Prosecution Of Charities Siphoning Donations During Disasters
Legal Framework
In Nepal, criminal liability for charities misusing disaster donations arises under multiple laws:
Nepal Penal Code, 2074
Section 166: Misappropriation of public funds or donations.
Section 2xx: Fraud, cheating, or criminal breach of trust (misuse of entrusted property).
Company Act and Social Organization Act
Require proper accounting and transparency in the handling of public donations.
Disaster Management Act, 2074
Stipulates accountability for aid distribution and proper use of resources during disasters.
Anti-Corruption and Money Laundering Laws
Misappropriation of funds collected during disaster relief can also attract liability under anti-corruption statutes.
Key Point: Even if a charity is legally registered, siphoning donations for personal or unrelated purposes is criminal and subject to prosecution.
Case 1: Kathmandu Flood Relief Misappropriation (2017)
Facts:
During the 2017 monsoon floods in Kathmandu, a charity collected funds and supplies for affected households. Investigations revealed that a significant portion of cash donations was diverted to personal accounts of the organization’s board members.
Legal Issues:
Misappropriation of donations under Penal Code Section 166.
Criminal breach of trust by charity officials.
Outcome:
Board members were arrested and charged.
Court convicted three officials: 2–3 years imprisonment and restitution to flood victims.
Charity registration temporarily suspended.
Significance:
First high-profile case in Kathmandu establishing accountability of charities during natural disasters.
Demonstrated that donors’ trust carries legal protection.
Case 2: Earthquake Relief Fund Misuse (Gorkha, 2015)
Facts:
Following the 2015 Gorkha earthquake, several charities collected millions of rupees in cash and materials for victims. Audits revealed that some relief funds were used to buy office equipment unrelated to relief efforts.
Legal Issues:
Criminal breach of trust.
Fraudulent misrepresentation to donors.
Outcome:
Court imposed 1–2 years imprisonment and fines on two charity executives.
Ordered recovery of misused funds.
Government issued stricter reporting requirements for all NGOs handling disaster funds.
Significance:
Set a precedent for auditing NGO funds during disasters.
Highlighted the necessity of transparency in relief operations.
Case 3: Pokhara Flood Donation Scam (2019)
Facts:
A local NGO in Pokhara collected donations after heavy floods. Funds were allegedly diverted to personal investments by the NGO director.
Legal Issues:
Violation of Nepal Penal Code: fraud and misappropriation.
Breach of fiduciary duty under Social Organization Act.
Outcome:
Police filed charges; director convicted and sentenced to 2.5 years imprisonment.
NGO dissolved; remaining funds returned to donors.
Significance:
Reinforced that charitable status does not shield individuals from criminal liability.
Case 4: COVID-19 Relief Fund Embezzlement (Kathmandu Valley, 2020)
Facts:
During COVID-19 lockdowns, a registered charity collected relief funds for medical supplies and food for vulnerable families. Investigations found that 40% of donations were siphoned into personal accounts.
Legal Issues:
Misuse of donations violates Penal Code Section 166.
Anti-corruption scrutiny applied due to public trust funds.
Outcome:
Court sentenced two board members to 3 years imprisonment.
Government mandated independent audits of all registered charities distributing COVID-19 relief.
Significance:
Modern example showing that courts enforce accountability even under emergency conditions.
Case 5: Earthquake Reconstruction Fund Misuse (Sindhupalchok, 2016)
Facts:
Charity raised funds for rebuilding homes after the 2015 earthquake. Donors’ money was diverted to the personal bank accounts of trustees and relatives.
Legal Issues:
Fraud, misappropriation, and criminal breach of trust.
Ethical and fiduciary violations under charity governance rules.
Outcome:
Trustees sentenced to 3–4 years imprisonment.
Full restitution ordered to earthquake-affected families.
Government tightened NGO monitoring and reporting mechanisms.
Significance:
Demonstrated that disaster relief funds are legally protected.
Highlighted the importance of third-party auditing.
Case 6: Landslide Relief Fund Misappropriation (Dolakha, 2018)
Facts:
After a landslide, a local NGO collected relief funds for victims. Audit revealed funds spent on luxury vehicles and unrelated business expenses.
Legal Issues:
Misappropriation under Penal Code.
Criminal breach of trust for charitable donations.
Outcome:
Court convicted the NGO director and treasurer: 2–3 years imprisonment and fines.
NGO placed under temporary government oversight.
Significance:
Reinforced criminal liability of individuals in charities.
Strengthened regulations for charity accounts during disasters.
Key Takeaways Across Cases
Criminal Liability: Charity officials can face imprisonment, fines, and restitution for siphoning disaster donations.
Relevant Laws: Penal Code (fraud, misappropriation, criminal breach of trust), Social Organization Act, Disaster Management Act.
Transparency & Accountability: Courts have reinforced the need for audits, reporting, and monitoring of NGOs handling disaster funds.
Donor Protection: Misrepresentation of funds is treated as a criminal offense, protecting the integrity of relief efforts.
Preventive Measures: After high-profile convictions, the government introduced stricter audit and reporting rules for all disaster relief charities.
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