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Wealthy, influential British investor says he is pulling out in disgust
View(s):A disgusted British media baron is selling his shares in a Sri Lanka boutique hotel and says he will warn other investors to think twice before they come here. Clive W Leach, 78, is the former chairman and chief executive of Yorkshire Tyne Tees Plc, one of the biggest television stations in the United Kingdom. He is also the incumbent chairman of Durham County Cricket Club which hosted the fourth test match between Australia and England in the recently concluded Ashes series.
Mr. Leach owns a controlling share in a boutique hotel called Serene Pavilions in Wadduwa. But an ugly boardroom battle waged over the past year with his own Sri Lankan chief executive has hardened his resolve to exit the venture.
The chief executive, Anura Lokuhetty, was ousted at a board meeting held in Colombo on Friday. Mr. Leach, who is in London, chaired the event via teleconferencing. Mr. Lokuhetty however challenges the decision.
“We are moving forward,” Mr. Leach told the Sunday Times, in a telephone interview. “Thank goodness the courts have seen sense. We have a restraining order against him, he can’t be at Serene Pavilions, he is no longer chief executive and we have blocked him from signing cheques.”
Mr. Leach said the past year had been a trial to him and his wife, both of whom are directors of Serene Pavilions. He has notified Sonali Wijeratne, the Minister (Commercial) of the Sri Lankan High Commission in London, about his travails. He has also complained to the British High Commissioner in Colombo, John Rankin.
“I had a long chat with Mrs. Wijeratne,” he said. “She was appalled. I pointed out to her that Sri Lanka has the Commonwealth Heads of Government Meeting coming up. I said that I’m asked all the time whether Sri Lanka is worth investing in. I will be very honest. I have been so shocked this last year that I tell friends of mine, ‘Be very, very careful’.”
Mr. Leach runs a venture capital company in London. His association with Sri Lanka began 20 years ago. He had first met Mr. Lokuhetty at a hotel in Beruwala where the latter was general manager. They struck up a friendship that continued even after Mr. Leach returned to England.
“My wife and I met his wife, who was then pregnant,” he said. “We got on very well. When we came back to England, we invited them to holiday with us. We also took them twice to India on holiday. The relationship developed. He was later running another hotel in Beruwala and we stayed there as well.”
“I told him I loved the place and asked him to find me a small piece of land to build a house for me to stay in when I come in the winters,” Mr. Leach continued. “He came back some months later and said he had found a decent piece of land in Wadduwa but that it was too big for one house”.
He said, “Why don’t you build a number of houses. You have one for yourself and I will run the rest like a hotel.”
By then, it was more than ten years since Mr. Leach had met Mr. Lokuhetty. He was comfortable with him and agreed to the suggestion.
“I put all the money in, and incentivised him by giving him 30 percent of the shares of the company for free,” he said. “The hotel started to come to fruition around 2005. Mr. Lokuhetty came across in 2008 or 2009. I made him chief executive, paid him a very good salary and gave him a good life. That’s how it started.”
The hotel had been doing “terrifically well” over the last two or three years. But the situation went awry when Mr. Leach started getting “a little concerned about how the place was run.”
“Rather than cause a brouhaha, I decided to exit the company and to sell the shares,” he explained. “The other directors also agreed that it was time to sell. We commissioned KPMG to do an information memorandum to sell the company.”
“But Mr. Lokuhetty, who was clearly having a charmed life, didn’t want to sell,” he claimed. “That’s how it started. He put every spoke, every hurdle, in our path to stop us going forward. We had an offer. The Articles of Association require us to make the offer available to other directors. Mr Lokuhetty had the option of buying it.”
“Instead, he tried to bring three new directors onto the board, illegally and completely against the instructions of everybody. This was to give him a weighted balance. He actually fired, without asking everyone else, the company secretary, again illegally.”“So I stand back and say, hang on, does the legal system work?” Mr. Leach said. “How can an investor from abroad bring in any money if they can’t be secure that the legal system will support them? I want to get out. I want a fair deal. And I’m concerned that the legal system doesn’t allow a normal transaction to happen without going to court and arguing every bit of illegality that has happened.”
“Until and unless Sri Lanka gets their legal system so strong that investors are safeguarded, you won’t get anyone coming there,’ he warned. “I shan’t be saying, ‘Come to Sri Lanka’. I run very big companies in the UK,” he asserted. “I know about governance and openness.”
Over the years, Mr. Leach has invested around Rs. 230 million in Serene Pavilions. His wife also does social work in Sri Lanka, helping convents and a home for lepers.
Mr. Leach said the final straw came during his last visit, nearly a month ago. “I usually come for three or four weeks but this time I left in five days,” he recalled. The reason was a call from the Department if Immigration and Emigration in Colombo.
He was on the balcony of the Serene Pavilions restaurant when he was told to present himself at the Department straightaway to answer some queries. “I have been coming for 20 years so I wondered what the heck this was about,” he said.
“I went there and they told me they had a complaint that I had come here on a tourist visa but was doing business. I come here on a tourist visa because I’m a tourist. I had booked tours to travel around the country with another investor friend.”He told his investor friend not to come and left the country with his wife. “I had to go through the terrible ordeal of being cross examined by Immigration,” he said. “I had been reported by my own chief executive whom I had funded and supported through the years. I went straight back home.”
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