KATHMANDU, Sept 17: The parliamentary special committee formed to probe misuse of cooperative funds has recommended that the government take action against four office bearers of Gorkha Media Network, including the chairman of the Rastriya Swatantra Party (RSP), for their involvement in the misappropriation of Rs 650 million that came from a cooperative to Gorkha Media Network. The parliamentary special committee, formed to investigate the misuse of cooperative funds, has recommended action against RSP Chairman Rabi Lamichhane, who was the then managing director of Gorkha Media Network, among others.

The other three individuals recommended for action are Gitendra Babu (GB) Rai, Chairman of Gorkha Media Network, Kumar Ramtel, a member, and Chhabilal Joshi, another director of Gorkha Media Network. A report from the parliamentary committee holds all four equally responsible for the misuse of funds from the cooperative. It is estimated that more than Rs 160 million of the misappropriated amount is attributed to each individual.

"Every company has its own purpose and essence. The directors or shareholders of such an institution hold primary responsibility. Those in roles such as shareholders, board members, and managing directors must be accountable and responsible for the funds received by the company. Account signatories who participate in account management and financial operations must also assume responsibility for their actions," the report submitted by the committee reads.

The report states, "Since the funds of the depositors from the cooperative institution were irregularly transferred to the account of Gorkha Media Network Pvt Ltd, and the involved parties, including Chairman Gitendra Babu Rai, member Kumar Ramtehl, former Managing Director Rabi Lamichhane, and Director Chhabilal Joshi, were responsible for managing and spending these funds, the Government of Nepal should take action in accordance with the prevailing laws."

Former deputy prime minister and home minister Rabi Lamichhane claimed he was unaware of the source of the funds. He had even praised Chairman Rai while leaving Gorkha Media. However, during a nine-hour interrogation by the committee regarding the cooperative funds at Gorkha Media Network, Lamichhane stated he did not know where the funds came from and that only GB Rai was aware of this information. Committee Chairman Surya Bahadur Thapa Chhetri mentioned in a meeting of the House of Representatives that the Rs 650 million received by Gorkha Media Network were all from the cooperative.

Legal experts have stated that this case represents a complete fraud. Advocate Radhika Khatiwada clarified that the basis for the committee's recommendation for action is entirely legal, emphasizing that there is no evidence showing that the cooperative funds were invested in productive sectors.

She said, “It was known that the funds were brought in. The benefits he received were not from profits but from the cooperative’s funds. He planned to bring in the money, benefited from it, and used it in his work successfully, which indicates that this is a complete fraud. There is no way to escape from this.”

Advocate Khatiwada commented that, as the Managing Director, it is evident that he systematically took and used the cooperative’s funds and also planned the expenditure.

When leaving Gorkha Media, Lamichhane had praised GB Rai effusively. “I am grateful to the esteemed Chairman GB Rai of Galaxy 4K Television for giving me the opportunity to develop such a large television station. Allowing me to leave this television station, akin to a child recently weaned, is not something a small heart can handle. It takes a heart as big as GB Rai’s for that,” he had said.

The parliamentary committee has decided to recommend that the government take legal action against the directors and those involved in the decision-making processes of the following cooperative institutions: Surya Darshan Savings and Credit Cooperative Ltd in Pokhara, Supreme Savings and Credit Cooperative Ltd in Butwal, Swarnalaxmi Multipurpose Cooperative Ltd in Kathmandu, Sahara Chitwan Multipurpose Cooperative Ltd in Chitwan, and Sanopaila Savings and Credit Cooperative Ltd in Birgunj. These cooperatives have been found to have violated cooperative laws by channeling funds to Gorkha Media Network Pvt Ltd.

Similarly, the committee has recommended that the government take legal action against the directors and those involved in the decision-making processes of the following cooperative institutions for violating the law by transferring funds to the company: Image Savings and Credit Cooperative Ltd, Samanta Savings and Credit Cooperative, Sumeru Savings and Credit Cooperative Ltd, IME Cooperatives, and other cooperatives involved in similar illegal activities.

The committee found that share transactions in companies, including Gorkha Media Network Pvt Ltd, were conducted using fraudulent documents rather than proper payment instruments and procedures. The committee has recommended that the government ensure the payment processes are completed properly, including paying the appropriate taxes, and that necessary legal measures regarding sweat equity shares be studied and implemented.

The committee has stated, "It has been found that share transactions in companies, including Gorkha Media Network Pvt. Ltd, were conducted using fraudulent documents rather than proper payment instruments and procedures. Therefore, we recommend that the government ensure that the payment processes are completed correctly and that the appropriate taxes are paid. Additionally, the government should be advised to study and implement necessary and suitable measures regarding legal provisions for sweat equity shares."

