24 September, 2020

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Sri Lankan Airlines & Weliamuna Report: Prosecution Of Negligent Auditors & Directors?

By Amrit Muttukumaru

Amrit Muttukumaru

Amrit Muttukumaru

Large-Scale corruption will continue to thrive so long as professionals – particularly auditors and lawyers (i) are not held accountable (ii) ‘named & shamed’ (iii) punished – for dereliction of duty and wrongdoing. Can any large-scale corruption occur without the complicity of professionals? Are not accountants and auditors the first line of defense against corruption in all entities dealing with financial resources?

This is precisely what is avoided even by purported good governance activists and the media in Sri Lanka. Although they talk the hind legs off a donkey on the evils of corruption, they fail to bite the bullet in regard to ‘naming & shaming’ professionals and bigwigs in the corporate sector.

Based on the Prime Minister’s statement, the J.C. Weliamuna Report into alleged corruption and abuse of power in Sri Lankan Airlines confirms this malady.

The Report which confirms in shocking detail what the discerning public has long suspected appears to have missed the wood for the trees by neglecting to give due attention to the fact that the alleged corruption and abuse of power by Chairman, Nishantha Wickramasinghe, Kapila Chandrasena (CEO) and others took place under the watch of the airline’s long standing auditors – Ernst & Young and its Board of Directors which included Messrs. Susantha Ratnayake, Nihal Jayamanne PC, Sunil G Wijesinha, Sanath Ukwatte and Manilal Fernando – many of them also in its Audit Committee – some even as Chairmen!

SriLankan airline 1

*Picture courtesy SriLankan Airlines Facebook page

Directors

As per Annual Reports, former Directors include:

Mr. Susantha Ratnayake – Chairman, Audit Committee for some years. He is a former Chairman, Ceylon Chamber of Commerce and incumbent Chairman, John Keells Holdings PLC – arguably the country’s leading private sector entity. He is also Chairman, Ceylon Tobacco Company PLC.

Mr. Nihal Jayamanne PC – Chairman, Audit Committee and its member for some years. He is a leading lawyer who is Chairman of the Law Commission of Sri Lanka and the Company Law Advisory Commission. He is also Chairman, Seylan Bank PLC.

Mr. Sunil G Wijesinha – Chairman, Audit Committee. He was a Director when Dr P B Jayasundera was Chairman and continued for a period when Mr. Nishantha Wickremasinghe succeeded him. He is a Chartered Engineer and until recently was Chairman, NDB Bank. Previously he was Chairman, Employers’ Federation of Ceylon and Deputy Chairman, Sampath Bank PLC.

Mr. Sanath Ukwatte – Member, Audit Committee is a leading hotelier. He is Chairman, Mount Lavinia Hotel Group

Mr. Manilal Fernando – a Director for some years is a lawyer. He is a Director of Aitken Spence & Co. PLC and Ceylon Guardian Investment Trust PLC (A member of the Carson Cumberbatch Group). These are leading corporate entities in Sri Lanka,

What does this convey about the professionals concerned and the private sector projected as the country’s ‘engine of growth’?

The Weliamuna Report while rightly recommending “criminal investigationsinto instances of alleged corruption which includes the entire re-fleeting process with brand-new aircraft costing $2.3 billion and “noting instances” where former Chairman Wickramasinghe and some others in top management should be “prosecuted” is apparently silent on proposed punitive action against the airline’s auditors and Board of Directors for any negligence of fiduciary responsibility inimical to the public interest.

‘Mihin Lanka’

Since we are on the subject of airlines, was it not a Past President of the ICASL and the OPA – Mr. Lakshman Watawala who was mainly responsible for the alleged “within 24 hours” BOI approval of ‘Mihin Lanka‘ not withstanding his reported admission to then COPE member Ravi Karunanayake (now Minister of Finance) “under normal circumstances it would take six to eight weeks at least”! (‘The Sunday Leader’ 10 December 2006).

The question is – will the government hold Mr. Watawala who has responsibility for many accounting bodies accountable?

Ernst & Young

The case of the airline’s longstanding auditors – Ernst & Young is intriguing.

Does not the question also arise why auditors are allowed to hold office in the same entity for extended periods?

Ernst & Young (together with PwC) was faulted for ‘Professional Misconduct’ by (i) the Supreme Court (ii) the Attorney-General (iii) Parliament’s COPE vis-à-vis the fraudulent privatization of the Sri Lanka Insurance Corporation. The ‘Supreme Court’ (SC FR Application No: 158/2007) in its landmark Judgment delivered on 4 June 2009, held the SLIC privatisation to be “illegal and invalid ab initio” and had ordered the removal “forthwith” of the auditors, Ernst & Young.

Although ICASL’s ‘Ethics’ Committee more than eight years ago endorsed the findings of its Investigating ‘Panel’ that a prima-facie case of ‘Professional Misconduct’ had been established against Ernst & Young and PwC and all their Partners, the ICASL has still not concluded its purported investigation of my ‘complaint’ of ‘professional misconduct’ made as far back as 8 August 2005. This appears to be of no interest to anyone!

