23 October, 2021

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Bond Scam: Simple Unstudious Advise Cost Us Heavily!

By Hema Senanayake

Hema Senanayake

Hema Senanayake

Ranil Wickeramesinghe’s unstudious instruction did cost Arjuna Mahendran his career, cost the government to bear losses exceeding Rs.1.6 billion and it cost the UNP its integrity. In regard to the sale of government bonds, Prime Minister Ranil Wickremesinghe told the parliament that, “I insisted on a public auction because private placements have led to corruption and lack of transparency” (March 17, 2015). But Sunil Handunnetthi, the Chairman of the COPE says that there is no such thing call “public auction” in regard to the sale of bonds by the Central Bank.

It is true that there are auctions but they are not public auctions. You and I cannot buy government bonds from the auction held by the Central Bank. It is because auctions are held among the 16 Primary Dealers registered at the Central Bank. Private placements too are done among the same Primary Dealers. Whether it is auction or private placement the bidders are the same Primary Dealers. In auctions and in private placements the necessary transparency is established. Hence the lack of transparency is not a problem in the issuance of bonds. However, this is a system where corruption could exist while having transparency if the top officials are corrupt. Hence, rather than the lack of transparency or corruption, there is one important rule that applies in the issuance of bonds. It is this rule that Arjuna Mahendran had violated taking Prime Minister’s unstudious advise seriously.arjuna-mahendran

Arjuna Mahendran [Photo via his Facebook]

Sunil Handunneththi explained that rule nicely. The first rule in administering the government debt is to have the least cost to the government. It is a commonsense rule but that should be used with an understanding of the future behavior of yield curve. Accordingly the Domestic Debt Management Committee (DDMC) of the Central Bank decided that only 2.6 billion should be accepted from the auction held on that fateful day of February 27, 2015 in order to have the least cost to the government. The balance requirement of money should be borrowed subsequently from a private placement. The balance cash requirement could have been raised from a subsequent private placement immediately with decimal point change of the average yield (interest) rate. DDMC’s decision has duly been conveyed to the Tender Board. It was not heeded. Sunil Handunneththi now explains that the DDMC’s decision has set the basis for the calculation of loss by the Auditor General. It is very logical and excellent basis.

However, it has now been proved that Arjuna Mahendran did not abide by the DDMC’s decision. By doing that he violated the rule of having least cost to the government. Taking the mere opinion of the Prime Minister which is mentioned above, he instructed the officials to jettison private placement mechanism and had instructed to raise money only though auctions. He said that it was the wish and was the instruction of the Prime Minister. This instruction was wrong and improper. To find this out the best thing Arjuna Mahendran could have done was to read the Monetary Law Act. Then he would have found out that the Central Bank is governed by the country’s Monetary Board and not by the Prime Minister or even by the President. Or at least, he should have read the board paper through which the private placement mechanism was established.

The mechanism of private placement was duly established in 2008 by a decision made by the Monetary Board. If Arjuna Mahendran had wanted to revoke the private placement mechanism then he had to submit a board paper and must have obtained the approval of the Monetary Board to do it. He did not do it until he left the Central Bank. Why? It is because the mechanism of private placement did not come into existence to support the crooks of the Rajapaksa regime. Any crook did not and do not want a private placement system. They can perform better under the so called “public auctions” as has been proved by Perpetual Treasuries. In fact private placement mechanism in conjunction with auctions is truly used to ensure in having the least cost to the government in borrowing through the issuance of bonds. That is why Arjuna could not put a board paper to revoke the private placement mechanism until he left. The mechanism of private placement still exists.

COPE Chairman now submits an open challenge. He demands to submit or present any board decision if there is any, made by the Monetary Board to revoke the private placements after the mechanism was introduced in 2008. As the COPE Chairman he decisively says that there is no such decision made by the country’s Monetary Board.

In view of above what do you think? Did Arjuna Mahendran exercise due professional care in executing his duties as the Governor? No! This is what the Auditor General has written in his report. After reviewing a lot of evidences COPE has upheld the Auditor General’s view. Yet the game is not over for the UNP. It is true that this COPE report itself could have been projected as a major victory for the UNP. The “gang of foot notes” destroyed it.

