UPFA leaders are busy preparing outlines for their polls campaign. As reported earlier, among the main issues they claim are “threats to national security.” This is the result of the Government’s talks with the Global Tamil Forum in London and related issues.
Another is the Central Banks Treasury Bond scandal. Details of this scandal have entered the public domain.
Here is how the issue played out in the past days. In the hours before dissolution of Parliament on Friday June 30, Communist Party leader D.E.W. Gunasekera, Chairman of the Committee on Public Enterprises (COPE), was very busy. He wanted to lay before the public the details of the issue at the Central Bank of Sri Lanka (CBSL) over the Treasury Bonds. Gunasekera had worked on the interim report by a Subcommittee which he had chaired. The draft was being finalised on Thursday night (June 30) for presentation to Parliament the next day, Friday (June 31).
Ironically, five parliamentarians who were among the 13 members did not turn up in Parliament that night to place their signatures. Of the eight present, three were from the United National Party (UNP) and the fourth from the UNPs ally, the Sri Lanka Muslin Congress (SLMC). They raised strong objections. They argued that they had not studied it. The UNP foursome had their way. Chairman Gunasekera telephoned the Speaker and they agreed it would be presented on July 7 – the same day the House was billed to take up the vote of No Confidence against Finance Minister Ravi Karunanayake. However, Parliament was dissolved ahead of that.
The foursome who objected were Sujeeva Senasinghe, Rosy Senanayake, Eran Wickremeratne and the SLMC’s Hassan Ali. Those who wanted to ensure that the report is presented in Parliament were Lasantha Alagiyawanna, Weerasumana Dissanayake and Rajiva Wijesinha. Also in favour was Chairman Gunasekera. “I had to listen to the dissenting views since this is not my own report,” lamented Gunasekera. He told the Sunday Times, “the UNP is saying I wanted to bring it to the House (Parliament). The SLFP is saying I deliberately delayed it.” He said he took no sides and did what he believed was an honest job.
Those parliamentarians who absented themselves and thus left a division of four on either side were Rajitha Senaratne, Arjuna Ranatunga, Susil Premajayantha (who was away in the US), Sunil Handunetti from the JVP which has been very vocal against corruption and E. Saravanapavan of the TNA. As a result, copies of the COPE draft only ended up in the hands of members of the Subcommittee. Copies have since been widely circulated.
A copy of the 19-page document obtained by the Sunday Times makes indictments on the Central Bank Governor Arjuna Mahendran and his son-in-law Arjun Joseph Aloysius. It has held that Governor Mahendran and Perpetual Treasuries Limited, a company held by his son-in-law Arjun Joseph Aloysius (who resigned two months before the transaction) but still co-owner of the holding company “had a related party transaction.”
• ”Senior management” of the Central Bank have given verbal instructions to increase the Treasury bond issue ten times, from one billion rupees to Rs 10.058 billion. There is a Minute that the “Governor instructed to raise funds up to Rs 10 billion taking into consideration additional fund requirement of the Government.”
• Governor Mahendran visited the Public Debt Department of the CBSL on two occasions on February 27 when the Auction took place. This has never happened before. He had visited around 10.45 a.m. whilst the bidding process was going on and remained up to the time of closing.
• The Monetary Board of the CBSL has not approved the increase in the amount of Treasury Bond to Rs 20,708. They had only ratified it after the issue was carried out.
• Though Perpetual Treasuries Limited has submitted bids for the Treasury Bonds previously, their bids have not been accepted in large amounts prior to February 27, 2015. However, after this date the majority of the bids placed by them were a success.
• Perpetual Treasures Limited had shown extraordinary performances after February 27, 2015. The maximum amount of the bid offered by them before was Rs 250 million.
• Perpetual Treasuries Limited is a fully owned subsidiary of Perpetual Capital (Pvt.) Ltd. Geoffrey Joseph Aloysius and Arjun Joseph Aloysius are the shareholders, with equal shares, of Perpetual Capital (Pvt.) Ltd. Arjun Joseph Aloysius was a Director of Perpetual Treasuries Limited. He resigned on January 16, 2015. He is the son-in-law of the Governor of the CBSL. Since Perpetual Treasuries Limited is a fully owned subsidiary of Perpetual Capital (Pvt.) Limited, the interest with Perpetual Treasuries Limited with Arjun Aloysius cannot be ruled out. Thereby it is evident that the Primary Dealer Perpetual Treasuries Limited and the Central Bank had “a related party transaction.”
• Ms Shiromi Noel Wickremasinghe was appointed as a director of Perpetual Treasuries (Pvt.) Ltd. on December 23, 2013. She continued in office till March 9, 2015. She is the sister of the Central Bank’s former Governor (Ajith Nivard Cabral). Therefore, it was observed that there could have been related party transactions between the Central Bank of Sri Lanka and Perpetual Treasuries Limited at that time also.
• The behaviour of Perpetual Treasuries Limited on the Bond issue, before and after, showed suspicious conduct. They had a capital of Rs. 1,20.84 million. According to Public Debt Department Circular the company could bid only up to 12.5 times of the capital. That amounted to approximately Rs 12,760.60 as at February 27, 2015. It had bid for Rs 15 billion which is 14.9 per cent.
• During the last few minutes of the auction time, Perpetual Treasuries asked the Bank of Ceylon to bid on its behalf. This is the first time that a Primary Dealer had asked another Primary Dealer to bid on its behalf. That request was at 10.48 a.m. with just 12 minutes for the issue to close. The Bank of Ceylon had asked for an extension of ten minutes.
The COPE subcommittee report was the outcome of a vote of no-confidence moved by opposition MPs against Governor Mahendran. It was listed in the Order Book without a date being allotted. Speaker Chamal Rajapaksa was of the view that matters in the motion should be investigated by a Subcommittee of the COPE. After a preliminary meeting on May 22, the COPE held sittings from May 29 to June 23 where oral, documentary and audio evidence were examined. Officials of the Central Bank, Treasury and Bank of Ceylon were among those who testified. The Commission to Investigate Allegations of Bribery or Corruption is also investigating a complaint against CBSL Governor Mahendran.
UNP targets DEW
As is clear from the interim draft report of the COPE, the UNP Government appears to have shot itself in the foot. At first it appointed a three-member team of lawyers who were not conversant with Treasury Bond issues. Their report was delayed for more than a month until the Opposition mounted pressure. When it was released, a provision not in the report that the Governor had no direct link to the Treasury Bond issue found a place in a Government news release. Now, even after dissolution making the COPE investigations officially invalid, some UNPers are targeting the COPE Chairman perhaps in the belief that the issue would blow over. To the contrary, they are re-igniting it with many asking why the critics were exceedingly sensitive over any probe. That no doubt lends credence to public perceptions that something is rotten.
President Sirisena, who declared ahead of the presidential election that he would remain neutral, has thrown in his lot with Rajapaksa. That indeed has jolted the UNP which was confident of a comfortable victory with a divided UPFA. The UNP faces a bigger challenge at the polls. Sri Lanka faces an even bigger challenge.