It must be noted that (i) Dr. P.B. Jayasundera – former Treasury Secretary and former Chairman of the airline was Senior Policy Advisor to Ernst & Young (ii) The auditors of the private media controlled Press Complaints Commission of Sri Lanka as per its website is Ernst & Young.

Any guesses who the auditors are of Transparency International Sri Lanka of which Mr. J.C. Weliamuna is Chairman? As per its website it is Ernst & Young!

To cap it all, the incumbent President of ICASL – Mr. Arjuna Herath is a Partner of Ernst & Young.

Since it seems inappropriate to have the ICASL under the Ministry of Trade and Commerce, it is suggested that it be brought under the ambit of either the Ministry of Finance or Ministry of Policy Planning and Economic Affairs.

Conclusion

On the subject of ‘complicity’ Wikipedia makes the following observation:

“An individual is complicit in a crime if he is aware of its occurrence and has the ability to report the crime, but fails to do so. As such, the individual effectively allows criminals to carry out a crime despite potentially being able to stop it from happening, either directly or by contacting the authorities. The offender is a de facto accessory to the crime, rather than an innocent bystander.”

In this instance we are referring to auditors and Board Directors with fiduciary responsibility!

Those reluctant to hold professionals accountable and ‘name & shame’ wrongdoers have clearly lost the moral authority to speak of good governance and any pretense to combat corruption.

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Latest comments

  • 3
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    As a Ex – employee of Srilankan i have learnt through another Ex-employee who is now based in Doha that around last 2009 A srilankan A320 flew in to Doha only with the operating crew, Which surprised the large Ex srilankan community who are working now at the Doha airport. Later this aircraft was boarded by Qatar rulers wife and her 50+ entourage. This aircraft then flew them to Male for their personal vacation spend few days and flew them back to Doha . And ended up flying back to CMB empty again. (No Way to verify this story but if somebody else can please do so, we can shed more light then)

    And A little bird told me that the recent Visit by the Qatar Emir to Srilanka was not a Diplomacy trip by any means . It was more of a business proposition trip. And this business proportion is to completely Acquire the Mattala International Airport for the use of Qatar Airways , which at that time i had troubled believing. But then i saw the news article in Sunday times saying all restriction for foreign carries in Mattala Intanational Airport has being lifted and Srilankan Airlines have moved away from ground handling operations.

    So lets wait and see whether my little bird was saying the truth

  • 1
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    Sri Lankan Airlines goes as a private company and does not come under COPE. It’s an absurd situation.

  • 2
    2

    Mr. Muttukumaru is absolutely right. The Airline Management cannot go on doing these deceitful things if the Auditors within and outside carry out their duties properly.

    These major Auditors are international crooks covering their backs behind fame and name. This is true with most of the American owned business organisation. Even The Amnesty International is private American company. The LTTE funds them with sweeteners and are held bent on persecuting the Sri Lankan government for war crimes etc. True innocent people died during the war. War is DIRTY when the worlds ruthless terrorist organisation backed by most of the western countries allowing these rogues to raise funds fight against a duly elected government for 30 odd years.The majority of people are trying hard to live together.

    Kick these rogue companie out of the country. There are enough decent Auditors in Sri Lanka to audit our public owned organisations.

  • 1
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    You may blame MR, it appaers to me he has picked the best of the best to run the airline. If the malady is with all Lankans, don’t blame MR, blame ourselves for we all are opportunistic greedy pigs.

    • 1
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      Hello Paul, “best of the Best” ? Why ? At least a couple of these directors have talked to the president about his brother in Law’s antiques. He did nothing . He just forced those concerned to continue to sit on that board!
      When the country is headed by a clone of Sadham Hussain, what can the best of the best do?
      When the clone of Uday Husain use girls ( supposedly with honors degrees from nothing less that Cambridge ) what do you do? Say no? Who would take notice?
      So Mahinda and his Wife who insisted on giving a job to an unqualified , sicko should be held responsible.

      • 0
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        If the Chairmen/ Deputy Chairmen and the Directors of John Keels, Seylan Bank, NDB Bank, Sampath Bank, Emplyers Federation, Mt Lavinia hotels group and Aitken Spence group – assuming these are not MaRa appointments/relatives- are not “Best of the Best” in business and industry in today’s Sri Lanka, who would be?
        I did not know Uday Husain was in SAL board, hence not in a position to comment.
        The simple rule in governance is that if you can’t bear the stench, then get out. A lower grade employee might find it hard, not the multi millionaire directors.

  • 1
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    The article, to some others may looks academic but it is a presentation of facts. I at at times wonder why professionals are finally go scot free? This is the absolute truth in Sri Lanka but not the developed world. I during my stint in SL got so pi….. o..being a witness to this. It is time we think of our morale obligations people.

  • 1
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    Keep going Amrith Muthukumaru………….
    You have shown where Weliamuna FAILED.

