Damak, Aug. 17 -- When Fagu Lal Rajbanshi found out that his father, Kaptaan, had received a government grant last year to harvest paddy during the spring season, he couldn't believe it. Kaptaan Lal Rajbanshi had been dead for more than 20 years.

"My father died in 1992," Rajbanshi said. "We were surprised to learn that a government grant had been withdrawn in his name."

Rajbanshi and Gaurigunj residents soon discovered, through records at the Agriculture Knowledge Centre, that two others-Nukanu Rajbanshi and Maan Maya Neupane-had also received agriculture grants. They too had been dead for years.

The villagers learned that three local farmers' groups in the municipality had falsified documents to take advantage of millions in agricult...