A scam on the roof of the world

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.

The number of rescues happening in Nepal’s Himalayas have soared.

Precise numbers are hard to come by. There is no central dispatch unit for helicopter flights and the ten private helicopters companies were unwilling or unable to give me the details of how many rescue flights they carry out each year. A few of them told me that if their competitors knew how many rescues they were doing, they would be targeted and undercut.

So, I turned to TripAdvisor.

I spent hours scouring reviews of Nepal-based trekking companies for references to helicopter rescues and messaging the review writers. It was through these conversations that I began to get a true sense of the scale of the problem: groups of tourists where more than half of them had failed to complete their trek and had instead been evacuated in a chopper.

While there were a few angry reviews by people who felt that they had been pressured into a rescue and suspected a scam, the vast majority of people were full of praise for their guide who organised a chopper to swoop in and save them from a bout of the squits at Everest’s base camp.

I found this naivety quite difficult to get my head around. Who honestly believes that it’s necessary to be rescued by a helicopter for a common cold? Or thinks that getting on a helicopter is safer than walking to a lower altitude? Walking down is the standard medical advice if you start experiencing first symptoms of Acute Mountain Sickness, like headaches, shortness of breath, loss of appetite, nausea. The symptoms disappear as if by magic the lower you get.

I have since managed to get my hands on more data and estimate that eight percent of tourists trekking in the Everest region this spring were rescued by helicopter – that’s up to 17 flights per day. Everest’s Khumbu Valley has become a helicopter highway.

The reason this scam works so well is that most altitude-related symptoms will disappear when the patient reaches Kathmandu, which lies at just 1,400 metres above sea level. In most cases, doctors can’t prove if a patient had potentially life-threatening altitude sickness before they got on that helicopter. They say there is little they can do to police the unnecessary rescues, as it’s their duty to give the benefit of the doubt to the patient. Though some hospitals and doctors are also in on the scam.

This leaves it up to the guides (few of whom even have first aid training) to make a decision about who needs a helicopter evacuation.

I saw this play out right in front of me.

After months of interviews in Kathmandu, I laced up my hiking boots and headed to the Everest region. Me and AFP’s Nepal photographer Prakash Mathema were aiming for Everest base camp – an eight-day trek from Lukla, a small town with an even smaller airstrip that serves as the gateway to Mount Everest.

A few days in, we arrived in the small village of Mongla at lunchtime. Within moments of ordering tea, we heard a helicopter was on its way to rescue a trekker. I went to find her.

Sunita, a student nurse from London, was tired. She was feeling nauseous. Climbing the steep slope to Mongla had just been too much, she said. She wanted to go home.

Why not walk back or hire a pony for the return journey, I asked.

No, she wanted a helicopter and her guide had assured her she could get one through her travel insurance.

As we continued to talk, I could see her guide becoming visibly agitated by my questions. He interrupted on a few occasions, taking her outside to talk away from me. She came back more convinced that a helicopter was needed.

Then she said something that set off the alarm bells: she admitted that she had only brought travel insurance the previous day.

Some insurers do let you buy coverage mid trip, but most – including hers, I later confirmed – have a 72-hour grace period, during which time you cannot use it unless you need assistance linked to an accident.

But her guide continued to assure her that his company had confirmed that a helicopter rescue would be covered by her insurance.

About an hour later, a helicopter turned up and Sunita disappeared back to Kathmandu.

We communicated by email after that. The last email I received from Sunita, about three weeks after the rescue, said she still believed her insurance company was going to pay. She then stopped replying.

I don’t know if Sunita lied to her insurer and told them that she had been involved in an accident, which would mean she committed insurance fraud. Or if her insurer refused to pay and she got landed with a large bill for a helicopter rescue she probably didn’t need. Her guide denied that he got a cut – but he was wearing a cap with the logo of a trekking company that I later connected to another fraudulent rescue.

Sunita had paid $950 for a 10-day trek to the Gokyo Valley, she told me. (The Gokyo Valley neighbours Everest and from its high reaches you get the best views of the world’s highest peak.) That amount is below the cost price for the trek, I confirmed with multiple industry sources. And 10 days does not allow enough time for acclimatization days, which are essential to get used to the thin air at altitude and avoid being hit by Acute Mountain Sickness.

Trekking agencies selling cheap treks, often with no acclimatization days, are at the heart of this scam. They attract customers with low prices, knowing they will make a profit if just one of the group gets rescued. They increase the chances of a tourist needing a rescue if they push them to high altitudes without the proper acclimatization. Meanwhile, some guides told me they were given quotas: get at least a third of the group choppered out. To make the quota, some would slip baking soda – a laxative – into trekkers’ food to give them diarrhoea.

