20 February, 2020

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Awoth Atha Thamai: Cabraal Is No Excuse For Mahendran

By Laksiri Fernando

Dr. Laksiri Fernando

Dr. Laksiri Fernando

“I promised that the consultative committee of my Ministry would be summoned to discuss the contents of this report. As far as this report is concerned the committee said there was no loss to the Treasury. This report has also criticised the shady transactions that took place from 2012-2015. It is there on the third page of this report. This report is not only about Arjuna Mahendran but also about the pervious Governor. Why not bring Ajith Nivard Cabraal to COPE to ask him how he approved borrowing without a tender committee? Are you protecting him?”

The above is what, unfortunately, Ranil Wickremesinghe has said about the “Report of the Bond Issues of the Central Bank 2015” in Parliament, the day before. I quote from the Daily FT, 22 May 2015. It is ‘unfortunate,’ because when people actively supported the ousting of the former President, Mahinda Rajapaksa, and appointing of Wickremesinghe as the Prime Minister, the hope was for a clean and transparent government or Yahapalanaya. Many people still believe it should be the case, and any return of Rajapaksas would be a disaster and a reversal of the difficult victory gained on the 8th January.

There is no question that Vasudeva Nanayakkara was provocative and blatantly abusive in his interactions with the PM, but even that is not a reason to deny the responsibility on the part of the Government or the PM on the bond issue. It is not merely a question of discussing the contents of the report in Parliament, but acting upon what has transpired through the Report although it has not accused the Central Bank Governor directly for the bond fiasco. It was beyond the mandate of the appointed Committee.

Arguments

It is also not correct for the PM to say that “the committee said there was no loss to the Treasury.” To asses the loss or gain was not within the Terms of Reference (TOR) of the Committee and in fact the members were not at all competent to do so. Corruption is not merely a matter of loss or gain, but about social ethics and rule of law of the country. It is true that the report has also criticized the shady transactions that took place from 2012 to 2014, which Wickremesinghe has ironically stated as ‘from 2012-2015,’ which particularly includes the recent bond fiasco.

Ranil 12 05 2015The PM has said “This report is not only about Arjuna Mahendran but also about the pervious Governor.” While it is partly true, he should have remembered that the main thrust of the Committee appointed by him were to investigate into (1) the reasons for the recent issue of bonds, initially declared as Rs. 1 billion and (2) the sequence of events with respect to each Primary Dealer in respect of the final allocation. It is to contrast the bids and allocations of the bonds, at the last instance, that the previous auctions and private placements were asked to be reviewed from 2012.

Wickremesinhe has asked from the opposition that “Why not bring Ajith Nivard Cabraal to COPE to ask him how he approved borrowing without a tender committee?” In fact this should have been done primarily when Cabraal was the Central Bank Governor. That time Wickremesignhe was the Leader of the Opposition. Now Cabraal is out, the best option is to bring him before the Financial Crimes Investigation Division (FCID), or the Bribery Commission, which is in fact happening. The ball now is in the Wickremasinghe court to do the right thing in respect of the recent ‘bond fiasco.’ I am naming it as a ‘fiasco’ even based on the report of the Committee that Wickremesinghe has appointed.

The behavior of Wickremesinghe was not acceptable in Parliament on that issue. We know about Vasudeva now as an outright Rajapaksa stooge. He is an invalid coin in politics or left politics. But Wickremesinghe is the PM of the much needed good governance order. He should not behave like old parliamentarians, just defending one’s own side and engaging in sarcastic polemics just to please the gallery. He doesn’t seem to be very serious in his responsibilities. I haven’t seen these type of behavior from a PM or a Leader of the Opposition in Australia. They are frank and even bipartisan in many national issues let alone corruption or mismanagement. That is what you expect from good governance.

Committee Report

Of course there are limitations in the Committee Report on Bond Issues. Those have emerged primarily from the mandate and the type of people appointed into it. Yet, the report transpires many irregularities for which the Governor and also the Prime Minister, as the Minister of Policy Planning and Economic Affairs, are responsible.
The story or the sequence of events goes like the following.

It is customary for the Central Bank (CBSL) to assess the government’s loan or debt requirements prior to their need. Sri Lanka like many other countries is in a situation where many of the activities are conducted on borrowed money. Therefore, this was estimated for the period beginning March in early February and the debt requirement was estimated approximately as 13.5 billion. By this time Arjuna Mahhendran was the Governor. It was determined that the entire funding should be through Treasury Bonds and it was not necessarily a bad policy. The Monetary Board (Chaired by the Governor) decided for 30 year bonds and this time to have Auctions during the same week. The decision was taken on 23 February. Even before the meeting, instructions were given to discourage Direct Placements which was the case before. This is a new policy which is not discussed here.

