However, issues from the past still remain unresolved
This week, the cabinet approved the Ministry of Finance’s plan to set up a State Owned Enterprise (SOE) for the purpose of starting the Lottery Business.
As a start the SOE will set up a paper lottery business like the Bhutan Lottery within Bhutan. Eventually once legal and other issues are resolved in India the plan is to take it across the border.
The previous Bhutan Lottery which was cancelled in 2011 was sold in both India and Bhutan though overwhelmingly the main market was India with very few buyers in Bhutan.
The SOE will have a board and a CEO along with some staff and also some equity investment by the government to set up the company and start the business.
It will have to do its own study and come up with various strategies and plans to sell lottery products. This will also include studies on how to re-enter the Indian market.
Earlier the Ministry of Finance (MoF) had a Directorate of Lottery located in Phuentsholing which was closed along with the lottery business in 2011.
In order to avoid having a Lottery Directorate the MoF will set up an autonomous SOE for the lottery operations similar to the recent Royal Bhutan
Helicopter Services Limited.
The SOE will have to start from scratch as the previous lottery staff have either retired or left the ministry.
A senior official said that apart from Bhutan Lottery there have been precedents of other lotteries done by the government directly or other agencies during special occasions or to collect funds.
The restarting of the Lottery business to earn revenue was one of the pledges made by the current government during its 2013 election campaign.
In the meantime, according to Indian media reports the Central Bureau of Investigation (CBI) from India is planning to file a charge sheet case in the Bhutan Lottery case with the available evidence it has got from its investigation in Kerala, India.
However, the CBI in the news report said that it did not get the required information from Bhutan like the details of the contract between the Bhutan government, lottery printers and distributors.
A CBI official was quoted as saying that investigations based on evidence collected in Kerala have been completed but, involvement of persons from Bhutan could not be confirmed due to absence of details from there.
The CBI in November 2012 had sent a letter to Bhutan through India’s Home Ministry and Ministry of External Affairs.The letters requested for details on the contracts between the Bhutan government and lottery Don Santiago Martin. In May 2013 the CBI said the former government declined to respond to the letter.
According to a senior official the current government also did not respond to the letter from CBI as it was feared that Bhutanese officials would be called and questioned by the CBI and it would become an issue of sovereignty. It was also feared that it might hamper the restarting of the lottery business.
The Bhutan Lottery at the time involved a multi-billion lottery scam that was uncovered by this writer in a series of investigative stories done during the writer’s time as a News Editor in Business Bhutan. The period of the investigation stretched mainly from 2007 to 2010.
Apart from showing corruption that involved Bhutanese officials in the Directorate of Lottery, 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 former government ordered for an Audit Report (RAA) that was submitted to the former Prime Minister in 2011.
The special RAA report on the Bhutan Lottery operations confirmed the writer’s reports on the Bhutan Lottery scam.
The report confirmed irregularities in the operation of Bhutan Lottery which was worth Nu 263.6 bn 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 former government 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; would have generated more revenue.
The RAA report confirmed the writer’s findings 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 4.4 bn in just three months of 2010, should have come to Bhutan as per the agreement signed with Martin.
The RAA found that in three bank 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. Money was going toward paying ‘draw charges’ to the judges, which according to RAA, was not authorized as lottery officials already got 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 3.36 mn 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 confirmed that Bhutan had reduced the annual lottery license fee from Nu 470mn to Nu 210 mn 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 73.012 mn 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 43 bn and based on that, they expected a license fee of Nu 350 mn a year. However, in 2007 the Bhutan lottery turnover was Nu 263.6 bn or around 6 times the estimated turnover. This meant that Bhutan should have put a calculation of an annual license fee of minimum Nu 2.1 bn as opposed to the accepted amount of Nu 210 mn.
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 reducing the offer once the contract is awarded. The Inter-Ministerial Lottery Committee awarded the tender accepting Martin’s explanation not doing diligence on 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 45.560 bn a year and earning of 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 1.557 bn worth of printing lottery tickets from April 2008 to 2010, a relatively easy job. Instead, the Lottery Directorate authorized Nu 13.7 bn 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 former Prime Minister, former 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 former government in response, shut down lottery operations, but no Bhutanese officials were held accountable.The ACC also did not investigate the case.