CBI to formally ask government for information on Bhutan lottery within a month
In an exclusive interview with The Bhutanese a senior Central Bureau of Investigation (CBI) officer investigating the Bhutan Lottery scam said that his agency would soon be approaching the Bhutan government for information on the Bhutan Lottery.
“We will soon approach the Bhutan government for some information on the lottery investigation within a month or so through the proper diplomatic channels,” said CBI’s Cochin unit superintendent K Krishnakumar based in Kerala.
CBI is India’s premier investigative agency that looks at issues of corruption and heinous crimes.
The CBI so far has already filed 32 cases in total for the Bhutan and Sikkim lotteries which were handled by lottery don Santiago Martin.
Krishnakumar said his agency would want to access investigation reports done in Bhutan, copies of legal agreement with Martin, information on number of draws, legally allotted lottery ticket number and other documents.
He, however, clarified that since Bhutan was a sovereign country the request for information would be made through the correct diplomatic channels.
“We will seek the cooperation of the law enforcement authority and also certain documents and facts which will help our investigation. We, however, will not interrogate anyone to get the truth,” said Krishnakumar.
The only review or investigation done on the Bhutan Lottery issue has been by the Royal Audit Authority in form of an incriminating RAA report.
He told this paper that the documents acquired would not only help the investigation but could also be presented before the courts as evidence.
He said that the CBI in asking for these documents from the government of Bhutan was only asking for public documents.
Krishnakumar also clarified that CBI would not seek the help of Interpol as these involved entirely different mechanisms.
The Bhutanese asked him if the CBI had come across evidence implicating Bhutanese officials in the lottery scam or if the agency suspected any involvement of Bhutanese officials in the scam. “As of this moment I cannot say anything or even presume anything as it will prejudice the investigation,” said Krishnakumar.
The CBI officer said that he was aware of informal diplomatic communication on the lottery issue between the Ministry of External Affairs and Bhutan’s Foreign Ministry but that so far CBI had not made any formal request for information.
In an earlier investigation Bhutan’s Anti-Corruption Commission (ACC) said that it had not investigated the Bhutan Lottery scam as it would have to investigate the Indian Operations where it did not have the jurisdiction to investigate the lottery scam in India.
Krishnakumar said that his agency would not want to pass the investigation buck to any agency in Bhutan but that he would only require some cooperation.
“Bhutan is a sovereign country and Indo-Bhutan relations are sensitive and so this case cannot be treated as a common case like a murderer running away to another country. We cannot jump the gun as CBI will have to follow the diplomatic procedures between the two governments,” said Krishnakumar.
CBI so far has received information from the Sikkim government but will be looking forward to the information from Bhutan as the majority of fake lottery tickets were from Bhutan.
According to the CBI once Bhutan gives the required information the case would take just a few more months.
When this paper contacted the acting Prime Minister Lyonpo Yeshey Zimba he said that he was not yet aware of the issue.
The Bhutan lottery scam is a multi-billion dollar lottery scam that was uncovered by a series of investigative stories done in Business Bhutan.
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 which 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 current government to favor Martin and other illegalities.
The report also pointed out 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 would have generated more revenue. This would mean that in 2007 when the turnover was Nu 263.6bn Bhutan could have got Nu 10.544bn in revenue. This money would 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, security deposit. These same accounts were also being used to make unauthorized payments to the staff of the 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 even many corporate employees. In one instance Nu 282,980 had been withdrawn and divided among 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. 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 from Nu 470mn per year to Nu 210mn per year on the grounds that Kerala operations were being shut which actually did not happen. The RAA report said that the lottery committee also faltered by not approaching 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 favor of the agent.
RAA has also said 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 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 doing any due diligence.
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 these missing records the records available with the directorate are incomplete and do not reflect the true state of lottery operations in India.
The audit 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 among others.
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 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.