In the magistrates Courts of Colombo
Ajith Nivard Cabral
6/31, Nawala road, Rajagiriya.
Carlton House, Medamoolana, Tangalle,
Nandana gardens, Embuldeniya, Nugegoda.
I Kelum Darshana Kumarasinghe of No 38, Bodhirukkarama Rd, Galborella, Kelaniya being a Buddhist do hereby solemnly sincerely and truly declare and affirm as follows
1. I am the affiramant and the complainant of this complaint and I affirm to the following facts from the information that is publicly available.
2. I state that the actions by the Monetary board and specifically the Governor of Central Bank Mr.Ajith Nivard Cabral as detailed below have engaged in corruption in violation.
3. I state that it is of utmost importance that public funds and state property be used for the benefit of the public and public officials who are entrusted with the public duty to manage such public property must exercise and maintain maximum and utmost care and sensitivity in handling such power in keeping with public interest.
4. I state that relevant public officials are not permitted to act in an unlawful, manner in violation of the stipulated provisions of law as there could be no exceptions to the due exercise of care and due diligence as the same would thereby cause irreparable loss to the Central Bank, government of Sri Lanka and to the general public. Such action amounts to Criminal Breach of Trust by the 1st Accused who was the Governor of the Central Bank and the Chairman of the Monetary Board.
5. I state further that where public funds are managed in an arbitrary manner resulting in committing Criminal breach of Trust of Public Funds held by the Central Bank in total abuse power vested with the Monetary Board as set out in this Complaint, such action is rendered all the more heinous when there is in abuse of office as evidenced where in the 1st and the have held the highest office in the Central Bank and the 2nd accused as the head of the Ministry of Finance.
6. I state that in accordance with Foreign Reserve Management Rules (guidelines) of the Central Bank of Sri Lanka (CBSL), to invest in Long Term Debt instruments, the minimum issuer requirement should be in the A3 level (as per Moody’s rating system), as stated in the Auditor General’s Report on the Central Bank dated 6th July 2012. As per Moody’s rating system (Obligation rated ‘A’ are considered upper medium grade and are subject to low credit risk). The Complainant annexes a table stipulating the credit rating system of three globally recognized credit rating agencies, namely, Moody’s Investors’ Service (Moody’s), Standard and Poor (S&P), and Fitch Ratings (Fitch) marked as X1 and pleads the same as part and parcel hereof. A copy of the Report submitted by the Auditor General’s Department to the meeting of the Committee of Public Enterprise (COPE dated 6th July 2012 on the Central Bank is marked herewith as X2 and pleaded as part and parcel of this complaint.
7. I state that the above requirement has to be complied with when making investments as per Section 5.2.9 of the FRM guidelines. It further states “notwithstanding the above, CBSL may invest in fixed income Securities issued by sovereign up to the maximum amount as specified by the Monetary Board that would significantly enhance the rate of return in foreign reserve management after careful consideration of market conditions”. A copy of such Foreign Reserve Management Guide Lines is marked herewith as X3.
8. I state that CBSL on 5 April 2011 had invested in Greek Government bonds which had a face value of EUR 30,000,000 for EUR 22,163,500 (Rs.3,472,576,045) purchased from the Secondary Market through intermediaries namely Morgan Stanley, Jefferies & Com. Inc., Royal Bank of Scotland Plc., Commerzbank AG on the 5th of April 2011. It is apparent that the bonds were trading below the face value, entailed a realizable value far below the Market Value of the secondary Market due to the debt crisis the government of Greece was saddled in, and the said Bonds were purchased through the intermediaries paying a high price when the actual value was far below the price that was paid for the purchase.
9. It is observed that at the time of the investment the long term debt rating for Greece had been downgraded to “B1” by the Moody’s rating agency. Obligations rated “B” are considered speculative and are subject to high credit risk. as set-out in the documents marked as X1 and X2 to this application.
10. I state that at the time of the investment, Greece was entrapped in a debt crisis and international financial rating agencies had downgraded its economic outlook and its ability to maintain financial obligations. The high risk involved and volatility in investing in Greek government bonds is common knowledge and does not require careful scrutiny or consideration of market conditions by professional researchers.
11. I state that the Greek Economy has been in dire straits since early 2008 and has continued to further deteriorate. The Complainant further states that recession was expected to be deeper in 2011/12 as Real GDP growth recorded a negative growth, the lowest -6% since the beginning of the Greek recession in 2008 as set-out on page 45 International Monetary Fund Country Report No.11/351 – Greece: Fifth Review under the Stand-by Arrangement, Rephrasing and Request for Waivers of Nonobservance of Performance Criteria; Press Release on the Executive Board Discussion; and Statement by the Executive Director for Greece (December 2011).A copy of pages 1 and 39 – 46 of the said report is marked as X4.
