Ceylinco Insurance directors accused in local court action of siphoning out funds
View(s):Global Rubber Industries (GRI), the second largest shareholder of Ceylinco Insurance in a petition filed before the Commercial High Court, has alleged that the Directors of Ceylinco Insurance are siphoning funds from the company and asked court to appoint auditors to conduct a forensic audit.
When the case was taken up for hearing at the Commercial High Court of Colombo before Judge Amendra Senevirathna this week, Shanki Parathalingam PC with Avindra Rodrigo appearing for GRI said that there was a large amount of funds being surreptitiously siphoned out by the directors.
He revealed that different companies have been illegally created and money transferred to the said companies without approval or knowledge of any shareholder.
The plaint also alleged that a company called Emerald Wealth Management (Pvt) Ltd was incorporated in 2011 as a 90 per cent owned subsidiary and it was later transferred to a company called Udumbara Hydro Energy (Pvt) Ltd in which some of the Ceylinco directors were directors and shareholders.
A company called Wealth Management (Pvt) Ltd, which was in charge of making repayments to two failed Ceylinco companies and had a common director with Ceylinco Insurance, also had shares in Emerald Wealth Management.
Regular payments were then made to Emerald Wealth Management, the petition alleged. In a 3.5 month period from November 2013 to February 2014 alone, Rs.116 million rupees have been paid out in installments, the petition alleged.
According to the GRI petition preferred employees are being paid large sums of money without any rationale or reason. Citing an example, the petition noted that an accounts clerk was being paid close to Rs. 2 million during November 2013 and February 2014.
The Board of Directors was illegally constituted in contravention of the insurance industry law which specifies that only five employees can be on the board of Directors. The Board comprises 12 paid employees on the Board of Directors.
Counsel Parathalingam said in court “the only reason why the current board is refusing Global Rubber any board seats is because they have something to hide. Because they fear that the can of worms will open”.
He said the 6th Respondent Ajith Gunawardena is a director of the Company. He has been indicted before the High Court of Kandy for offences including fraud, criminal breach of trust and financial misappropriation. How could such a person sit on the board of a company which takes in public money? Mr. Parathalingam noted that he is “not fit and proper’ to serve on the board of a company that takes in public money.
The petitioner is seeking an interim order to appoint two independent directors – Anil Amarasuriya and Dinesh Weerakkody – to the board in order to ensure proper governance; to appoint KPMG an international audit firm to conduct a forensic audit of the company finances; and restrain Ajith Gunawardena from acting as a director of the board among others
while Harsha Amarasekara PC appeared for Prabhash Subasinghe, Managing Director of GRI. Romesh De Silva PC, Faizer Musthapha PC, Ali Sabry PC, Kuvera De Zoysa PC appeared for the respondents – directors of Ceylinco Insurance and the company. The case was re-fixed again for December 16-17 for preliminary objections by the respondents.