Additional fund requirement for road projects was false

Published : 9:16 am  January 18, 2018 | No comments so far |  | 

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  • No decision was taken at the ‘breakfast meeting” held on 26 February 2015, to raise money for road projects 
  • Mahendran’s claim that it was necessary to accept Rs. 10 billion to meet additional Government fund requirements has been demonstrated to be false
  • Mahendran was the “inside man” 
  • PCoI report recommends criminal action against MP Ravi Karunanayake, fmr. CBSL Governor Arjuna Mahendran, PTL owner Arjun Aloysius, PTL CEO Kasun Palisena
  • Report says the Prime Minister would have been better advised, if he had independently verified what had happened at the CBSL on 27 February 2015, before making any statement
  • The ‘Pitipana Committee’, did not possess technical knowledge or practical knowledge in the considerably complex arena of Government Securities and Public Debt

 

We have held that, no decision was taken at the ‘Breakfast Meeting” held on 26 February 2015, to raise money for Road Projects at the Auction of Treasury Bonds held on 27 February 2015 and that, Mr. Mahendran’s claim made to the PDD and Tender Board that, it was necessary to accept Rs. 10 Billion to meet additional Government fund requirements, has been demonstrated to be false

 

bond commission report out

 

 

image_1516217120-6983a8910d By Shehan Chamika Silva and Hafeel Farisz   

The Presidential Commission of Inquiry (PCoI) report on the Treasury Bond scam released to the public yesterday held that the claim that there was a decision to raise money for road projects via treasury bond auctions on February 27, 2015 was false.   

n“We have held that, no decision was taken at the ‘breakfast meeting” held on  February 26, 2015, to raise money for road projects at the auction of Treasury Bonds held on February 27, 2015 and that, Mr. Mahendran’s claim made to the PDD and Tender Board that it was necessary to accept Rs. 10 billion to meet additional Government fund requirements, has been demonstrated to be false,” the report said.   


nThe report further held that the “inside man” of Perpetual Treasuries, was former Governor of the Central Bank- Arjun Mahendran.   


It hardly needs to be said here that, a Governor of the CBSL who divulges or provides inside information (or price sensitive information) to a primary dealer, and thereby enables the primary dealer to benefit from that “inside information” and obtain a very high value of Treasury Bonds at an auction, will be acting wrongfully, improperly, mala fide, fraudulently and in gross breach of his duties as Governor of the CBSL” the report states.   


The report at length discusses the conduct of Mahendran at various events weighing the evidence and concluding that he was acting in collusion with Perpetual Treasuries.“We further hold that Mr. Mahendran committed the aforesaid wrongful, improper, mala fide and fraudulent acts which were in gross breach of his duties as Governor of the CBSL with the knowledge of and acting in collusion with Perpetual Treasuries Ltd,” the report said.   


nThe report, published in the Presidential Secretariat website, also recommended that the Bribery Commission and the Attorney General should consider criminal action against Perpetual Treasuries Ltd owner Arjun Aloysius and former minister Ravi Karunanayake on matters connected to the lease of an apartment for giving ‘false evidence’ before the Commission.   


Detailing the “Penthouse” payment by a company directly connected to Perpetual Treasuries Ltd., the report draws a connection between Karunanayake and Perpetual Treasuries Limited and his actions in his capacity as Ministry of Finance. The title of the said chapter is thus: “PERPETUAL TREASURIES LTD AND HON. RAVI KARUNANAYAKE, MP – THE APARTMENT AND THE MEETINGS AT MINISTRY OF FINANCE IN MARCH 2016”.   