I feel Deputy Minister Ajith P. Perera hinted the logical end of this episode that would possibly bring another camouflaged victory for the UNP. They would make the Perpetual Treasuries to pay the alleged loss to the government estimated by the Auditor General. They can pay it easily. Attorney General could mediate the settlement through a court procedure or outside the court. But this process would be torpedoed if the President appoints a committee of professionals to estimate the total loss to the government. Let us wait and see what will happen next.

Yet I hope, one simple apology from Prime Minister could fix the problem honorably and would provide a necessary space for the country to move forward. This cannot be a big deal for a Prime Minister who nominated his buddy Arjuna Mahendran to the governorship of the Central Bank and who instrumental in appointing Sunil Handunneththi as the Chairman of the COPE which appointment was hailed by everybody.

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  • 7
    11

    “Ranil Wickeramesinghe’s unstudious instruction did cost Arjuna Mahendran his career, cost the government to bear losses exceeding Rs.1.6 billion and it cost the UNP its integrity. In regard to the sale of government bonds, Prime Minister Ranil Wickremesinghe told the parliament that, “I insisted on a public auction because private placements have led to corruption and lack of transparency” (March 17, 2015). But Sunil Handunnetthi, the Chairman of the COPE says that there is no such thing call “public auction” in regard to the sale of bonds by the Central Bank.”

    The above unstudious statement by H Senanayake alone is enough to lay bare what an ignorant, disqualified and failed economic critique HS is and has been. If the government is to consider his view together with Handunnetti’s and that of the other pack who are barking on the bond fiasco, as valid then there is no use use of adopting the current practice of going for tenders by the government and its numerous institutions, all the auctions conducted by the same must forthwith stop and allow the authorities decide the price and whom to be granted the offer! What a [Edited out] logic does this asshole is proposing. This[Edited out] trying to trap Arjun for the bond scam and now the fucker is sympathetic that AM lost his job due to RW! This is why I have been saying this Hema is a scavenger fed, hired and nurtured by Rajapakshas to propagate falsehoods for Rajapaksha familial project. What a load of bullshit this HS is!

    • 14
      3

      Silva, get a life, this is an a partial clarification of events by Dr. Hema. But one that is clearly biased!

      But the fact is that even if Mahendran was following Ranil’s orders, he should have taken special care that Perpetual Treasuries should cause LEAST COST to the Treasury, rather than make obscene profits.

      Mahendran was clearly involved in Financial Crime and INSIDER TRADING and saying that he simply followed Ranil’s advise is not enough. DUE DILIGENCE is his job as CB head.

      Mahendran is a CROOK and financial Criminal, even if Ranil gave wrong advice Mahendran was duty bound to follow the Monetary Board and rule of GOod Governance. Mahendran was not qualified to head the Central Bank and did not have a Doctorate in Economics or Finance and is a crook to boot -a derivatives trader in Singapore.

      He was also unethical to share insider information and let son is law profit.
      BOTH RANIL AND MAHENDRAN must RESIGN. Ranil should not have appointed Mahendran to the job in the first instance!

  • 7
    2

    So Diaspora Arjun didn’t read or wasn’t aware of the Monetary Board Guidelines on Yahapalana Bonds..

    Can’t believe it..

    Didn’t Mahendran cut the teeth on “Bond Trading” and everything else, at the Central Bank?.

    Minister Kalu Ajth’s estimate of the “loss” must have been worked out after deducting Aloysious’s donation of LKR 1 Billion for the UNP Daily News and the upcoming Elite , Anglican , and Vella e News.. EAVeNews to go along with Mangalan’s Lanka e version.

    That is another story.

    But I am at ease with this loss which resulted in a profit of 5 Billion LKR to PT shareholders Family Trusts in just 12 months .

    Which was all paid by the Yahapalana PAYE suckers..

    If they haven’t paid at least some already, they will be paying it for the next 29 years.

    Dalits in the South don’t pay Income Tax. although they have been been forced by the Yahapalana Budget to pay VAT on Keeramin and Kurrakkan.

    But then how much Keeramin and Kurakkan can they eat?.

    So ultimately it is the Yahapalana suckers who will cop the lot.

