Saturday, September 22, 2018

"A scam on the roof of the world"

From AFP's Correspondent, Sept, 18:
Kathmandu -- It started with rumours and numbers that didn’t add up. It led to hours scanning reviews on TripAdvisor and weeks hiking around Mount Everest. But when I started looking into insurance fraud linked to helicopter rescues in Nepal, I didn’t think it would end with a government probe and an ultimatum from global insurers that could be a death knell for the Himalayan nation’s vital tourism industry.

Hundreds of thousands of visitors flock to Nepal each year, drawn by the Himalayas. The scam that I uncovered affects them all: huge numbers of trekkers are being pressured into expensive helicopter rescues that they don’t need so that a coterie of middlemen can cash in on the insurance payout. Some are even being made deliberately ill for the scammers’ profit.

When I first arrived in Kathmandu in November 2016 to head up the Nepal bureau, I made it my business to get to know as many people as possible linked to the lucrative Everest industry, which nets the impoverished country millions of dollars a year. The spring climbing season, when hundreds of mountaineers gather at the foot of Everest with their sights set on reaching its 8,848 metre summit, is our busiest time in the bureau. Each year records are broken as men and women push themselves to the limits of human endurance. Many fail. Some pay the ultimate price, losing their lives on the flanks of the world’s highest peak.

As a journalist, Everest had me hooked. It has all the ingredients of an amazing story: big personalities, big money, and an even bigger mountain.

But as a ‘civilian’ (and an avid trekker myself), the Everest circus horrifies me. In many ways it represents the worst of humankind: greed, corruption, and man’s desire to control and conquer Mother Nature.

The helicopter rescue scam, which primarily targets trekkers hiking to Everest’s base camp, but also has links to climbers trying to reach its summit, is probably the most brazen example of fraud and corruption linked to the industry. And for me, it has come to typify Nepal’s mercenary attitude towards its greatest attraction, Everest.

It’s like the goose that laid the golden egg. We all know how that story ends.

Not long after I arrived in Nepal I started hearing rumours of middlemen profiting from the insurance payouts linked to unnecessary helicopter rescues of tourists. But it was two stats that initially spurred my investigation: first, that 20 new Airbus B2 and B3 choppers had been delivered to Nepal in five years. And second, that private helicopters in Nepal wrack up more flying hours per year than anywhere else in the world. Those two figures suggested to me that Nepal’s helicopter business was disproportionately lucrative compared to the size of the market.
I started digging.

Many of the people I first spoke to tried to tell me that the fraud was an old problem. It had been brought under control years ago. No story here. That type of reaction was something I frequently came up against during my investigation as people tried to dismiss my questions, telling me that I didn’t understand Nepal.

But being brushed off like that is a red flag to most journalists. I soon realized that the scam had evolved, becoming harder to prove – and even more lucrative – in the process.

Rewind four years. There were a handful of helicopter operators and their brokers charging insurers exorbitant and inconsistent rates for chopper rescues. I saw the invoices: a rescue from near Everest billed at $10,000 and then a few days later a similar rescue billed at $12,000. Another might come in at a bargain $6,000. The true cost of the flight was closer to $4,000 but the insurance companies were coughing up and the difference was being spread between the helicopter company, trekking guide and the broker.

At that point, a few forward-thinking brokers waded into the market. They realised that insurers were catching on to the scam because of the inconsistent billing. So they did two things -- they negotiated a unified price grid with some helicopter companies at the start of the main trekking seasons (spring and autumn) so prices were fixed. And they built relationships with international insurance companies to allay any other concerns they may have.

As a result, prices came down, so the insurers were happy. So were these shrewd brokers who had priced in a per flight cut for themselves.

And that’s where the new scam took off. Instead of charging crazy rates for a few flights, these brokers pushed guides to have as many people as possible rescued, often with multiple tourists crammed into one chopper (each trekker’s insurance company would be billed for the full flight). In return, they would get a cut.

Most trekking guides make Rs2,500 per day ($22) during the two short trekking seasons, but can make up to $500 in kickbacks from a single rescue. The broker with a charter company and the trekking agency managers in Kathmandu pocket even more in commission from the hospital....MUCH MORE