Weighing the evidence before the Commission, the report points out the details of the financial transactions between the companies in question and the Karunanayake family, “We find it difficult to believe that, Hon. Ravi Karunanayake, MP was, in fact, unaware that, the Apartment in which he had his family moved into in February 2016, had been leased by Walt and Row Associates (Pvt) Ltd and that, Walt and Row Associates (Pvt) Ltd had paid the lease rental to the owner of the apartment”   


Thereafter in the paragraphs preceding the evidence regarding the apartment, the report dwells into the meetings and directions given by Karunanayake in his capacity as Minister of Finance.   
n“However, we have concluded earlier that, there is no evidence before us which suggests that, Ravi Karunanayake, MP or the Ministry of Finance advised the CBSL that the aforesaid instruction had been given to the three State banks. We have held that, any such omission on the part of Ravi Karunanayake, MP or the Ministry of Finance to inform the CBSL is likely to have given Perpetual Treasuries Ltd an advantage at the Treasury Bond auction held on March 29, 2016. We note that, these meetings were held at the Ministry of Finance and MP Ravi Karunanayake gave these instructions soon after he moved into the Apartment for which Walt and Row Associates (Pvt) Ltd paid the lease rental” the report said.   


image_1516217120-6983a8910dDetailing all facets of evidence placed before the Commission, the Report divides each bond transaction and the evidence underpinning it, after which the following conclusions were reached, “We have determined that, the Government of Sri Lanka suffered an avoidable loss of Rs. 688,762,100/- as a direct result of Mr. Mahendran’s intervention in the Treasury Bond Auction held on February 2015 and the instructions he gave to both the PDD and the Tender Board that bids to the value of Rs. 10.058 billion must be accepted at the auction and we have determined that Mr. Mahendran is liable and responsible for this loss. Accordingly, we recommend that, appropriate proceedings are instituted against Mr. Mahendran to recover this loss.,” the report said.   


The report further holds that former Deputy Governor of the Central Bank, Tender Board Chairman and consultant to the Finance Ministry P. Samarasiri “ was grossly negligent, and was in grave breach of duty” and that his “actions negated the purpose for which the Tender Board was created. The report holds that both Samarasiri and Mahendran acted mala-fide and deliberately to mislead the Prime Minister.   


n“While we do not, for even a moment, presume to make any pronouncement on events that transpired in Parliament, we consider that, Hon. Prime Minister would have been better advised, if he had independently verified what had happened at the CBSL on 27 February 2015, before making any statement, placing reliance on what was held out to him by Mr. Mahendran and Deputy Governor Samarasiri,” the report said.   


n“We are of the view that, the three person “Pitipana Committee,” (Comprising of three senior and reputed Attorneys-at-Law) which was appointed by the Hon. Prime Minister to inquire into and report on this Auction, did not possess technical knowledge or practical knowledge in the considerably complex arena of Government Securities and Public Debt although, we see that, the Hon. Prime Minister has sought to supplement that lack of expertise by ensuring that, the members of the “Pitipana Committee” had the assistance of Dr. W.A. Wijewardena ( Former Deputy Governor of the CBSL) with regard to the technical aspects of the matter being inquired into, we consider that, a more effective Inquiry could have been done if the Pitipana Committee” also had members who had knowledge and experience in the technical and practical aspects of the matter being inquired into,” the report said.   


nThe report said that action must be instituted against Perpetual Treasuries Ltd. “ we recommend that, appropriate proceedings are also instituted against Perpetual Treasuries Ltd to recover Rs. 688,762,100/-. In this connection, we consider that, the provisions of Section 21D (5) of the Registered Stocks and Securities Ordinance are likely to be relevant” it said.   


The Report further said that the Bond Auctions during the entire period in which Perpetual Treasuries and thereby Arjun Aloysius and Geoff Aloysius made exorbitant profits had caused grave loss to the country and called on parliament to make new laws to recover the monies defrauded.  “We would also think that, in view of the extreme gravity of the facts and circumstances which formed the subject matter of our mandate and the very substantial prejudice caused by these facts and circumstances to our economy and our nation, parliament may wish to carefully consider whether it is appropriate and necessary to take steps to recover the aforesaid monies by exercising its legislative powers.   


