Who is behind Nepal’s multi-million dollar insurance fraud scam?

Helicopter rescue of a trekker from Everest Base Camp (Getty)

Kathmandu, Nepal (February 3rd, 2019) — Over the past 10-days there has been a myriad of articles on the travel insurance fraud scam in Nepal, in both the local and international media. Most recently, quotes published by local media from various ‘unnamed’ sources have proven to be wrong and misleading — and has shown that local media are being used as pawns in a strategic game that is being played by both the government of Nepal and the fraudsters.

The business of paying commissions and purposely making travellers sick in Nepal has been happening since at least 2013, as reported by Ed Douglas of the British Mountaineer Council, and is continuing to happen, despite the Tourism Ministry promising to tackle the fraud and corruption.

In May 2018, after facing the most expensive season on record for insurance claims in Nepal, international insurers joined forces to put pressure on the Government to crackdown on fraud or risk insurers boycotting the country.

After a 90-day investigation, a committee appointed by the Ministry of Culture, Tourism and Civil Aviation confirmed that the fraud was happening.

Joint Secretary of the Tourism Ministry, Ghanashyam Upadhyaya told AFP, “When we began our investigation we did not realise the magnitude of the problem.”

Despite promises being made by the government to bring those responsible to justice, not one single charge has yet been laid. In addition, the Ministry promised to implement changes to rescue procedures to stop the fraud, but failed to do so.

Ghanashyam Upadhyaya added: “Our office has sent our findings to other ministries — health, home, finance and civil aviation — but we’re waiting to hear back.”

The struggles within the government seem to be just as blurry as the details of the investigation itself. Comments by government officials seem to contradict each other and the blame for why charges were not laid is being put on each of the ministries.

Ramkrishna Subedi, Joint Secretary at the Ministry of Home Affairs, said: “This is not our responsibility, the Tourism Ministry must take action.”

In a press release by the Tourism Ministry sent on September 1st, 2018 to the Kathmandu Post, they listed all of the companies involved:

Flight Connected Domestic (also operating as) FCI Helicopter Charter Service, Kailash Charter and Rescue, Mountain Heli Charter Service, Eagle Heli Charter Service, Easy Heli Charter Service, Alpine Rescue Service, Mountain Rescue Service, Himalayan Social Journey Trekking, CIWEC Hospital, SWACON Hospital. Vayodha Hospital, Heli Everest, Air Dynasty and Manang Air.

Tourism Minister, Rabindra Adhikari told AFP, “We are deeply committed to taking action against them. The government will make no compromises in this regard,”

However, soon after these names were published, a meeting led by Nabaraj Dahal of the Trekking Agents Association of Nepal (TAAN) met with the co-Chair of the ruling Nepal Communist Party (NCP), Pushap Kamal Dahal who then put pressure on Minister Adhikari to drop the charges against the named companies. This according to a report in the Nepali Times.

Traveller Assist, a medical assistance and cost containment company, who acts on behalf of insurers and underwriters, has been conducting an insurance fraud investigation in Nepal since August, 2017.

Jonathan Bancroft, Managing Director said, “From the results of our own investigation and after seeing the names of companies listed by the Tourism Ministry from their investigation, we are confident in our findings.”

After countless hours spent searching through company records, cross referencing bank accounts listed on invoices, interviewing whistleblowers in different organisations, fact-checking and conducting surveillance, a clearer picture has emerged.

Bancroft went on to say, “We know exactly who is controlling the fraud in Nepal and how it happens. When all is said and done, and the layers are peeled back, it is apparent that only a handful of well connected and influential people have engineered and continue to control this elaborate multi-million dollar scam.”

These fraudsters should be charged to the full extent of the law and not be allowed to hide behind Ltd. companies. Some of the [owners of] unscrupulous companies involved in the scam enjoy high-level political protection because they are party donors, offer free helicopter rides during elections, or provide complimentary hospital treatment, as reported by Sharad Ojha.

Suggestions made by the Tourism Ministry of Danny Kaine, an employee of Traveller Assist, trying to ruin the reputation of Nepal is “ridiculous” explained Bancroft. The blame for the dent in Nepal’s tourism industry lays squarely on the unscrupulous characters in the tourism sector — and the Ministry for failing in their promise to bring them to justice.

One change the government did introduce, with devastating effects, was a ‘Restricted Area’ permit that helicopter operators had to apply for, in a lengthy process, that in some cases meant a rescue was delayed for several hours or even overnight. A report in Aviation Nepal directly blamed these unnecessary delays on the death of Canadian trekker, Randle Baker. According to the Pilot in Command at Simrik Air, these delays also likely led to the unnecessary deaths of other travellers.

