6 December, 2023


Bond Scams: Trade Unions To Save Workers’ Savings

By Lucien Rajakarunanayake

Lucien Rajakarunanayake

The continuing political altercation about the forensic audit on Treasury Bonds and Central Bank activity, has largely ignored the related situation of the Employees Provident Fund (EPF), the largest Social Security Scheme in the country, and the source of relief for millions who have no pension facilities on retirement from work.

The Annual Report for 2016, the latest on the Internet, states the total assets of the EPF increased by 11% during 2016 from Rs. 1,668 bn in 2015; and the total member accounts went up from 16.9 mn to 17.3 mn in the same year. This is certainly good reading, but the facts and figures emerging from the Forensic Audit reports, as revealed by Members of Parliament who now have access to them, show a picture that raises much concern

The EPF was established in 1958 to serve the rising call for social security in retirement by employees in the non-state sector, as government service employees had a pension scheme. The call for such a facility came very strongly from the left-wing trade unions of the time, and was part of the wider call for security that came from the time that worker organizations began in the 1890s and later moved to trade unions.

The trade union movement is largely divided politically today, but the facts of the Treasury Bond Scams of 2016, and the prior realities seen in the forensic audits, shows the need for a non-political unity by the trade unions to prevent future threats and losses the EPF would face if the current politico-governance trend continues.

The nearly 20 mn or more “Member Accounts” of the EPF relate to the vast majority of non-government employees of this country. They are employees of the Private Sector – big and small businesses, State Corporations and Statutory Boards, the plantations, and new economic & trade sectors. This is the largest employee sector in the country that requires retirement securities, housing loan facilities, and other social and personal assistance the EPF provides. While the politicians go on with their arguments and wrangling about the recent and past Bond Scams, Stock Market investments, and other use of EPF funds, it is becoming a necessity of the trade unions to come forward against this corrupt politics, governance and administration that poses a major threat to the EPF.

The UNP-led Ranil/Mahendran Bond Scam certainly misused the EPF in its record of perpetual fraud. The Perpetual Treasuries in the Bond bidding made profits by getting the EPF to invest with them, while they later made more profits by investing inTreasury Bonds. The Government authorities associated with these Bond transactions also influenced, if not directed the EPF towards making these questionable investments. The EPF clearly lost.

The EPF takes pride in its ability to assure financial stability to employees in the ‘winter of life’ and the rewards it provides to employees in being participants in the economic growth of the country. That all sounds very good. But the evidence emerging from the Presidential Commision of Inquiry (PCoI) into the Bond Scam, and the Forensic Audits that were conducted on the recommendations of the PCoI, show major losses incurred by the EPF in Treasury Bond and other investments in the Share Market. These are not seen in the annual reports of the EPF that come from the Central Bank, which formally manages the Fund. These reports show the annual profits, but do not reveal the losses that have incurred and covered by the overall profits, which remain a loss to EPF members.

The question of the EPF investing in Treasury Bonds and the Stock Market has bothered those concerned about the security and people’s profitability through this Fund. There are valid concerns about the financial status and security of some of the companies in which investments have been made. This is a reality of EPF investments in the Bond Scam corruption (2015 – 2017) and in decades before this. These are losses that are not accounted for, and not even discussed by the managers of the EPF.

Evidence before the PCoI said that internal investigations by the Central Bank did show considerable losses faced by the EPF. The losses suffered by the EPF as seen in the Forensic Audits raises questions about the profitability of EPF investments in the secondary market, and more importantly the directions given to the EPF for such investments. These figures were known before the forensic audits, which show devastating losses suffered by the EPF, amounting to Rs.3000 million, all of which is the savings of the people.

These losses by the EPF in the 2016-17 Bond Scam period show that such losses would have contributed to the overall profits of Perpetual Treasuries and helped in the money laundering exercises made through questionable investments.

Two reports of the Committee on Public Enterprises (COPE) of Parliament have found major concerns about the conduct of the Treasury Bond exercises. These were Committees chaired by two MPs respected for their interest in proper procedure and against the trends of corruption – Mr. DEW Gunesekera (CP) and Mr. Sunil Handunneththi (JVP). We also saw several UNP members of the second COPE inquiry place footnotes at its report seeking to belittle the findings and revelations of the report, showing their lack of interest in the profitability of the EPF, and their interests in the profits of those who manipulate EPF monies for individual or corporate profits, and handling of the market.

