{"id":86787,"date":"2019-03-27T16:05:49","date_gmt":"2019-03-27T23:05:49","guid":{"rendered":"http:\/\/www.lankaweb.com\/news\/items\/?p=86787"},"modified":"2019-03-27T16:05:49","modified_gmt":"2019-03-27T23:05:49","slug":"yahapalana-and-corruption-part-3a","status":"publish","type":"post","link":"https:\/\/www.lankaweb.com\/news\/items\/2019\/03\/27\/yahapalana-and-corruption-part-3a\/","title":{"rendered":"YAHAPALANA AND CORRUPTION Part 3A."},"content":{"rendered":"

KAMALIKA\u00a0 PIERIS<\/em><\/span><\/h2>\n\n\n

The Bond scam\nsaga is not over. It is still going on and looks as though it will go on\nforever. Those responsible, such as former Central Bank   Governor Arjuna Mahendran and his son in law\nArjun Aloysius have not been arrested and the matter is still pending.  There is no sign of any action being taken\nagainst anyone regarding the 2015 bond scam. <\/p>\n\n\n\n

Investment banker\nArjuna Mahendran is the son of Charlie Mahendran, a retired Foreign Service\ndiplomat who had joined the United National Party after returning from his last\nposting as Ambassador to China, said the media. When Ranil Wickremesinghe\nbecame Premier in 2001,  Charlie\nMahendran went to New York as Sri Lanka\u2019s Permanent Representative to the\nUnited Nations. Arjuna Mahendran was simultaneously made Chairman of the Board\nof Investment (BOI). In January 2015, \neleven days after the Sirisena-Wickremesinghe Cabinet was installed.\nArjuna was appointed Governor of the Central Bank . <\/p>\n\n\n\n

The media\nsaid that Arjuna Mahendran was a UNP insider who was privy to all the secret\ndeals that were hatched with regard to the Yahapalana conspiracy. It was\nprobably at his house in Singapore that members of the Rajapaksa government had\nfinalized their deals to join the other side. Therefore the UNP would never go\nagainst him.  <\/p>\n\n\n\n

Governor Mahendra\u2019s period as Governor,\nCentral Bank has been a turbulent period. He  was not interested in running the Central Bank\nin the traditional manner. He had ,  for\ninstance,  engaged  in a verbal spat over transfers with officials.\nCB officers of Grade 4 and above,  the\nhighest ranking officers after the Deputy Governors, were having a noon day\nmeeting in a committee room to discuss concerns about new transfers and plans\nto hire retired bank staff as consultants.   \nGovernor Mahendran had walked  in\nand confronted the officers. <\/p>\n\n\n\n

Discussions of this sort should not be held,\nhe observed. The officials had said that they had held meetings like this\nearlier too. Next day the authority to book committee rooms including the one\nused was transferred to the Governor\u2019s Secretariat. <\/p>\n\n\n\n

The validity of currency notes signed by  Governor Arjun Mahendran  was questioned in Parliament. Arjun Mahendran\nis a Singaporean citizen. A Singaporean citizen could not obtain a dual\ncitizenship. Despite that, Mahendran was appointed the CB Governor and currency\nnotes were issued under his signature. Mahendran had not even taken oaths as\nper the Constitution when he assumed duties,  \nMP Bandula Gunawardene said.Mahendran  had said that \nhe did not take the oath mandatory to heads of department as stated in\nthe schedule to the Constitution. He said he did not know. <\/p>\n\n\n\n

Mahendran was\nnot frightened of the Commission of inquiry \non the Bond issue. He attended the \nCommission\u2019s sittings with a  panel of legal representatives.  His attorney, Romesh de Silva PC made an\napplication on behalf of Mahendra to allow access to the evidence and records\nof proceedings in possession of the Commission, especially the documents,\nincluding the Monetary Board minutes. According to de Silva the CBSL had let\nMahendran know,  that if the Commission\npermits, he can have access to the minutes of the Monetary Board. <\/p>\n\n\n\n

