13 April, 2024

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Auditors Could Have Prevented Alleged ‘Thico’/Thilini Scandal

By Amrit Muttukumaru

Amrit Muttukumaru

The unfolding multi-billion rupee scandal allegedly involving Thico Group Pvt. Ltd. and its founder Thilini Priyamali have the hallmarks of the rot contributing to systemic corruption in this country over the years. It is systemic corruption together with the dreadful mismanagement of national unity by successive administrations which are largely responsible for the economic woes and political instability in Sri Lanka.  This was given a turbo boost after the installation of the Executive Presidency in 1978. The mismanagement of national unity will not engage the attention of this article.

‘Thico Group Pvt. Ltd.’ is a “duly registered company” dealing in a “range of industries including construction, entertainment, gem and jewellery, real estate and trading”. It is headquartered on the “34th floor, World Trade Centre” in close proximity to the Central Bank of Sri Lanka (CBSL).

Since Thico Group itself claims it is a “duly registered company”, does it not imply that apart from other statutory requirements, the company has to engage qualified accountants and have its accounts audited by chartered accountants? 

Since Auditors/Chartered Accountants are the first and last line of defense against any form of financial corruption does it not mean that they could have nipped in the bud the alleged corruption in Thico Group? Why are everyone including the businessmen controlled mainstream media and well-heeled NGOs who scream from the rooftops about ‘good governance’ ignoring this truism? A simple question which would alert even a simpleton is how Thico Group could afford to have an office at the “34th floor, World Trade Centre”?

Bigwig Collusion?

What also needs to be unraveled is how as alleged by Shamindra Ferdinando in his otherwise (ignoring auditors) incisive article “Thico ’investments’, money laundering and related matters”  (‘The Island’ of 19 October 2022) “a woman, from an ordinary low income family, in Kalutara, with an education only up to eighth grade” could have pulled off a scam such as this? Does he not imply the involvement of influential politicians, businessmen, law enforcement officers and regulators? 

In the same vein Ferdinando refers to “prominent businessman Kamal Hassen” claiming to have been “swindled” by Thico Group questioning how “Thico Group proprietor obtained approval for her bodyguards to carry automatic weapons, in a high security zone”? 

He also reports Kamal Hassen’s allegation that he had “rejected the disgraceful proposal made by a lawyer, on behalf of the accused” to “drop the case” at the Fort Magistrate’s Court in exchange for “Rs 10 mn as the initial payment”.

What takes the cake is Ferdinando’s reference to a vocal former Provincial Governor who with his “associates” is said to have parked “over Rs 226 mn” in Thico Group allegedly having “questioned” at a TV interview “the right of the public to ask how they got so much money”! 

Is it any surprise the CID has “informed Colombo Fort Magistrate’s Court that several politicians and popular personalities who invested their money at Thilini Priyamali’s Company are reluctant to make complaints with police for various reasons.”? (‘Daily Mirror’ 20 October 2022) 

Money Laundering

Kudos to Shamindra Ferdinando for posing the question “whether Priyamali, and those who invested money through what was advertised as a well-diversified duly registered Thico Group of Companies, were involved in money laundering.”?

On the subject of money laundering, did not the Sirisena – Wickremesinghe Yahapalana government in which SJB leaders figured prominently and JVP supported, in effect facilitate money laundering when it repealed the Exchange Control Act No. 24 of 1953 and brought into law the new Foreign Exchange Act No. 12 of 2017?  The new law certified on 28 July 2017 became effective from 20 November 2017. SJB’s Eran Wickramaratne who is now very concerned about money laundering was State Minister of Finance from May 2017. These are the people including the JVP who are now promising a ‘system change’!

precursor to the dangerous Yahapalana inspired Foreign Exchange Act was the ‘invitation’ issued by then Finance Minister Ravi Karunanayake through India’s  ‘The Hindu’ of 5 October 2015 to “Sri Lankans and Indians who had to take back their deposits from banks in Switzerland to place their funds in Sri Lanka”.  He had further assured that “No questions would be asked”!

As if these were not bad enough, then CBSL Governor Dr. Indrajit Coomaraswamy (who Colombo elites consider could do no wrong) under whose tenure this dangerous Act became effective, had the audacity to cite this Act to justify CBSL inaction  to determine legitimacy of offshore accounts in tax havens held by Sri Lankans named in the ‘Panama Papers’:

“The time period prescribed by the Foreign Exchange Act No. 12 of 2017 to conclude investigations under ECA expired on 19.05.2018 as stipulated in the Foreign Exchange Act No 12 of 2017. These investigations also lapsed on that date.”

Corrupt CA Sri Lanka

I make bold to affirm that the apex body (CA Sri Lanka)  regulating the audit/chartered accountancy profession in Sri Lanka makes no small contribution to the systemic corruption in this country if it’s disgraceful handling of its investigation of my ‘complaint’ made as far back as 8 August 2005, of the  ‘Professional Misconduct’ by the local affiliates of Price Waterhouse Coopers (PwC) and Ernst & Young (EY) in relation to the scandalous privatisation of the Sri Lanka Insurance Corporation (SLIC) is anything to go by.

