Bond scam probe: Political interference and public-private sector complicity frightening-Dew
Posted on October 6th, 2017

by Shamindra Ferdinando Courtesy The Island

One-time Chairman of the Committee on Public Enterprises (CoPE) Dew Gunasekera yesterday declined to comment on state banks, Bank of Ceylon, the People’s Bank and the National Savings Bank receiving instructions twice in 2016 to make bids at the treasury bond auctions at lower interest (yield) rates as that particular matter hadn’t been investigated by his committee.

General Secretary of the Communist Party Gunasekera said so when The Island asked him how his committee had failed to unravel state banks receiving instructions inimical to them from the then Finance Minister Ravi Karunanayake. “My committee probed the first controversial issuance of treasury bonds in late Feb. 2015 just eight weeks after the change of government.”

The second COPE probe dealt with both transactions, Gunasekera said, adding that specific instances of political interference and officials’ complicity at various levels had to be established. Gunasekera said that he was really perturbed by state banks assertion how they were misled by the very minister in charge of them. The complicity of politicians and public and private sector officials in alleged bond scams was frightening, he said.The former minister pointed out that the revelations had been made at the Presidential Commission of Inquiry (P-CoI) on Wednesday pertaining to the second alleged bond scam involving the CBSL and influential Primary Dealer (PD) Perpetual Treasuries Limited (PTL).

The veteran politician recalled how Karunanayake, in spite of being appointed finance minister in President Maithripala Sirisena’s 100-day administration remained a CoPE member. People had forgotten that in the wake of January 2015 presidential election defeat, the government, too, changed to pave the way for first bond scam.

Gunasekera said the then Speaker Chamal Rajapaksa had told him to select a special team comprising CoPE members to probe the scandalous transaction. According to CP veteran, Karunanayake hadn’t been included in the first ever CoPE team appointed outside usual procedure. Gunasekera explained that until then all CoPE investigations had been based on Auditor General’s findings in respect of public enterprises. There had never been an instance where the CoPE had been asked to inquire into a transaction before the Auditor General scrutinized it, Gunasekera said.

In the light of the then Finance Minister giving adverse instructions to state banks as transpired at P-CoI, Gunasekera emphasized the urgent need to review safeguards in place to prevent recurrence. Gunasekera pointed out that the second far bigger and damaging issuance of treasury bonds had taken place over a year after the first alleged scam.

Responding to another query, Gunasekera said that the Monetary Board had suspended the PD under a cloud in early July 2017 for a period of six months. Since then there had been significant developments at the P-CoI and Monetary Board would certainly have to take them into consideration before deciding on renewal, Gunasekera said.

Former Deputy Governor of the Central Bank Dr. W. A. Wijewardena yesterday told The Island that both politicians and officials alike had acted in contravention of rules and regulations governing banking operations. Dr. Wijewardena said that obviously all concerned had carried out the ‘business’ with impunity and weren’t bothered at all about serious violations.

Dr. Wijewardena said against the backdrop of the top management of state banks assertion that they had received wrong advice pertaining to March 2016 transaction, it would be pertinent to establish who had actually authorized the Chief Dealer at the Bank of Ceylon (BC) to bid Rs 13 bn on behalf of PTL.

The expert who had advised a three-member team of lawyers appointed by Premier Wickremesinghe to probe the first alleged scam and Dew Gunasekera’s committee said that as the Chief Dealer lacked authority to commit such a huge amount of funds he would have had to certainly clear that transaction with BC superiors .

Dr. Wijewardena said there hadn’t been a thorough examination into serious violations of internal controls and safeguards in state banks though the top management recently admitted them being deceived by the minister in charge of the subject.

If not for the P-CoI, the issuance of controversial ministerial instructions wouldn’t have come out, Dr. Wijewardena said, urging review of safeguards.

When Chairmen of state banks realized that they had been wrongly advised what did they do? Dr. Wijewardena asked.

Dew Gunasekera said there hadn’t been any indication that they had taken up that matter until P-CoI launched fact finding probe.

Current Chairman of CoPE responsible for the second parliamentary inquiry, JVP MP Sunil Handunetti couldn’t be contacted as he was overseas.

3 Responses to “Bond scam probe: Political interference and public-private sector complicity frightening-Dew”

  1. Ananda-USA Says:

    OMG, Arjun Mahendran ALSO catches R. Karunanayagam’s DISEASE …. HE KNOWS NOTHING!

    He was IGNORANT says he! Poor Baby …. he was not in the LOOP!

    Now, that’s ANOTHER REASON that Ranil Wikunanasinghe should not have HIRED this guy. Either he is a CONGENITAL IDIOT, or he is suffering from a RAPIDLY PROGRESSING FORM of Alzheimers!!

