Justice for depositors of CIFL and Touchwood
Some affected parties contacted me and requested me to help them by intervening on their behalf. I politely declined and jokingly told them that I was neither the Central Bank (CB) nor the Securities and Exchange Commission (SEC), the official watchdogs. Irate depositors said that the so-called regulators were sleeping dogs at best and lapdogs at worst, who bark only after letting the rogues rob the household.
They reminded me of the time when a 3-judge bench of the Supreme Court headed by the then Chief Justice unanimously ordered the regulator CB to consult ‘Mr. K.C. Vignarajah representing the depositors, and restructure the Pramuka Bank instead of liquidating the bank’ as they had set out to do. I pointed out that there were certain crucial differences in motives, direction, style and commitment to obtain the rights of average decent citizen, the nation’s interest and upholding the good name of the enterprise section which delivers excellent results to the stakeholders and at all times safeguard the investing public and the national interest. Thus the reported restructuring scheme of CIFL directors differs from the above principles in a fundamental manner.
a) The directors who presided over, or maybe even caused the failure, are to continue to be in charge, after extracting some more concessions from the poor shareholders!
b) Why convert 60 per cent of deposits to ‘non-voting’ shares, and relegating to a worse, voiceless position?
c) Why reduce the interest payable to depositors to a very low 5 per cent? This must be related to TB rates. Have the directors and key management personnel (KMPs) reduced their salaries and perks?
d) The connection between ‘Touchwood’ and ‘Aspic’ must be fully explained to the depositors and shareholders of both the PLCs, and the investing public, before ‘Touchwood’ and ‘CIFL’ shares are allowed to be traded in the stock market.
The boards of these companies should be restructured immediately to eliminate conflicts of interest and ensure the representation of the independent shareholders. The advisory committee of depositors should be given due recognition and actively consulted.
An independent due diligence must be undertaken and the directors and advisory committee of the depositors be furnished with these information in order that they may decide what is best for them with the active assistance of the respective regulators.
In the case of restructuring the Pramuka Bank there was no fees or expenses charged by this committee of which I was Chairman and all the committee meetings were held at my residence. It was in the public and national interest to save this institution and the poor depositors. We appealed to all Members of Government and Opposition who supported us. We also had eminent lawyers namely Messrs M.A. Sumanthiran, Viran Corea and Mohan Balendra, who were fully committed and did not charge any fees recognizing the public interest and the immense service to the average decent citizens who invest their hard earned money.
In this context excerpts from the Sunday Times of Sept. 4, 2011 quoted below, is symptomatic of the present malaise.
‘’Persisting conflicts of interest “Economist and opposition Parliamentarian Harsha de Silva who, along with independent investor and stock-market watchdog K.C.Vignarajah , are among a few individuals raising ‘hell’over the deals in the market, has criticized the SEC compounding in the ERI case. He has also, very rightly, raised the issue of conflict of interest……”
“Whistle-blower Vignarajah, a former Chairman of the Ceylon National Chamber of Industries whose presence at many AGMs is refreshing to small and independent investors but a source of worry and annoyance to directors, is again beating the drums of ‘evil’ in the market. In a letter to the SEC, he says there are small groups or clubs of people acting in concert with ‘crooked’ directors, errant auditors, compliant lawyers, independent advisors and company secretaries making them an impenetrable fortresses’ of evil.” An upright SEC acting together with honest members and officials of the CSE, utilizing the commitment, knowledge, invaluable experience and insight of IMS (Independent Minority Shareholders), will be the most effective way to handle these issues.” he said…” (Unquote)
We trust that fundamental principles of good governance are followed. Depositors and shareholders must realize maximum value while those who caused losses should be penalised and not be allowed to benefit.
K.C. Vignarajah
Colombo
(Writing in the public and national interest)