It has been customary for the CBSL to announce the value of the bonds very much less than the actual requirement. The argument is, if the market (the bidders) know the actual requirement, then they will competitively go for higher interest rates and that is what exactly has happened. This leaves doubts about whether this information was leaked to some bidders! It is possible that some knew the information vaguely, and some others quite precisely. It appears that even some knew that higher interest rates even up to 12.5 would be accepted although the prevailing rate was 9.5. “When the Governor was interviewed by the Committee he explained that the restart of auctions was important” (Report, p.4). The question is who benefitted?

It is also interesting to note the Governor’s answer, when asked, whether there was a direct link or dealing. “When he was asked if he acted in a manner, which favored any particular Primary Dealer, his answer was that he did not do so and that his concern was to raise money for the Government and not to see who is funding it.” (p. 5 and my emphasis).

Awoth Atha Thamai!

The figures given by the Report are very clear on the matter (without much analysis) on who benefitted from the new policy of enhanced ‘market mechanism’ through auctions. All together there had been 16 Primary Dealers bidding for supposedly 1 billion of bonds. The controversial Perpetual Treasuries stand in contrast and some of the other ordinary dealers were Acuity Securities, First Capital, Entrust Securities, EPF, Peoples’ Bank etc. All the other bids put together stand at 4.9 billion except one (exceeding the declared amount marginally) and that was Seylan Bank bidding for 1.2 billion. The average bidding of all of them together was just 326 million.

In contrast, Perpetual Securities made 5 direct bids amounting to 2 billion, and 3 major indirect bids through the Bank of Ceylon amounting to 13 billion. All together they have bid for 15 billion more than triple the amount of all other bidders for seeking some luck! It is interesting note what has transpired between the two obvious culprits, the Chief Dealer of the Bank of Ceylon and CEO of the Perpetual Treasuries as recorded in the Report.

“The Chief Dealer of the BOC also stated that he inquired from the CEO of Perpetual Treasuries as to the reasons of high amount of yield net tax and the reply he received from the CEO of Perpetual Treasuries was ‘Awoth Atha Thamai.”

Ranil’s three member lawyers’ Committee says, ‘the rough meaning of this Awoth Atha is: “a colossal profit, if successful”!

How did the bids become accepted? The Central Bank has decided to accept up to 10 billion of bids from the Primary Dealers, ‘of course given the funding requirements of the Government,’ however 10 times over what was advertised on the same day of 27 February. This is unprecedented.

How does it constitute?

According to the Table given in the Report, the bids amounting to 3.8 billion are from all other 15 dealers. In contrast, the Perpetual Treasuries won the day or the proverbial Atha, having accepted 5.2 billion of their bids.

LF

Over to the Prime Minister

It is strange that the Report (that I have seen, Colombo Telegraph) does not give a date even with the signatures of the Committee members. I assume that it was out early this month. It is true that the Synopsis to the Report states the following in respect of the Governor of the Central Bank. However it is within brackets as follows.

(In terms of the above there is no evidence at this stage to the effect that the Governor of the CBSL had direct participation with regard to the activities of the PDD and the Tender Board Committee as aforesaid other than to issue central directives based on the decisions of the Monetary Board and the Operational Manual of the PDD). (My emphasis).

We need to note: “no evidence at this stage” about “direct participation.”

It is also important to note what the Governor had to say on this matter, as reported by the Sunday Times (8 March 2015). “Mr. Mahendran said there were other dealers who had also offered bids in excess of Rs. 1 billion adding that the regulator in the past too had accepted bids over and above the requested amount.

However, as I have noted before, there was only one dealer bidding 1.2 billion, slightly over the amount, and it was Seylan Bank. In addition, “ Referring to the allegations against his son-in-law, an issue that also delayed his appointment last month, the Governor said Arjun Aloysius resigned from the family firm and was no longer involved.” Then the Sunday Times further reported the following.

“However when pressed that these issues would continue to nag the Governor in future money market transactions, Mr. Mahendran pondered in his response: “Well … I don’t know. My son-in-law resigned from the firm when the issues arose during the time my appointment was being formalised. I don’t know … maybe I should ask them (the company) to close or not operate in the market.”