    Ranil Wikunanasinghe should be FIRED for management INCOMPETENCE for he has HIRED people who are INCOMPETENT as managers but nevertheless are EXPERT BANK ROBBERS!

    Mahendran pleads ignorance over ‘State Banks meeting’ summoned by Ravi
    Oct 10, 2017

    Former Central Bank Governor Arjuna Mahendran yesterday told the Presidential Commission of Inquiry (PCoI) that he was unaware about the two meetings summoned by former Finance Minister Ravi Karunanayake, where he had asked the state banks in the presence of public officials to bid at a lower rate at the March 29 and 31, 2016 Treasury Bond auctions with a guarantee that the Central Bank would not accept other bids at a higher yield rate.

    During the continuation of former Governor Arjun Mahendran’s Cross-examination Senior State Counsel (SSC) Shaida Barrie questioned him over the two meetings summoned by then Finance Minister Ravi Karunanayake at the Finance Ministry on March 29, and 31, 2016.

    Yesterday’s proceedings revealed that the Central Bank (CBSL) had advertised a Bond auction to be held on March 24, 2016, which was ultimately cancelled. According to SSC Shaida Barrie, at the scheduled March 24 auction, the state banks had placed their bids at a much higher rate (the prevailing market rate) and hence there was competition with regard to the bids.

    According Mr. Mahendran’s testimony, the Tender Board had decided not to accept the bids received at March 24, 2016 auction due to the higher rates received at the auction.

    Later, on March 29, 2016 and March 31, 2016, the Central Bank of Sri Lanka had held two bond auctions to raise funds to the Government. The advertised amount at the March 29, 2016 auction was Rs. 40 billion and it had ultimately accepted Rs. 76 billion. The advertised amount of the March 31, 2016 auction was Rs. 25 billion and the accepted amount was Rs. 50 billion.

    During startling evidence by eight witnesses from the three state banks (BoC, NSB and People’s Bank), before the PCoI it was revealed on October 4, 2017 that former Finance Minister Ravi Karunanayake had asked the state banks to bid at lower rates at these two bond auctions with the assurance that other bids at higher rates would not be accepted. However, on both occasions at those auctions the CBSL had accepted bids much more than the advertised amount and at much higher rates.

    It was revealed that former Finance Minister Ravi Karunanayake had held two meetings on March 28, 2016 (before the first auction) and March 30, 2016 (before the second auction) with the state banks at the Finance Ministry.

    Senior State Counsel Shaida Barrie stated yesterday that in the back drop of the State Banks being asked to bid at lower rates at these auctions (March 29, 31) Perpetual Treasuries Ltd (PTL) gained considerable advantage as Aloysius had received the precise ‘cut off’ point (rate) about the March 29, 2016 auction which was revealed through a deleted phone conversation.

    There was a deleted phone conversation earlier played before the Commission where, Aloysius was instructing his CEO Palisena on how to bid at the March 29, 2016 auction referring to vital information (including cut off rate) he received from a “friend in the Department” and “friends in powerful places.”. This conversation took place during mid-morning on the March 29 auction day.

    Aloysius in the conversation says that there was a “state banks meeting” that had taken place closer to that day. According to what happened at that meeting, Aloysius tells Palisena the exact rates at which the state banks (NSB, BoC, and People’s Bank) would bid at the March 29, 2016 auction.

    SSC Shaida Barrie: Now you are aware that according to the evidence led before this Commission, former Finance Minister Ravi Karunanayake had asked the state banks to bid at lower rates, right?

    Witness Mahendran: Yes, I was not here listening to the proceedings but got to know from the media reports.

    SSC Shaida Barrie: So, would it be a distortion of the Market, if the Public Debt Department knew about this meeting and the Minister’s assurance to the state banks, but still went on to accept bids at higher rates?

    Witness Mahendran: There are two things here. First is the instruction given by the Finance Ministry to the state banks to bid at lower rates. I don’t know whether that was true or false. As far as the Public Debt Department (PDD at (CBSL) is concerned the PDD got bids at those auctions and considering the Governments fund requirements they had accepted it. When those bids keep coming, they compare it with the previous auction and select the necessary cut off rate. Then gives to the Tender Board for approval and then comes to me for the final approval. That is the process. Don’t confuse PDD’s matters with what the Finance Ministry does.

    At this moment the Senior State Counsel said that there was a phone conversation between an official of the Treasury Operation Department of People’s Bank and Mr. Sarathchandra (Superintendent of the PDD at that time), where the People’s Bank official was seeking an assurance over the undertaking given by the Minister at the meeting on the rates. Mr. Sarathchandra in the phone conversation says that he would convey the message to the Tender Board.

    It was also revealed during the evidence of eight officials of NSB, BoC and People’s Bank that there were several officials present from the CBSL and the Treasury at the two meetings held with Minister Ravi Karunanayake.