Leaders of the RSP have interpreted the report as a 'clean chit.' After the committee submitted the report to parliament, RSP leaders claimed that Lamichhane had received a 'clean chit.' Chairman Lamichhane himself also responded by claiming that he had received a 'clean chit.'

Speaking with journalists at the parliament building in New Baneshwar on Monday, Lamichhane stated that although he had not seen the full report, the investigation committee had clarified that he was not involved in the cooperative fraud case. He mentioned that overseeing the sources of investment in Gorkha Media was not his responsibility and that he had used the funds in internal operations as the Managing Director (MD). Lamichhane also made it clear that those who actually committed cooperative fraud should not be spared from punishment. He claimed that there was no misuse of funds during his tenure at the institution.

The committee has also suggested that, in accordance with cooperative laws, the Savings and Credit Protection Fund, Debt Recovery Tribunal, Credit Information Bureau, and Savings Insurance should be operated effectively. 

For directors of problematic cooperative institutions, the committee recommended that their and their immediate family members' immovable property, bank accounts, passports, and travel permits be frozen. They should be required to obtain government approval to travel outside the city where the cooperative's main office is located. A specific period should be set for this arrangement, and if a complete resolution is not achieved within this timeframe, legal action should be considered.

Additionally, after declaring a cooperative as problematic, the committee has suggested that a management team be deployed to handle the cooperative's assets and liabilities. This team should operate effectively, maturely, and robustly in a takeover style. The team should establish offices in the field to manage the cooperative. The government should also provide justifiable intervention to resolve the current cooperative crisis. For small savers with amounts up to Rs 500,000, the government should issue internal bonds under its guarantee and return the funds through authorized channels. The government should then implement a program for recovering these amounts to other government receivables. Furthermore, the government should start the process immediately and progressively facilitate the return of larger savers' funds by identifying sources, incorporating them into the tax framework, and assisting in their return according to the law.

Similarly, the committee has recommended several measures to manage problematic savings and credit cooperatives effectively. It suggests conducting thorough investigations to examine all transactions of these problematic cooperatives in order to determine the true situation. Legal action should be taken against those involved in improper loan disbursement and financial misconduct, with their movable and immovable assets being seized. Furthermore, the committee advises recovering loans and returning funds to savers. Assets invested by the cooperatives should be seized and transferred to the government, ensuring that small depositors receive their savings back. After debt collection, audits should be conducted to ensure proper management and recovery of funds. Additionally, the committee recommends establishing a secondary regulatory authority to oversee and supervise savings and credit cooperatives, which will help address the crisis and ensure proper management and oversight of problematic cooperatives.

The committee has determined that the likelihood of problematic cooperatives returning to normal operation is very slim. It recommends forming separate task forces for each cooperative, consisting of three to five members including banking experts, cooperative specialists, and chartered accountants. These task forces should be given specific mandates and methodologies to assess and manage each cooperative's financial transactions and assets. The task forces would have the authority to oversee everything from asset and liability evaluation to decisions on whether to resume operations or dissolve the cooperative. Additionally, the committee suggests prioritizing the development of a plan to return savings to depositors from problematic cooperatives.

The committee has recommended several actions regarding cooperative institutions. It suggests freezing the institutional assets of cooperatives and the personal assets of their directors and involved individuals immediately. Additionally, it advises taking responsibility for managing the assets of cooperatives involved in illegal activities at the central, provincial, and local levels. This includes selling assets, recovering loans, and returning deposits to depositors. Legal and institutional measures should be established for these tasks. The committee also recommends preparing an inventory of the assets of cooperatives and their directors involved in illegal activities, and ensuring the proper management of these assets according to the inventory. It suggests converting immovable assets into movable assets (through sales) and determining the proportion of funds to be returned to depositors based on their priority and available assets. Finally, it proposes returning the savings to depositors in the order of priority established.

The committee has stated that with cooperatives becoming problematic, their offices might close and directors could face suspension or imprisonment. Given that savings deposited by individuals have been used as collateral for loans, including capitalizing the interest on these loans, and considering the tendency to disregard depositors' savings in favor of liquidating loans, the committee recommends that the government, through Nepal Rastra Bank, coordinate with banks and financial institutions. This coordination should focus on liquidating the assets at market value to recover the loan amounts and provide the remaining funds to the troubled cooperative management committee. The government should send a letter to banks and financial institutions via the central bank to facilitate this process.