by C.A.Chandraprema Courtesy The Island

May 19, 2018, 8:35 pm

In January 2018, the Commission to Investigate Allegations of Bribery or Corruption filed case No: 87741/01/18 in the Colombo Magistrate’s Court against former Deputy Solicitor General (DSG) A.H.M.D.Nawaz (who is now an Appeal Court Judge), former Attorney General Mohan Peiris and former Secretary to the Ministry of Power and Energy M.M.C.Ferdinando. The main charge was that former DSG Nawaz had not taken into account the findings of two reports of Committees headed by S.J.Pathirana dated October 2009 and by M.A.R.D.Jayatileke dated July 2010 with regard to several transactions at Lanka Electricity Company (LECO) which had taken place between 2007 and 2009 and had issued a letter from the Attorney General’s Department dated December 16, 2010 stating that these transactions ‘do not lead to an inescapable inference of criminal liability’. It was deemed that former DSG Nawaz was therefore guilty of the offence of corruption under the Bribery Act and the offence of criminal misappropriation under the Penal Code for issuing that opinion with a view to benefitting the LECO executives under investigation.

The charge against former Attorney General Mohan Peiris and former Secretary to the Ministry of Power and Energy M.M.C. Ferdinando was that they had aided and abetted former Deputy Solicitor General A.H.M.D. Nawaz in this matter. Appeal Court judge A.H.M.D Nawaz was a Deputy Solicitor General in the Attorney General’s Department before being appointed to the judiciary. On December 2, 2010, when Nawaz was a DSG in the AG’s Department, the then Secretary to the Ministry of Power and Energy M.M.C. Ferdinando wrote to the then Attorney General Mohan Peiris seeking an opinion about the possibility of initiating an investigation through the Criminal Investigation Department into a series of financial improprieties that had allegedly taken place at LECO between 2007 and 2009. Ferdinando had also sent to the AG’s Department, several annexures to his letter which included the following:

(a)    A report dated October 12, 2009 by a Committee of five members headed by Mr S.J.Pathirana former Secretary Ministry of Lands which had been appointed by Ferdinando himself as Secretary to the Ministry of Power and Energy.

(b)   A report dated July 29, 2010 by Mr M.A.R.D.Jayatileke former Secretary, Ministry of Environment who had been appointed to look into the financial losses caused to LECO and to identify those responsible for such losses based on the previous five-member committee report.

(c)    An internal audit report by Mr V.Kandasamy dated October 18, 2010.

Attorney General Mohan Peiris had as is the usual practice in the AG’s Department, sent this letter and all the accompanying documents to Deputy Solicitor General Nawaz with a minute saying “Please study carefully and report early”. DSG Nawaz had studied the material and discussed the issues involved with Attorney General Mohan Pieris and concluded that according to the material furnished, criminal liability did not necessarily arise with regard to the transactions under investigation. A letter to this effect was sent on December 16, 2010 by the Attorney General’s Department signed by DSG Nawaz to M.M.C.Ferdinando the Secretary to the Ministry of Power and Energy.

The transactions under investigation

The five member committee headed by Mr S.J.Pathirana which carried out the investigation into the financial irregularities that had taken place at LECO between 2007 and 2009 had looked into 15 transactions ranging from the purchase of properties to a tender for the printing of diaries. Some of the more important transactions were as follows:

*  Lease of two floors of a building at No 117, Subaddrarama Rd, Nugegoda for four years at the monthly rental of Rs.315,000 to establish a new branch office. No valuation has been obtained from a professional valuer.

*  Purchase of a building at No: 204, High Level Rd, Nugegoda, at an inflated price. LECO had advertised to procure a land with a building with a floor area not less than 6,000 sq ft, but had acquired a building over 18,000 sq ft at a price of Rs 210 million on 27.5.2009, this price had been determined by the price negotiating committee based on a valuation made by professional valuer Mr Gamini Haegoda who had valued this property at Rs. 248 million.