12. I state that it was a widely accepted fact that the default of the Bonds by the Greek Government was only a matter of time and that the probability of default varied between 20% to 30% in the case of Bonds with a maturity period of 1 year to approximately 80% to 90% in the case of Bonds with a maturity period of 10 years as illustrated by a graph, in an article published by the Center for Geoeconomic Studies. It is very much apparent that as per a projection carried out on three dates, specifically on 30th April 2011, 11th May 2011 and 1st September 2011 the probability of default was almost certain as illustrated in the graph.
The Complainant annexes hereto the said article marked as X5 to this Complaint.
13. I state that despite the alarming risk factor being very obvious, the CBSL did not pay any heed to take into consideration of the market trends and the projections based on the research papers that were currently available as at the date of the investment/purchase, and instead chose not to obtain the prior approval of the Monetary Board as required by law despite clear credit risk in a surreptitious manner with fraudulent intention.
14. I state that the requirement for the approval of the Monetary Board has been circumvented on the basis that these securities will be added to the high yielding tranche and in general to be kept until maturity and the approval for investment in the Greek Government bonds had been granted by Governor Cabral, a Deputy Governor and an Assistant Governor as per the Report submitted by the Auditor General’s Department to the meeting of the Committee of Public Enterprise marked as X2.
15. I state that it is appalling to note the sale of Bonds with a face value amounting to EUR 5,000,000 which had been purchased by the Central Bank of Sri Lanka at EUR 4,103,500 had been sold at EUR 3,300,000 on the 13th July 2011 merely three months subsequent to the purchase of the same, acting in conflict with all accepted principles and practices followed by financial experts in making investments causing loss to the Central Bank and the Government of Sri Lanka by the actions of the 1st Accused aided and abetted by the 2nd Accused.
16. The Complainant further states that investment in such high risk investments committed by the 1st aided and abetted by the 2nd Accused are according to accepted principles and practices of the financial experts to be kept until maturity, with proof as not only the basis of the decision to purchase the bonds but also the rationale of the decision to sell the bonds merely 3 months after the purchase of the same incurring a loss of EUR 803,000 as pointed out in the Report submitted by the Auditor General marked as X2 to this Complaint is further proof of the commission of Criminal Breach of Trust.
17. I state that the Monetary Board headed by the 1st Accused had taken a decision to accept the Greece Debt Swap Programme under which the CBSL was compelled to accept the following in respect of Bonds containing a face value of EUR 15 Million as per the document marked as X2:
19. The Complainant respectfully states that the Leader of the Opposition and the Leader of the United National Party, which he represents, raised a question in Parliament under Parliamentary Standing Order 23/2 in connection with the purchase of Greece Bonds and the same was answered to by former Minister of International Monetary Cooperation. The said former Minister has communicated to The Parliament of Sri Lanka on the issuer of the Bonds, date of issue, currency in which it was issued, date of maturity, the specific purchase date, the brokers through whom the same was purchased and the consent of the Monetary Board. The said detailed answer is annexed hereto marked as X6.
20. I state that as per the answer given by the said former Minister he has failed to disclose the fact that Bonds valued at EUR 8.025 Million consisting 53.5% of Bonds containing a face value of EUR 15 Million was wiped out as disclosed by the Auditor General in the document marked X2.
21. However former minister Amunugama disclosed to the Parliament by tabling X6 that US$ 5.5 Million was incurred as a loss in the sale of Bonds with a face value of EUR 10 Million, in the sale that occurred in November 2011, in addition to a further loss of US$ 1.1 Million that was incurred in the sale of another set of bonds with a face value of EUR 5 Million..
22. The Complainant further states that the loss incurred of US$ 5.5 Million by way of a sale of Bonds with a face value of EUR 10 Million and the sale of the said bonds with a face value of EUR 10 Million itself, has not been disclosed in the Auditor General’s report marked as X2 above.
In the circumstances it is stated that the total loss incurred by the Central Bank of Sri Lanka as per a compilation of the revelations made in the Auditor General’s report marked as X2 and the Answer given by former minister Amunugama in Parliament is illustrated in the table below:
23. I state that despite the above investment being contrary to accepted procedure it is questionable and is implicit of dishonest, and/or intentionally deceitful conduct of 1st Accused Governor Cabral.
