Situation Report

There is another sequel to The Sunday Times exclusive revelations last week on the controversial MiG-27 procurement deal from Ukraine. Now, the Government of Sri Lanka will investigate the billion-rupee transaction, which has led to widespread allegations of corruption and serious irregularities.

Prime Minister Ratnasiri Wickremanayake declared on Thursday that the Government had decided to appoint a Parliamentary Select Committee to probe matters relating to the MiG-27 deal. This is in addition to another Select Committee to probe Opposition allegations that the Government made cash donations to the Liberation Tigers of Tamil Eelam (LTTE) ahead of the November 2005 Presidential elections and thereafter. Premier Wickremanayake's announcement came when he participated in the national television network Rupavahini's programme "no aesu prashna" (or - questions not asked).

Government sources said yesterday a resolution for the appointment of the Parliamentary Select Committee will be moved when sittings resume on August 21. It is likely that the terms of reference would be formulated in conjunction with Opposition parties.

The Government of Ukraine has already ordered a probe into the MiG-27 deal as revealed in The Sunday Times last week. This is to ascertain why it was touted as a "Government to Government" deal when in reality it was made through a third party - an unknown company named Bellimissa Holdings Ltd., which operated from a London address. They suspect this to be a ruse.

If nothing else is known about Bellimissa Holdings Ltd., The Sunday Times revealed last week, that the name of one individual transpired in the Sri Lanka Air Force (SLAF)-Ukrinmash Contract. That is M.I. Kuldyrkaev who signed as "Director, for and on behalf of Bellimissa Holdings Ltd.,"

According to an authoritative source in the Ukrainian capital Kiev, investigating officials there are still unable to make contact with Mr. Kuldirkaev. They have ascertained that the man who lived in the UK with his family has left to a Latin American country despite repeated appeals to return to Ukraine to answer a number of questions.

There was an inadvertent error last week. The contract between the Sri Lanka Air Force and Ukrinmash, a subsidiary of state owned Ukrspetsexport, was concluded in Kiev and not in Moscow. However, it was signed on behalf of the Commander of the SLAF by Kulasena Thantrige, Counsellor/Head of Chancery, Embassy of Sri Lanka, Moscow. Signing on behalf of Ukrinmash was its Director, D.A. Peregudov.

More details of why concerns of the Ukranian Government heightened emerged this week. Laws there forbid proceeds from the export of any product being remitted to another country. The requirement is that they should go to a bank in Ukraine. Even payment of commissions, widely practised in Ukraine, is made only thereafter. In all other military deals with Ukraine, some carried out through third parties acknowledged by that Government, as commercial deals, moneys have been directly remitted to Ukranian banks or financiers in that country.

However, in the case of the MiG-27 deal, the funds involved have, and are still going to Bellimissa Holdings Ltd., in London - a company that has no staff or office. (See Letter of Credit on this page). Nor are other particulars of the company like the Board of Directors, details of shareholders or a profile available. The SLAF-Ukrinmash Contract (article 23.1) stipulates:

"The BUYER and the SELLER are aware that a Third Party, Bellimissa Holdings Ltd. (in this Contract (Part I) referred to as the DESIGNATED PARTY") shall be involved to provide the finance needed in executing this project. All payments under this Contract, including direct payments pertaining to freight charge (except freight cost for air transportation of the first three units of the AVIATION PRODUCTS), termination, compensation, etc. shall be irrevocably assigned and paid to the DESIGNATED PARTY in consideration for obtaining the finance package. This shall include naming the DESIGNATED PARTY as the beneficiary in the L/C."

That is not all. Page 14 of the contract signed on July 26 says: "Bellimissa Holdings Ltd., represented by M.I. Kuldyrkaev, acting on the basis of the constitution of the Company (hereinafter referred to as the "Designated Party")…..

The question that naturally begs answer is whether the authorities in Sri Lanka knew of the Constitution of Bellimissa Holdings Ltd., when no other details of the company are known. This aspect has now come under scrutiny even by the Ukranian Government. The Commission to Investigate Allegations of Bribery or Corruption is now conducting a separate investigation into the MiG-27 deal.

The fact that no details of Bellimissa Holdings Ltd. is known raises several questions. It could be argued that besides commissions, the moneys paid could go to any questionable organisation.

The Sri Lanka Government should be commended for deciding, eventually to conduct a probe into the MiG-27 deal. Though the announcement came only after the Ukranian Government had begun its own probe, such a move is an acknowledgement that the issues publicly raised merited investigation. When The Sunday Times first broke the story about the MiG-27 deal on December 3, last year, in a front page report, Air Force and other Government officials were of the view that the deal should be probed. A Government official then suggested that the mandate of a three member Presidential Commission of Inquiry now probing procurements be extended to cover the MiG-27 deal.

In disclosing the Ukranian Government's investigation into this deal, I noted last week that those dabbling in millions of dollars or billions of rupees in military procurements get away in this paradise isle. "The only casualties are those exposing them. They continue to become prime targets and many an embarrassed official want to hound them out. Little wonder, to some, war is big business," I pointed out. A Sinhala translation of the Situation Report last week appeared in the Lankadeepa last Tuesday.

Last Thursday, the Free Media Movement said in a statement that "on 16th August it was reported" that protection given to Iqbal Athas, Defence Correspondent and Consultant Editor of The Sunday Times had been removed on August 15 (Wednesday)." I do not propose to discuss personal security matters except to say it was the former Government of President Chandrika Bandaranaike Kumaratunga which directed that I be assigned personal security. That was on the basis of threat perceptions she received as Minister of Defence and Commander in Chief of the armed forces. Thereafter, President Mahinda Rajapaksa, who took over in November, 2005 chose to continue it. It is the sole, and undisputed prerogative of the Ministry of Defence to determine whether or not to provide personal protection to those under threat. I do not challenge it nor complain about it. It is their right to determine priorities.