*  LECO had advertised to procure a land of 40 perches, but had proceeded to procure a land of 52 perches on Nawala Rd, Nugegoda at a price of Rs191 million on 18.3.2008 (this price has been determined by the price negotiating committee based on a valuation  made by professional valuer Mr Gamini Haegoda who had valued this  property at Rs. 232.9 million.

* Purchase of a land and building in Nuwara-Eliya for a  Holiday Resort at a price of Rs 53 million on 6.2.2009. The valuation by professional valuer Mr Gamini Heagoda was Rs. 59 million.

* Procurement of a land at Kotikawatta for a primary substation at a price of Rs. 15.2 million on 27.5.2008. This price had been determined by a price negotiating committee based on the valuation determined by professional valuer Mr P.B.Ratnayake in his report dated 10.4.2008 as Rs. 15.2 million.

The M.A.R.D.Jayatileke Committee had come to the conclusion that the cumulative loss to LECO from the 15 transactions investigated by the five member committee headed by S.J.Pathirana was over Rs. 250 million. The loss to LECO resulting from the largest transactions were stated as follows:

*  Land and building at No: 204, High level Rd, Nugegoda bought at Rs. 210 million. Chief Govt. Valuer’s valuation Rs. 100 million. Loss: Rs.110 million.

*  Land at Nawala Rd, Nugegoda bought at Rs. 191 million. Chief Govt. Valuer’s valuation Rs. 101 million. Loss: Rs. 90 million.

*  Land and building for a holiday resort in Nuwara-Eliya bought at Rs. 59.5 million. Chief Govt. Valuer’s valuation Rs. 25 million. Loss: Rs.34.5 million.

*   Land at Kotikawatta for a primary substation bought at Rs. 15.2 million. Chief Valuer’s valuation Rs. 1.9 million. Loss: Rs. 13.3 million.

What DSG Nawaz said

It was in the face of such allegations made in the S.J.Pathirana and M.A.R.D.Jayatileke committee reports that Deputy Solicitor General Nawaz opined as follows in his letter to Power and Energy Ministry Secretary M.M.C.Ferdinando:

“Upon a careful consideration of all the documents and annexes submitted for our perusal it is apparent that it was the board of directors of the company who had taken the coactive decision to authorize the transactions by unanimity. The annexes do not reveal that one single director could be classified as the directing mind of a particular transaction as the whole board had assented to the ventures. You will appreciate that a judgment error by the board with regard to the commercial viability of a transaction which results in a loss does not lead to an inescapable inference of criminal liability and would therefore preclude criminal action being launched against the board of directors.”

“In any event the grounds that are relied upon to initiate a criminal investigation are not supportable having regard to the prevalent authority. In this connection it is relevant to take note of the jurisprudence of the Court of Appeal in the case of Hithakamy Chidrupa Pieris V Divisional Secretary/Acquiring officer and others (CA Application No: 1225/2000) where the Court of Appeal made the pertinent observation that the valuation made by the Chief Valuer cannot be mechanically adopted (in this case the value  given by a private valuer was higher than that of the chief valuer). In the circumstances I am of the considered opinion that this is not a fit and proper case which warrants a criminal investigation. May I also hasten to observe that you may issue suitable directions for more than one valuation inclusive of the Chief Valuer’s to be considered in transactions of this nature as a matter of prudence.”

This is the legal opinion that DSG Nawaz gave with regard to this case on the direct authority of the Attorney General. Three points in this letter stand out. The first is the consideration that an error in judgment made by the board of a government owned company (or indeed even a privately owned company for that matter) with regard to the commercial viability of a transaction which results in a loss does not lead to an inescapable inference of criminal liability. If this was not so, no board member of any company will want to participate in any kind of decision making. No board of any entity can always be right and without some leeway, it will not be possible to make any decisions as the director of a company.

The next point is that almost in all the cases of alleged financial malpractices mentioned above, the actual price paid had been contrasted with the valuation that the chief government valuer had given. To this the Attorney General had opined quoting case law that a valuation made by the Chief Valuer cannot be ‘mechanically’ applied to decide whether a property has been purchased for more than its value. There is also the issue that neither the S.J.Pathirana nor the M.A.R.D.Jayatileke committees had obtained a valuation from one or more private valuers for the properties before arriving at the conclusion that they had been purchased at more than their market value. In fact DSG Nawaz had himself drawn attention to this matter by suggesting that ‘more than one valuation’ inclusive of the Chief Valuer’s be considered in transactions of this nature. What is surprising is that such a procedure had not been followed by a government owned entity as large as LECO which should have well defined guidelines for procurement.