24. I state that the purchase of the Bonds issued by the Government of Greece by Mr. Cabral has not been done at source namely the primary issue and instead has been purchased through the secondary market from those who have already purchased such bonds through brokers which is unprecedented.. Namely the said intermediaries were Morgan Stanley, Jefferies & Com. Inc., Royal Bank of Scotland Plc., Commerzbank AG on the 5th of April 2011.
25. I state that either X2 or X6 does not reveal the Market value of the bonds as at the date of purchase on the 5th of April. 2011 from the intermediaries nor the market value as at the date of the answer given in the Parliament..
26. I state that as per the revelations of the former Minister Amunugama and the Auditor General the loss of Public Funds to the State is a sum of approximately Rupees 2.14 billion.(6.6 M US$ + 8.025 M Euros). This sum is not conclusive as the present Market value of the remaining bonds are not known.
27. I state that as the impugned investment has been carried out arbitrarily and capriciously at the outset, only with the prior approval of the Governor, Deputy Governor, and an Assistant Governor without any assistance from the research division of the Monetary Board or the Secretary to the Treasury who is the link between the Government and the Monetary Board the impugned investment in totality is ab initio illegal and has now caused an enormous loss to the taxpaying citizens of the country.
28. I state that this investment has been carried out at the behest of the 1st Accused Cabral and the 2nd Accused Mahinda Rajapaksha in an a illegal dishonest manner with intent of personal gain as these two persons are on the Monetary Board by virtue of their official status as the Governor of the Central Bank and the 2nd accused having aided and abetted the 1st accused to commit the offence of Criminal Breach of Trust.
29. I state that 1st accused Cabral and the 2nd accused Mahinda Rajapaksha have committed offences punishable under section 388 of the penal code punishable under section 389 of the Penal Code and having committed the offence on Public Property Act and Act No.19 of 1994 – the Commission to Investigate Bribery and corruption.
30. I state that as a result of this arbitrary and irresponsible exercise of authority by the said Cabral and Mahinda Rajapaksha the citizens of the country are now called upon to pay for the losses incurred. These actions and omissions have a material bearing on the State and the citizens of the country.
31. I state that a Sinhala Translation of this Complaint will be filed in due course. However in the name of National Interest your Honour’s permission is sought to support this Complaint moving for summons and an interim order as prayed for in prayer (2) as mentioned below.
32. I state that:
(a) from the foregoing facts it is clear that the relevant financial supervisory institutions set up by law have been suppressed with information and their sanction not obtained and such illegal, deceitful and fraudulent conduct by the 1st and the 2nd accused have resulted in causing grave loss, damage and mischief to the Government and the public, wrongfully and unjustly causing the alienation and/or unjustly causing mischief to the property of the public held in trust, in blatant violation of all applicable laws.
(c) the said illegal, fraudulent, deceitful and unlawful acts of the 1st and the 2nd accused by making / aiding and abetting in making such investment has caused enormous losses and an economic burden to the Complainant and the citizens of the country.
(e) the averments contained herein, supported by the Documents annexed herewith, disclose the startling, wrongful, unlawful and fraudulent transaction causing enormous loss and detriment to the Government and the public, including the Complainant violating the rule of law, with misuse and abuse of power in breach of the trust of the people by the arbitrary acts of the 1st accused Cabral and the 2nd accused having caused the offence of Criminal breach of Trust.
33. I state that the 2nd accused being the Minister in charge of the subject of Finance and the 1st accused was directly reporting to the 2nd accused. This incident causing loss to the EPF was very much publicized and was reported in the public domain. How ever the 2nd accused aided and abetted the 1st accused by knowingly ignoring his illegal conduct and encouraged the 1st accused to commit the offence of Criminal Breach of Trust of the funds of the EPF that was entrusted with the 1st accused as the head of the Monetary Board.
34. I urge that a Sinhala translation of this plaint will be filed in your honour’s court in due course.
35. The 2nd Accused was also holding the office of the President of the Republic of Sri Lanka. He has relinquished office on the 8th January 2015. The 2nd Accused Mahinda Rajapaksha does not enjoy any immunity. He can be sued in any court of Law.
36. I wherefore seeks summons/notices to be issued in the first instance on the 1st and 2nd for the offence committed under and in terms of section 388 of the penal code accused and to take steps to punish them under section 389 of the penal code.
Read over and explained and ]
Having understood the contents ]
Therein signed and affirmed ]
To at Colombo ]
On this 12th Day of August 2015 ] Before me
Justice of the Peace