Bond Commission Report: Moment of Truth for Country
Posted on December 18th, 2017

 Amrit Muttukumaru Courtesy The Daily Mirror

The country is awaiting with a mix of excitement and trepidation the Report of the Presidential Commission of Inquiry (PCoI) into the alleged Treasury Bond scam which will one way or another indicate whether there is hope for optimism for the future of the country. The report is crucial for reasons which include:

PCoL Chairman Justice K. T. Chithrasiri and Commission member Justice Prasanna Jayawardene are seen leaving the commission premises  [Stock image]

1) It has captured the popular imagination unlike no other scam in a country awash with scams under successive administrations since television in vivid colour and social media enhanced by good investigative reporting in the print media have brought its sordid details to even the humblest of homes. The people have drawn their own conclusion and if they sense there has been a ‘cover-up’ particularly of its masterminds it would further undermine the ‘rule of law’ which is a sine qua non for any meaningful socio-economic development.

2) Those who voted for the ‘Yahapalanaya’ government under trying circumstances to usher in ‘good governance’ after the traumatic Rajapaksa years feel betrayed and demand accountability.

3) That Sri Lanka is an unreliable and unstable country where the ‘rule of law’ is not applied uniformly is well known to the outside world. Equally well known is its endemic corruption, social injustice and inability to address long festering minority issues. It is due to this that ethical FDIs are few and far between. In its place we have had some questionable proposals with alleged money laundering origin. The controversial Chinese and Indian investments are largely driven by geo-political consideration with the potential to destabilize the country. Any ‘cover-up’ will confirm the worst fears of the international community.

4) After nearly 70 years of independence the country has come to such a sorry pass that we have to suffer the ignominy of:
The US State Department” reportedly fielding a Resident Legal Advisor in Colombo to provide anti-corruption and asset recovery training and also support the Commission to Investigate Allegations of Bribery and Corruption (CIABOC)”
Does this not indicate we are near to being a ‘failed state’? In this context if the Report of the PCoI is noy credible, will it not confirm this with all its implications? Have not some PCoI actions during the inquiry stage raised fears of what’s to come? Partiality?
Readers can decide for themselves whether or not the PCoI abandoned ‘due process’ for other witnesses by glaring partiality to one witness?

Core of Bond Scam

1) ‘Conflict of interest’ arising from then CB Governor Arjuna Mahendran’s son-in-law, Arjun Aloysius – owning/controlling PTL (Perpetual Treasuries Limited) – a Primary Dealer.

2) Arjuna Mahendran – a foreign national was hand-picked for the position of Governor, Central Bank of Sri Lanka (CBSL) by the Prime Minister although aware of the ‘Conflict of interest’. This was confirmed in his affidavit and while testifying before the PCoI.

3) The CBSL which is the issuing agency for Treasury Bonds which normally falls under the Ministry of Finance was brought under the purview of the PM.

4) He continued to have Mahendran as CBSL Governor although aware that Mahendran had reneged on his ‘assurance’ to him that his son-in-law (Arjun Aloysius) will sever all links with PTL prior to his appointment as CBSL Governor.

5) He robustly defended and endorsed Mahendran for a second term despite the widespread perception of his role in the alleged Bond Scam.

6) Being fully confident on the propriety of the issuance of Bonds, he robustly defended the same in Parliament despite the evidence that subsequently transpired before the PCoI.

7) During his testimony at the Bond Commission he stated: Aloysius did say to me he need a bit of time to dispose his share holding to get good price. (shares of Perpetual Treasuries Ltd or shares he held in other entity in the name of PTL). I met him (Aloysius) at one or two parties, and there he told me that he was pursuing his interests in one of the leading distilleries companies.”
What is at issue is the integrity of the CBSL. How can the PM who is also responsible for the CBSL even consider a bit of time” to resolve a ‘conflict of interest’ concerning the Governor and that too articulated at one or two parties”?
Despite all this, did not the PCoI take some unusual decisions in regard to one witness?

1) Unlike in the case of other witnesses, the PM was given questions in advance by the PCoI to enable him to provide answers by way of affidavit.

2) Unlike in the case of other witnesses, the PCoI decided to invite the AG himself who wasn’t involved in the investigation up to that point to personally lead evidence for the first time. Up to this time, Dappula de Liveira and Yasantha Kodagoda – Senior Additional Solicitor General [SASG] and Additional Solicitor General [ASG] respectively lead evidence.

