Investigators have questioned the managing director of a Nepalese metals company after a container he had imported was found to be full of sand, pebbles and stones. According to letter of credit (L/C) documentation related to the container, it should have contained copper scraps.

It is clear that this is case of fraud, but it has yet to be established that an L/C fraud has been perpetrated. The man who has been questioned - Mahendra Golchha, managing director of Hulas Wires Industry (HWI) - denies involvement in fraudulent activity and maintains he was duped by the suppliers of the container of the worthless cargo.

Lax procedures

If the nature of this fraud is as yet unclear, there are some reliable reports that the checks and procedures employed by Nepalese investigators over the suspicious cargo have been far from methodical.

The container was found to be underweight at Kolkata port. The port authorities there notified the discrepancy to HWI officials. They then reportedly brought it to the attention of the Biratnagar customs, where the consignment subsequently arrived and was found to contain sands, pebbles and stones. The consignment had arrived in Nepal from the Philippines via Singapore and Kolkata port.

Undue haste

It seems that rather than making initial investigations, Golchha was questioned by officials from Nepal's Revenue Investigation Department (RID) on 18 September 2002. After interrogating him for a full day, they demanded Rs.18.3 million in bail from Golchha.

The RID had arrested Golchha on charges of misusing foreign currency worth over Rs.6 million, which according to the L/C was meant for the import of copper scrap.

Protests

This prompted a chorus of protest from Nepalese business groups who claim that the bail was demanded in very strange and, to them, unacceptable circumstances. Bail was demanded after business and banking hours and, critically, before international investigations had been properly conducted.

The Morang Trade Association and Moran Industry Association (MTAMIA) severely criticised the actions of the authorities, saying that their "haphazard action" would not help the economic condition of the recession hit country and that the RID "did not show maturity" in this case.

The RID should have first investigated the whole case and then identified the real culprit according to the MTAMIA. If the supplier is immediately going to be collared and labelled a culprit simply because it is plausible that he is a culprit, then this potentially shows a green light to would be suppliers of substandard or worthless goods.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.