BY Kavindya Chris Thomas Courtesy Ceylon Today

Following a week-long intermission, former Governor of Central Bank of Sri Lanka Arjuna Mahendran, this week faced the next round in the cross-examination ring with acting Solicitor General Dappula de Livera. Thus began another eventful week at the Presidential Commission of Inquiry probing the Treasury Bond issuance by the Central Bank of Sri Lanka (CBSL), which churned out new and shocking information.

Monday: AM 22 and Conflict of Interest

On Monday (2) ASG de Livera suggested that the witness had contradicted his own testimony late last month regarding the request made by former Finance Minister Ravi Karunanayake. He had previously testified that a Rs 75 billion requirement of funds was made to him concerning planned road development projects, as substantiated by a letter purportedly written by Karunanayake that was furnished to the Commission as evidence (document No. AM22). However, the Prime Minister, in a statement to Parliament on 17 March 2015, had referred to an urgent requirement of Rs 15 billion only. This was later clarified by Mahendran as an initial requirement of Rs 15 billion needed immediately, followed by a further Rs 75 billion.

ASG de Livera claimed that Mahendran had changed his position, adding colour to his previous testimony, accusing him of never having mentioned this Rs 15 billion. Mahendran denied this, claiming to have definitely mentioned it.

Conflict of interest

Following this, the Attorney General’s Department questioned Mahendran regarding the potential conflict of interest with regard to Mahendran’s son-in-law Arjun Aloysius. Here, de Livera said the decision to go for public auctions had not been conveyed to the market until 6 March 2015, despite the fact that Mahendran had been privy to this information since 24 February.

“This information went to your son-in-law between 24 and 27 February,” he said.

“I can’t speak for him,” said Mahendran.

This explained PTL’s bid of Rs 15 billion, continued de Livera, suggesting that it was Mahendran who had conveyed this market sensitive information to his son-in-law.

“I wouldn’t have done such a foolish thing. I have been in banking for 35 years. I know exactly what good governance is and what price sensitive information is,” responded Mahendran.

While this debate was raging on, Justice Prasanna Jayawardene opined that it was also important to highlight that the Mahendran’s predecessor former CBSL Governor Ajith Nivard Cabraal, too, had a sister that served as a director of the controversial primary dealer; Perpetual Treasuries Ltd. Acceding that two wrongs do not stand to make anything right, Justice Jayawardene claimed that this conflict of interest has arisen in the past.

Tuesday: New Texts and Staff Transfers

Several new text messages, extracted from Arjun Aloysius’ phone, referring to individuals known as ‘AM’ and ‘RK’ were produced on Tuesdays (3) cross examination of Mahendran.

Accordingly, seven new text messages, that had taken place between 22 November 2016 and 4 January 2017, between Arjun Aloysius and his personal assistant, Steve Samuels, were produced before the Commission.The text messages refer to certain ‘To-do lists for AM and RK’ maintained by PTL. The seven text messages refer to these files meant for individuals regarded as ‘ArjunaM’, ‘AM’, ‘Arjuna’ and ‘RK’.

Following are brief extracts of the text messages as read out by ASG de Livera during the proceedings;

Text message 1: “Also, we have the A. Mahendran to-do list.”

Text message 2: “Chairman, awaiting update on to-do-list files on ArjunaM and RK”

Abbreviations

Mahendran resolutely maintained that he does not know who the abbreviations referred to and claimed that ‘AM’ could mean to also refer to his son and his daughter; Arvind and Anjalie, were A. Mahendran’s. He also questioned the authenticity of the document containing the text messages.

When de Livera suggested that Mahendran had lied to the commission about his involvement with PTL following his resignation from CBSL, the former Governor opined that Aloysius had merely informed him about PTL being curtailed by CBSL to which he had simply recommended seeking legal advice.

“I have never heard [Minister Ravi Karunanayake] being referred to as RK,” Mahendran went on to say, adding that he calls the former Finance Minister ‘Ravi K.’

At this point, ASG de Livera pointed out that the Minister himself had previously denied in his testimony before the commission that ‘Ravi K’ was any reference to him.

Text message 3: “Leaving office. Going to Flower Road residence to deliver AM and RK files. Hope to catch Dilshan at the Ministry”.

As confirmed before Mahendran lived at his residence in Flower Road, Colombo 7 which had been gifted to his daughter following her marriage back in 2012. It was also acceded that this was where Aloysius resided as well. However, Mahendran denied that this meeting took place and claimed ignorance as to who ‘Dilshan’ is as well.

Text message 4: “Reminder. Meeting with RK. New to-do-list file for AM delivered to home.”