3) Unlike in the case of other witnesses which included former Finance Minister Ravi Karunanayake who were grilled by the SASG and ASG, limited questions were posed to the PM. He was at the PCoI reportedly for less than an hour to clarify matters arising from his affidavit

4) Much is being made that he ‘volunteered’ to come before the PCoI although ‘not summoned’ like the other witnesses. The media has even reported that PCoI Chairman – K. T. Chitrasiri (Supreme Court Judge) emphasised that the question of compelling PM Wickremesinghe to appear before the commission had never arisen”. I respectfully ask (i) in view of the facts and circumstances should he not have been ‘summoned’ like the other witnesses? (ii) if not why? (iii) what does this indicate?

Arjuna Mahendran – a foreign national was hand-picked for the position of CB Governor

The question of compelling PM Wickremesinghe to appear before the commission had never arisen- K. T. Chithrasiri

PM was at the PCoI reportedly for less than an hour to clarify matters arising from his affidavit

It is disappointing that the AG’s Department had no questions – to ask Ministers Malik Samarawickrama and Kabir Hashim (UNP General Secretary)

PM Contradicted

For reasons best known to the PCoI it did not pursue the PM’s affirmation in his affidavit Upon the formation of the new Government in January 2015 there was a general consensus within the Government that Arjuna Mahendran should be appointed to the post of Governor of CBSL.”
Did the general consensus” include the President and Cabinet Ministers?
No less a person than Cabinet Co-Spokesperson and Minister of Health Dr. Rajitha Senaratne has contradicted the claim of general consensus”: Senaratne said he had opposed the appointment of former CB Governor Arjuna Mahendran to the position at the time. I warned that it would tarnish the government’s image,” the minister said.”

‘Breakfast’ Meeting

Malik Samarawickrama who did not hold ministerial portfolio at that time and who was Senior Advisor to the PM and Chairman of the UNP confirmed attending the initial ‘Breakfast’ meeting in February 2015 (presumably with his concurrence) on the issuance of Treasury Bonds.
It is disappointing that the AG’s Department had no questions – to ask Ministers Malik Samarawickrama and Kabir Hashim (UNP General Secretary) when they appeared before the PCoI and did not seek to clarify whether a discussion regarding funding to the tune of Rs.15 Billion could be concluded over a ‘breakfast’ meeting. One wonders what the funding requirements must be to have a formal meeting! No questions were also asked as to how an ‘advisor’ can request funding.

Muted Opposition Response

The alleged Treasury Bond scam is one of the largest financial scams to take place in the post-independence history of Sri Lanka. For sheer impunity and involvement of powerful politicians in collusion with a section of the corporate sector and regulatory authorities it is hard to beat. The muted response of the opposition exemplifies the rot in governance in this country. In the context of the alleged money laundering charges against the previous regime, whether the muted response has anything to do with former CB Governor, Arjuna Mahendran’s stint as Chief Investment Officer, Wealth Management Division of Emirates NBD Bank, Dubai would be revealing.

Incidental Issues

I trust the PCoI in its report will at least recommend that crucial issues of governance incidental to the alleged bond scam thrown up by witnesses at the Bond Commission such as possible (i) Tax Evasion (ii) Money Laundering (iii) Bank Malpractice (iv) Politically Exposed Persons (PEPs) being appointed as directors of banks must be transparently addressed by regulatory agencies such as the CBSL and Inland Revenue Department.
To date these agencies do not appear to have demonstrated any interest in addressing these issues. I trust Dr. Indrajit Coomaraswamy – CB Governor and others will take note.


Things are so bad in Sri Lanka that the rule of law was selectively applied not to compel Arjun Aloysius – owner of PTL to give evidence before the Bond Commission on the basis it would incriminate him since apparently in his own mind there was a high probability he would be prosecuted. The same rule of law was mute in taking the next steps that could have been taken independent of the report of the Bond Commission in the context of the damning evidence produced at the PCoI. It also indicates that the relevant regulatory and law enforcement agencies are largely on sleep mode. This tardiness in taking necessary legal action has resulted in a situation where as disclosed by the Prime Minister during his testimony at the Bond Commission, Aloysius was even able to be present at one or two parties” where he was in a position to converse with the PM himself!
As I see it, the alleged Bond Scam had the masterminds and the facilitators. I trust those concerned will not miss the wood for the trees! Of course, the ‘facilitators’ too must be held accountable.
What we have still not convincingly seen is the quantifying of the looted monies which must be returned to the exchequer. It is hoped that particularly PCoI Commissioner – K.Velupillai (former Deputy Auditor General) will address this in the report.

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