Posted on March 30th, 2017

By Deepal Warnakulasuriya – Courtesy The Nation

Former Governor to the Central Bank of Sri Lanka (CBSL), Arjuna Mahendran arrived at the premises of the special Presidential Commission of Inquiry to Investigate and Inquire into the issuance of Treasury Bonds last week after he was summoned by officials of the Criminal Investigation Department.

He arrived at the Commission this week and participated as an observer with the permission of the tribunal appointed by President Maithripala Sirisena. The Commission met four days during this week too and two CBSL officials testified.

During Monday’s sitting, most noteworthy fact that came to light was that there were certain discrepancies between the witness, Secretary to the Monetary Board, H.A. Karunaratne’s personal notes pertaining to the minutes of the meetings of the CBSL’s Monetary Board and the approved minutes pertaining to CBSL’s Monetary Board meetings.

The witness told the Commission that at the time there was no digital software or any other recording system available for use and therefore he himself took down notes of the minutes while the meetings were on-going as was his duty.

However, the Commission found out that the Secretary to the Monetary Board had forwarded his draft minutes to two Assistant Governors and also Deputy Governor, P. Samarasiri. Karunaratne also told the Commission that his draft had been amended by Samarasiri while adding that he had received it only subsequent to the next auction date. He further said that due to the fact that the auction was over, he had decided not to make a fuss over the amendments which had been done by Deputy Governor Samarasiri.

According to Karunaratne, wordings in his notebook quoting the then CB governor Mahendran in reference to exploring the possibilities of issuing 30-year Treasury Bonds” had been printed in the minutes stating that the Monetary Board instructed the Public Debt Department to raise 30-year Treasury Bonds within the week.”

Further, the day’s testifying also revealed that Mahendran had himself changed the decision by the Monetary Board to keep the interest rate of its daily deposits at 5% and had arbitrarily increased it to 6.5%. He also said that the then Governor had also instructed the Domestic Operations Department to issue a circular and accordingly the Director of the said Department, PWDNR Rodrigo had issued the said circular. He said that it was also unusual” for anyone occupying the position of Governor to take such a decision alone.

On Tuesday,   before the Commission began hearing testimony from Secretary to the Monetary Board, H.A. Karunaratne yet again, Attorney-at-Law representing  Mahendran,  President’s Counsel (PC) Romesh de Silva appeared before the Commission with a team of lawyers. In addition, former governor Mahendran was also seated inside the Commission room. De Silva PC made a request according to Clause 16 (1) of the Special Presidential Commissions of Inquiry Law, asking for permission for his client Mahendran to be present and observe the Commission’s proceedings.

Initially, the Commission noted that as the former Governor had already been allowed to be represented by his lawyers at the Commission, it was sufficient. Chairman of the Commission, Supreme Court Judge, Justice KT Chithrasiri also said: Towards the end of the proceedings, the Commission will call Mahendran to testify and before that we can let you know the areas of concern. That is only fair. We will not be forwarding a charge sheet.”

However, De Silva PC pointed out that according to media reports available in the public domain regarding the witnesses’ statements before the Commission, his client had already been made a culprit and further added that was why Mahendran had wanted to be in the Commission room and observe the proceedings of the hearings.

The Commission comprised of Chithrasiri, Supreme Court Judge, Justice Prasanna S. Jayawardena PC and former Deputy Auditor General, Velupillai Kandasamy who had a brief personal discussion and allowed the former CB governor Mahendran to observe the conduct of the affairs of the Commission. However, the decision was not to the satisfaction of the Attorney General’s Department and Senior Additional Solicitor General Dappula de Livera PC opposed the move and it developed into a verbal clash between the counsel.

De Silva PC who became impatient during De Livera’s explanation to the Commission, told him (De Livera PC): You are barking.” But De Livera PC retorted saying that he would also bite. Mahendran’s counsel took the issue up further, saying that: You (de Livera PC) should be chucked out from your position” to which the latter replied: You too should be chucked out from where you are.”

De Livera PC pointed out to the Commission that witnesses testifying before the Commission would be subjected to undue pressure owing to Mahendran’s presence at the proceedings. However, the Commission came to an understanding that the proceedings of the Commission are similar to the procedure in a civil court and therefore that it was fair that the former Governor be allowed to sit in the Commission chamber while the proceedings were going on. Chairman of the Commission intervened and pointed out they should be mindful of their language and reiterated once again that no one should be in a panic situation as the Commission was not out to punish anybody. Justice Jayawardena PC added that both the learned counsel had shown their childishness before the Commission.

Again, an argument broke out when De Silva PC requested that they be allowed access to the evidence and the records of the proceedings in possession of the Commission, especially the documents, including the minutes of the Monetary Board. De Livera PC pointed out the difficulty of providing all the documents as some of the evidences were of a highly confidential nature. He further said that the CBSL should hear about the situation before handing over confidential documents to a possible witness to the Commission.

These are official documents. The CBSL has certain objections in giving these documents, so I am only saying that the CBSL should hear about this, if the Commission is to give an order. Not only that, the Attorney General too is of the same view”, Livera said. The Commission assured to let De Silva PC know the decision on the confidential documents within a week.

The hearings on Wednesday too began with Secretary to the Monetary Board, H.A. Karunaratne who was cross-examined by the counsel representing the CBSL’s Deputy Governor, P. Samarasiri, Perpetual Treasuries Private Limited and the former governor Arjuna Mahendran, as well as by the representatives of the Attorney General’s Department to affirm some points.

During the cross-examining, it was revealed that the decision regarding the controversial Greek Bonds purchase in 2011 came from an unofficial meeting held between certain officials of the CBSL and it had been approved later by then Governor Ajith Nivard Cabraal. Nihal Fernando PC raised the fact that the transaction had resulted in a loss of USD/$ 15.6 million. The witness while admitting to the fact added that it had also brought positive results later.

Though the Greek Bonds issue was not under the purview of the present Commission, the Commission was interested to hear more as the witness said that the decision was taken at a gathering.” Justice Jayawardena PC questioned the witness whether it was a gathering of elephants in Minneriya or somewhere else. The witness then proceeded to change his phraseology to mean a casual meeting.”

Karunaratne during the cross-examination also admitted that Deputy Governor Samarasiri had advised him to change the minutes of the meetings of the Monetary Board. He also said that even at that time when he had wanted to record the meetings and had subsequently asked about the possibility of doing so from the said Deputy Governor in a casual fashion, Samarasiri had told him not to do so.

He also admitted that his notes on the minutes of the meetings of the Monetary Board which had read as explore the possibility to issue 30-year bonds” had been changed to issue 30-year bonds”. And then Governor Mahendran’s directive to allegedly move away from direct placements” as had been recorded in Karunaratna’s notes had also been changed to temporarily suspend direct placements.”

A counsel representing former governor Mahendran, Attorney-at-Law Chanaka de Silva raised concerns about the witness’ statement on the unusual pattern of transfers” by then governor Mahendran and the witness then reiterated that his numbers were correct. However, the Counsel added that Karunaratne hadn’t made mention about certain departments which had been newly set up during that time. It also came to light that in 2015, the CBSL had established a Legal and Compliance Department and a Risk Management Department.


  1. Sarath W Says:

    Did puppet My3 appoint Velupillai Kandasami to look after the interest of this biggest crook in Sri Lanka’s history Mahendren?

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