Bond scams, Geneva process and RK’s resignation
Posted on August 15th, 2017

By Shamindra Ferdinando Courtesy The Island

The unprecedented political crisis caused in the wake of the alleged Central Bank-Perpetual Treasuries bond scams has threatened the continuation of the UNP-SLFP coalition.

Perpetrated in Feb. 2015’ and March 2016, the alleged scams, compelled President Maithripala Sirisena to appoint a three-member Presidential Commission of Inquiry (CoI) by January this year to probe the complicity of the then Governor, Singaporean Arjuna Mahendran, his son-in-law Arjun Aloysius, as well as the UNP, in the deceitful transactions.

Although the UNP put on a brave face and engaged in various damage control measures, the shocking revelation that Ravi Karunanayake, who had held the finance portfolio, at the time of the alleged scams, stayed at a luxury penthouse, at the Monarch apartment complex at Colombo 03, paid for by Arjun Aloysious, in 2016, before purchasing it at a staggering Rs 165 mn later the same year under controversial circumstances, sealed the top UNPer’s fate.


Karunanayake received the foreign affairs portfolio, on May 22, 2017, in President Sirisena’s first cabinet reshuffle. Newly appointed Finance Minister Karunanayake was named, by Premier Wickremesinghe, as a member of the ministerial committee to coordinate and implement recommendations, in accordance with Geneva Resolution 30/1 adopted on Oct 1, 2015. The committee comprised Karunanayake, Dr Wijeyadasa Rajapakse, PC, Mahinda Samarasinghe, Sagala Ratnayake, Tilak Marapana, Ruwan Wijewardene and Dr Harsha de Silva. Rajapakse is under fire, from a section of the government, for severely criticising the UN in respect of its human rights/accountability stand on Sri Lanka as well as over the leasing of the Hambantota harbour to a Chinese firm for 99 years.

Many an eyebrow was raised when Karunanayake’s predecessor Mangala Samaraweera, who had really worked hard to secure the Western backing for the new administration was unceremoniously dropped from the ministerial committee.

Karunanayake’s testimony before the CoI, comprising Supreme Court judges K.T. Chitrasiri (Chairman), Prasanna Sujeewa Jayawardena and retired senior deputy Auditor General Velupillai Kandasamy, on Aug. 2, 2017, really embarrassed the government.

State Minister Lakshman Yapa Abeywardena, on behalf of President Sirisena, on Aug. 8, delivered a two-week deadline for the UNP to decide on Karunanayake. State Minister Abeywardena warned that unless the UNP got Karunanayake to give up his foreign affairs portfolio, President Sirisena would remove him the way he replaced Arjun Mahendran with economist Dr. Indrajith Coomaraswamy, on July 2, 2016.

President Sirisena, in mid-July 2015, in the run-up to the parliamentary polls, the following month, revealed how he tried to convince Premier Wickremesinghe to get Mahendran to quit in the wake of allegations. “I have a personal opinion and there is an opinion among the people in the country that (Prime Minister) Wickremesinghe is not a corrupt person, a thief,” President Sirisena told a group of journalists at the Presidential Secretariat. “In this background, I said the best thing was for the Central Bank Governor to resign.”


Had President Sirisena allowed the first Special 13 member COPE (Committee on Public Enterprises) sub-committee, headed by the much respected Communist Party leader, Dew Gunasekera, to present its disputed report to parliament, in late June 2015, the second, much bigger scam wouldn’t have taken place, in March 2016. Unfortunately, President Sirisena had no option but to dissolve parliament to protect his 100-day administration until early general election could be held. The dissolution also thwarted JO attempts to move no faith motions against the Sirisena-Wickremesinghe administration.


Karunanayake quit the foreign ministry portfolio, on Aug. 10, 2017 (afternoon) to avoid the Joint Opposition (JO) no-faith motion handed over on Aug. 3. Karunanayake faced the risk of losing the no-faith motion much to the embarrassment of the UNP as well as President Sirisena, who secured the presidency at the January 2015 polls, thanks to the UNP.


President Sirisena is certainly beholden to the UNP. But, in spite of that, even at the risk of his alliance with Premier Ranil Wickremesinghe, he took brave action. The political alliance was meant primarily to achieve two objectives. One of the two objectives had been to check growing Chinese influence in Sri Lanka. Western powers and India wanted the Sirisena-Wickremesinghe alliance to halt Chinese projects. However, their tall order went awry due to cash strapped Sri Lanka having to re-launch the flagship Chinese project, the USD 1.4 bn Colombo Port City and lease the Hambantota harbor, to state-owned China Merchants Port Holdings (CMPH), to develop, manage and operate the facility which is on one of the world’s busiest shipping lanes.


