Sugat Ratna Kansakar, the managing director of Nepal Airlines at the time, emailed AAR Corp, a multinational aerospace firm based in the United States, a draft of the request for proposals (RFP) for the purchase of two Airbus A330s well in advance in order to modify the terms to the AAR’s advantage.
According to the statement and official document that AAR presented to the US Securities and Exchange Commission (SEC), the draft’s terms were then cleverly changed and returned to Nepal Airlines. The shady process followed a long sequence: The RFP draft was prepared. It was then sent to AAR Corp to manipulate its clauses to win the bid. The document was returned to Nepal Airlines, and the RFP was issued. After that, the supply contract was signed, following which the plane supplier was changed.
After the change of supplier, many shady intermediary companies were opened to distribute the bribes. The SEC made the document public on December 19. In 2015, Nepal Airlines received a nod from its board to buy two wide-body jets from Airbus, the European aviation giant, after receiving two narrow bodies of the Airbus A320 aircraft.
The decision followed its management’s recommendation to switch to Airbus from Boeing as pursuing a one-family aircraft strategy would reduce maintenance and crew training costs. On September 26, 2016, the national flag carrier invited sealed requests for proposal (RFP) from aircraft manufacturing companies, airlines, aircraft leasing companies and bankers to purchase two A330-200 jets. The $209.6-million plane purchase deal was the largest in Nepal’s aviation history.
In 2015, Deepak Sharma, 46, a Nepali-born British citizen, was hired as president of the International Supply Chain for an AAR subsidiary. At the time, Sharma suggested he could help secure the Nepal Airlines deal. Upon arriving at AAR, Sharma pursued the opportunity as the lead employee responsible for winning the Nepal Airlines contract, reporting directly to an AAR executive.
Sharma, the president of the AAR subsidiary, had been in charge from November 2015 until his suspension in April 2019— when Kansakar orchestrated the plan. In March 2016, Sharma secured and shared internally at AAR an unpublished draft of the RFP for AAR executives to “comment on” and “change any terms to suit AAR.”
As a result, Sharma and others at AAR proposed changes to the draft RFP to benefit AAR in the bidding process. According to the document, a few months later, Sharma “emailed the Nepal Airlines’ Managing Director adding specifications to the RFP, and then forwarded this email internally,” writing that the “way this RFP is going no one else will qualify to bid except AAR.”
The bid documents said the minimum age of the proposed aircraft could not be more than 1,000 flight hours, and the date of manufacture should not be before January 2014. The intent was to keep the manufacturer Airbus out of the race as it could not deliver used planes and other bidders could not meet the specifications outlined in the bid document.
On September 26, 2016, the RFP was officially published. Upon publication, Sharma reported in an internal email that the RFP was “designed for us.” When the final deadline ended on November 10, 2016, eleven international firms submitted bids to supply two long-range wide-body passenger jets to Nepal Airlines.
The suppliers were Rolls-Royce, KL AeroParts, Aircraft Investment Group, Crown Commercial Services, Synergy Aerospace, ST Aerospace, Le Group Delta, AAR Corporation, Surya Air Support, KJT Investment & One World Closeouts and Ron Motta Associates Aircraft Sales & Parts. Rolls-Royce had applied to supply the aircraft engine. Sharma’s internal communications to AAR personnel suggested that Nepal Airlines request for proposal (“RFP”) would be drafted to favour AAR.
For example, on November 22, 2015, Sharma sent an internal email conveying that he had a “good meeting” with the “CEO of [Nepal] airlines” and that the RFP for the transaction would be drafted in favour of the AAR. In a follow-up December internal email, Sharma forwarded the email correspondence between himself and Nepal Airlines’ Managing Director Kansakar, adding that the Managing Director was “100 percent relying on us to bid and win this aircraft sales” contract.
Soon after the RFP was published, Sharma discussed internally the need to engage third-party Agents [a Hong Kong corporation, controlled by a German corporation and a Portuguese charter airline, and purportedly involved in the telecom business] as an agent on the Nepal Airlines transaction. In doing so, Sharma noted that he would “pull all political strings in Nepal” and that setting up a foreign representative agreement (FRA) with Hong Kong corporation would help “lock… in” the Nepal Airlines deal.
The Hong Kong corporation, purportedly a telecom business, was engaged by an AAR subsidiary despite red flags raised during due diligence. AAR’s due diligence flagged that the Hong Kong corporation lacked any aviation industry experience and had limited and vague descriptions of the services it would provide. Two customer references provided by the Hong Kong corporation involve sales of cell phones and electronics.
As a part of the scheme, the AAR subsidiary retained the Hong Kong corporation, whose role was to bribe officials who had control over the Nepal Airlines contract. AAR terminated its relationship with the Hong Kong corporation before the transaction’s closing, resulting in Sharma arranging to have the German corporation pay the Hong Kong corporation and its successor entity—another Dubai-based entity incorporated in the UAE—a success fee for winning the Nepal Airlines contract.
On November 1, 2016, the Hong Kong corporation was officially engaged under the Foreign Representative Agreement (FRA). Under the FRA, the corporation would get a commission payment of 7 percent of the final sales price of the two aircraft, and the commission payment was estimated to be between $9.6 million and $14.6 million. On November 8, 2016, the AAR subsidiary formed a consortium through a framework agreement with the German corporation and the Portuguese charter airline (collectively the “AAR Consortium”) to submit a bid on the Nepal Airlines RFP.
Under the initial structure, AAR would provide the aircraft, the German corporation would offer financing, and the Portuguese charter airline would provide services, spare parts, and tooling. The German corporation would use a Special Purpose Vehicle to buy the two A330 aircraft from Airbus, and the Special Purpose Vehicle would then sell the aircraft to AAR, which in turn would sell the aircraft to Nepal Airlines. AAR estimated it would make between $8 million and $12 million from that transaction structure. On November 9, 2016, the AAR Consortium submitted its bid in response to the RFP. In the cover letter for the bid, Sharma addressed Nepal Airlines Managing Director Kansakar. The next day, Sharma texted an AAR executive, “We got the Nepal deal.”
Source: Here