How the Bribery Commission got involved

It appears that sometime after former DSG Nawaz under the authority of the Attorney General had given his opinion on December 16, 2010 regarding the transactions that had taken place at LECO, the CID had once again sought an opinion from the then Additional Solicitor General Palitha Fernando about this matter. ASG Fernando had apparently instructed a Senior State Counsel to ask the CID to go ahead.  In 2012, this Senior State Counsel had filed a confidential report to then Attorney General Mrs. Eva Wanasundera who had in the meantime succeeded Mohan Peiris about the opinion given by DSG Nawaz on December 16, 2010 and recommended that a complaint be made to the Bribery Commission and that an internal inquiry should be conducted into why DSG Nawaz gave that opinion. On July 5, 2012, Attorney General Eva Wanasundera had written a minute on that confidential report sanctioning an internal inquiry.

However, for the next two or three years, this internal inquiry was never held. The delay raises many questions. If there was a suspicion about the integrity of a high official in the AG’s Dept., why was an internal inquiry never held? In the meantime, in September 2014, DSG Nawaz was appointed to the Appeal Court. If an internal inquiry had been held and wrong doing proved, DSG Nawaz would not have become an Appeal Court judge. The delay was unfair to DSG Nawaz too, because he was deprived of the opportunity to clear his name at the level of the Department. Be that as it may, by the time Attorney General Eva Wanasundera’s minute was activated years later, Nawaz was no longer in the AG’s Dept. Thus it appears that the matter had been handed over to the Bribery Commission. On September 22, 2016 Appeal Court Judge Nawaz received a notice from the Bribery Commission requiring him to appear before the Commission and make a statement in relation to  the allegation that whilst he was serving in the Attorney General’s Department, he had prejudiced an investigation that was then being conducted by the Criminal Investigation Department, by forwarding a legal opinion dated December 16, 2010 to M.M.C. Ferdinando who was the then Secretary to the Ministry of Power and Energy.

However, back in 2010 when he provided that opinion to the Secretary to the Ministry of Power and Energy, then DSG Nawaz was obviously not aware that there was any inquiry by the CID into the matter on which he was giving his opinion. In fact, the very purpose of Ferdinando’s letter was to seek the opinion of the AG as to whether a CID investigation into the alleged malpractices at LECO was warranted.

The case against LECO directors

Be that as it may, all the transactions that were subjected to investigation by the Pathirana and Jayatilleke committees had been unanimously approved by the board of directors of LECO which at the time which was as follows.

Champani Padmasekera – Chairman

M.N. Perera – Director

D.W.Amunugama – Director

S.M.V. Perera – Director

S.M.A.Seneviratne – Director

On July 27, 2015, the Bribery Commission filed action in the Colombo Magistrate’s Court against these five directors of LECO. But there was only one charge against them – the lease of two floors of a building at No 117, Subaddrarama Rd, Nugegoda for a four year period. Here too the only allegation made against the directors is that when these premises could have been obtained for a rental of Rs, 300,000 a month, it had been obtained at Rs. 315,000 and the payment of the total amount of Rs. 15.1 million was made upfront, thus causing a loss to the government of Rs. 720,000 or a gain by the same amount to the fifth suspect S.M.A.Seneviratne. The other directors had been named as suspects in the case on the grounds that they aided and abetted the latter in the commission of this alleged financial impropriety.

This was a far cry from the loss of Rs. 250 million as calculated by the M.A.R.D.Jayatileke Committee. What happened to the alleged loss of Rs. 110 million in purchasing the land and building at No 204, High level Rd, Nugegoda, the loss of Rs. 90 million in purchasing the land at Nawala Rd, Nugegoda, the loss of Rs.34.5 million in purchasing a land and building in Nuwara Eliya, and the loss of Rs.13.3 million in purchasing land for a primary substation in Kotikawatte? We see that in filing action against the directors of LECO, after an investigation by the Bribery Commission and the CID as well, all the other losses have been dropped and only one loss amounting to Rs. 720,000 remains.