    At this moment Counsel Chanaka de Silva who was appearing on behalf of Mr. Mahendran objecting to the questioning moved that it was not fair to question on something which happened between third party witnesses.

    The Commission was also concerned about the relevancy of the questioning.

    SSC Shaida Barrie was of the view that these two auctions happened during Mr. Mahendran’s watch, so that whether he would take the responsibility on those auctions.

    However, the witness said that he had absolutely no knowledge of the meetings.

    SSC Shaida Barrie said that there was significant market uproar at that time regarding the two auctions that took place on March 29 and 31.

    “There are uproars in various markets, this country is practicing a wide range of democracy and everybody was shouting due to that”, said witness Mahendran.

    At this moment Justice Jayawardena smiled and replied “That is true.”

    When the Senior State Counsel continued to question Mahendran on the PTL’s advantages in the secondary market due to the state banks bidding at lower rates at the primary auction, Counsel Chanaka de Silva objected and said that it was based on the third party evidence and not fair to be put the witness.

    He also observed that the Superintendent of the Public Debt Department was also not questioned on this regard and the officials at the Public Debt Department were treated as angels.

    SSC Shaida Barrie: I suggest to you that before the March 29 and 31, 2016 auctions then Finance Minister Ravi Karunanayake had asked the state banks to bid at a lower rate at the auction on the undertaking that other bids at higher rates would not be accepted. Therefore PTL on the other hand gained an advantage having possessed the precise cut off rate at the auction. Their bids were accepted at a much higher rate than the state institutions so that they gained a monopoly at the secondary market.

    W: I have no any knowledge on any of these events and I can’t comment.

    SSC Shaida Barrie: But those auctions took place during your tenure as the Governor. Have you heard of these things?

    W: I’ve never heard about them. I got to know about them through news papers. And there should be a proper investigation. Nobody had investigated about them in great depth therefore. I don’t think anybody could come to this conclusion.

    Justice Prasanna Jayawardena: Now the bids placed at the March 24 auction were not accepted on the rationale of high rates, right?

    W: Yes

    Justice Jayawardena: Subsequently, on March 29, 2016, the bids were accepted?

    W: Yes

    J: Were you informed anything about meetings conducted by the Finance Ministry with the state banks before the auctions?

    W: No

    J: Did the PDD inform you about the Finance Ministry’s meetings with state banks?

    W: No

    In the meantime during yesterday’s proceedings, when Mahendran was questioned on the decision which had been taken by him to suspend the Direct Placement method, he said he took the decision on the auction day (February 27) after he entered the auction floor (PDD) for the secondtime and it was his sole individual decision.

    According to Mahendran it was explained that, he was having continuous discussions with the Monetary Board and other relevant officials at the CBSL to suspend the Direct Placement Method (DPM) before the February 27, 2015 auction.

    According to his testimony it was revealed that he had discussed also with the Prime Minister regarding the suspension of the DPM and on February 24, 2015 the Prime Minister agreed to suspend the DPM.

    While questioning, Senior State Counsel Shaida Barrie observed that under the Monetary Law Act, relating to the CBSL, there was no provision to its subject Ministry to give directions regarding Monetary Policy decisions and it should only come from the Monetary Board.

    The Presidential Commission of Inquiry (PCoI) comprising Justice K.T. Chitrasiri (Chairman), Justice Prsanna Jayawardena and retired Deputy Auditor General Velupillai Kandasamy, will meet again at 10 am on Monday (10) and Deputy Solicitor General Milinda Gunetilleke will cross-examine witness Mahendran.

    (By Shehan Chamika Silva)

  2. Susantha Wijesinghe Says:



  3. Ratanapala Says:

    There is enough evidence before the public as well as in front of the law enforcing authorities to arrest and remand several individuals pending further investigations and subsequent trials before courts of Law. There is enough material now in the public sphere for the Attorney General’s Office to file charges against all those implicated, as the money involved run into Billions. It is only the other day at Hambantota several were arrested and put in remand prison for damaging public property.

    The reasons as to why this has not been done, now even after nearly two and half years since the first scam coming to light is a mystery. Or is it really a mystery knowing the forces at play? The perpetrators of the crime went onto a repeat performance on 29 March and 31 March 2016.

    The people, the citizenry of Sri Lanka has been robbed and now they are paying for the losses through higher taxes, increased interest rates, the sale of national assets etc. Apparently every single individual in Sri Lanka – now over 22 Million are indebted to the tune of Rs 50,000 because of this day light robbery. This is public money, public property and as far as I know non-bailable offenses.

    The people of Sri Lanka are waiting with baited breath when among others those named as AA, AM, RK, Hon RW, Little Johnny, Charlie, Kanishka etc will be arrested and arraigned for the alleged crimes.

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