By Amrit Muttukumaru –

The report of the Presidential Commission of Inquiry (PCoI) into the Treasury Bond scam is like the curate’s egg good and bad in parts. It had already laid the ground work at the investigative stage by its glaring partiality to the Prime Minister to give a preview of what was to follow in its report. In this respect the PCoI has been consistent!

The bottom line are its RECOMMENDATIONS. In this respect there is an evident MISMATCH between what transpired at the investigations which the PCoI has by and large covered and its recommendations particularly in regard to the PM where the commissioners have failed to connect the dots which were staring in the face.

It has rightly faulted inter alia, former CBSL Governor – Arjuna Mahendran, PTL virtual owner – Arjun Aloysius, PTL CEO – Kasun Palisena, former Minister of Finance – Ravi Karunanayake and “relevant officers of the CBSL and the EPF”.

While faulting former PABC (Pan Asia Bank) Chairman – Nimal Perera, a gaping hole in the report is the ‘pussyfooting’ on the Bank of Ceylon giving Perpetual Treasuries Limited (PTL) access to Billions of Rupees almost instantly which enabled PTL with the aid of “inside information” to make a ‘killing’ in the secondary Bond market at the further expense of state institutions which included the hard earned savings of workers in the EPF. Chairman, Bank of Ceylon – Ronald Perera is a long standing member of the influential UNP Working Committee.

Crucial issues of governance incidental to the alleged bond scam thrown up by witnesses at the Bond Commission which include possible tax evasion, money laundering and PEPs (Politically Exposed Persons) being directors of banks are hardly on the radar.

In the context of what follows below, it is strange there is no recommendation whatsoever in regard to the PM. In fact to the best of my knowledge ‘PM’ or ‘Prime Minister’ have no mention in the ‘recommendations’!

PM’s Involvement & Contradictions

1) ‘CONFLICT OF INTEREST’ is the CRUX of the Bond scam.

Arjuna Mahendran – a foreign national was handpicked for the position of Governor, Central Bank of Sri Lanka (CBSL) by the Prime Minister although aware that his son-in-law, Arjun Aloysius – virtuallyowned/controlled PTL (Perpetual Treasuries Limited) – a Primary Dealer.

2) For reasons best known to the PCoI it did not PURSUE the PM’s affirmation in his affidavit “Upon the formation of the new Government in January 2015 there was a general consensus within the Government that Mr Mahendran should be appointed to the post of Governor of CBSL.”

No less a person than Cabinet Co–Spokesperson and Minister of Health Dr. Rajitha Senaratne has contradicted the claim of “general consensus”:

“Senaratne said he had opposed the appointment of former Central Bank Governor Arjuna Mahendran to the position at the time. “I warned that it would tarnish the government’s image,” the minister said.”

3) The PCoI has mentioned only “In passing” that the Central Bank of Sri Lanka (CBSL) which is the issuing agency for Treasury Bonds which normally falls under the Ministry of Finance was brought under the purview of the PM. The PCoI did not question the PM on the rationale for this change.

4) The PM continued to have Mahendran as CBSL Governor although aware that Mahendran had reneged on his ‘assurance’ to him that his son-in-law (Arjun Aloysius) will sever all links with PTL PRIOR to his appointment as CBSL Governor.

The PCoI while stating “We consider that, the confidence which the Hon. Prime Minister states he placed in the assurances given to him by Mr. Mahendran, was misplaced. We are of the view that, the more prudent course of action would have been for the Hon. Prime Minister to have independently verified whether Mr. Mahendran was, in fact, honouring the assurances he gave the Hon. Prime Minister. We regret that, the Hon. Prime Minister did not take that course of action.” has curiously failed to question the PM on the rationale for this “confidence”.

5) At the Bond Commission when the PM was asked whether he was aware that (i) “Holding Companies of Perpetual Treasuries Ltd were Perpetual Capital Holdings (Pvt) Ltd and Perpetual Capital (Pvt) Ltd?”(ii) “Mr. Aloysius continued to be a Director and Shareholder of these two Holding Companies even after January 2015?” he pleaded ignorance.

His position of being unaware is contradicted when “he went on to state that, Mr. Aloysius had said that he needed a “bit of time” to dispose of the shareholding he had in Perpetual Treasuries Ltd.”

The PM also contradicts his claim of being unaware in his affidavit to the PCoI where he states:

“I became aware that Mr Aloysius had in the month of January itself resigned from the post of Chief Executive Officer and Director of Perpetual Treasuries (Pvt) Ltd. I also became aware that however he remained a Shareholder of that company” 

6) A failure in the PM’s judgment observed by the PCoI is:

“when the results of the Treasury Bond Auction held on 27th February 2015 became known and there were several allegations that, Mr. Mahendran had interfered in the Auction, the Hon. Prime Minister appointed the three-member ‘Pitipana Committee’ to inquire into and report on the matter.