Sri Lanka and China finalised the Hambantota deal on the morning of July 29, 2017, in spite of strong opposition from trade unions. The Sirisena-Wickremesinghe government earlier cleared the Colombo Port City Project. In addition to them, the Chinese remained engaged in a spate of major projects in Sri Lanka, including the Colombo Lotus Tower, funded by Exim Bank of China.

The second major Western/Indian objective had been to ensure post-war reconciliation process, based on Geneva Resolution 30/1, co-sponsored by Sri Lanka, on Oct. 1, 2015.

In the wake of their failure to thwart the Chinese projects here, those who had sponsored the new administration wanted to save the second operation, meant to implement the Geneva Resolution 30/1. The Central Bank-Perpetual Treasuries alleged bond scams threatened to undermine the UNP-SLFP coalition as the latter blamed the UNP for the highly questionable transactions. The fact that top UNPer Karunanayake’s family had rented a penthouse, courtesy Arjun Aloysious, threatened to unravel the partnership. The UNP-SLFP marriage of convenience, built on the 19th Amendment to the Constitution, that had been introduced in late April 2015, is meant to bring in the required constitutional changes.

Sri Lanka reached an understanding with the Geneva-based United Nations Human Rights Council, in March this year, to fully implement the Geneva Resolution within two years. The Central Bank-Perpetual Treasuries episode threatened the partnership. Obviously, the JO no-faith motion scared the daylights out of those sections of the government, as well as their foreign sponsors hell-bent on keeping the constitutional making process on track.

Karunanayake had to quit the foreign affairs portfolio as part of the overall damage control measures.

Karunanayake’s move, at the behest of President Sirisena and Premier Wickremesinghe, had taken the heat off the government, to some extent though the issue, at hand, remained to be exploited by the JO. The JO’s moves will be certainly influenced by ‘explosive’ testimonies of Arjun Mahendran and Arjun Aloysious.

However, Karunanayake’s resignation has cleared the way for the UNP and the SLFP to extend their post-Aug 2015 parliamentary polls agreement. State Minister Abeywardena had publicly speculated about the possibility of the SLFP having to quit the agreement depending on the CoI recommendations and subsequent judicial proceedings. Although, Karunanayake’s resignation had saved the coalition for the time being there is a school of thought that CoI recommendations can be devastating and place the government in an extremely embarrassing and difficult situation.

The Central Bank-Perpetual Treasuries transactions involving the Bank of Ceylon, Employees Provident Fund (EPF), Pan Asia Banking Corporation, DFCC Bank et al had become the biggest scandal to shatter the much touted claim to good governance and financial accountability. On the basis of the testimonies so far before the CoI and the forthcoming evidence of Arjuna Mahendran and Arjun Aloysius that can certainly cause quite a stir, recommendations in respect of future action are certain to be inimical to those in power.

It would be pertinent to mention that the failure to take tangible measures in the wake of the February 2015 bond scam, which Auditor General Gamini Wijesinghe estimated to have caused a staggering Rs 1.6 bn loss immediately, though the losses spread over 30-year period due to Perpetual Treasuries buying Rs 5 bn worth bonds at a sharply higher interest rates, can cause irreparable damage to the national economy.

TNA reiterates stand on Geneva Resolution

Tamil National Alliance (TNA) leader R. Sampanthan’s appeal to the US, in respect of the Geneva Resolution, a few hours before Karunanayake gave up the foreign affairs portfolio, on the afternoon of Aug 10, 2017, underscored the Tamil party’s concern over the current situation.

Sampanthan and Jaffna District MP and TNA spokesman M.A. Sumanthiran made representations to Representative Rodney Frelinghuysen (Republican New Jersey), Chairman, House Appropriations Committee and Rep. Henry Cuellar (Democrat – Texas) at the Opposition Leader’s Office at 11 am. The meeting lasted about an hour and was attended by US Ambassador Atul Keshap.

The TNA has told the US delegates that the Trump administration should hold the Sri Lankan Government responsible for the commitments it had made to the international community, particularly with regard to the Geneva Resolution.

The Geneva Resolution has proposed the setting up of a hybrid war crimes court, including foreign judges, among other things.

A statement issued by the Opposition Leader MP Sampanthan’s Office quoted the veteran politician as having said “Sri Lankan Government cannot shirk its responsibility of fulfilling its commitment to the international community.”

Sampanthan faulted the UNP-SLFP coalition for delaying constitutional making process in accordance with the Geneva Resolution. Sampanthan called for a referendum, following the proposed draft constitution, received two-thirds approval in parliament.

However, there hadn’t been any reference to the Central Bank-Perpetual Treasuries bond scams in the statement issued by the Opposition Leader’s Office, following the talks. Sampanthan and the US delegates having failed to take up Sri Lanka’s biggest scam against the backdrop of much publicized US commitment to help Sri Lanka tackle corruption blamed on the previous administration, should be ashamed of themselves.