    • 5
      7

      KASmaalam KA Sumanasekera

      “So Diaspora Arjun didn’t read or wasn’t aware of the Monetary Board Guidelines on Yahapalana Bonds..”

      It is just like Diaspora Gota and Basil forgetting to read many regulations governing treasury transactions and military code of conduct.

      It is also just like you talking bull on important issues of theft by the clan.

    • 1
      1

      Sumane giving his life to trap Mahendran to save Batalanda. CBG has been a political appointment. Further CC supposed to do the vetting. Diaspora Ajith Nivard too was like diaspora Mahendran. He just implemented what Old King told him to do. Further Batalanda has not confessed that he had consulted CGB, and there is no evidence that is all what happened at CB. So Sumane hanging on that statement is only save Batalanda as “The Prime Minister just joked, but Why diaspora Mahendran took it seriously? Don’t you guys make a joke once in while?”

      Further, from Old King’s time, Aloysius’s company was a primary dealer before Mahendran came into CB. Rather than Aloysius is Arjuna Mahendran’s son in law, he is more of Old Son Prince’ friend, Old King’s financial advisor and a person highly influential in UNP. When the things were like that with Aloysius, and he recommended his Father in Law for the job, and then how did Mahendran go through the CC vetting? It is open and clear that Mahendran was brought in for different purpose, not alone to run CB. Aren’t Old King and New King Worked for 10 years together for the single purpose of looting and suddenly overtly they claimed they had maintained files on each other? It seems while others had their files, diaspora Mahendran did not have the experience to work with Sinhala Intellectual and had not filled up his file, so not ready get in the game. You see now GL is out of the SLFP, all Old Royal members are safe and in and Dinesh had said that Joint Comedians will not support GL’s party. Now nobody there to clean his couches. GL is alone. GL had been shuttling between UNP and SLFP but did not learn the trick of the trade. It is the case of Mahendran.

      There was no guarantee of raising through private placements. Not just private placements, there is no way of paying any of China’s loans so even an ordinary ambassador kicking on the butt these Sinhala Intellectual Ministers, but they are not able to do anything about that. (Batalanda had saved Old Royals from being investigated for those bad loans.) Handunnetti has not just established the cost of loan for CB, he failed to recognize the CB is now ultimately not being able to run the country’s monetary management. Then, where did he find the basis for loss calculation?

      Certainly Sumane’s share seems to has not reached his hand, it seems.Now, Radhika recommended and Indrajit is there. Once again, if Sumane did not get his share only he is going to bring Indrajit’s cases here?

  • 1
    2

    1. “However, this is a system where corruption could exist while having transparency if the top officials are corrupt.”

    2. Being one of the 16 primary dealers, Perpetual Treasuries bought the bonds at the public auction.

    3. As per 1, the top officials found in Mahendran and Aloysius, and not only relatives but Tamils too.

    4. Now, it is not “could exist”, but “must have existed”.

    5. To add the case more compelling, PT made a huge profit, and made it public.

    6. Conclusion- COPE decides that Governor is guilty.

    Does DDMC say that the amount Rs 2.6B should be raised through private placement?. First time I hear that private placement offers more advantage than private placement, particularly the tender administrative cost would have been negotiable in comparison tot he tender sum. Maybe I am missing something. A comparison between the two methods with some numbers might erudite the readers?

  • 1
    1

    FIL & SIL INSIDER DEAL.PERIOD.

  • 0
    1

    Please be adviced that as per the advise given by King Yama, the vice thing to do is to squeeze Arjuna Mahendran’s such and such things in a wise, to deter others from being unvice enough to repeat such unvice acts. (Pleace see adverticement that follows).

  • 4
    2

    Hema Senanayake

    Every one points the finger at Ranil Wickramsinghe.

    Ranil has a history as one who screws up what ever he touches. Yet, he thinks he is another chosen one to govern the country and he does not resign.

