By Eran Wickramaratne –
The appointment of Mr. Nivard Cabraal as Governor of The Central Bank brings to the forefront the credentials required to hold key positions in President Gotabaya Rajapaksa’s government.Vistas of Prosperity and Splendor has devolved into Vistas of Corruption and Negligence. This started with the swearing-in of a convicted murderer as a Member of Parliament, admittedly now on a judicial appeal. The saga continues with State minister Ratwatte allegedly threatening prisoners in state custody. Ratwatte’s appointment to high office disregarded due process where previous allegations have gone unanswered. Appointment of the present Central Bank Governor also disregards due process where MR. Cabraal’s name has surfaced in many scandals.
Often such criticism is dismissed as political mud slinging without proper investigation and judicial probe. In a country where the judicial system is held in esteem, if the accused has been falsely implicated, an independent investigation followed by an impartial judicial hearing will clear the good name of the accused. If the allegations are proved to be correct, then the accused must be punished.
The Central Bank’s (CBSL) primary responsibility is to maintain financial system stability and economic and price stability. The founding financial architects of the CBSL believed that the foundation of the financial system is trust. To maintain this, the individual appointed to its highest office should be trustworthy beyond question. Is Mr. Cabraal of such character?
It is well known that there were many questionable transactions that the Central Bank was involved in when Mr. Cabraal previously held office as Governor. This includes investments in Greek bonds, hedging transactions of the Ceylon Petroleum Corporation, investments of the Employees Provident Fund (EPF), issuing Treasury Bonds and its secondary market transactions.
Given the serious nature of these allegations, former President Sirisena convened a Presidential Commission of Inquiry. The then Monetary Board of the Central Bank, under the Chairmanship of then Governor Dr. Indrajit Coomaraswamy appointed BDO and KPMG to conduct the forensic audits. The completed audit reports were made available on the 7th, 8th and 9th of November 2019, and entailed the following:
1. Issuance of Treasury Bonds during the period from 1st January 2002 to 28 February 2015 by the Public Debt Department.
2. Primary and secondary market transactions of the Employees Provident Fund involving Treasury Bonds issued/transacted during the period from 1 January 2002 to 28 February 2016.
3. Transactions of the EPF from 1 January 1998 to 31 December 2017 in listed and unlisted equities.
4. Issuance of Treasury Bonds and remittances of funds received to the General Treasury during the period from 1 February 2015 to 31 March 2016 by the Public Debt Department.
5. Conduct of the Supervisory and regulatory role by the Superintendent of Public Debt/Director, supervision of non-bank financial institutions pertaining to selected primary dealers from 1 January 2009 to 31 December 2017.
The forensic audits name 19 companies that allegedly caused loses to the EPF through “pump and dump” schemes. These investments have mostly taken place during the 2010-12 period. The losses through these transactions have been several billion rupees. The EPF has more than 18 million contributors and is the main retirement saving of private sector workers in the country.
While no single individual is responsible for these losses, Mr. Cabraal’s name appears more than two dozen times in the forensic audit. Mr. Cabraal has not appeared before the forensic auditors neither provided access to his computers. What is he hiding?
The many conflicts of interest with members of his family have been highlighted in the forensic audits as they have not been declared by him.
In 2014, Zuberi a US national was hired by the CBSL entered a contract to improve Sri Lanka’s image in the United States. Sri Lanka agreed to pay Zuberi a total of $8.5 million over the course of six months in 2014. American federal prosecutors unearthed that Sri Lanka had sent a total of $6.5 million pursuant to the contract. Zuberi was sentenced to 12-year imprisonment for this crime by the US court in February 2021.The then Monetary board and Governor Cabraal have many questions to answer on this transaction.
Hence, several elements of these contractual arrangements have given rise to suspicion of a potential money laundering arrangement. This transaction must be investigated in full. The U.S judiciary has convicted an individual who has fraudulently benefitted from Sri Lanka’s tax money but no investigation in Sri Lanka! Why cover up? Who are we protecting?
Since the forensic reports were released the week before the Presidential election of 2019, the outgoing government had no opportunity to direct the Attorney General to pursue legal action. If President Gotabaya Rajapaksa has made the appointment of Cabraal on the basis that he has not been convicted of wrong doing , then this argument can be extended to a previous Governor, Arjuna Mahendran. Will the President appoint Mahendran to high office as Governor of the Central Bank?.
Although the President has the prerogative of making significant appointments, determining the suitability of the individual must not be confined to the Office of the President. The 19th Amendment to the Constitution had the desired mechanism in place where the nominee of the President had to be approved for being a “fit and proper” person for appointment into high office. In the case of the appointment of Mr. Cabraal, there has been multiple public concerns raised over a period of time. Mr. Cabraal, nor the President, have had the decency to answer any of these questions.
Since assuming duties, it is reported that the Secretary to the Monetary Board, Mrs. K. M. A. N. Daulagala, has been relieved of her duties. Is the new Governor trying to suppress any evidence that could be raised in a future investigation? Who will ensure that evidence and witnesses are safe under the custody of the Monetary Board?
Today, the Sri Lankan public expect politicians, more specifically, the 225 Members of Parliament, to correct the wrongs in society, with respect for due process. As one politician once said, “Don’t you understand that the system works for us – so why should we change it?”
If we are to make the system right, establish the rule of law and create a more just and fair society, then all arms of government, including civil society, and media must take responsibility. We cannot consent to the Vistas of Corruption and Negligence.
*Eran Wickramaratne M.P – Former State Minister of Finance