We are of the view that, the members of the “Pitipana Committee” [comprising of three senior and reputed Attorneys-at-Law] did not possess technical knowledge or practical knowledge in the considerably complex arena of Government Securities and Public Debt.”

(7) He robustly defended and endorsed Mahendran for a second term despite the widespread perception of Mahendran’s role in the alleged Bond Scam.

8) Being fully confident on the propriety of the issuance of Bonds, he robustly defended the same in Parliament on 17 March 2015 despite the evidence that subsequently transpired before the PCoI. In this regard the PCoI observes:

“with regard to the Statement made in Parliament by the Hon. Prime Minister on 17th March 2017, in which he states, inter alia, that, Mr. Mahendran had not interfered in the Treasury Bond Auction of 27th February 2015 …….. we consider that, the Hon. Prime Minister would have been better advised, if he had independently verified what had happened at the CBSL on 27th February 2015, before making any statement, instead of relying on the Briefing Note and report submitted to him by Mr. Mahendran and Deputy Governor Samarasiri.”

(the report erroneously refers to ‘17th March 2017’ when it should have been ‘17 March 2015’)

9) The PM’s defense of Mahendran is contradicted in the report:

“We have held that, Perpetual Treasuries Ltd acted upon “inside information” (or “price sensitive information”)when it placed Bids for an unprecedented value of Rs. 15 billion at an Auction at which only Rs. 1 billion had been offered;

We have also held that, Mr. Mahendran was the source from which Perpetual Treasuries Ltd obtained this “inside information” (or “price sensitive information”);”

“Accordingly, we have held that, Mr. Mahendran acted wrongfully, improperly, mala fide, fraudulently and in gross breach of his duties as Governor of the CBSL”

10) During his testimony at the Bond Commission the PM stated: “Mr. Aloysius had said that he needed a “bit of time” to dispose of the shareholding he had in Perpetual Treasuries Ltd.”

What is at issue is the INTEGRITY of the CBSL. How can the PM who is also responsible for the CBSL even consider a “bit of time” to resolve a ‘conflict of interest’ concerning the CBSL Governor?

11) To the PCoI question “whether the Hon. Prime Minister instructed Mr. Mahendran, on 24th February 2015, to “immediately stop” the practice of the Central Bank accepting “Private Placements” of Treasury Bonds”, the PM had inter alia stated that “he directed Mr. Mahendran to “consider” issuing Treasury Bonds by way of Public Auctions in accordance with the Economic Policy of the Government and that, the Hon. Prime Minister “expected that he would comply with due procedure”.

This response is CONTRARY to his speech in Parliament on 17 March 2015 where he inter alia stated “I insisted on a public auction”. It must be noted the PM had the benefit of questions given in ADVANCE by the PCoI to enable him to provide answers by way of affidavit.

The question is why the PCoI did not confront the PM on this contradiction.

12) R. Paskaralingam – Senior Advisor to the Prime Minister.

It is revealed in the report that “Hon. Ravi Karunanayake, MP, the then Minister of Finance, gave instructions to the three State Banks to place Bids at specified low Yield Rates and for low amounts, at the Treasury Bond Auctions held on 29th March 2016 and 31st March 2016.”

It was alleged by the officials concerned of these banks during their testimony that the ‘instructions’ were given in the presence of the PM’s Senior Advisor, R. Paskaralingam.

“In reply to the Commission of Inquiry, the Hon. Prime Minister stated that he was not aware of the meetings held at the Ministry of Finance on 28th March 2016 and 30th March 2016 and that he was not aware whether Mr. Paskaralingam was present at these meetings.”

In this connection the PCoI has observed: “we consider that, Mr. Wasantha Kumar, the General Manager of People’s Bank, was a reliable witness with a clear recollection of the events of this meeting held on 28th March 2016.”

If indeed Paskaralingam attended these meetings, would it not have been SOLELY in his capacity as Senior Advisor to the PM? Is there not a major management failure if the PM was unaware of Paskaralingam’s presence?

13) Footnotes in COPE report:

The controversial ‘FOOTNOTES’ in the Sunil Handunetti led COPE report probing the 27 February 2015 bond scam introduced by the UNP parliamentarians concerned have not received the sanction it deserves from the PCoI.

The widely read ‘Sunday Times’ exposé of alleged machinations in relation to the Sunil Handuneththi led COPE report referred to the ‘Footnotes’ as follows:   

“As is clear, the thrust of these footnotes is to make clear that Mahendran has not been responsible for any impropriety.  

The UNP is confident that it can, through the documentation Deputy Minister Harsha de Silva has received, prove its case that its man Arjuna Mahendran is not to blame.”  

 As if this were not enough, consider Harsha de Silva’s response to the following question from a journalist on the ‘Footnotes’:  

“Minister do you at any point now regret the footnotes on that COPE report? Going by what is being revealed now, do you regret it or was there a lack of information at that point?”  

What does his response from (21:25:40) indicate? The clarification sought from Harsha de Silva has still not come.   