  • 2
    2

    Don Stanley, KA Sumanasekera, jim softy, Hema Senanayake,

    There is an old saying “barking dogs cannot bring down a mountain”. In the same vain, you can bark like dogs at RW but nothing will happen. [Edited out] like you cannot understand the workings of RW. You clowns, on the other hand, allege that Mahendran is responsible for insider trading. How do you [Edited out] say so? Did you see him do it? Why did your [Edited out] brains fail to see that Cabraal’s sister was a Director at Perpetual Treasuries? Why don’t you dimwits get the picture of EPF staff, Monetary Board Staff and P. Treasury robbing the EPF through insider trading and pumping and dumping? You [Edited out] have no inkling of understanding the colossal robberies and wastage Rajapakshas have done to this country. It is said AM managed Rajapakshas’ stolen billions and billions of rupees in the foreign bank he worked at. Don’t you [Edited out] at least now get the bigger picture of governance of a country and its affairs. Alas! How do you born donkeys are able to think of such an approach? Therefore you lunatics are always barking and howling without any purpose or aim. Do you know SWRD Banda was the chief architect of this incurable problem at the Central Bank with the EPF? Do you [Edited out] know that is why RW proposed to divorce EPF from CB and manage it under a separate management?

    • 1
      2

      Silva:

      YOur intention is Protecting Ranil Wickramsinghe and the gang.

      What do you say, Ranil wickransinghe did not know any of those things. what did he do as the Eternal Opposition leader. HE was deaf and dumb ?

      Ranil wickramsinghe even gave a minister to the man who pulled off it. Ranil Wcirakmsinghe escaped from the scam as soon as it was revealed by appointing three UNP lawyers to invesigate the Law aspects of it. He was not worried about the money that the country lost. Ranil gave dutry free car permits to COPE members, He manipulated with the committe so many times, by appointing UNP members, Finally, they did not include the name of Ranil or any of those politicians.

      Ranil has a history of supporting criminals, now in this case a financial fraud.

      • 0
        1

        jim softy,

        Sing your bullshit to the putrefaction called Consolidated Opposition now called Pohottuwa and they will be jubilant and howl still louder, but no other citizen will believe it! Simply put, you silly bugger buggers off with some valuable stuff or money at the place you work and then the pack of dogs sleeping with Rajapakshas come along and begin barking at the person who employed you and demand that your employer be tried and imprisoned for the theft you silly fucker committed! How on earth would such utter madness be justified and on what logic? Your perverted arguments on bond scam against RW is identical.

      • 0
        1

        jim softy,

        “YOur intention is Protecting Ranil Wickramsinghe and the gang.”

        Exactly!

        RW is the one and only democratizing political figure left in our era. He is the chosen one to save this country at this juncture of the country’s life. No one else can do better and in democratic space with the blessing of all concerned. Like Amaradewa he is a national treasure and it is our duty to extend him every support we could to fullfill our common aspirations.

  • 2
    0

    Mr HS says that DDMC wanted to raise only 2.6bn from the auction and the balance (in this case about 8.0bn)from private placement. Private placement from whom? Was it from EPF,ETF? I think the argument of PM that the Central Bank cannot do two opposing things at the same time has some merit. On one hand Central Bank is expected to raise money for the government at the least cost and on the other it is supposed to earn maximum possible for the EPF,ETF members whose money it is in charge of. It is obvious that Central Bank cannot do two opposing things at the same time. Through private placement it is EPF,ETF money that have been given to the government at a low rate from 2008 on wards.What about the loss to poor EPF,ETF members? Why should they alone Bear the loss? Why not the whole population bear it as happen when money is raise through auction. The scam is not the auction. It is the fact that Primary dealers are allowed the facility of arbitraging which Perpetual Treasuries used to the maximum. Central Bank officials including the Governor are responsible for allowing such a high difference to exist between Central Bank lending rate to Primary Dealers and the market interest rate. For that negligence they should be punished.If the above is not correct please Mr.HS or any knowledgeable person enlighten me as I am a layman.

  • 0
    1

    Why should anyone be talking about the profits made by Perpetual Treasuries. They are in the business of making money for themselves and their clients.

    If the Central Bank of Sri Lanka and its officials, along with the Prime Minister of Sri lanka are stupid enough to engage is complex financial instruments without protecting the people of Sri Lanka; why should Perpetual be held responsible?

    As far as I am concerned everyone involved are shady characters, no matter what they say today. Lets not be barking up the wrong tree and allow the real culprits to hide what really transpired.