Additional\nsolicitor general De Livera pointed out the difficulty of providing l the\ndocuments as some of these are strictly confidential. He further said CBSL\nshould  be told before handing over\nconfidential documents, to a possible witness to the Commission. These are\nofficial documents. The CBSL has certain objections in giving these documents,\nso I am only saying the CBSL should hear about this, if the Commission is\ngiving an order,\u201d de Livera said. The Commission directed de Livera to consult\nwith the Attorney-General and the CBSL and let the Commission know their\nresponse. <\/p>\n\n\n\n

 On\nanother occasion, Mahendran\u2019s attorney submitted to the Commission a\nconfidential document belonging to the Central Bank .   It was \na draft pertaining to future plans on the issuance of Central Bank\ntreasury bonds with technical advice from the World Bank and the IMF. The\nCommission permitted Mahendran to use it to question the Central Bank.\nCommission  decided to hold the\nquestioning behind closed doors. Media personnel and others who were present\nthere were asked to leave the place temporarily.<\/p>\n\n\n\n

the Presidential\nCommission of Inquiry  came to the conclusion that Former Central\nBank Governor Arjuna Mahendran acted in mala fide and fraudulently, in gross\nbreach of his duties as Governor of the CBSL at that bond auction.  Sri Lanka is now  trying to get Mahendran back to answer charges\non the Bond scam. <\/p>\n\n\n\n

INTERPOL has issued a red notice on April 19,\n2018 (Sunday\nTimes 23.3.19 p 1). Sri Lanka made an official request on May 28\n2018, through the Defence Ministry Secretary to extradite Mr. Mahendran to Sri\nLanka. Singapore\u2019s Foreign Ministry called for further information over the\nextradition request. The Attorney General\u2019s Department is now compiling a\nfurther detailed statement supporting the request for  extradition, on the instructions of the President,\nsaid the  President\u2019s secretariat in\nMarch 2019. <\/p>\n\n\n\n

Arjun\nAloysius, the head of Perpetual Treasuries,  is   married to Arjuna Mahendran\u2019s daughter.  Arjun is the grandson of Kattar Aloysius, who\nstarted out as a dry fish exporter and ended up as one of Sri Lanka \u2018s most\nsuccessful businessmen. Kattar founded the Free Lanka Group and was a\nsignificant shareholder in several companies at the time of his death in 2013.\nKattar was close to Premadasa, said an informant. Kattar must not be confused\nwith \u2018Aloysius mudalali\u2019 who was also very close to Premadasa.  Kattar had first got to know Premadasa when\nPreme was PM. Kattar had good PR skills was a great networker and would often\nassist Premadasa for free such as providing food for functions, said the\ninformant. The Kattar family  hailed from South India .  They\nare Catholic. <\/p>\n\n\n\n

Namini\nWijedasa said that every one she interviewed \nsaid that Aloysius was well-connected, both with the previous\nadministration and the present government. One\nsource related how Arjun  had hired a\nlimousine for an influential Government minister in London  in2015, during an investment road show.The\nminister wanted to eat Chinese food but the restaurant at the hotel wasn\u2019t that\ngreat,\u201d he narrated. So, Arjun Aloysius took the minister out to dinner in his\nlimousine to China Town. That\u2019s just the tip of the iceberg. <\/p>\n\n\n\n

 Arjun nurtures his relationships and was\nfrequently seen with this Minister during last year\u2019s campaign for the\nparliamentary election.\u201dHe has covered his bases, whatever the party,\u201d said a\nsenior political source. He is confident enough.\u201d Aloysius\u2019s connections, through\nhis father-in-law and of his own making, are too strong, for him to be toppled   Arjun and Arjuna have too strong an\ninfluence with the Yahapalana to be shaken easily, they said. <\/p>\n\n\n\n

Arjun is a\ndeal maker, said one investment analyst. He gets things done by using contacts,\nforging alliances, or by other means. Perpetual\nmade a lot of its money by establishing connections, and flogging certain\nshares at high prices. If you have connections, you can sell to anyone,\u201d the\ninvestor said. You don\u2019t need half a brain to do that. These are deals. If you\nknow someone who knows someone, you can make it happen.\u201d However, Arjun\u2019s firm was not openly\nidentified as part of the well connected  \nstock market mafia.  He remained\nin low    profile. <\/p>\n\n\n\n