Dr. Harsha de Silva is Deputy Minister, Ministry of National Policies and Economic Affairs where the PM is the Minister in charge.   

14) Rosy Senanayake – ‘Deputy Chief of Staff’ in PM Wickremesinghe’s ‘core team’.

It was alleged at the PCoI that COPE documents relating to PTL CEO Kasun Palisena’s testimony were given to ‘PTL owner’ Arjun Aloysius by “Rosy’s son” identified as “Kanishka Senanayake”.  

This has been denied by Ms. Senanayake on the grounds she was not a COPE member after the August 2015 parliamentary elections. Does not the question arise whether in her capacity as ‘Deputy Chief of Staff’ in PM Wickremesinghe’s ‘core team’ she would have access to COPE reports? Although requested, she has still not clarified this position.   

Favored Treatment

1) Unlike in the case of other witnesses, the PM was given questions in advance by the PCoI to enable him to provide answers by way of affidavit.

2) Unlike in the case of other witnesses, the PCoI decided to invite the AG himself who wasn’t involved in the investigation up to that point to personally lead evidence for the FIRST TIME. Up to this time, Messrs. Dappula de Livera and Yasantha Kodagoda – Senior Additional Solicitor General and Additional Solicitor General respectively lead evidence.

3) Unlike in the case of other witnesses which included former Finance Minister Ravi Karunanayake who were grilled by Messrs. Dappula de Livera and Yasantha Kodagoda, limited questions were posed to the PM. He was at the PCoI reportedly for less than an hour to clarify matters arising from his affidavit.

Conclusion

Things are so bad in Sri Lanka that the rule of law was selectively applied not to compel Arjun Aloysius – owner of PTL to give evidence before the Bond Commission on the basis it would incriminate him since apparently in his own mind there was a high probability he would be prosecuted. The same rule of law was mute in taking the next steps that could have been taken independent of the report of the Bond Commission in the context of the damning evidence produced at the PCoI. It also indicates that the relevant regulatory and law enforcement agencies were on sleep mode until the bond commission was appointed. This tardiness in taking necessary legal action has resulted in a situation where as disclosed by the Prime Minister during his testimony at the Bond Commission, Aloysius was even able to be present “at one or two parties” where he was in a position to converse with the PM himself!  

Successive governments have done their damndest to underscore the presence of a ‘Deep State’ in Sri Lanka. The egregious Bond Scam and impunity involving key sections of the political and corporate establishments is evidence of its presence. The media has reported that Messrs. Dappula de Livera and Yasantha Kodagoda – Senior Additional Solicitor General and Additional Solicitor General respectively who led evidence at the PCoI have been “sidelined from initiating legal action based on recommendations by the Presidential Commission regarding the fraud”.

It is outrageous that the PM has suddenly ‘discovered’ only after the publication of the PCoI report of the Bond Scam under the incumbent yahapalana government how allegedly corrupt the issuance of Treasury Bonds have been prior to January 2015 when Nivard Cabraal was CBSL Governor. It is surprising that the CBSL which is under the PM’s purview had not brought this matter to his attention earlier. It begs the question as to what the government elected on the promise of corruption free good governance and holding those concerned under the Rajapaksa presidency they screamed from rooftops were responsible for terrible corruption, abuse of power and violence accountable after due process were doing these past three years?

The PCoI reports that Ms. Siromi Wickramasinghe the sister of former CBSL Governor, Nivard Cabraal was a ‘Director’ of the ‘holding company’ of Perpetual Treasuries Ltd at the time of the 27 February 2015 bond scam under the Yahapalana government! (Pages 473 & 474)

As Alice cried in Wonderland, things are indeed getting “curiouser and curiouser” in this ‘land like no other’!

Siromi Wickramasinghe was no doubt a Politically Exposed Person (PEP) who should have been monitored by the CBSL. In the context of PEPs being at the centre of the worldwide efforts for the prevention of money laundering, the CBSL is obliged to co-operate with other jurisdictions to combat this menace associated inter alia with political/economic instability, trafficking in illicit drugs and financing of terrorism. Although all PEPs are NOT INVOLVED in criminal activities, nevertheless all PEPs are subject to scrutiny particularly in their dealings with banks. This is why even in Sri Lanka “Opening of accounts for ‘politically exposed persons’ (PEP) should have authorization of senior management.”

It is imperative that Sri Lanka must adhere to its international obligations. Sri Lanka is a member of the Asia/Pacific Group on Money Laundering (APG) which in turn is an Associate Member of the Financial Action Task Force (FATF) which is “an independent inter-governmental body that develops and promotes policies to protect the global financial system against money laundering and terrorist financing. “

It is surprising to note that even today there are PEPs who are holding office as directors of banks and financial intermediary companies. We do not appear to have learnt any lessons from past experience. My engagement with Dr. Indrajit Coomaraswamy, CBSL Governor on this issue commencing 5 July 2017 have been in vain.