To date it has not concluded its investigation, has reneged on its undertakings given to me and kept me the complainant in the dark. The undertaking includes “to complete the investigation early and transparently.” (Ref. ICASL (CA Sri Lanka) e-mail of 13 March 2006).

Purported ‘Good Governance’ activists which include businessmen owned newspaper/TV  mainstream media and NGOs such as Transparency International Sri Lanka, Verité Research, Advocata Institute and others who talk the hind legs off a donkey on the evils of corruption and get paid for doing so, have steered clear of demanding accountability from Chartered Accountants faulted for egregious ‘professional misconduct ‘by the Supreme Court, Parliament’s  COPE, the Attorney-General and CA Sri Lanka ‘Ethics Committee’ itself vis-à-vis

the scandalous SLIC privatization. They fail to bite the bullet by ‘naming & shaming’ errant professionals and bigwigs in the corporate sector complicit in the corruption of politicians.

The ‘Supreme Court’ (SC FR 158/2007) in its landmark Judgment delivered on 4 June 2009, held the SLIC privatisation to be “illegal and invalid ab initio” and ordered the removal “forthwith” of the auditors, Ernst & Young. (emphasis mine)

The COPE Report to Parliament dated 12 January 2007 as recorded in the ‘Hansard’ inter alia states as follows: 

“Ernst & Young auditors and PwC Consultants were directly involved in the said fraudulent conduct. (emphasis mine)

Inaction by CA Sri Lanka on the ‘Professional Misconduct’ by PwC and EY in relation to the scandalous SLIC privatisation is probably the most glaring example of CA Sri Lanka corruption. 

Impunity & CA Sri Lanka

Impunity appears to be the standard feature in the manner CA Sri Lanka conducts its affairs. This includes:

1) The Senior Partner of EY at the time of the SLIC divestiture (Asite Talwatte) being appointed to the key decision making CA Sri Lanka ‘Council’ SUBSEQUENT to my ‘complaint’.

2) The Senior Partner of PwC at the time of the SLIC divestiture (Deva Rodrigo) being appointed by CA Sri Lanka SUBSEQUENT to my ‘complaint’ to its ‘Quality Assurance Board’ purportedly designed “to maintain and enhance the credibility and high standards of our profession.” (Ref. CA Sri Lanka Circular to members – 6 September 2010)

3) Sujeewa Mudalige SUBSEQUENT to my ‘complaint’ being allowed to be the President of CA Sri Lanka notwithstanding apart from being a Partner of PwC, he was a part of the Sri Lanka Team that comprised the PwC Indonesia Team that played a pivotal role in the fraudulent SLIC privatisation.

Incredibly, the “Chief Guest” at his induction was Dr. P.B. Jayasundara after he was faulted by Parliament’s COPE and the ‘Supreme Court’ in relation to the scandalous SLIC privatization.

4) Another member of CA Sri Lanka ‘Quality Assurance Board’ Ajith Ratnayake was Director- General, Sri Lanka Accounting & Auditing Standards Monitoring Board (SLAASMB) at the time it sent me its FARCICAL response at the conclusion of its purported ‘investigation’ of this same privatization – ref. e-mail dated 28 November 2005:

“Whilst we appreciate the contribution made by the complainants, we are not in a position to keep the complainant informed of the progress of the investigation and the outcome of the investigation, as it would undermine our policy on releasing information to the public.”!

Any guess as to who was Chairman of SLAASMB at this time? It was none other than W.A. Wijewardena, former CBSL Deputy Governor who every week waxes eloquent on the need for ‘Good Governance’!

Other Cases

(1) It was a Past President of CA Sri Lanka and the OPA (Lakshman Watawala) who was mainly responsible for the alleged “within 24 hours” BOI approval of ‘Mihin Lanka’ not withstanding his reported admission to then COPE member Ravi Karunanayake “under normal circumstances it would take six to eight weeks at least“! (‘The Sunday Leader’ 10 December 2006)

(2) At the time of the alleged wrongful purchase of TFC (The Finance Company PLC) shares by the NSB (National Savings Bank), the Chairman of TFC was Preethi Jayawardena and the CEO of NSB was Hennayake Bandara. Both of them are senior chartered accountants who were also former members of the CA Sri Lanka governing ‘Council’.

(3) The alleged financial profligacy at ‘Sri Lanka Cricket’ in the run-up to the 2011 Cricket World Cup which Sri Lanka co-hosted took place when the Treasurer of ‘Sri Lanka Cricket’ was senior chartered accountant (Sujeewa Rajapakse) who subsequently became President of CA Sri Lanka.

