just the amount that foreign insurers were over-billed. It’s not the total amount of helicopter and medical bills. 3,000 helicopter rescues at an average cost of $4,950 is USD$14.8 million in revenue split between 10 companies who own helicopters. Flight records obtained by Traveller Assist show that Air Dynasty conducted just short of 70% of the heli-rescues in 2018.

In addition, the average cost of an inpatient medical bill in Nepal is $1,370. With 3,120 inpatient cases, that’s USD$4.2 million and a further 12,480 outpatient cases with an average bill of $250 is USD$3.12 million. A total of close to $7.4 million in revenue for hospitals.

It’s easy to understand how a completely unregulated rescue industry in Nepal with total revenues of over USD$22 million per year, can and does attract fraudulent activity.

The allegations

Both the Tourism Ministry and the Chief of Police have made comments to the media that Traveller Assist and Head of Assistance, Danny Kaine have been placed under investigation by the Central Investigation Bureau. The exact reasons are unclear. It has been suggested that Traveller Assist has placed pressure on the government. It has also been suggested that Traveller Assist has smeared the reputation of Nepal.

Jonathan Bancroft said, “We issued an ultimatum on behalf of our clients that stated if they do not take action to stop fraud, then our clients would boycott the country. We then sent emails to ministry officials to request their cooperation and inform them of our intentions. It is true, we have put pressure on the government. That is the very definition of an ultimatum and lobbying. As for smearing the country’s reputation, that lays squarely on the people responsible for the fraud, and the government for not stopping it as they had previously promised to do.”

In addition, FCI Heli Charter Services has filed a complaint to the Police that they issued an invoice to Traveller Assist to claim for a helicopter and that we refused to pay for it. There is a simple reason for this. It was an unnecessary helicopter lift that was not authorised by the insurer. Traveller Assist acts on behalf of the insurer and they denied the claim. Case closed.

A local highly placed source also indicated that an official at CIWEC Hospital has suggested that Payr, a global payment platform developed by Traveller Assist, was used to launder money. Firstly, Payr is a payment platform, not a company. Secondly, Traveller Assist does not receive any form of payment from any company or person in Nepal. It’s a software service that insurers use to make foreign currency payments abroad. Thirdly, Payr is a send only system, it does not receive funds. In addition, all payments sent by Payr are monitored and regulated by the Financial Conduct Authority.

It was also suggested that Traveller Assist has contacted helicopter companies and hospitals in Nepal to pressure them into using our company’s services. The reason for those emails was to inform them that if they rescue or treat a traveller without first informing us, then any invoice they send for their services could be denied. As an assistance provider it is our duty to assess the patient as best we can (via phone or email) and confirm their symptoms. If a helicopter is required, it is requested from a trusted heli provider and we direct care to a trusted hospital, suitable for the symptoms or injuries. In some cases would would also send a doctor/medic on the heli who can treat the patient en-route to hospital.

Bancroft added, “These claims are baseless and ridiculous. Look at the people who made them. All of them named in the governments own investigation. It’s the oldest trick in the book. Someone points the finger at you, you point it right back.

These claims have been made to muddy the waters and to take the focus away from the people and companies responsible for the fraud. The fact remains that the fraud has happened and is continuing to happen. It has cost insurers millions of dollars and has also caused the deaths of travellers, and placed the health and safety of countless other travellers in jeopardy.

The conclusion

As the Managing Director of Traveller Assist Ltd., I stand by the evidence our team has gathered, processed and analysed — as do our lawyers, and if called into question by any of the named people or companies, we will publish all of the evidence online for all to see, and defend it in a court of law if required.

For now, the evidence has been presented to Traveller Assist clients’ and they are in possession of the facts whereby they can make a fully informed decision. They understand the situation and they are waiting for official news from the Tourism Ministry before making their decision. One insurance brand has already taken the drastic measure of categorizing all travel in Nepal outside Kathmandu as ‘high risk’ — that’s the same policy a traveller would purchase to visit Iraq or Afghanistan.

Regardless of their decisions on whether they will continue to insure travellers to Nepal or not, Traveller Assist will not accept any services or invoices from the above named companies.

Jonathan Bancroft added, “What we have witnessed and uncovered is a trekking and rescue industry where fraud is so ingrained, it has become ‘normal’ for some providers to place money and greed over the health and safety of travellers.”

Under the UK’s Bribery Act 2010, it is an offence for ‘failure by a commercial organisation to prevent a bribe being paid to obtain or retain business or a business advantage… and to ‘knowingly send payments to a commercial organistation or person involved in fraudulent activity.’

Most countries have these laws, Ireland under the Criminal Justice (Corruption Offenses) Act 2018, the United States has the Foreign Corrupt Practices Act 1977, and both Australia and New Zealand cover these laws under their Criminal Code Act.

Bancroft added, “It would be entirely unethical for Traveller Assist to accept any services from these companies at this time. As an assistance company, a critical service we provide is to facilitate payments to helicopter companies and hospitals. Under the laws of the countries we are incorporated in, I am not willing to break the law to send money to fraudulent companies.

While not all trekking agencies, helicopter companies and hospitals in Nepal are involved in fraudulent activity, the problem still remains that these fraudulent companies are still ‘rescuing’ travellers and taking them to fraudulent hospitals. Sometimes, insurers and assistance providers don’t have a choice who conducts the rescue, because they don’t inform anyone ahead of time. It’s another fraudulent tactic that they use to take the decision away from anyone who could stop them from being paid a commission. This creates a problem because insurers and assistance providers then need to pay these companies, potentially breaking the law in their own country by doing so.

In addition, Traveller Assist staff have received threats of violence toward them for uncovering the extent of the fraud. Knowing the background of some of the named people, and the people they are involved with, including a major crime syndicate with a history of violence, those threats have been taken very seriously. As a result, we have removed our two employees from the country and all assistance cases will be handled from outside of Nepal by our 24/7 assistance centre, using only trusted helicopter providers and hospitals.

Danny Kaine added, “As an assistance provider, we have two mandates. To ensure excellent quality of care for travellers and to reduce financial risks for insurers. Our intention has been to make Nepal a safer place for travellers and less risky for insurers.

Read: Industry group lists top five risks insurers face in Nepal