    I remember a Mr. Alwis writing an article about all these moneys were a back-hand method to repaying the election expenditure. I have not seen any corroboration to that theory.

    There is a story behind this story!

  • 1
    0

    According to the report “The procedure adopted upto 27th February 2015 had been to get a minor portion of the governments debt requirements from the primary auctions and get the rest by the direct placement method.”

    Why was this decision made to get only a “minor” portion of the governments requirements from the primary auctions?

    So that the government could fix interest rates and cheat the public of their legitimate dues in terms of market determined interest rates.

    This is what the fuss is all about. The UNP wants the public to get their legitimate market determined interest rate not the 6% that the previous government fixed the interest rate at through private placements with the EPF and its captive Primary Dealers.

    This is a struggle between free market economics and communism.

    You can choose.

  • 0
    1

    RW may have told Mahendran to go for auctioning without going into the matter seriously and weighing the risks involved.( A PM is not expected to deal with matters of this nature so lightly).As very correctly said it was up to Mahendran to enlighten PM on these negative repercussions and also get the approval of the Monetary Board for adopting auctioning if he or PM wanted to go ahead.Mahendran did not do both and used the change/opportunity to assist his son in law to loot the country’s wealth.The subsequent actions of Mahendran very clearly established this fact. He has badly led down his PM friend. PM is still behaving as if this country is a backyard of a feudal property owned by him and the people are feudal subjects of a feudal reign where no due note is taken on public opinion.For him, it is Mahendran not the country or the people.The most annoying thing is that on top of all these particularly when the Head of the Government/Executive declined to appoint Mahendra for a second term, obviously due to the questionable character of Mahendran, PM goes and immediately appoints Mahendran to another high post as one of his advisors and taking him around the world exhibiting his worthy friend who has done irreparable damage to the reputation of the country in the international finacial and banking circles and colossal financial losses. Further, he is paid with public funds in his present position.Even connected to a routine inquiry against a public officer he is kept out until the inquiries are over and no other appointments are given.PM, please note that you are not a feudal master to do as you please. You are an elected representative of the people and you are responsible to the people. How dare you place Mahendran, a foreigner against the interest of the people of this country.Your party is in power with the help of another party.People have not endorsed your party with an overall majority.Even with such a majority, you are not expected to behave in this obnoxious manner.
    So, right from the beginning PM has established that he is not qualified to handle this case as he has his own interests particularly to safeguard Mahendran. This is precisely why the President should be in charge of the investigations beyond this point. He seems to be going on a correct path.A committee of the SLFP has been appointed to advise him on the matter.A Forensic Audit has been recommended by the experts on Central Banking to ascertain the full scale of involvements of interested parties. This is a must. It is better that a Presidential Commission with full powers investigate into the matter as any other mechanism will be used by the vested interests to kill the issue. President right through the investigations and the until the culprits are punished and loot is recovered should oversee the matter to avoid it being highjacked. It is the responsibility of the President to follow this cause of action as he was elected on the pledge that he will root out corruption in this country. From this people will judge whether President is a Stateman or just another politician with no value to the country and the people.
    Central Bank governor has a big responsibility to launch an internal investigation and punish if any collaborators in the crime are identified and also introduce measures to prevent or minimize the looting of the national wealth in the future.
    The civil society responsibility is to ensure that criminals are punished appropriately and loot is recovered and deliver a strong message to the politicians and other anti- social elements that as in the past one cannot sweep things under the carpet and that the wrong-doers will be severely dealt with.

  • 1
    0

    he state is supposed to provide certain services to its citizens. It is not supposed to enrich itself at the cost of the citizens.

    With the direct placement method the state “saved” close to 10% on interest charges on borrowings and citizens saw their interest income crash from 16% to 6%. The equities market was distorted as a result as citizens plunged their savings into stocks in a losing battle to survive and opened themselves to exploitation by crooks pretending to be investors who played “pump and dump” on the stock market.

    So who lent to the government at its fixed interest rate of 6%?

    The EPF and ETF of course.

    What happened to this 10% that was “saved” by the state?

    It was spent by the government.

    On what was it spent?

    Most of it has ended up as commissions and kickbacks that are all safely deposited in offshore banking units in Dubai, Nicosia and Mauritius and many others. From where they are sneaking back into the island in the form of private investments.