Following are excerpts of the report-:


LATE-CITY--DM-1-4nFurther, we recommend that, the Attorney General and other appropriate authorities consider whether Mr. Arjun Aloysius and Mr. Kasun Palisena are parties to and directly responsible for the commission of an offence under section 56A(1) of the Registered Stock and Securities Ordinance and, if so, proceed against these two persons too, in terms of Section 56B of the Registered Stock and Securities Ordinance;   


We further recommend that, in view of the determinations referred to above, the Commission to Investigate Allegations of Bribery or Corruption and the other appropriate authorities consider whether the aforesaid acts of Mr. Mahendran amount to acts of “Corruption” as defined in Section 70 of the Bribery Act and, if so, prosecute Mr. Mahendran under the Bribery Act and other applicable law.   
We have also stated that, given the complexity of the task and the expertise needed, a Forensic Audit or similar process should be carried out to accurately estimate the quantum of the sum which Perpetual Treasuries Ltd gained and benefitted from the “inside information” [price sensitive information”] at the Treasury Bond Auction on March 29, 2016.   


nWe recommend that, the Hon. Attorney General and other appropriate authorities examine whether prosecutions should be instituted, under the Penal Code or other relevant provision of the Law, against Mr. Mahendran, Mr. Arjun Aloysius, Mr. Palisena and relevant officers of the CBSL and the EPF on the basis of the facts and circumstances established by the evidence placed before this Commission of Inquiry.   


nWe recommend that, the Commission to Investigate Allegations of Bribery or Corruption should consider whether Ravi Karunanayake, MP, while he was Minister of Finance, derived a benefit from the lease payments made by Walt and Row Associates (Pvt) Ltd, which is an Associate Company of Perpetual Treasuries Ltd and is owned and controlled by the same persons who own and control Perpetual Treasuries Ltd, for the lease of apartment occupied by Ravi Karunanayake, MP and his family and if so, determine whether appropriate action should be taken against Ravi Karunanayake, MP, under the Bribery Act.   


We also recommend that the Attorney General and other appropriate authorities consider whether some of the evidence given by Ravi Karunanayake, MP, before us is shown to have been incorrect and, if that is the case, whether he should be prosecuted under Section 179 and/or Section 188 of the Penal Code or other relevant provisions of the Law, read with Section 9 of the Commissions of Inquiry Act No. l7of 1948.   

 

  • The Govt. suffered an avoidable loss of Rs. 688,762,100/- as a direct result of Mr. Mahendran’s intervention in the Treasury Bond auction and the instructions he gave
  • “We are of the view that, the three person “Pitipana Committee,” did not possess technical knowledge or practical knowledge in the considerably complex arena of Government Securities and Public Debt


We recommend that pending the consideration of institution of the aforesaid proceedings, the Assets of Perpetual Treasuries Ltd and its beneficial owners, namely Mr. Arjun Aloysius and Mr. Geoffrey Aloysius – and the persons who had day-to-day control of Perpetual Treasuries Ltd – namely Mr. Arjun Aloysius and Mr. Kasun Palisena – including all monies lying to the credit of Perpetual Treasuries Ltd including accounts with the CBSL and other banks, shares in National Development Bank PLC and the dividends aggregating to Rs. 641,556 million paid by Perpetual Treasuries Ltd to its beneficial owners, be held or placed ‘under lien”, so that such Assets cannot be disposed of in the meantime.   


nWe also recommend that consideration be given to recovering the costs of this Commission of Inquiry, from Perpetual Treasuries Ltd.   


n“While we have recommended that, consideration be given to instituting appropriate proceedings in court for the recovery of the aforesaid monies from Mr. Mahendran, Perpetual Treasuries Ltd and its beneficial owners – namely, Mr. Arjun Aloysius, Mr. Geoffrey Aloysius and Mr. Kasun Palisena [in the manner and for the sums referred to earlier], we would also think that, in view of the extreme gravity of the facts and circumstances which formed the subject matter of our mandate and the very substantial prejudice caused by these facts and circumstances to our economy and our nation, Parliament may wish to carefully consider whether it is appropriate and necessary to take steps to recover the aforesaid monies, by exercising its legislative powers”.      

 


 

Bond report published online

The report of the Presidential Commission of Inquiry into bond issuance has been published online on the President’s official website.

The English version of the report could be accessed on www.presidentsoffice.gov.lk

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