Perpetual\nTreasuries\u201d began business  in 2013 with\nan investment of just  three hundred\nmillion rupees.  Perpetual Asset\nManagement (Pvt) Limited, the holding company,  recorded a net loss of 2.8 billion as to March\n31, 2012. But in  2017 Perpetual\nTreasuries    showed a profit of four\nbillion rupees, while their three years profit was 12.5 billion. How could PTL\nmanage to  show such high profits in such\na short time. The phenomenal growth of\nPerpetual Treasuries  was  because \nit wielded political influence at the highest level, said DEW\nGunasekera.  <\/p>\n\n\n\n

Perpetual has\nsubstantial stakes in HDFC, Central Finance, Lanka Ashok Leyland, Bairaha, Dimo\nand CIC and took control of WM Mendis.  In\n2016, Perpetual was  planning to expand\nfurther. There is speculation that it wants to buy a stock brokerage. Religare Capital\nMarkets has been mentioned, reported the media. It is eyeing a television\nstation. Journalists are already being recruited for a national newspaper\nproject. It is  well known that Aloysius\nhas been helping to keep afloat a newspaper house which has been in financial\ndifficulties for months on end. <\/p>\n\n\n\n

His manager\nhad told the editorial staff that his task was to protect his investor\u2019s interests.\nThe money, around Rs 1 million a month, comes in via Perpetual Group\nadvertisements. Employees recently went unpaid for two months after the money\nfailed to come in, said Namini Wijedasa in 2016.   Perpetual\nhas a \u2018deal\u2019 portfolio that they flip to the EPF at multiples of the market\nprice, they have a separate strategic portfolio and  said a senior stock broking source.  Only when the stock market bubble burst did\nthey shift their attention to the bond market, said informants.\u201d <\/p>\n\n\n\n

 Perpetual Treasuries\u201d  is not highly regarded in  investment circles.  Some laughed when asked about Perpetual\u2019s\nbusiness practices,\u201d  reported Namini\nWijedasa  . An investor who studies\ntrends said I\u2019m not entirely convinced that they are smart investors who do\ntheir research well.\u201d Perpetual  holds on to certain portfolios and sells them\nwhen the market is down. Perpetual Capital made losses on Bairaha which it\nsold in stages. Perpetual could have earned substantially more on the stock\nexchange had he sold Perpetual\u2019s stakes in some companies when the respective\nshare prices were peaking. <\/p>\n\n\n\n

In 2011,\nPerpetual Capital acquired a large stake in Lanka Ashok Leyland held by an\ninvestor, Perera. This longstanding shareholder had bought 27.8 percent of the\ncompany over a period of time. But he was in debt to a private bank. Perpetual\narranged with the bank to repossess a section of  Perera\u2019s bloc. The bank force-sold around 12\npercent of  the stake to Perpetual at a\nmassive discount.\u201d The share was trading at Rs. 3000 when Perpetual lapped it\nup at Rs. 1000, causing shockwaves in the industry. The sale was carried out\nostensibly to settle  Perera\u2019s dues. But\nPerera  found that the bank had disposed\nof far more than necessary.  He was sad\nabout losing something he had collected for so many years,  said the informant.\u201d Days later,  Perera, \nbubbly, self-made man\u201d, died of a heart attack. He was in his early\n50s. <\/p>\n\n\n\n

Perpetual Capital\nand Perpetual Asset Management joined a tiny posse of companies, including\nCeylon Grain Elevators and Lanka Orix leasing, that were helping to pump up the\nvalue of certain shares and unload them on to the EPF.  Some shares were taken up to     500% to sell to EPF.  Then the price crashed back to the original\nlevel. <\/p>\n\n\n\n

Perpetual\nacquired shares of Grain Elevators for around 50-80 rupees each at the end of\n2010. On March 3-4 the following year, EPF bought five million of these shares\nfrom Perpetual at Rs 205. The price then fell dramatically to original levels,\nslaying everyone else that had put money into \nGrain Elevators,  after having\nobserved it rise (artificially) in value. Among\nthose affected in a similar manner were some friends of  Aloysius. After helping to inflate or pump\nup\u201d the prices, they lost millions when the share prices plummeted following\nhis sales. <\/p>\n\n\n\n