    This is how the government “saved” 10% on interest on borrowings at the cost of the citizens of the state.

  • 1
    1

    This misappropriation and draining of EPF fund has been done for years with the collusion of EPF, CB and Perpetual staff. The bloody SLFP party of donkeys headed by SWRD Banda is the original mischief maker who created this system that allowed the robbers a loophole to steal poor workers’ hard earned money. RW, once he became PM, proposed corrective measures to this anomaly but Alas, the dumbest motherfuckers in the world the JVP, SLFP buggers, Mahindayage ata lewakana buggers, the working class fools all began jumping up and down demanding EPF be kept under the control of CB! And this is how CB has managed the EPF!!!!!!! I remember vividly how these so called economists, critiques, social activists and every nobody added his/her opposing shit to RW’s good governance and realistically correct proposal! It is those nincompoop dimwits who are really responsible for the bond scam because it is they who prevented the scientific management of the EPF. By simply calculating the difference of cooked up interest rate given to EPF depositors and the real interest rate that should have been given to them calculated based on the inflation rate the massive amount robbed from EPF depositors may be calculated. The real aim of these “bond barkers” is to divert the attention of the public away from the real robbers and also to gain political milage against RW.

  • 0
    0

    Dear Hema

    Could explain to us that why we cannot have real public auctions where every one interested can register and bid for bonds?

    This can be implemented via simple order processing software over the web!?

    This gives the opportunity to Expat and foreign investors to bypass this primary dealer mafia and compete on open market!

    Is it mere complexity of issuing certificates? (we do it anyway later)?
    or

    Is it another opportunity for primary dealer clan to take a piece from the pie?
    or

    the central banks do not just bother?

  • 0
    1

    I have not,in general,commented on the Bond issue since I was not very conversant on the subject.
    Certainly,this fine essay by Mr.Hema S.has clearly outlined the details.

    Arjuna Mahendran,the 13th Governor of the Central Bank,with his experience and credentials has in this case burnt his boat.I hope the previous bond issues notably the Greek Bond issue during the reign of MaRa will also be probed executed by the 12th Governor Nivard Cabral!

    Prime Minister Ranil Wickremasinghe,with his unimpeachable financial conduct,in Public life,spanning almost 40 years,has had a dent in his boat!
    The irony is the loss is only a small fraction of the Booty siphoned out by the MaRa family!

    • 0
      0

      Plato, I agree with you 100%. Let us do some math shall we? How much was the profit of Perpetual T? Rs 5 billion, right? Divide by 22 million and we get a per capita amount of Rs 225. These days one cannot buy even a kg of parippu with that. So these Parippu eating baiyas are complaining about a measly Rs 225 which can buy perhaps around 500 g of quality parippu according to the prices daily quoted by that nice Food City girl on TV.

      Now if one considers the Greek bonds that Plato mentions, perhaps that is not so insignificant. Also those are all foreigners. The money went to the foreigners with a small something for the baiyas. But with Mr. Clean the money went to our own people like Arjuna Mahendran & Aloysius. They are toiyas – not baiyas. Nevertheless they are our own toiyas. Of course, baiya or toiya, Ranil being an epitome of cleanliness did not get even a cent.

      This is the problem with Baiyas. They don’t mind getting killed by foreign toiyas. But if a local toiya does the very same thing they are up in arms.

      Hema’s fine essay should get full marks from his English teacher. Plato in his comments has stood up for his buddy Arjuna taking a cue from Ranil, the smartest politician in Asia, next to Kim Il Sooney Sun.

      When the going gets tough – the tough get going.

  • 1
    0

    I am no public finance whiz kid. But what is clear is that there is a thing called dealing only with primary dealers, total of 16 is involved. Then there is a thing called the least cost to the Government. Can anyone explain to me how a least cost is achievable by only confining to the 16 dealers only? Is it sancrosanct and why?

    Arjuna Aloysius’s firm was one of the primary dealers. He is the SIL of Arujna Mahendran. The FIL should have had the common sense to tell his SIL not get involved with dealings with the Central Bank of Sri Lanka as long as he was the Governor. Such dealings in the first place appears to me is a serious conflict of interest.

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