Text message 5: “Update. Asela is bringing document. Do you want me to bring it to AM?”

Text message 6: “Good luck with RK. Hope AM has a good meeting.”

Mahendran unaware

Again Mahendran claimed that he was unaware what these text messages refer to. He denied that he met anyone as per the text suggest. “I’ve never received such a file,” he said adding, “I don’t know the relevance I have to this.”

To this, Additional Solicitor General Dappula de Livera accused Mahendran of lying. He noted that Mahendran had previously claimed that he had not maintained official communication with his son-in-law Aloysius during and after vacating his position at the CBSL. Commissioner Justice Prasanna Jayawardena, in the meantime, “Is your son-in-law a friend of Angelo Mathews’?”

“You’re lying through your big teeth,” ASG de Livera accused Mahendran and went on to suggest that he was in contact with Aloysius well after vacating his position at the CBSL. Mahendran of course, denied these accusations calling the Commission and the Attorney General’s Department to properly verify the evidence that had been brought before him. He called it an “unprofessional job” and an “odd document”. ASG Yasantha Kodagoda retorted at this comment saying, “very much like the bond auction!”

Later that day, Mahendran was questioned regarding the 501 staff transfers, including those of the department heads. It was suggested that the staff transfers were made to accommodate his own agenda within the CBSL, to influence market activities as planned by Aloysius. ASG de Livera claimed that these staff transfers that had taken place during his tenure had managed to de-establish the CBSL itself. Mahendran denied it.

Wednesday: Ravi K orders State Banks to bid low

The heads of three State Banks on Wednesday (4) told the Commission, that they were compelled to make lower bids, on the request of the then Minister of Finance, Karunanayake, in both controversial Treasury Bond auctions which earned Perpetual Treasuries Ltd. billions of rupees in unlimited profits.

On the day prior to both auctions, they said, they were summoned to the Finance Ministry, by Karunanayake and informed that since money was needed at a lower rate of interest for a State requirement, to submit very low bids at the next day’s auctions. At the same time, the limits on the bids to be submitted were given to them, the Chairmen and General Managers of the National Savings Bank, People’s Bank and Bank of Ceylon, told the Commission.

Chairman of People’s Bank Hemasiri Fernando and General Manager N. Vasantha Kumar, Chairman of the National Savings Bank Aswin de Silva and Deputy General Manager and Advisor on Treasury Affairs A. A. Lionel, Chairman of the Bank of Ceylon Ronal Chithrananda Perera, confirmed these revelations under oath.

Treasury Bond Auction

On 28 March 2016, that is the day before the Treasury Bond Auction, held by the CBSL on 29 March, and also on 30 March 2016, the day before the Treasury Bond Auction was held on 31 March 2017, Karunanayake had summoned them to the Ministry and held two meetings and at both these meetings the Minister himself had handed them the limits of the bids to be submitted.

The witnesses said the Economic Advisor to the Prime Minister, R. Paskaralingam and Secretary to the Treasury Dr. R. H. S. Samaratunge had both been present at the two meetings and Deputy Governor P. Samarasiri had representing CBSL had also participated in those meetings.

“We were assured that nothing higher would be accepted,” said Kumar.

Witnesses added that, they had submitted lower bids from their banks according to the limits handed to them by Karunanayake, however, it was Perpetual Treasuries Ltd. which submitted somewhat higher bids and was successful at both auctions and earned a massive profit. Giving evidence for the first time before the Commission, Central Bank official N. Vasantha Kumar said during the tenure of more than 30 years in the banking service, or even externally, no Finance Minister had ever, in this manner, influenced a Treasury Bond Auction in order to ensure undue advantages for a different bidder nor had he even heard of an occasion where the profit of billions that the State banks could have earned was prevented.

Chairman of the People’s Bank Hemasiri Fernando said since he was not a Banker, he could not make a statement about figures immediately but that the seriousness of the harm that had been done to State Banks through this action could be understood easily by anyone.

The witness also said that during this activity, Deputy Governor of the Central Bank P. Samarasiri had also intervened in the transaction. At the same time, another witness said that he was informed by the Deputy Governor of the Central Bank, himself to attend the meeting at the Minister’s office.

He made this statement in response to cross questioning by the lawyer Harsha Fernando, who represented the Deputy Governor of the Central Bank, Samarasiri.

Responding to Judge Prasanna Jayawardena of the Commission, Chairman of the National Savings Bank Aswin de Silva said he, who has served in Australia for a period of nine years, was surprised by this procedure and that he was also utterly amazed at the fact that the Deputy Governor of the Central Bank P. Samarasiri had supported these activities.