    He should have begum his investigations with the Audit reports.
    Weliamuna has failed and moreover has protected his Auditor Earnest & Young…………

  • 5
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    Mr.Muttukumaru I salute your bravery. What the country is missing today are a few more people like you! You were spot on with the fake transparency NGO! It is a privileged club managed by one making his living selling anti-corruption tales. The so called anti-corruption NGO was founded in SL in late 1990s. Since then it does not have more than 50 members (for over 16 years!). What type of values does this practice foster? Then they select the board of directors (BoD) from among this privileged club and keep rotating happily forever. Anyone can be admitted to the membership only with the nod of the BoD. So you and I however much we want to fight corruption in this land are not privileged to join this exclusive elite anti-corruption club. Members can remain only for a limited term as long as they please the BoD and the NGO master whom we all know. The BoD and membership hold office for a limited period and they have to win the confidence of one man to remain in the membership or BoD. The BoD of this NGO consists of cohorts or “podiyens” of this NGO boss. If you see the records at the registrar of companies, since inception a lady junior lawyer of the boss is there right through in the privileged membership and BoD rotating merrily forever to enable the unscrupulous agenda of the boss. If this is not cronyism, then how else do you define it? Democracy, transparency, accountability is for the country and not for the so called crusaders of this cause. Just remember what we have in our country is what is deeply rooted in our society. What we have at our home is what we find in our village. What we have in our village is what we find in our country. Please don’t be amused what we have in these so called anti-corruption, pro-democracy agencies is precisely what we find in our country! We are such a stupid nation to reckon these jokers as saviours of our nation from corruption and dictatorship. It’s time people start speaking up!

    I doubt you can carry on your bold exposes long. They are all out discrediting you and finish you off. Keep up you good work. We’ll support you…!

  • 0
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    I agree with Mr.Muttukumaru and would like to add a few comments.
    Even in the Greek Bonds and the Hedging deal what were the other Monetary Board members doing. Sitting on their asses and drawing a fat monetary package given to them to keep their mouth shut.
    It not Nivard who should be investigated it should be the entire Monetary Board who should be be investigated for neglegence of duty and misconduct.

    It is sad today that in Sri Lanka Directors of Companies are not held responsible for the conduct of the Derectors. They all want to be Directors for the fat monetary package they receive.

    Take for instance Mr. Russell De Mel former CEO of NDB Bank who leaked confidential information of the former Cheif Justice to the press and the public now sits on the Board of several companies.
    What is Sri Lanka coming to????

    The government & the BASL should take note of all these and bring good governance to the Public companies where the public have invested there funds.

    • 0
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      Kumar not all of the directors sat there for money. There are directors who have never taken a rupee, nor a single free ticket ,on that board. Most of them abused the perks though. That is also a reason the air line operated like that I guess. But do not lump all of them in one lot.
      Go back and find out the perks used by the Directors. Then you will know. Ukwatte ,is he a friend of Chandiram and Kapila?
      Did Chandiram buy gold watches for Nishantha and the legal wife. Who bought Nishantha’s tart a watch for 5000 dollars?

    • 0
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      Kumar, neither the greek bond purchase nor the hedging deal were corrupt acts for the benefit of any one or more individuals: they were purely commercial transactions, with hindsight we could say, that went sour. Do not confuse the readers by bringing this up in argument on auditors and directors derelict of duty.

  • 2
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    On the subject of ‘complicity’ Wikipedia makes the following observation:

    “An individual is complicit in a crime if he is aware of its occurrence and has the ability to report the crime, but fails to do so. As such, the individual effectively allows criminals to carry out a crime despite potentially being able to stop it from happening, either directly or by contacting the authorities. The offender is a de facto accessory to the crime, rather than an innocent bystander.”
    Hello! This is correct in today’s context not, prior to 8th January. One wants to resign and not be a party to it? King says stay , you stay.report to whom? Mohan Peris was pretend CJ ?
    The king and his family, together with all and sundry hair dressers , facial experts, even Shyamals who clean nails, get on these air crafts as they pleased. Who do you report to? Mothers and sons , together with CEo s got commissions buying and leasing planes. Who do you report to? Ali baba? Brothers in law were jumping every one and every thing. Who do you report to?
    Do not forget we had the clones of Sadham Hussain and Uday Hussain. Do you really mess with them?
    Find out first, before making accusations. Some of these directors tried to do their best under trying circumstances, and did not take a cent as emolument and never used any perks? At least this is what I am hearing.

  • 0
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    mr Muthukumaru is right. Ernest and Young ,if I remember right audited the golden key account as well. The problem is that the audit firms are too scared to bring out too much as,they could lose the audit.
    On the other hand we were under A Dictator. White vans and Mohan Peirs’s law. Who would want to be confronted by that?
    Mr Susantha Ratnayake is doing more than fine with John Keells . I have also heard from a little girl in marketing ( not sure if this is correct) that Mr Ratnayake has never taken any emoluments from the air line and he has NEVER EVER taken a free ticket from the air line. I. Would think that is not all that common,when most people like to get in to air lines for free tickets. So under those circumstances why would he not , say and do the right thing by the air line? May be they ignored his advise? Any way it is good that these things will be investigated ,for us to know what really happened.

    I can not imagine all those guys sat there and allowed the Wickramasinghe joker to ‘F ‘ around unless they were beholden to them for money and Perks or they were scared of the dictator and his white vans?

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