Sampanthan didn’t hesitate to lie as regards Tamils seeking ‘asylum’ abroad. The TNA statement quoted Sampanthan as having said: “Over fifty per cent of the Tamil population has left the country due to the unresolved national question, and if we don’t find a reasonable solution more people will leave, we don’t want that to happen.”

Sampathan claim can be compared with unsubstantiated allegation that the Sri Lankan military killed 40,000 to 100,000 Tamil civilians during the last phase of the offensive, generally referred to the period between January-May 2009.

Having faulted the ruling coalition partners for not implementing the Geneva Resolution, Sampanthan rushed to parliament where he lavishly praised Karunanayake for giving up his ministerial portfolio that had direct bearing on the Geneva-led process.

The Central Bank-Perpetual Treasuries bind scams had placed the US, the UK and India in an extremely embarrassing position.

In the wake of the Rajapaksas defeat, in January 2915, both the US and India announced their readiness to help Sri Lanka’s new government to track down stolen wealth, stashed abroad,while US Secretary of State John Kerry also pledged help when he visited Colombo, in May 2015.

Kerry assured that any assets robbed from Sri Lanka and hidden in the US would be returned to the people of Sri Lanka.

Then Foreign Minister Mangala Samaraweera is on record as having said that Sri Lanka had secured support from four countries to locate and bring back an estimated $18 billion in assets stolen by former president Mahinda Rajapaksa and his family. The writer was among the journalists who covered the briefing given by Samaraweera at UNP headquarters, Sirikotha.

Addressing a large gathering at the Lakshman Kadirgamar Institute, Kerry said: “We are also ready to help with asset recovery and the enforcement of anti-corruption rules. Our investigators are prepared to work with your investigators. Our prosecutors are prepared to work with your prosecutors and we commit that any stolen assets in the United States will be returned to their rightful owners.”

The US commitment should be examined against the backdrop of millions of USD spent on a high profile project to thwart twice President Mahinda Rajapaksa securing an unprecedented third term at the January 2015 presidential poll and also to sustain the new administration. The US recently admitted the release of millions of USD in support of project/projects in Sri Lanka, in response to a query raised by the US-based Hassina Leelarathna. According to information made available by the USAID on the basis of the Freedom of Information Act (FOIA), USD 3.4 mn had been released from Complex Crises Funds (CCF) which was meant to make available USD 40 mn in support of governance, rule of law and economic reform in Sri Lanka.

In addition to that, Sri Lanka, Nigeria and Burma had been categorised as ‘democracy projects’ that received USD 585 mn during 2015. Although specific amount of funds, made available to Sri Lanka, through the US State Department, hadn’t been revealed, Sri Lanka received CCF amounting to USD 13,589,951 in 2015.

The British, too, had supported the new government high profile anti-corruption drive. The former deputy British High Commissioner in Colombo Laura Davies, in Dec 2015, declared the formation of an international coalition to help the Sirisena-Wickremesinghe government to stamp out corruption.

Davies said that the UK was working closely with the US, Australia and Switzerland to help the new administration.

Davies said that the UK was in the process of enhancing Sri Lanka’s capability to handle international cases.

In accordance with an understanding with the government of Sri Lanka, the UK provides legal advice, training as well as English language training.

She asserted that the training provided to Sri Lankan personnel by the British had enhanced their confidence as well as their skills.

The diplomat revealed that the UK had committed Rs. 15 million to support Sri Lanka’s anti-corruption project. The UK would continue to focus on capacity building and training for all the professional branches involved in anti-corruption work. Funding for anti-corruption project is in addition to the 6.6 mn pounds sterling made available for military reforms and post-war resettlement of the displaced families, etc.

Strangely, both the US and the UK remain silent on Sri Lanka’s largest financial crime in spite of independent experts and the media here pointing the finger at the government in power.

The UK headquartered Global Tamil Forum (GTF), that had been quite critical of waste, corruption and irregularities, allegedly taken place in Sri Lanka during the 2005-2015 period, remained silent on the massive bond scams. Those foreigners who had been used to preach good governance and accountability remained silent today as the government struggled to cope up with the deepening crisis caused by the UNP’s folly.

Perpetual Treasuries Limited has received the appointment as a primary dealer on Sept. 30, 2013, and commenced handling government securities on Feb 5, 2014. At the time of the first alleged scam, the enterprise had been fully owned by Perpetual Capital Holdings Pvt Limited (PCHCL). However, before the second much bigger allegedly corrupt transaction, the ownership of the controversial outfit changed to Perpetual Asset Management (Pvt) Limited.