The dangers to the funds of the people in the EPF were seen when the UNP-SLFP Yahapalana Government of Maithripala Sirisena and Ranil Wickremesinghe moved the control of the Central Bank (which overall manages the EPF) to the Office of the Prime Minister from the Office of the Finance Ministry. The instructions given to State Banks by the then Finance Minister Ravi Karunanayake not to bid at certain Treasury Bond auctions, and thus help Perpetual Treasuries, shows how manipulative politics can adversely affect the EPF. It is clearly seen that the Central Bank under Arjuna Mahendran was involved in leading to the losses suffered by the EPF by the contrary and questionable directions given or encouraged in EPF investments at the time.
The Forensic Audit reports on the Central Bank Treasury Bill, Treasury Bond, and share market transactions in the 2015 to 2017 period, and such activities in a decade before that, under Governors of the Central Bank, certainly points to the need for a total rethink and overall reform of the investment guidelines and policies of the EPF. The problem should not be with the name of the Governor but their policies. This does raise valid questions about the relationship of Central Bank Governors with the directors and key operators of the few approved investors in Treasury Bonds. Family bondage, as seen in the Perpetual dealings with Governors Mahendran and Cabraal, certainly point to the need for further investigations into their directives and policy approaches. These will also show the necessity to bring in new legislation and regulations on how the EPF investment policies are worked out, and prevent political and/or family interests in the carrying out of such policies.

There should be thorough investigations on the reasons and background in which Central Bank Governor Nivard Cabraal gave instructions to the EPF on investing in the Stock Market during the Mahinda Rajapaksa presidency, when he was also Finance Minister. Why was the EPF prevented from obtaining a higher of .05 percent profit from investing in the Primary Market, and instead officially directed to invest in the Secondary Market and the Stock Exchange. The .05 percent profit may seem very small, but it is not so when it involves many millions of rupees. It is also necessary to probe as to how employees of the EPF invested funds of the Fund in the secondary market, and then got profits by the sale of such stocks.

There was a huge media exposure and blitzkrieg when it was revealed there were close family links, or in-law connections (Governor Mahendran and son-inlaw Arjun Aloysius) with Perpetual Treasuries, when the Treasury Bond auctions took place under Governor Mahendran, during the Ranil Wickremesinghe premiership. The people did see it as shocking, and correctly so. Similarly, the people will see it similarly shocking to know that EPF investments in Perpetual Treasuries also took place when the sister of the former Governor Cabraal – Srima Wickramasinghe – was a key directress of that company when such investments took place.

The public should also know how and why the EPF was directed or encouraged to invest in companies that had poor records of profit, and even worse, made to invest in companies that were not listed in the Stock Exchange.

What is on record today, from the Forensic Audits and prior to those too, is a bizarre and baffling record of the manipulation and exploitation of the funds of the EPF (and the Employees Trust Fund – ETF too) by those who governed the Central Bank and their political directors or presidents and prime ministers for nearly two decades. This is not the loss of State Funds, but the misuse of the people’s savings, the retirement relief funds of the people, the housing loan assistance, and the marriage relief to women, through the EPF. Whatever the rival political debaters, wranglers and disputers may say, what the public is concerned is not about Arjuna Mahendran or Ajith Nivard Cabraal – but about the peoples’ savings for retirement. It is time to take this debate away from the Mahendran/Cabraal or Arjun Aloysius/Srima Wickremesinghe duos, but bring it to the massive robbery of the peoples’ savings and retirement benefits.

This is a matter that needs the close attention of the trade unions in the country, irrespective of the political parties they may be associated with, especially the independent trade unions such as the Ceylon Mercantile Union, and other such key organizations, serving many millions of non-government employees. This is not anymore a matter to be left to the publicity tactics and electoral manipulators of political parties. It is a call for the Trade Union Movement in the country to come out in support of their members, their savings, their retirement benefits. It must be a united call by the workers to expose these massive frauds and their manipulators, and bring in new legislation to ensure the independence and security of the Employees Provident Fund, just as the trade union movement of the past saw the birth of the EPF.

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Latest comments

  • 1

    Lucian’s piece is interesting because the Srilankan airlines trade union nidahas sevaka sangamaya have called for investigations on the airbus deal. they have also raised questions on the “meeting” held at the speaker’s residence in march 2013 .. where his son and kapila were also present.

    • 3

      People are made to believe, If anyone under Mahinda Jarapakashe would deliberately committ high crimes, that should be regarded as no CRIMES while anyone else, like for example under MS-RW govt to have committed losses, then it should be PRONOUNCED as no other, to be real losses.
      This is the srilanka, that Rajaakshes have misled sofar. People WAKE up from your slumber and get ready BP Rajapakshes be hung by their balls by bringing to GALLE face green.
      Please listen to the YT video and get your facts right. Are there all lies ?
      Pasqual or the like ONES got raped by Rajaakshes would never see it but would go on getting back pleased, but we the REAL srilankens would not want, Rajakashes be our leaders.

      Shameless Rajapakshes, loot our nation and country from where they stopped in 2015.