This is a clear acceptance of at least a ‘conflict of interest’ or its perception, if not an ‘insider trading,’ I must note to the credit of Arjuna Mahendran. What is strange is the inaction on the part of the Prime Minister, whatever the reason. Whatever the weaknesses of the Committee, on the other hand, they have made a clear recommendation to follow up by the Prime Minister as follows under Recommendations. I am breaking the main recommendation into three parts for clarification.

  1. “The Committee at this stage can only make an observation that the bidding pattern of Perpetual Treasuries and securing 50% of the accepted bid as unusual.”
  2. “Given the limited scope of the TOR this Committee is not empowered to make any assumption with regard to the aforesaid.”
  3. “However, in the interest of the public since the said transaction involves public funds and fiscal regulations of the Government, the Committee observes that a full-scale investigation by a proper Government Authority is warranted.” (My emphasis).

Over to Mr. Prime Minister, Sir!


*Laksiri Fernando is former Senior Professor in Political Science and Public Policy (University of Colombo), with a strong economics background, and also was a Director of the Colombo Stock Exchange (CSE) who resigned in 2011.

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Latest comments

  • 1
    0

    This comment was removed by a moderator because it didn’t abide by our Comment policy.For more detail see our Comment policy https://www.colombotelegraph.com/index.php/comments-policy-2/

    • 2
      2

      President Sirisena MUST use his executive power and remove Mahendran from the post of CB Governor.
      Both Caraal and Mahndran must be investigated and their assets frozen at this time.

  • 10
    2

    RW,if you lose the coming elections,this will be the main reason.Thus is not fair to the country,people and even to you.You are the PM cos of luck and you shouldn’t abuse it please.

  • 7
    1

    Sir,

    Thank you for your analysis on the Bond ” fiasco ” !

    It was refreshing to read your analysis. Most others who have written about same have – no clue to what they have been shouting about – whether it be in Parliament and/or on forums. I am surprised that Colombo Telegraph entertained those sheets (pun intended) of misinformation.

    Sri Lankans have now become accustomed to Politicians of every ilk shooting their mouths to justify or protect their greater motives – of which the PM too stands guilty, in this instance.

    While no person should be held indispensable for the sake of ” GOOD GOVERNANCE”, it seems like the current Governor of the Central Bank has the ability and the wherewithal, internationally, to get things done – favourable to Sri Lanka. Hence, the blind support.

    The Governor’s credentials, contacts and expertise in matters over and above fiduciary duty should be considered for the rapid progress on ” GOOD GOVERNANCE”.

    While it seems highly unlikely that the Governor himself, aided and abetted Perpetual Treasuries into this transaction – it speaks very poorly of the people at Perpetual Treasuries for having taken advantage. The SRI LANKAN mindset needs to be addressed by the powers-that-be.

    • 11
      2

      Nivard Cabala’s sister is a Director at Perpetual.

      She must be equally corrupt just like her brother. Cabala’s cronies would have given her insider information for a sum.

      It will take more than 10 years to clean up the public sector !

      • 1
        2

        Thank God that Mahendran has made such a great start…eh

    • 1
      2

      “it seems like the current Governor of the Central Bank has the ability and the wherewithal, internationally, to get things done – favourable to Sri Lanka. Hence, the blind support. The Governor’s credentials, contacts and expertise in matters over and above fiduciary duty should be considered for the rapid progress on ” GOOD GOVERNANCE”. “

      What a load of Bullshit!

  • 3
    5

    When Dr Lucksiri continues to go after Mr Clean who is the undisputed leader of the Elite, and the Anglicans, it is serious.

    Ranil says LKR 5000 Million his mate gave the SIL is peanuts,

    Because Cabral gave LKR 2.7 Trillion to his mates.

    It was just in two years 2012 /2014

    Ranil only just find out this… How cool.

    For my Dalit mates if any here, I Tril is 1000 Bil.

    So Ranil got a point ,Mahendran’s 5000 Million is less than 2%.. Right..

    Just imagine the scope for scooping for the Perpetual Rip Off Associates of the SIL if Mahendran keep signing Bond Contracts along side our new LKR 5000 Bank Notes going forward.

    Now the main issue is Ranil getting upset when old Vasu our Velalala Viggy’s BIL.called him Pakaya.

    I mean that doesn’t sound that bad , when Dr Lucksiri’s new fellow citizens use that term often, even while talking to their mates.

