A senior official with the Central Bureau of Investigation (CBI) told this paper that though a request for information and evidence for the Bhutan Lottery case was sent last year in around November 2012, the Bhutan government has not cooperated with the investigation.
The letters from CBI was directed to Bhutan through India’s Home Ministry and Ministry of External Affairs in October and November last year. The letters requested for details on the contracts between the Bhutan government and Santiago Martin. But, the government declined to respond to the letter, the CBI said.
The senior official involved in the investigation told this paper that the CBI investigation on Bhutan Lottery would be incomplete without the necessary information from the Bhutan government.
The officer told the paper, “The Bhutan government is a sovereign government, and so we have sent for a request for some information through our Ministry of External Affairs, but so far, we have got nothing. If there is no cooperation from the Bhutan government then nothing can be done.”
Meanwhile, Indian media outlets have quoted the CBI saying that they will seek the help of Interpol to investigate the infamous Bhutan Lottery scam, after letters from CBI requesting information from Bhutan government has failed to elicit any response.
Asianet News and other Indian media outlets reported that CBI has found that lottery king Santiago Martin has received full support from the Bhutan Lottery Directorate in his selling of illegal tickets, and dubious prize money distribution.
The Bhutan Lottery scam is a multi-billion dollar lottery scam that was uncovered by a series of investigative stories done in Business Bhutan. The period of the investigation by the paper stretched mainly from 2007 to 2010, and involved the Finance Ministry and Directorate of Lottery.
Apart from showing blatant corruption that involved Bhutanese officials, the investigation showed how Bhutan lost billions in potential revenue under highly dubious circumstances, and also how the lottery committee made a series of poor and even illegal decisions on Bhutan Lottery.
In order to verify the stories uncovered, the government ordered for an Audit Report (RAA) that was submitted to the Prime Minister in 2011.
The special RAA report on the Bhutan Lottery operations confirmed many of the media reports on the Bhutan Lottery scam.
The report confirmed irregularities in the operation of Bhutan Lottery which was worth Nu 263.6bn a year in 2007 alone, printing in illegal presses, billions in potential revenue lost by Bhutan, non-printing of prize money, changing the lottery agreement illegally by the incumbent DPT government to favor Martin and other illegalities.
The report also pointed to cases of unauthorized payments to Bhutan Lottery Directorate staff by Martin, illegal transfer of company ownership, under-reporting of actual value of Bhutan Lottery by lottery officials, etc.
The report says that Bhutan’s earlier arrangement with Jayantilal of 4% of the total turnover, if applied, on the current lottery business; it would have generated more revenue. This means that in 2007 with the turnover at Nu 263.6bn, Bhutan could have instead got Nu 10.544bn in revenue. The money could easily have solved Bhutan’s Rupee Crisis and more.
The RAA report confirmed that Martin had been skimming off billions every year in prize money of Bhutan Lottery tickets in India by keeping the prize money for himself. The prize money which was Nu 4.4bn in just three months of 2010, should have come to Bhutan as per the agreement signed with Martin.
The RAA found that in three of the CD accounts, huge deposits of cash amounting to Nu 185.5mn had been made in the accounts for minimum assured return, prize money, and security deposit. Those same accounts were also being used to make unauthorized payments to the staff of the Bhutan Lottery Directorate. The RAA found that money was going toward paying ‘draw charges’ to the judges, which according to RAA, was not authorized as lottery officials already get 20 to 30% salary allowance monthly, and a yearly two month bonus, making them better paid than highly paid corporate employees. In one instance, Nu 282,980 had been withdrawn and divided among the staff members. It was shown that Nu 3.36mn had been paid out in the last three years just from this one account.
It was also found that Bhutanese employees working for the Martin’s lottery agency in Bhutan and their relatives were among the prize winners of Bhutan Lottery. In fact, between 2008 and 2010, around 26 Bhutanese won Nu 107.58 mn worth of prizes. This was strange, as Bhutan Lottery ticket sales in Bhutan are miniscule in scale. RAA had recommended the investigation of these prize winners.
The RAA found that Bhutan had reduced the annual lottery license fee from Nu 470mn to Nu 210mn on false grounds. Bhutan’s Lottery Committee had reduced the amount on the grounds that Kerala operations were being shut, which actually did not happen. The RAA report said that the Bhutan Lottery Committee also faltered by not approaching the other bidders who had been willing to match Martin’s original offer. Bhutan also lost another Nu 73.012mn in three years, in additional revenue, as the draw charges for Bhutan Lottery were waived off. The RAA report says the revision of the important clauses in the agreements was totally in favour of the agent.
RAA has also stated that the transfer of the lottery agreement from Martin Lottery Agencies to Monica in March 2010 is not allowed as they were two different legal entities. The RAA says that the subsequent resignation of Martin and his wife from Monica and his letter in 2011 already absolved Martin of all legal responsibilities in operation of Bhutan Lotteries in India and showed mala fide intentions.
The report also criticized the Bhutan Lottery Directorate for doing poor research as their tender invitation in 2007 had estimated the total turnover of Bhutan lottery to be Nu 43bn and based on that, they expected a license fee of Nu 350mn a year. However, in 2007 the Bhutan lottery turnover was Nu 263.6bn or around 6 times the estimated turnover. This meant that Bhutan should have put a calculation of an annual license fee of minimum Nu 2.1bn as opposed to the accepted amount of Nu 210mn.
The RAA also noted several shortcomings in selection of Martin as a lottery agent with several allegations against Martin amongst other, which included several court cases in various Indian states for not fulfilling contractual cases, and his habit of reducing the offer once the contract is awarded. The Inter-Ministerial Lottery Committee awarded the tender accepting Martin’s explanation at face value and not giving the due diligence to the matter.
The RAA report also says that relaxation of rule of giving a six-month prize guarantee by the committee resulted in Bhutanese banks losing the opportunity of guaranteeing fees up to Nu 45.560bn a year and earning interests.
It is also pointed out that by not following the lottery law to print in the home state, the Bhutanese printing industry lost out on Nu 1.557bn worth of printing lottery tickets from April 2008 to 2010, a relatively easy job. Instead, the Lottery Directorate authorized Nu 13.7bn worth face value of lottery tickets in illegal presses in just a few months of 2010.
The RAA’s enquiries were also thwarted with the fact that the Lottery Directorate did not maintain records like detailed sales records, cash and bank records, details of unsold tickets, taxes, and draw charges paid, etc. RAA says due to such missing records and the incomplete records with the Lottery Directorate, the true state of lottery operations in India cannot surface.
The RAA report was, however, not shared with anyone except the Prime Minister, Finance Minister, and the Finance Secretary.
ACC was not provided with a copy, and copies were denied to the National Council and Opposition Party as well.
RAA’s then recommendations included the termination of the existing agreement with Martin, organizational reforms of the Directorate of lottery, ensuring proper conduct of lottery operations, studying the various option in managing Bhutan Lottery like, conducting market study, appointing multiple agents, printing of tickets in Bhutan, levying tax on lottery operations, further investigating of some issues, collaborating with state governments, and making sure that lottery agents deposit all security deposits, sales proceeds, and submit accounts for unsold tickets.
The current government in response, shut down lottery operations, but no Bhutanese officials were held accountable.
Tenzing Lamsang / Thimphu