Vasudeva Nanayakkara and Nihal Sri Ameresekere speak to reporters outside the courthouse soon after Thursday’s verdict.
Pic by J. Weerasekera. |
A day after the Supreme Court annulled the privatisation of the Sri Lanka Insurance Corporation (SLIC) over a fraudulent deal, the Finance Ministry took over the management and control of the company and said the SLIC will continue its operations under the existing management headed by the Chief Executive Officer.
It will be supervised by the Ministry’s Public Enterprises Department (PED), a senior Finance Ministry official involved in the process, told The Sunday Times FT. “The Ministry has already informed the CEO to follow its instructions till the appointment of the new Board of Directors in two weeks,” he said.
He said that a comprehensive audit will be carried out by the PED and stern action taken against any officers found involved in corrupt practices or illegal transactions. “No one will be allowed to meddle with the data base or accounts of the company during the transition period,” the official said, also adding that no employee will be affected as there is no management change envisaged. A Finance Ministry representative will also be appointed to the board, he added.
The Supreme Court on Thursday annulled the privatisation transaction between the government and a consortium of companies led by businessman Harry Jayawardena and ordered that the 90% stake be returned to the Treasury which would now have to return Rs 6 billion paid by the consortium for the shares.(See Page 4 for fuller report on judgment).
 The court didn’t impose any penalty on Mr Jayawardena or his companies for the flawed transaction but a fresh affidavit to move court to penalise these parties and also launch an investigation into possible bribery and corruption in the deal is being contemplated by the petitioners, informed sources said.
Petitioner Vasudeva Nanayakkara and public rights activist Nihal Sri Ameresekere have called a press conference tomorrow to explain the next course of action. Present and former employees of the SLIC were jubilant over the decision, saying the Jayawardena-controlled management ran the company with an iron-fist.
One worker said that employees were unhappy as trade unions were not allowed to operate and there was no authority to listen to their grievances. “The management ran the company under a strict, disciplined regime but often suppresed the rights of workers,” a former senior manager, who left in disgust, said.
The court also faulted SLIC auditors Ernst & Young (E&Y) and ordered their removal. In a statement, E&Y said it had ceased to be SLIC’s auditors since 31st December 2007. “Ernst & Young were appointed as auditors of SLIC in 1998 and continued to be re-appointed annually by the shareholders, both prior to and after privatization, in accordance with the provisions of the Companies Act. Throughout this period we acted with integrity, independence and professionalism in keeping with our firm’s values,” it said in a statement.
There was mixed reaction to the impact of the ruling on Jayawardena-led companies. While the general view was that Mr Jayawardena himself hadn’t been affected, some industry analysts said Distilleries Company of Sri Lanka (DCSL), of which SLIC was a subsidiary, would be affected both in terms of value and opportunity costs. "As SLIC has a big asset base, the balance sheet of DCSL will have a big hole, since DCSL effectively owned SLIC and the massive income generated though SLIC," an analyst said.
However, a source close to SLIC, said that there are no serious problems. "The judgment requests the state to deposit Rs. 6 billion in treasury bonds. The treasury bond yield is approximately at 15%. As such the yield DCSL will get will be about Rs. 900 million each year. This is more than SLIC's profit," he said.
Dr Nalaka Godahewa, a former SLIC CEO under Jayawardena’s management and now a Board of Investment consultant, stressed the need for a professional management team to run SLIC under state control. He said landmark judgments of LMS, Waters Edge and SLIC will send a strong message to anyone who will be involved in future privatization processes to ensure fairplay and proper governance.
Confifi Group Chairman Professor M.T.A. Furkhan said that while the judgment goes to show that a privatisation transaction can be challenged in court and could put off investors, the good thing is that a sigh of relief can be heaved because ‘some attempt has been made to wipe out corruption and misconduct in governance’.
“This transaction was not holy in more than one occasion. Cabinet sanction was not granted, at COPE level the mark was overstepped and the same occurred at the Treasury Secretary’s level. All in all it wasn’t a fair transaction between the state and the buyers,” he said. |
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