A Public Enterprise Reforms Commission (PERC) official gave a statement this week regarding the LMSL deal in connection with the investigation carried out by the Commission to Investigate Allegations of Bribery or Corruption, its Chairman Justice Ameer Ismail told The Sunday Times FT. “Investigations began soon after the COPE (Parliamentary Committee on Public Enterprises) report was published and the probe deals with many issues raised in there,” he said adding that it should come to an end soon.
The Wijedasa Rajapakse-led COPE report raised questions on various aspects of the deal. One issue raised by the report is that no Cabinet Appointed Tender Board was appointed. Also mentioned in the report was a statement from the Request for Proposals (RFP) which states “"Bidders shall conduct and are solely responsible for conducting their own independent research... Bidders shall conduct and are solely responsible for conducting their own due diligence... No written or oral information provided shall be considered legally binding by the Bidders".

The report also points out that DFCC Bank was selected by PERC without competitive offers to do a business valuation of LMSL, abandoning the Chief Valuer’s valuation. The report points out that the bank’s valuation had also been incorrect. The bank had not valued the net assets of LMSL, especially the land in Bloemandhal which the Chief Valuer had confirmed as completed and was avoided by PERC. The Chief Valuer had valued the land in 1993 at Rs 82 million.

PERC Chairman P.B. Jayasundera, in an exchange of letters with John Keells Holdings on August 2, 2002 had agreed to grant a monopoly to LMSL after JKH purchases 90% of LMSL shares, even though the TEC had previously rejected the bid of Sri Lanka Shipping Co. Ltd which had sought an 8-year monopoly of LMSL. The Chairman had also, during a pre-bid conference on April 30, 2002 confirmed “LMS will not have a monopoly on the import and sale of bunkers subsequent to the sale of LMSL”.

The Share Sale and Purchase Agreement and CUF Agreement signed by the PERC Chairman, then Treasury Secretary Charitha Ratwatte and PERC Legal Director Shamalee Gunawardene with JKH was done on August 20, 2002, before the Cabinet decision was confirmed and notified on August 21, 2002, thereby making the agreement invalid, null and void. The Common User Facility (CUF) agreement also included Clause 8.2 which was new, which says “GOSL / SLPA / CPC shall ensure that all bunkers / marine fuels handled and transported within the Port of Colombo would be handled and transported using the CUF”.

The inclusion of the “monopoly” clause has been held by the Court of Appeal as ultra vires (beyond the power) of Petroleum Products (Special Provisions) Act no 33 of 2002. (LP)