Perpetual Asset\nManagement employed a similar strategy to sell shares of LOLC to EPF and Bank\nof Ceylon. A study of historic stock market data, including daily price sheets\nand trading information, shows this. One stockbroker estimated that Perpetual\nmade Rs 700-800 million profit from each or about Rs 1.5 billion from both, Grain Elevators  and LOLC. <\/p>\n\n\n\n

Analysts\nhad  noted that EPF was investing in non\nblue chip companies in a questionable manner. There was an  \u2018inside ring\u2019 consisting of certain officials\nwithin the EPF and Central Bank, they said. <\/p>\n\n\n\n

Perpetual\nTreasuries Limited Chief Dealer told the Commission that Perpetual Treasuries\nLimited was bribing informants to get confidential information from the\nEmployees\u2019 Provident Fund and the Employees\u2019 Trust Fund and other institutes. PTL\nhas been paying for its informants continuously from its commencement as a\nPrimary Dealer in 2014. These informants were paid bribes in millions when\nformer Governor of the Central Bank Ajith Nivard Cabraal was in office as well.\nIn the period July 17, 2014 to December 31, 2014, the informants were paid by\nthe PTL more than Rs. 94 million. <\/p>\n\n\n\n

Public Debt\nDepartment has not been concerned about the track record of the full\nshareholder of the Perpetual Treasuries (Pvt) Limited when issuing Primary\nDealers\u2019s license to it. When a director\nof a Primary Dealer company is a close relative of a CBSL top ranking official,\nit creates a conflict of interest.  The\nCode of Conduct to the Primary Dealers, states that  in the wake of such a conflict of interest,\nthe Public Debt Department can withhold or cancel the license of a Primary\nDealer. <\/p>\n\n\n\n

Journalist\nNamini Wijedasa observed that just three days after the       2015 presidential election, someone\npredicted on an online website for stock market investors,  that the Bond scam would happen. The man\nwrote on Sri Lanka Equity Forum: Perpetual Treasuries owned by\nFree Lanka Capital Holdings owners will mostly get a large amount of business\nvolumes of Treasury Bills and Treasury Bonds business in new \u2018Yahapalana\nGovernment\u2019 of Maithripala-Ranil Regime since the  new Governor of Central Bank is tipped to be\nFree Lanka Capital\u2019s driving force Arjun Aloysius\u2019s father-in-law Arjuna\nMahendran who is also the top Economic Advisor of Ranil Wickremasinghe [sic]\nsince old times.\u201d <\/em><\/p>\n\n\n\n

He was proved\nright at the Central Bank bond auction of late February 2015.. The Government\nwas not two months old when Bond scam occurred. \nFor those of us who knew how Perpetual did business, it didn\u2019t come as\na total shock,\u201d said one investment management source. Perpetual\nTreasuries <\/em> were connected with pumping\nup stocks and dumping them at high prices on the Employees\u2019 Provident Fund,\nwhich appeared to be a willing participant in this scheme. What shook us was\nthat the new Government had  allowed\nwhat  happened at the bond auction. ( Continued)<\/p>\n","protected":false},"excerpt":{"rendered":"

KAMALIKA\u00a0 PIERIS The Bond scam saga is not over. It is still going on and looks as though it will go on forever. Those responsible, such as former Central Bank   Governor Arjuna Mahendran and his son in law Arjun Aloysius have not been arrested and the matter is still pending.  There is no sign of […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":true,"template":"","format":"standard","meta":{"footnotes":""},"categories":[104,106],"tags":[],"class_list":["post-86787","post","type-post","status-publish","format-standard","hentry","category-kamalika-pieris","category-106"],"_links":{"self":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/posts\/86787","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/comments?post=86787"}],"version-history":[{"count":0,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/posts\/86787\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/media?parent=86787"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/categories?post=86787"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/tags?post=86787"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}