I decided to pose as a tourist to see how easy it was to buy a trek for below cost price and without acclimatization days. I donned my scruffiest jeans, flip flops and grabbed the elephant-patterned cloth bag I’d picked up the last time I was in Sri Lanka, and headed for Kathmandu’s tourist district, Thamel.

As I negotiated Thamel’s narrow potholed streets for once I didn’t bristle when approached by hawkers trying to sell me tourist tat. Thamel is a maze of alleys crammed with cupboard-sized trekking agencies with faded maps and photos of the famous Himalayan peak peeling off the walls.

I walked into a few at random. Each time I gave them the same story: me and 5 friends wanted to go to Everest base camp. After getting the price for a standard 12-day trek (the highest price I was quoted was $1,050 and the lowest $650), I asked if we could do it in 10 days so me and my fictional friends could also squeeze in some extra sightseeing during our Nepal sojourn. Only one out of the five companies I spoke to refused my request and warned me that it was unsafe to climb to Everest base camp’s 5,364 metres without acclimatizing properly.

I asked some of the trekking agencies what would happen if me or my friends got ill while trekking. They all assured me that a helicopter could be there to save us within moments.

“After you get back to Kathmandu, we get on the phone together to your insurance company and you tell them ‘I needed a rescue, I didn’t want to die’,” one told me.

“This is my volunteer service to tourists,” he added.

Nepal’s tourism industry is vital to the country’s economy. In terms of cash and the numbers employed, it is probably second only to Nepal’s export of men to the Gulf’s construction sites (remittances from foreign labour account for over a third of GDP). But between poverty and a lack of opportunity, poor regulation and a weak government, unchecked growth and the lure of quick cash, it is easy to see how -- and even why – mountain tourism in Nepal has become such a dirty business.

Veterans of Nepal’s trekking and climbing industry often blame the scams and unscrupulous business practices on outsiders who have muscled in on the mountain tourism. They say its businessmen from other parts of Nepal, not the natives of Nepal’s high Himalayas who are responsible. In some ways it is driven by jealousy that those born in the Himalayan foothills have been lucky to benefit from an industry that has grown up around them. The Khumbu region, which is home to Everest and the Sherpa ethnic group who have become synonymous with mountain guiding, is wealthier than other parts of Nepal thanks to tourism.

While Sherpa continue to guide people to Everest’s summit, few are employed in the less lucrative trekking business. Many trekking guides don’t even come from the mountains, but Nepal’s lowlands where more than half the country’s people live.

The Everest industry – both climbing and trekking – has become a victim of an aggressive race to the bottom on pricing, with cost -- not the quality of service -- defining the market. The price of a trek to Everest base camp has stayed roughly the same for the last 20 years, while the cost of an expedition to the summit has halved. With razor thin profit margins, fraudulent helicopter rescues represent low hanging fruit in terms of potential cash. Many also blame the 2015 earthquake, which devastated swathes of the country, for scaring away tourists, forcing travel agencies to compete for a smaller pool of potential customers.

The commission chain that underpins the scam is an accepted part of doing business in Nepal, an attitude that will be difficult to change. Salaries are low and kickbacks are expected to boost earnings: a taxi driver dropping off a tourist at a hotel will usually receive a small payment. A doctor can boost her income considerably on the small commission she gets from the private lab where blood tests are sent. The ambulance driver will also be paid by the hospital where his drops a patient.

On top of that, the tourism industry is built on a web of close connections, the same names cropping up as board members and shareholders of trekking agencies, helicopter companies and hospitals. I found one particularly well-connected man who owns a helicopter company and a charter company. He is also a founding member of a second helicopter company and a hospital, as well as being the managing director of two trekking companies and the executive chairman of an airline.

These same people also sit on the board of the civil aviation authority or head up the Trekking Agencies’ Association of Nepal (TAAN), which is somehow meant to be both an industry regulator and a lobby group. This conflict of interest is costing Nepal the opportunity to build a sustainable tourism industry.

A similar attitude pervades the government. The Tourism Ministry launched its own probe into the scam in early June, just weeks before I published my article after more than six months of work. It wrapped up in six weeks with threats of action against 15 companies. However, the government appears more concerned by the untaxed dollars linked to the huge insurance payouts than actually holding anyone to account for the massive fraud. In the final investigation report, there is no mention of the commission payments that are fuelling the scam.

I sat down recently with a senior government figure closely connected to the probe. He started by blaming the tourists. “They demand the rescues,” he told me. That is the same argument used by the trekking companies I’ve linked to the fraud. He then told me that some new guidelines and a code of conduct for the trekking agencies were going to stamp out the scam.

As I left, I passed members of TAAN who were there for a meeting with the same government official. I wondered if they were there as lobbyists or regulator.