    • 1

      I think SINHALAYA are made PERMAMENT MODAYAS by BP Rajapkashes for their political comeback.
      So long sinhalaya would pay a blind eye to anything and everything, Rajakshe looters would suck the last drop of the blood of the nation:
      Please get up and go for MONATH long protests until BPs Rajaakshes are caught by the law. I think so long LIES would lead fooling the majority of this country, nothing would change for the betterment of the nation:

  • 2

    I agree with you that Central Bank management of the EPF has been putrid. I am thankful that my provident fund contributions were managed by the Mercantile Service Provident Fund Society, which invested the funds wisely, declared attractive dividends and provided the contributors 75% of their balance for building a house or buying a house or flat.

    Central Bankers have joined hands with rogues who were at the helm of the Central Bank to debunk the Forensic Audits done by specialists in the field. They are incompetent to analyze Forensic Audits. The time has come for the Trade Unions, Employers Federations and the Chambers of Commerce and Industry to request the President to handover the responsibility for investments of EPF to a body where these stakeholders are adequately represented, based on best practices prevalent in other countries.

    • 1

      Even this once-voluble Rajapaksa foot soldier has not explained who has actually lost money, and how much.
      Another in the long list of speculations without evidence.
      “The .05 percent profit may seem very small, but it is not so when it involves many millions of rupees.”
      Well, I suppose one cannot expect a better grasp of mathematics from a “journalist”. For the uninitiated, that’s five rupees in a thousand. A life and death matter? I don’t think so.

  • 0

    These facts, gravity of the situation including the names of the suspects have to be presented through Sinhala newspapers readers to identify these white collar criminals. Isn’t this similar to a third party taking control of ones bank account and doing whatever they want with it without ones knowledge. Using retirement funds to invest in highly volatile manipulated stocks(pump and dump) in the SL market instead of stable bonds could wipe out the funds in no time.

    It is good that people have opened their eyes if not the financial advisors of the current govt may be licking their lips for another round of misappropriation. Contributors would like to hear what people like Mr Rusiripala has to say on this matters.

  • 1

    There are “FIVE” Forensic Audit reports, one of those deals extensively with the the “USE” and “ABUSE” of EPF & ETF funds. All these reports are meant to be USED and call for evidence on the “FINDINGS” stated therein. Those who produced the “FINDINGS” are RESPONSIBLE and LIABLE to be tested in a Law Suite. So WHY can’t the “TRADE UNIONS” form into one “FEDERATION” and file a “LAW SUITE” and claim the RECOVERY of the “LOSS” and also pray for severe punishments to those responsible – the CUSTODIANS of the Fund? It would be very interesting to then find how the “CORPORATE SECTOR” manipulated in connivance with the “Authorities”. Now we have seen enough of “MEDIA” Stage Plays by the Political Parties and those “Involved” and “Interested” in all these “BOND SCAMS” and “ROBBERIES” of the Central Bank. Isn’t it TIME RIPE to move into action? It would be ideal this case to be directed to the Special Courts already set up to hear “MEGA CORRUPTIONS”. It could be channeled through the AG by making a COMPLAINT in the CID or BRIBERY COMMISSION. To do that retain the services of a “GOOD” and “GENUINE ” team of Legal Experts. I know “Millions” of funds are available in the Trade Union Accounts. Please do that NOW. It would PREVENT the very “PERPETRATORS” appearing in “MEDIA” (both print & electronic) DEFENDING and MISLEADING the very members of the fund in particular and the public in general.

  • 0

    I can not believe, workers in the EPF did not know that their Manager rip their institution, durin about two years period and two govts.

  • 0

    JD: You talk of ignorance of “Workers in the EPF”. What do you think of the “6.9” and “5.2” million who voted SLPP and UNP respectively, at the last “Presidential Election”? Wait for a “REPEAT”at the next Parliamentary Election.

  • 1

    The Sinhala idiom most appropriately describes the situation we are faced with.”Wetah Nearath Goyam Kanam Kata Pawasam A Amaruwa.” [ If the fence and the ridge eats the harvest to whom are you going to complain ]

    • 0

      Upali, great comment. and thank you. So long people are made to believe that Rajaaksehs s bond scam should be negligible because he led the last phase of CIVLI war to end, and only the scam ( though that are not even 1/100 of Rajakshe bond losses), destined by RW govt should be protested, there we the nation are fully wrong. Regardless of the status of RAJAAKSHES, they should be hung by their balls ino order to heal our wounds, the bugger, should PREMEDITAted TO THE manner that Jamal Khashogi was fated, Then only our healing would have been served well. Bp Rajakshe should be brought before the court and punished him as any citizen should have to face it. BB

  • 0

    This is the fate of those living in a” failed state” – this tunnel called Sri Lanka has “no end”, therefore never ever we’ll see any light.

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