Helicopter returning to base over Swayambhunath in Kathmandu, January 2019 (Traveller Assist / Danny Kaine)

To better understand the travel insurance scam in Nepal, it’s important to first note the difference between a helicopter charter company and a helicopter company. Charter companies don’t own helicopters. They have agreements with helicopter companies who do. A Manager who works for a helicopter company in Nepal told AFP that they pay a $500 commission per case to the charter companies and said, “If we don’t pay the commission, we can’t get the business.”

The scam works through a combination of referrals and commissions that typically starts with the trekking company. A traveller will complain of a minor ailment such a common cold or being tired and the guide will insist on a helicopter being called. Trekking companies typically have agreements with certain charter companies and they are paid a commission for each case. Hospitals also pay commissions to the charter companies and trekking agencies to receive patients.

Guides working for the low-cost agencies are being told to make up the shortfall by getting trekkers rescued by helicopter: one guide told AFP that he was given a quota for the number of trekkers he should have “rescued.”

Suraj Paudyal, who coordinates helicopter rescues for Mediciti Hospital in Kathmandu said,“The industry thrives on these unnecessary rescues.”

On September 5th, 2018 — Kai Schultz of the New York Times tweeted that as part of the Ministry’s investigation, they found evidence that trekking companies had put rat droppings and high amounts of baking soda (a known laxative) into trekkers meals. This was so guides and trekking companies could collect the commission for calling a helicopter.

Screenshot from Twitter of tweet sent on September 5th, 2018.

A subsequent article in the New York Times named trekkers who were taken advantage of by trekking agencies, helicopter charter companies and hospitals, all to defraud foreign insurers in an elaborate scam.

In one example, FCI Helicopter Charter Services, a company blacklisted by World Nomads Insurance and Traveller Assist, had sent a helicopter to pick up the travellers without the insurers permission, and transported them to SWACON Hospital, a small clinic that is also on the blacklist of World Nomads and Traveller Assist. An invoice of over $10,000 was sent to the insurer, but there were medical report inaccuracies by SWACON Hospital.

Shyam Kandel of FCI Heli Charter, who is also a promoter of Air Dynasty and SWACON Hospital, among other companies, denied the allegations. However, upon further investigation, the helicopter rescue was found to be unnecessary and the helicopter bill that was sent to the insurer was double the amount of industry standards.

An article by Annabel Symington in AFP, a journalist who has been investigating insurance fraud in Nepal since early 2018, describes how a trekker with Himlayan Social Journey tells of how she was forced to take a helicopter after saying she had a common cold. 10 people in her group returned to Kathmandu on three helicopters, but were told to say that each were alone on the flight back. Himalayan Social Journey then billed each insurer for separate flights, pocketing $35,000 USD in the process.

Ram Sapkota of Himalayan Social Journey, who is also a 10% owner of Altitude Air and a promoter of Air Dynasty and SWACON Hospital, denies that each insurer was billed for the flight, despite insurers providing evidence to prove him wrong. Ram Sapkota also admitted that his guides receive a commission from some hospitals if they take a tourist there, saying he allows it because his company needed to “maintain relations” with medical providers.

In 2018, Seven Summit Treks were fined $44,000 USD for forging ‘Everest Permits’ for Australian climber, Ian James Hibbert and Chinese climber, Xu Zhong Zhou. Seven Summit Treks co-founder, Mingma Sherpa told the Himalayan Times that he believed an employee was responsible for forging the documents.

Trekking agencies, charter companies, helicopter operators, hospitals and hotels in Nepal are all competing against each other in profit focused businesses, in an overcrowded market, that many people have come to know as ‘Everest Inc.’

Deepak Joshi, CEO of the Nepal Tourism Board, told Gear Junkie. “We are moving on a price war rather than a service war… And that is causing desperate measures.”
Tourist Guide Association of Nepal at the Pashupatinath Temple, January 2019 (Traveller Assist / Danny Kaine)

In an interview with Sangam Prasain at Kathmandu Post, Yog Raj Kandel, Secretary General of the Helicopter Society of Nepal has hit out at claims helicopter companies are involved in the scam.

“We don’t conduct rescue operation and deal with insurance claims directly… A chopper is dispatched to rescue people at the request of the trekking operator, after payment is confirmed.”

