KATHMANDU, April 21: Unity Life International (ULI), a company offering social security schemes without legal permission and running a flawed binary network marketing model based on the pyramid scheme, has already brought into its net more than 650,000 clients and raked in over 6 billion rupees.
The company offers two long-term social security schemes-- an assurance plan and a health plan.[break] Under the assurance plan, modeled around an insurance policy, the company charges clients (it calls them members) Rs 15,000 (or US$ 210), promising to provide accidental death insurance of half a million rupees and assurance coverage of Rs 100,000 in case of death.
In case the member survives, ULI promises to refund the money with 10 percent annual interest, in the manner of a bank, in five years.
Similarly, under its health plan, the company is charging clients Rs 15,750 (or US$ 191) for life-long free health checkups and a treatment package at hospitals operated by ULI in different districts. ULI has set up Unity Hospitals in 19 districts. While some of its hospitals in Kathmandu, Pokhara and Itahari have modest facilities others are more like clinics with a few rooms.
BOTH SCHEMES ARE ILLEGAL
Universally, any long-term social security scheme functions under a regulatory body and is governed by specific laws since clients make long-term investments in such schemes in return for some degree of social/financial security. These are sensitive personal investments and mean long term labiality for the companies offering these services. That is primarily why the state monitors such companies through regulators. In Nepal also, financial and banking institutions, which mobilize deposits, are regulated by Nepal Rastra Bank (NRB) and companies offering various insurance plans are regulated by the Insurance Board (IB). ULI is registered neither under NRB nor IB or any other regulatory body and hence its operations are illegal.
MARKETING SCAM
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The binary network marketing model in pyramid style that ULI employees to intensify sales of its assurance and health plans is not just illegal but such schemes are actually banned in many countries. Under this model, the company gives a member a commission of US$ 10 for adding two new clients below him in the marketing pyramid, US$ 20 for adding four, US$ 40 for six, US$ 80 for eight and US$ 140 for inducting 10 clients into the network. For the sustainability of this marketing model there has to be an infinite number of clients, which not possible in the real world.
More than a dozen similar marketing scams have cheated Neaplis of billions of rupees in the past. Among them the most infamous was Gold Quest, a Hong Kong-based fraudulent company that came to Nepal in March 2000. It is believed to have siphoned off over two billion rupees before its operation was declared illegal in Nepal and some of its agents put behind bars. But even after that, dozen of such companies, including Prime Bank International, a network company based in Dubai, Deosoft, Life Vision, Quick Earning Program, Conservation Nepal, Web Line, Neosoft, Innovative and Nobel managed to cheat Nepalis, especially those at the bottom of the pyramid.
UNCHECKED EXPANSION
As the authorities have failed to take any action against ULI, its management has felt emboldened and has expanded its operations within and beyond Nepal. ULI´s Managing Director, Bishnu Chhetri, informed Republica that his company has corporate offices in Hong Kong, Dubai, Malaysia and Qatar, contact offices in 13 other countries and a presence in 62 countries.
"We have about 400,000 members in Nepal and 250,000 foreign clients in India, Malaysia, Gulf countries and Israel among others," said Chhetri. He also claimed that his company has mobilized more than six billion rupees so far from Nepalis alone through its various operations. If the claim is true, the company has collected at least another Rs 3.75 billion from foreign nationals. "Our target is to have two million members by the end of 2010," said Deepak Bhattarai, ULI´s foreign director.
Awash in cash, the company is now venturing into any field you care to name, from real estate to airlines to department stores to Direct to Home Satellite TV.
ULI has used its political connections to mobilize some embassies in the Gulf and East Asia to expand operations targeting many poor Nepalis working in those countries. "About 65,000 of our members are Nepali laborers working abroad," Chhetri said.
Asked whether his company´s operations are legal, he retorted, "Which law says ULI´s operation is illegal, who said Gold Quest was illegal?" He argued that there was no law governing the type of service ULI offers and said he has been advocating such a law. "Since ULI has grown to such enormous size and offers a promising future, even if there is no law to legalize our operations the state should come up with one in future."
Why hasn´t state taken action?
Various regulatory authorities and state agencies term ULI´s operations ´illegal´ and a ´fraud´ but none of them has taken action against it.
Director General of Department of Commerce (DoC) Anil Thakur, said, "Network marketing of services is still illegal."
Officials at the Insurance Board also say that ULI is illegally selling insurance policy under the guise of assurance plans. “Insurance and assurance are understood as the same the world over. If someone says they are different, he is just playing with words,” said Shekhar Kumar Aryal, IB spokesperson.
Concerned about ULI´s illegal operations, Nepal´s four key institutions entrusted with regulatory work-- NRB, IB, Securities Board of Nepal and Company Registrar´s Office-- had published a joint notice/appeal in leading newspapers on June 17, 2008, appealing to people not to buy insurance and banking policy from unauthorized companies. They also tagged the network marketing in pyramid fashion as an ´act of gross cheating´ but stopped short of naming ULI.
When Republica asked some top regulatory authorities why they haven´t initiated any action against ULI, each of them offered lame excuses.
Director General Thakur of DoC, the main state authority that is supposed to check such anomalies and protect consumer interests, said the department lacked manpower and resources to take action against such a huge and fast-growing company.
The excuse of the IB is equally lame. “The Insurance Act is silent on what action we can take against unauthorized insurance operators. This handicapped us from taking any action,” said Dr Fatta Bahadur KC, its Chairman.
Officials at the central bank refused to even talk of the matter. Newly appointed NRB Governor Dr Yuba Raj Khatiwada said he doesn´t yet have a clear picture of ULI´s operations.
Insiders speak of two reasons why there has been no action against ULI. The first, according to a government official, is that "ULI has strong political clout which has always prohibited any action against it."
The fact that Home Ministry officials have issued instructions to the district administration offices to facilitate ULI´s operations in the districts and that various Nepali embassies in Gulf countries and East Asia have helped its operations targeting Nepali workers in those countries prove this point.
“The penetration of the company in politics and the bureaucracy is deep. How can we take action when our ministers and secretaries have been heavily influenced by the company, taken part in its programs and express best wishes in its souvenir publication?” quipped an official at the Ministry of Commerce and Supplies.
The second reason for hesitation in taking action against ULI seems to be linked to the sheer size of its financial operation and membership base. "How can bureaucrats take action against such a huge company with a membership of over 600,000 without the politicians taking the initiative?" said an official, adding, "No one wants to take the risk."