He is currently Chairman of People’s Bank. Does no one see the massive ‘conflict of interest’ in he being the Managing Partner of audit firm BDO Partners? 

(4) Could not chartered accountants/auditors have blown the whistle long before alleged frauds were ‘discovered’ in the failed finance companies? 

(5) Could the egregious Treasury Bond scams have taken place without the complicity of professionals which include chartered accountants in the hierarchy of the Central Bank and Bank of Ceylon? 

(6) What action if any has CA Sri Lanka taken on the alleged egregious professional misconduct of former CBSL Governor Ajith Nivard Cabraal who is a Past President of CA Sri Lanka?

(7) Why did not then PM Ranil Wickremesinghe identify Ernst & Young as the long standing auditors of SriLankan Airlines (up to at least 2014-15) when he stated at a news conference: “Most of Mihin Lanka’s losses had been hidden in the Sri Lankan Airlines balance sheet thereby inflating its debt burden to USD 3.2 billion” (ref: ‘The Island’ 27 April 2016)

Conclusion

Is there any collusion between the larger audit firms in this country (mainly PwC/EY/KPMG) which enable influential auditors from these firms soon after retirement to be ‘invited’ to sit on the director boards of leading PLC companies while ‘technically’ avoiding companies being audited by them? Should there not be a mandatory period (say 5 years) during which retired auditors cannot hold any office of fiduciary responsibility in ‘quoted’ companies? 

Unless Auditors/Chartered Accountants who are the first and last line of defense against any form of financial corruption are held accountable for any negligence, the country  ‘will not have a prayer’ to avoid financial corruption.  If the proponents of ‘good governance’ are unwilling to do this, they must forever ‘hold their peace’!

I urge CA Sri Lanka and any of those named to CREDIBLY REFUTE any of the above.

Is it not in the public interest for the businessmen controlled mainstream media to name (i) the auditors of ‘Thico Group Pvt. Ltd.’? (ii) the ‘investors’ in this company? 

It is highly unlikely this article will see the light of day in any of the mainstream media – including Shamindra Ferdinando’s ‘The Island’!

‘System Change’ my foot!

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Latest comments

  • 0
    0

    Auditors Could Have Prevented Alleged ‘Thico’/Thilini Scandal

    If no one Prevented Alleged, in future how the public can recognized the genuine or quality controlled of advertisement supposed by any other sources.
    Just because something is familiar,( advertised) it doesn’t mean it’s safe. And just because something feels safe, doesn’t mean it’s good for you.

  • 14
    0

    The writer asks: ” Could not the chartered accountants/auditors have blown the whistle long before alleged frauds were discovered in the failed Finance Companies”?

    How can they blow the whistle, when they are “PARTNERS” in crime? It is a long story to tell if one were to narrate the so-called “ADVICE” given to their clients in the final preparation of “Financial Statements” that are submitted to the Income Tax and other relevant authorities.

    Can anyone say what happened to the “FORENSIC AUDIT” reports that were finalized in relation to the “Bond Issue” by the Central Bank? What more to speak, when the State’s records don’t show the actual loans that have been taken by the Government?

    It will be an uphill task to disband these “Financial Crimes” and their accomplices such as the “Accountants/Auditors” who are formed into a “MAFIA”. The name of the “Game” is “COOK THE BOOKS” and the “Chefs” are all “Accredited Accountants/Auditors”. The writer has given enough evidence.

  • 13
    9

    Well said Amrit M.When it suits them Accountants and Auditors turn a blind eye.So does the Inland Revenue Another lot are the legal eagles

    The only Whistle Blower is Amrit M a brave man

    Is the silence of the Chartered Fraternity an acknowledgement of their involvement in all the frauds

    Talk show hosts should invite Amrit M to their shows

  • 2
    0

    The Colombo Diocese of the Church of Ceylon has a Bishopric Endowment Fund It provides for the transport needs of Bishops (including retired Bishops) archdeacons, area deans et al.

    A provision of the Constitution says capital expenses need confirmation of the Diocesan Council. Indeed, cars are capital expenses.

    But about two or three years ago the Standing Committee (appointed in part by the Council and the Bishop) without seeking confirmation of Council, allocated Rs 10 million for cars for each of the 4 archdeacons, Rs. 5 million each for cars for retired Bishops Kenneth Fernando and Duleep de Chickera. The smaller Area Dean’s were left out to go by motor bikes.

    Council was never asked for confirmation because when I ask them they say there is no justification when the recipients have few qualifications to justify the extravagant, show offish cars. The grand and illegal purchases were made. I call it theft by high ecclesiastical officials who supposedly govern us by the Constitution and should know it thoroughly.

    That may be history but when the auditor BFO who failed to flag this was reappointed yesterday 28th despite the lapse, only 2 of us opposed the appointment.

    I believe Council members will say yes to anything from the Bishop. They seem happy to be fleeced so long as it is by spiritually consecrated people.

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