Yog Raj Kandel claimed that the Helicopter Society of Nepal requested copies of fraudulent helicopter invoices from Traveller Assist, “but they refused to provide them.”

Danny Kaine, Head of Assistance at Traveller Assist said: “Why would anyone from the Helicopter Society of Nepal contact Traveller Assist to request copies of invoices, it makes no sense. They were not part of the governments investigation team and if they were, it would be a gross failure of due process by the Government of Nepal to appoint a society to investigate its own members.”

All eight people who sit on the board of the Helicopter Society of Nepal each hold positions in eight of the ten companies in Nepal who own and operate helicopters.

Incidentally, Yog Raj Kandel is the Chief Executive Officer of Heli Everest, one of the companies named by the Ministry’s own fraud investigation. Heli Everest is also known to be promoted and used by Easy Heli Charter Service and Alpine Rescue, two companies also named in the fraud investigation.

A street in Thamel, the tourist area of Kathmandu, January 2019 (Traveller Assist / Danny Kaine)

In a textbook tactic of deflection and redirection, the Tourism Ministry have tried to divert the focus away from the fact that they did not follow through on their promise to bring the named fraudulent companies to justice — and instead focus their investigation on Traveller Assist. This is according to an article on January 30th in the Kathmandu Post.

Jonathan Bancroft, Managing Director of Traveller Assist said, “While we welcome any investigation into our company, we question the motives of a government wasting time, money and resources to investigate a trusted assistance provider that is owned and operated by military and law enforcement veterans.”

Minister Adhikari has claimed in a Nepali Times article that as a result of the investigation by his government last year, the amount of helicopter rescues has drastically dropped, quoting that only 186 helicopter rescues happened between September and November, 2018.

In fact, there were over 1,600 helicopter rescues that happened in that same time period. 94 of those helicopter rescues were coordinated by Traveller Assist. It is believed that only 186 helicopter rescues were reported to the ministry, meaning that over 1,400 helicopter flights went unreported and unregulated.

Krishna Prasad Devkota, Tourism Secretary admitted, “Rules have not been enforced because of a lack of manpower.”
Annapurna Base Camp, January 2019 (Traveller Assist / Danny Kaine)

As if this saga could not get any stranger, an ‘unnamed’ official at CIWEC Hospital made baseless allegations to the Kathmandu Post that Traveller Assist’s Danny Kaine threatened them to gain control of their cases.

He commented, “At no point have I ever threatened CIWEC Hospital or any other company in Nepal. I have been informed who the source is at CIWEC and it is my belief that their baseless allegations are in response to me sitting in their office last week and explaining that we have credible evidence they misdiagnosed and over-treated patients to inflate medical bills.”

In the spring of 2018, Traveller Assist provided a list of insurance brands to CIWEC Hospital to facilitate faster assistance services for travellers. This was to avoid CIWEC trying to take payments directly from travellers and to stop them confiscating travellers passports until medical bills were paid. This was a courtesy email only.

Kaine added, “CIWEC is not our preferred hospital in Nepal and so it makes no sense that we would have tried to get any kind of exclusivity deal with them.”

Traveller Assist represents insurance underwriters. Not necessarily travel insurance brands directly. The brands remain the same, but the underwriters change. In September, Smriti Tuladhar at CIWEC sent an email directly to insurance brands mentioned in our email from March. Unfortunately, in the six months that had elapsed since the first email, some of the insurance brands had changed underwriters, so we no longer assisted them. The emails by CIWEC caused a lot of unnecessary confusion in the industry, which has since been resolved.

Understandably, CIWEC Hospital are nervous. A press release sent by the Tourism Ministry to the Kathmandu Post named them as being under investigation ‘for quoting exorbitant rates and making [those] claims against tourist insurance policies.’ Traveller Assist has also recently blacklisted them.

In the past, Tourism Ministry officials have threatened to ban foreign assistance providers from operating in the country, but it’s just not realistic. Insurers rely on assistance providers and their trusted provider networks. If Nepal bans foreign companies from operating in the country, this will have a knock-on effect that will likely lead to insurers deeming Nepal too risky, and boycotting the country.

In the coming 12-days, international insurers will be monitoring closely what happens in Nepal. There is hope that further pressure will not be placed on the Tourism Ministry for them to let the named fraudulent companies ‘off the hook’ (which has already happened once) — and that those found responsible will this time, be brought to justice.

Tourism Minister, Rabindra Adhikari said on January 30th, 2019, “ In two weeks, there will be action taken against these fraudulent companies.”