    Like , Asshole, Shit Merde.. Poofter and so on . And our Hindian mates call Pakaya for uncooked Vegetable salads…. Right,

    In return Ranil called Vasu a dried Pumkin…I mean that is inappropriate ,

    Because it is not the appropriate term

    Ranil should have called Vasu a Dried Prune or Dried Vatakolu so our dalits can understand.

    But my Elders tell me Ranil is not into Vatakolu and Dried Prunes are more up his alley.

    • 4
      3

      Vasu a fire brand from the past who is a more senior and cleaner politician than Ranil is justified in breathing fire at Ranil for the despicable manner in which he is covering up for Mahendran that is obvious. It’s pathetic to see the PM of the country trying to protect his appointee after a big fraud. Best thing is Mahendra must resign immediately.

    • 2
      2

      “Kehutu Vambotta” would have been the most appropriate for Vesideva – because he is past her prime and juicy days are long gone.

  • 6
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    Simple clear analysis.

    From the onset the purpose of the committee was to whitewash, Mahendran. If not why appoint 3 UNP lawyers as the members ? Unfortunately for the PM the issue is not going away….

    Also, while we focus on the dictatorial tendency and the decline of democracy under MR, we must remember the role played (or not played) by the opposition by NOT being a good counter balance to the govt.. The current PM did nothing as the nation slid down the precipice over the past 10 years….

  • 0
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    Nivard Cabraal has [Edited out]

  • 7
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    Facts: The son in law dumps 10 billion apparently without rhyme or reason. An associate admits a windfall was anticipated. The father in law says he did not give confidential information to the son in law.

    If a civil suit (not criminal proceedings, where a higher standard of proof is required) is filed jointly against the f-in-law and s-in-l on charges of insider trading, claiming damages caused to the reputation of the Central Bank, on the basis of the rules of evidence relating to presumption, judgment will be awarded against the defendants.

    Any bets?

  • 5
    1

    This statement by the PM is like: “Yanne Koheda, Malle Pol”. The immediate question to be addressed is that of the “Bond Issue” during the tenure of the present CB Chairman who is overall responsible for all the functional aspects of the bank. Instead of meeting that issue, PM is making an attempt to “cover” or “side track” it by bringing in the “Bond Issues” during the period 2012 to 2014. If the PM has collected all that information of such “fraudulent” deals during that period, there is already a mechanism under his purview to investigate and take appropriate action against those responsible. Let that arm of the law handle it.

    Why can’t PM come clean of this “Bond Issue” under the present CB Chairman and try to put the entire blame on a “Tender Committee”? Has he forgotten who the “Head” of the Central Bank is? Mr. PM, please don’t try to dodge this issue. In the first place, you were very wrong in appointing this person to this position without making a back ground check, especially to his relationship to a “Big Time” dealer in the Bond Market. It is said that the CB Chairman occupies one half of the same house of his son-in-law, who is the dealer in question. On the other hand, he is a “National” of another country that will not permit dual citizenship. He can be highly qualified and very intimately connected to you; but those are not the “National Criteria” to be followed in making appointments to this type of high profiled positions. Why can’t even this person, in the midst of such outcry, with honour step down and say “Goodbye”. That is what an honourable and an “educated” person would do. If he resigns, he is also helping the PM to get out of this mess. So far, it is quite clear that this PM has miserably failed to “select” people to manage our public enterprises. A good example is the appointments he made to manage the affairs of Sri Lankan Air. It is no secret that he heavily relies on his “friends” who happens to be “class or school mates” and such types of “henchmen”. Mr. PM you have NOT met the “expectations” of the people and FAILED to measure up to be the “FUTURE LEADER” of the country. That you have proved within a matter of 100 days. The “BUZZ WORD” among the “Young Voter” is: “RANIL – FORGET”. Please therefore, begin to feel the PULSE of the people, than to fight for SURVIVAL.

  • 0
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    Sir,

    I suggest that the statement in your article stating:

    “The average bidding of all of them together was just 326 million.”

    be understood by people before they comment.

  • 4
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    For the ill-informed and the un-informed, here are the facts.

    1. The govt. of SL needed money very badly to settle debts pending from pre-Jan8th.
    2. The bond issue was meant to cover the immediate needs, which was estimated to be about 1.5Billion.
    3. The auction was opened with those facts.

    Suddenly, a genius at the Finance Ministry and the another in the PM’s office figured they should try to raise as much as possible because there were other major payments coming due shortly.