Suffice to say that Army Commander Lt. Gen. Sarath Fonseka as well Commandant of the Police Special Task Force (STF) Nimal Lewke, DIG can be proud of the men they have so tirelessly trained for personal protection. Commandos of the Army and thereafter the STF did a professional job in keeping me away from harms way. Their commitment and dedication is unmatched.

But, some of the insidious methods that are used when corrupt practices are exposed in The Sunday Times, to say the least, are highly disturbing. Those embarrassed have launched a witch-hunt for sources to a point where travel is a frightening experience. There are unsolicited motorcycle escorts who seemed to want to know where visits are being made. Some of the other hindrances placed cannot be detailed out. But they are clearly acts of intimidation to prevent further disclosures.

One comical argument was that the recently acquired MiG -27s were used to carry out a string of sorties on targets near Toppigala. That was before the Government declared it had re-captured the entire East. Therefore, attempts are being made to suggest that the purchase of such fighter jets which contributed to military victories should not be commented upon critically. How silly !! Another was the argument that the exposures on the MiG-27 deal were being made as an affront to some top defence officials and military top brass.

Yet, another is the claim that the MiG-27 (manufactured in Russia) had come from Ukraine and therefore it came for praise by those who flew it. That is not the issue. The fact is that a higher sum was paid for aircraft that were rejected earlier and found to be old.
Nothing can be furthest from the truth. The facts speak for themselves. If the facts are wrong, the strongest option left to authorities concerned is to point them out. But diverting attention by making irrelevant charges is nothing new. Weeks after President Rajapaksa was voted to power, The Sunday Times revealed exclusively how Admiral Daya Sandagiri ordered 20 year old guns for the Navy's Fast Attack Craft (FAC) fleet on the grounds they were "brand new."

The Commander of the Navy, Vice Admiral Wasantha Karannagoda, said in a report to Defence Secretary Gotabhaya Rajapaksa, "this appears to have been done deliberately in order to give time for the contractor to find the guns since they were not in production.'
Vice Admiral Karannagoda added, "Possibility exists that this was done to buy time until the Royal Navy (United Kingdom) started removing their 20 year-old guns from their vessels." He declared: "If the deal went through, the Sri Lanka Navy would have been fighting with weapons of outdated technology against the Liberation Tigers of Tamil Eelam (LTTE). This would have had a serious bearing on national security."

The disclosures led to President Rajapaksa calling upon serving judges of the Supreme Court to conduct an inquiry. He wrote in January, last year, to Chief Justice, Sarath N. Silva. This was invoking provisions in the Constitution that allows the President to obtain the opinion of the Supreme Court on "a question of law or fact" that has arisen or is likely to arise, "which is of such nature and public importance that it is expedient to obtain the opinion of the Supreme Court." The Commission to Investigate Allegations of Bribery and Corruption also conducted a separate investigation into other aspects including allegations that Admiral Sandagiri had tampered with declarations he made about his own assets. They had been deposited at Navy Headquarters.

The Chief Justice named two Commissions of Inquiry. The procurement by the Navy of "high value weapons, military equipment, material and services between 2001 and 2005 - the period when Admiral Daya Sandagiri was the Commander of the Navy - was placed in the hands of Justice Nimal Gamini Ameratunga. Among the aspects he was called upon to probe were:

Justice Gamini Ameratunga has already completed his investigations. His report has been handed over to President Rajapaksa but the findings still remain a Top Secret. It is clear that the revelations in The Sunday Times led to President Rajapaksa taking note. That led to the appointment of the one-man Commission on allegations against Admiral Sandagiri. Some of the charges that were probed, listed above, apply in equal measure to the MiG-27 deal. In addition there are many other aspects. One can only hope the Parliamentary Select Committee will unravel them in the national interest.

The Chief Justice also named a threemember bench comprising Justice Shirani Tillekewardena, Justice N.K. Udalagama and Justice N.E. Dissanayake. This was on the same request from President Rajapaksa. This three-member Commission, which is still sitting, is probing all military procurements during the period 2001 to 2005. If the period of reference of this Commission is extended to cover up to 2007, there is no doubt many more questionable deals would come under their scrutiny.

The fact that such Commissions have been appointed highlights that that there is, in the least, prima facie evidence that corrupt and irregular activity does take place in military procurements. The volume of money involved is enormous and the influence wielded by those benefiting in corrupt deals is so high that they could turn fact into fiction. All the recent deals have come into focus only under the Rajapaksa administration. That is not to say corruption or highly irregular activity did not take place earlier.
There were many occasions during the previous United National Front (UNF) administration where such corrupt activity was exposed by The Sunday Times. The catalogue is too long to list, but long-time readers of the newspapers would have read about them. Many who were powerful and influential were hurt by such revelations. In one instance, some even thrust a loaded automatic pistol on my head whilst a traumatised (then) seven-year-old daughter watched with desperation and mortal fear. Besides revealing such corrupt activity, The Sunday Times also bared the truth behind the Operations Cell of the Army's Directorate of Military Intelligence at Athurugiriya.

However, today there is a new and unprecedented climate. Baring the truth hurts and even deeply embarrasses some. The answer seems to be revenge, unbridled revenge. That is for not saying things that is sweet music to their ears. The message is thus clear for those who do not tell the truth the way the high and mighty see it, the way they want it said and the way they want themselves glorified.

MiG deal: More twists, turns and threats