It would be interesting to know whether the CoI had received a copy of an on-site examination of Perpetual Treasuries undertaken by the Public Debt Department (PDD) of the Central Bank on Sept 30, 2015. The PDD examination that had taken place during Mahendran’s tenure as the disputed Governor of the Central Bank of Sri Lanka exposed all those involved in the alleged bond scams. Against the backdrop of such shocking revelations, how the interested parties had manipulated the entire system, to their advantage, at the expense of the national economy, is no longer a secret. The CoI cannot turn a blind eye to the PPD’s findings even if it had not so far received a copy of the report headlined ‘Perpetual Treasuries Limited-Findings of the on-site examination.’

To be continued on Aug 23

4 Responses to “Bond scams, Geneva process and RK’s resignation”

  1. Dilrook Says:

    Another informative article.

    However, I disagree that Sirisena was brave at all.

    Quite the opposite. Mangala, although worked hard for his election, was minor in comparison to Ravi in both finance and foreign minister portfolios. Ravi on the other hand was/is a political giant. Mangala has a soft corner for Mahinda but not Ravi. Sirisena wanted to save Ravi as much as he could and use him to punish war heroes in Geneva with a political twist. It failed.

    If Sirisena had separated lotteries boards from Ravi, then he would be brave. Indecision better describes him.

    Marapana is a good choice for foreign minister from what is available.

    Agree with the rest.

  2. Lorenzo Says:

    MANY people MIX My3 with UriNePee. That is WRONG.

    My3 did a good investigation and found out the BOND CROOKS. He REMOVED the minister and later told him to RESIGN. This NEVER happened in SL history!

    UNP RUINED the economy, sold off anything they can SELL and other PLUNDERS. My3 put BRAKES on them.

    President Sirisena is certainly beholden to the UNP. But, in spite of that, even at the risk of his alliance with Premier Ranil Wickremesinghe, he took BRAVE action.

    We have to call a spade a spade. My3 is WEAK, STUPID at times but his BRAVE action MUST be commended. Otherwise it is MALICIOUS.

    Our heartfelt THANKS and GREAT RESPECT goes to ANIKA. A RARE honest person in SL. May god bless you madam.

  3. Ratanapala Says:

    March 2016 Bond Scam – How can a second CARBON COPY scam take place when one is exposed and under investigation – Only in Sri Lanka!

    What baffles the mind and hardly anybody seems to pick up is the fact that a second Bond Scam took place in March 2016. This is after the appointment of a COPE investigation during the first ‘one hundred days, after the Parliament was dissolved by Sirisena in for parliamentary elections to be held in August 2015 and after the appointment of the second COPE investigation.

    Surely someone other than the Central Bank officials must take responsibility for this grand larceny. It should point this time with more poignancy at the Prime Minister for by then it was a known fact that Arjun Mahendran is already implicated in the fraud.

    Idiotic Sri Lankans do not even have the ability to get angry. They are facing increased taxes, increased interest rates – borrowing more expensive, rupee devalued by 15% in mere two years, default on all promises made for Yahapalanaya – all this with stoic indifference, while they have the energy to take to the streets over a comparatively ‘near on issue’ such as SAITM.


  4. Ananda-USA Says:



    It BAFFLES my mind too, how even a SET OF MARGINAL IDIOTS can hope to escape the REPERCUSSIONS of such a large THEFT. They not only DO IT ONCE, but YET ANOTHER TIME!

    Moreover, the MIS-STEPS of the Yamapalanaya in this Buddhist Majority Nation are a LEGION! How could this PARA-GATHI Minority KALLIYA hope to ESCAPE the INEVITABLE BLOWBACK?

    Furthermore, Ravi’s behaviour in the Penthouse Bribery also baffles me. This man has been ACCUSED NUMEROUS TIMES of FINANCIAL SKULDUGGERY; Did he not know any links to Aloysius would be POISON?

    Surely, he must be aware that the Yamapalana Opponents are WATCHING HIS EVERY MOVE?

    The ONLY THING that can account for this MYOPIA is SHEER ARROGANCE; the ARROGANCE of POWER!

    The ARROGANCE that he and the rest of the Yamapalana KALLIYA, with a PUPPET CAPTIVE President hoisted onto the throne, have so completely bamboozled the country that THEY ARE BEYOND THE REACH OF THE LAW that they NOW OWN THOROUGHLY.

    The ONLY THING they have not FACTORED into their calculation, is the intransigence of an unbending MAHA SANGHA and the loyalty of common ordinary Sinhala Buddhist citizen who loves this the Motherland beyond everything else!

    Those two PATRIOTIC groups form the BED-ROCKS that SINK WOULD-BE TRAITORS in Sri Lanka every-time, regularly LOPPING THE HEADS OFF TRAITORS throughout our history!

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