CIB Investigation into Cooperatives Fraud Finds Embezzlement of Billions of Rupees

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CIB Investigation into Cooperatives Fraud Finds Embezzlement of Billions of Rupees


KATHMANDU: Ram Chandra Pokharel is a member of the problematic Deurali Savings and Credit Cooperative. He said that he deposited his hard-earned money of Rs 3 million in the cooperative but he has not been able to get it back yet.

Pokharel said that even though he went from pillar to post knocking the doors of the Department of Cooperatives as well as the municipality to get back his money, the cooperative is yet to release the amount.

"The fraudulent operators of the cooperative have political protection, that's why they are not in favor of returning the money," he accused. The deposits of hundreds of other depositors are also trapped in the cooperative. The directors of Deurali have been accused of embezzling more than Rs 2 billion of the depositors.

Similarly, Rakesh Murarka said that he worked day and night for five years to earn Rs 8 million and deposited the money in National Development Cooperative Cooperative. He says that he requested all concerned bodies to return his money but was denied justice.

"I even visited political party leaders but in vain," he said expressing his pain. According to Murarka, the depositors of the National Cooperative have lodged a police complaint against its director for embezzlement of Rs 332.22 million. However, the cooperative has not returned their savings yet.

The Central Investigation Bureau (CIB) of Nepal Police is currently investigating the irregularities in about a dozen cooperatives including these two. CIB's research has shown that most of the cooperatives have collapsed due to indiscriminate and excessive investment in unproductive sectors. It has been found that many co-operatives had given loans without collateral and many such debtors have run away.

The police investigation has also revealed that the operators of the problematic cooperatives were found withdrawing money from the cooperatives arbitrarily and investing the money at their whims, which risked billions of rupees deposited by the members. The investigation also found that the cooperatives lacked any kind of regulatory mechanism and auditing.

Superintendent of Police at the CIB Hobindra Bogati told New Business Age that billions of rupees of the depositors were trapped in cooperatives and the police had trouble verifying the details.

"During the investigation, it was found that the operators of cooperatives had purchased luxury vehicles with the money deposited in the cooperatives. They also used the money for usury, and bought land in the name of third persons," Bogati said.

The investigation of the police has also shown that the family businesses were opened in the name of the parents, sisters, in-laws of the operators of cooperatives while some cooperatives were opened with the motive of embezzling the money of unsuspecting depositors.

The police concluded that the country's economy has been negatively affected due to the problems in cooperatives. "The problem surfaced due to the dumping of the money in non-productive areas, as a result of which the economy has slumped," said Bogati.

Lalitpur's Deurali Cooperative was found to have embezzled more than Rs 2 billion and the owner of Shiva Shikhar Cooperative, which had a network spread across 35 districts, had embezzled billions of rupees.

According to the police data, since mid-July of the current fiscal year, cases have been registered all over the country saying that co-operative operators have cheated Rs 6 billion. A total of 148 people have been arrested in this connection.

During last fiscal year, the police registered cases related to cooperative fraud worth Rs 7 billion. The cases are sent to the police only after failing to resolve the issue by the local and state governments as well as the Department of Cooperative. The police investigation has shown that by the time all those agencies investigate, the operators of the cooperatives manage to sell their property. As a result, they were unable to return the savings to the victims.

According to government data, there are 31,373 cooperatives in operation across the country. They have a collected Rs 478 billion from the depositors and invested Rs 426 billion in loans.

Although the Department of Cooperatives has estimated that around 500 cooperatives are facing problems, it is not known how much money exactly has been embezzled.

According to the police officials involved in investigation, the cooperatives have 73,81,218 depositors. Stakeholders say that thousands of depositors have not been able to get back their money due to political intervention.

CPN (UML) whip Mahesh Bertaula said that even though his party was serious about the issue of cooperatives, the Nepali Congress has become the obstacle in resolving this issue.

On the other hand, Chief Whip of Nepali Congress Ramesh Lekhak claims that the ruling parties are busy protecting the co-operative thugs. According to him, the Congress is effortful to ensure justice to the cooperative victims.

Former Secretary Gopinath Mainali sees the need to form a committee to remove the legal obstacles rather than focusing on individuals to solve the problems of cooperatives. "Those with vested interests should not sit in such a committee," he said.

He said that the state side has not taken any concrete steps to resolve the problems while the main opposition party is linking the issue of cooperatives with the government.

“Why are the political parties not ready to take action by amending the law immediately?" he questioned, adding, "There is no law that allows immediate freezing of the property of directors and officials as soon as cooperatives are declared problematic. The state should make such laws. Legal arrangements should be made to bring those who invest recklessly against the norms of the cooperative to the court.”

The government has announced the creation of a special regulatory agency to control irregularities in the cooperatives sector. According to Mainali, although the matter of creating such a body was included in the budget many times, the political leadership never implemented it.

"Even though many committees were formed to solve the problem and submitted reports, it was kept in the drawer," said Mainali.


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