The curious case of Delta Life Insurance

Highlights:

• Auditor first finds Tk638cr in irregularities
• Provisional interim report then puts figure at Tk3,687cr
• New report comes 1 month after the first one
• Suspended board terms sum impossible
• IDRA boss accused of demanding bribe before troubles began
• Final report yet to come

Wildly changing audit figures, allegations of bribery by an auditor and from the very top level, and shuffling of roles, are the key elements to the current state that Delta Life Insurance Company finds itself mired in.

Finding a starting point to the saga is a lost cause, but last month is as good a beginning as any. That is when the first hint of an anomaly came to the fore.   

In November this year, the Insurance Development and Regulatory Authority (IDRA) reported to the Ministry of Finance that internal and external audits of the administrator-run Delta Life Insurance Company had initially found Tk638 crore in irregularities within the company's accounts. 

Just a month later, the insurance regulator sent another letter to the ministry to report that the figure involving financial irregularities had skyrocketed to Tk3,687 crore in the provisional interim audit report by newly-appointed auditor ACNABIN Chartered Accountants. 

The irregularities involved corporate corruption, embezzlement, tax irregularities and mismanagement by the company's suspended board and management, all of which had hurt the publicly-listed life insurer, according to the IDRA. 

The Tk3,687cr figure itself appeared to be a curious anomaly as members of the company's suspended board claimed it was impossible to embezzle such a huge amount out of a company which had a life fund of Tk4,200cr, while it had been maintaining its "AAA" credit rating for five consecutive years. 

IDRA Chairman Dr M Mosharraf Hossain, himself, was surprised to have learned about the huge sum. 

"Earlier this year, the IDRA appointed an administrator for Delta Life to address and repair some irregularities within the company that were hurting insurance clients' interest. But, the latest provisional report by the new auditor sounds very alarming for the insurance sector," Mosharraf told The Business Standard over phone on Sunday. 

Asked about the unusual jump in the financial figure of suspected irregularities, he said all were interim reports and the figures might change in the final version. 

"We reported each of the interim findings by the auditors concerned to our ministry and will be waiting for the final audit report to learn about the full picture," he added. 

A ring of silence

IDRA Director Shah Alam, who sent both the reports to the Ministry of Finance, was asked about the beefed up figure in the latest report. 

"The auditor's interim report was communicated to the ministry," he said, declining to comment further. 

Kuddus Khan, the IDRA-appointed administrator at Delta Life, was unaware of the elements of the big deviation in the two interim reports as he "joined the post very recently." 

Chartered Accountant Moniruzzaman, the auditing partner of ACNABIN, did not respond to repeated requests for comments. 

A synopsis of the ACNABIN provisional report seen by The Business Standard, however, reveals that the big difference was mostly due to a gigantic Tk2,513cr irregularity mentioned as an overstatement of the life fund through hiding insurance claims over the 2012-2020 period and paying dividends based on the inflated accounts. 

Meanwhile, in a rejoinder to an online report published by The Business Standard on Saturday evening, Zeyad Rahman, a member of Delta Life's suspended board, said the reporting and publicising of the provisional, interim reports by the IDRA was a violation of the Insurance Act. 

He said the embezzlement of or irregularity concerning the Tk3,687cr was impossible and the information was completely false, baseless and misleading given Delta Life's total life fund, which was properly allocated to various sectors.  

Giving a breakdown, the rejoinder said Tk1,500cr was invested in government securities, Tk1,400cr in the capital market, Tk765cr in fixed income deposits in various banks, Tk120cr in land and building properties, Tk140cr in brokerage subsidiary, Tk100cr in premium collection accounts in various banks, and Tk75cr in home and other loans against insurance policies. 

He also said the interim report by ACNABIN did not provide any basis of the possible irregularities and when the report matures, the auditor would need to meet with the board and management to discuss the points. 

"We are confident that all their queries and objections, if any, will be addressed," Zeyad Rahman said. 

He also mentioned in the rejoinder that the ousted directors legally challenged the whole process of appointing an administrator for Delta Life and the matter was under judicial review. 

The administrator appointment was an after-thought by the IDRA chairman when the company filed a complaint against him with the Anti-Corruption Commission (ACC) for demanding a bribe of Tk2cr, with them claiming to have a record of the conversation in this regard. 

Slinging mud

The row between the IDRA and Delta Life has resulted in several court cases and the High Court issued rules against the Ministry of Finance, among others, to explain why the appointment of the IDRA chairman would not be declared illegal on several grounds of disqualifications, including concealing the information of holding directorship in two companies. 

The HC also asked the ACC to investigate the allegations against the IDRA chairman and give a report soon. 

On the other hand, law enforcement agencies are investigating embezzlement allegations against the ousted Delta top management made after the first administrator was appointed in February this year. The board was suspended at the same time.  

The rejoinder by Zeyad Rahman also claimed that the previous external auditor asked for undue favours from Delta Life sponsor-directors' other businesses in exchange for a favourable audit report and as soon as they denied the request, the firm kept submitting "false reports" against them. 

The Delta directors filed a complaint against the audit firm Aziz Halim Khayer Chowdhury and Co. The Institute of Chartered Accountants of Bangladesh and the Financial Reporting Council are investigating the matter. 

Former IDRA member Sultan-Ul-Abedine Molla, who was the administrator in Delta Life over the February-June period this year, said he only acknowledged the first auditor's interim report and the provisional figures in the second report surprised him. 

Molla was withdrawn by the IDRA after four months of his tenure following legal actions by Delta directors and as the next administrator resigned in a few weeks. Then, the IDRA appointed former secretary and IDRA member Kuddus Khan as the administrator.