Mahendran ‘threatened’

Published : 12:10 am  August 1, 2017 | No comments so far |  | 

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 me to appoint Saman Kumara: ex-epf chief

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By Shehan Chamika Silva  
Former EPF Superintendent A. Jayalath told the Commission of Inquiry that former Governor Arjun Mahendran had threatened him to appoint controversial dealer Saman Kumara for EPF Front Office operations in 2015. 

  • It was revealed that the witness had prepared a report identifying some suspicious activities that happened during the alleged transactions based on the information he collected at the middle office.  
  • According to the PCoI Commissioner, Justice Prasanna Jayawardena’s examination it was revealed that setting such voice recording system into the EPF costs only about 
    Rs. one million.
  • Few phone conversations that had been taken place between PABC, PTL, and EPF dealers in the course of secondary market transactions ,played 

Mr. Jayalath also confirmed that there were certain collusive activities visible during the secondary market transactions which happened between the EPF and Perpetual Treasuries, where Pan Asia Bank had acted as an intermediary in November 2015.
Currently working as an Assistant Governor at the Central Bank he had been the Superintendent of the EPF Department from April, 2015 to April 2016.  


Mr. Jayalath said several transfers took place with the EPF in 2015 and that when he was appointed Superintendent, two experienced officials, Paduman and Dilini, were transferred from the EPF in April 2015.  


Later in June, 2015, Saman Kumara was transferred into the EPF and the witness had appointed him to do Risk Management duties.  
The witness said he was concerned about the performance of Saman Kumara because the staff at EPF kept informing him about Saman Kumara’s questionable past and his involvement in several controversial deals when he was at the EPF before.  


However, on June 8, 2015, former Governor, Arjun Mahendran had phoned him and scolded him saying that he had sent a CFA qualified person to the EPF and to appoint him to the EPF Front Office. The witness said the former governor wanted Saman Kumara appointed to the Front Office by going against the wish of the witness.   


“The governor scolded me and I was given one week to appoint Saman to EPF Front Office. He sounded as he was threatening me then I asked him to give me one week to do so,” the witness said.  

 

During this time the witness said he was repeatedly asked to intensify secondary market transactions of the EPF by the former Governor and it resulted in having to send daily reports relating to its transactions to the Governor 

 

Subsequently, Saman Kumara was trading in equity matters at the Front Office.  


During this time the witness said he was repeatedly asked to intensify secondary market transactions of the EPF by the former Governor and it resulted in having to send daily reports relating to its transactions to the Governor, which was not a prevailing practice at the CB.   
However, in October, 2015 two officials who were handling matters relating to the Front Office Fund Management were also transferred.   
The witness said he kept asking for experienced and skilled persons to operate the division but the Governor was reluctant to send previously transferred people back to the EPF but asked him to use Saman Kumara instead.  The witness said he then appointed Saman Kumara as the head of the Front Office, and thereby he started handling deals relating to the Treasury Bonds.  


According to the witness it was also revealed that Saman Kumara was a constant visitor to the  former Governor’s office and their unusual relationship was evident in several instances. He said it was unethical for Saman Kumara to discuss EPF division’s decisions with the Governor.  It was revealed that questionable secondary market transactions between EPF and Perpetual Treasuries Ltd had been taken place in November, 2015, where PABC acted as an intermediary.  


However, in January, 2016 there was a rumor circulating in the market about the EPF’s secondary market transactions.  
The witness said an e-mail was circulating at that time and consequently he was asked to conduct an investigation about the matter by the Monetary Board and the then Governor.  


It was revealed that the witness had prepared a report identifying some suspicious activities that happened during the alleged transactions based on the information he collected at the middle office.   


He said the preliminary investigation was conducted in the absence of a voice recording system at the EPF and therefore he had mentioned in his report that he could not affirm allegations stated.  


However, the report was given in February 2016 to the then Governor but the witness had not received any feed back from the Governor afterwards. The existence of such a report came to light only in October 2016 during the inquiry conducted under the new Governor Indrajith Kumaraswami.  


The witness said he had informed the Governor about the necessity of having a voice recording system to scrutinize the dealers who had contact with counter-parties. However, setting up a voice recording system was never considered.  


According to the PCoI Commissioner, Justice Prasanna Jayawardena’s examination it was revealed that setting such voice recording system into the EPF costs only about Rs. one million.  


Subsequently, Deputy Solicitor General Milinda Gunathilake, who led the evidence, played few phone conversations that had been taken place between PABC, PTL, and EPF dealers in the course of secondary market transactions.  These voice recordings were obtained by the investigation from the voice recording system of the PABC.  


Having listened to the phone conversations, the witness, Mr Jayalath said that it was apparent that the prices and the rates had been prearranged when PTL and EPF have been transacting in the secondary market through PABC, because there were no negotiations visible in the conversations.  

 

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