    In true Sri Lankan style (Yahapalanaya, bullshit notwithstanding) they looked to get 10Billion in one go.

    Mahendran can deny all he wants. Aloysius can swear as much as he wants. And Ranil can pretend all he wants. There is’nt 10 Billion floating around even in Medamulana. So, Aloysius calls his catcher’s at BOC and they put the funds together for him. I would like to know how the other incompetants who also bid at this auction never got wind of this change in requirements( unofficially)? No one has ever complained that they lost out on a golden opportunity. Should’nt that raise a few eyebrows; why the losers never made even a hum?

    The key is about who knew what, and told whom when. Nothing else. In that, there is no corruption but sleaze and unethical business practices. Ranil must learn to call a spade a spade. That he cannot do, because he is a Royalist. Ever heard a Royalist criticize another Royalist?

    The fundamental issue is why the auction limits were not changed to allow the other traders to also bid. It is not like Aloysius had a couple of Billions somewhere. He borrowed the money to begin with. Why did BOC not bid to begin with?

    Mahendran followed instructions of his political masters. Aloysius did what any unscruplous businessman would do( He is not alone. There is absolutely no crime in what he did) Mahendran asking his son-in-law to resign only muddied the waters more because it clearly showed that he(Mahendran) knew the stink was becoming overwhelming.

    And, Ranil is now trying to pretend nothing wrong happened. No sir! It is you who did wrong and you are trying to point fingers elsewhere thinking we are all idiots. We voted for you, but we are NOT IDIOTS. Ranil’s definition of corruption is related to him not making any money. NO ONE CAN FAULT HIM FOR THAT. Unfortunately for him, that is not enough anymore because he is PM, not Leader of the Opposition.

    We know when some things are done right. We also know when things are not done right. We are not POLITICIANS. Therefore, we do not have to pretend like you have to. Case closed!

  • 0
    6

    RW and UNP will sweep the polls. So all this smsll talk with clownish Vasu are of no use. Mahinda and the horapakses plundered SL. His BiL of Sri Lankan airlines is now blaming MR. MR used to say “Mey yaka magey nama wikunam kanawa” but he kept that failed planter corpse looking brother in law as chairman for a reason. His spouse knew about his virility and his sexcapades. He used to love going to Kandy for that reason. He loves women and to have good sex with young pussy. He’s insatiable. So to keep his rather boring Shiranthi silent and sons happy he let the corpse chairman run wild and let his sons run amok.

  • 1
    0

    The best option to PM is apologizing to the parliament and to the public with out any further embarrassment and get ready for the election. Then people respect him and vote for the UNP

  • 0
    0

    This is a very unfortunate situation in the yahapalanaya government. As Dharma & Das quite rightly says Ranil will have to take full responsibility if the UNP loses the general elections.They will only win by default in case the SLFP splits with pro Mahinda & Sirisena factions.

    The downfall of the UNP has always been Ranil’s Arrogance & stubbornness.He never listens to anyone.His Mr clean tag has been tarnished by trying to shield AM. Of course he is responsible in getting AM to quit his lucrative job to take up the post of CBG. But then loyalty at what cost? This is no different to MR regime & Ranil has no moral ground to call MR & his cronies crooks now. He is doing the same. One cannot justify by saying Nivard flouted the procedures for larger sums to justify Arjuna’s actions. Two wrongs dont make a right.

    As the leader of the UNP he doesnt have a mandate to justify an irregularity & take the whole party down the drain & even the possibility of losing an election just because he wants to defend his appointee. He can always give him another posting elsewhere after the elections. This attitude of his needs to change. Even Vasu fiasco he didnt conduct himself to the decorum of a Prime Minister. Later calling him a rotten pumpkin he stooped down to the same level.He perhaps thinks his mockery statements on stage go down well to me he is demeaning his position as PM.They are talking about “Sahana” . Most of it has not gone to the people. Only 2 items Fuel & Milk Powder. The rest No impact. 3 Wheelers didnt reduce rates either.

    All this hype about the various frauds & threat to close the airport created so much of expectations. Nothing much has happened except to catch some culprits for much smaller offences.Rural people nw tend to believe that all these were election gundus. The govt has done nothing to educate the public why the delays are except a few who have appeared on Television talk shows.

    The sad part is that what was achieved on January 8th may well be a thing of the past if he doesnt realize his follies & apologize get AM out even at this late stage. If not we will allbe doomed with the Rajapakse’s again.

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