The incongruity here is that former Deputy Solicitor General A.H.M.D.Nawaz (who is now an Appeal Court Judge) former Attorney General Mohan Peiris and former Secretary to the Ministry of Power and Energy M.M.C.Ferdinando are being arraigned in court for not taking into account the findings of the S.J.Pathirana and M.A.R.D.Jayatileke Committee reports on financial improprieties at LECO and opining that no criminal liability arises in relation to those transactions, while the Directors of LECO who are supposed to have engaged in those malpractices, have been let off on virtually all the allegations made against them except for the pettiest one – taking the building at No 117,Subadrarama Rd, Nugegoda for four years on rent at an extra Rs. 15,000 per month.

Even this charge can hardly be expected to get anywhere. The manner in which this extra 15,000 per month had been paid is this: The owner of the building had originally quoted a sum of Rs. 300,000 per month for 6,000 square feet at the rate of Rs. 50 per square foot per month. Later, one of the directors is said to have obtained a letter from the owner claiming payment for 6,300 square feet. The LECO branch manager had measured the building and found that it does indeed have 6,300 square feet. Thus, the monthly rental had gone up by Rs. 15,000. The charge sheet filed by the Bribery Commission before the Colombo Magistrate’s court says that this building had been obtained at Rs. 315,000 when it could have been obtained at Rs. 300,000. That is to say that LECO should have taken the building on rent at the rate mentioned by the owner without ascertaining whether the building actually had 6,000 square feet or not. Nobody agrees to pay a certain rate per square foot without first ascertaining whether the building does have the number of square feet claimed.

When the measurement is done and it is found that the building has a little more than was stated, then you end up paying a little more. But what would have happened if LECO had taken the building on rent at Rs. 50 per square foot for Rs. 300,000 a month and it was later discovered that the building did not have the full 6,000 square feet but only 5,700 square feet? All the directors would have been hauled up before courts for corruption. In this case, the building actually had 6,300 square feet and LECO has only paid the Rs. 315,000 that was legally due. Obviously the Bribery Commission case against the directors of LECO is not designed to go very far.

Bribery Commission concurs with former DSG Nawaz

With that being the situation of the only case that the Bribery Commission has filed in relation to the fifteen cases of alleged financial irregularities at LECO, what is the justification for filing action against former Deputy Solicitor General A.H.M.D.Nawaz, former Attorney General Mohan Peiris and former Secretary to the Ministry of Power and Energy M.M.C.Ferdinando, saying that former Deputy Solicitor General Nawaz issued an opinion on behalf of the AG without taking into account  the reports of the Committee of five members headed by S.J.Pathirana, the Committee headed by M.A.R.D.Jayatileke and the internal audit report by V.Kandasamy? When we look at the charge sheet filed by the Bribery Commission against the directors of LECO, it becomes only too plain that the Bribery Commission also has ignored the three reports that they accuse Nawaz, Peiris and Ferdinando of having ignored!

The single charge that they have brought against the directors of LECO also looks like it was never meant to succeed. So what then, was so wrong with the opinion expressed by Deputy Solicitor General Nawaz on behalf of the AG, on December 16, 2010 on the alleged malpractices at LECO as to warrant prosecution? This is the first time in history that former officers of the Attorney General’s Dept. are being prosecuted over an official opinion given by the AG. Strangely, even the former Secretary to the Ministry of Power and Energy M.M.C.Ferdinando who had written to the Attorney General asking for an opinion whether the reports into certain alleged malpractices at LECO warrants a CID investigation, has also been charged for aiding and abetting in a corrupt practice. Henceforth, no government official in his right senses will want to write to the AG’s Dept. asking for an opinion and no officer of the AG’s Dept. will want to express an opinion because years after retirement they could end up facing criminal charges for their pains.