News
Lobby payments: How the Central Bank goldmine was plundered
For three consecutive years, the Auditor General’s Department queried the Central Bank of Sri Lanka (CBSL) about the millions paid in fees to foreign lobbyists, consultants and public relations agencies.
Imaad Zuberi
The reports for 2013 and 2014 will be published within weeks, when they are tabled in Parliament. The Auditor General first raised concern in 2012 after noticing that the CBSL had advanced money to these firms when it should have been routed through other channels. But this observation was omitted in that year’s final report.
The Central Bank’s income statement for 2014 places accumulated costs for advertising, consultancy, communication, advisory and professional fees at Rs. 2,050,619,000 or more than Rs. 2 billion.
In 2014 alone, Rs. 1,396,223,000 — nearly Rs. 1.4 billion — was spent. The regulator neither defended nor justified the figures.This was observed by Weerakoon Wijewardena, who retired from the CBSL as Deputy Governor. The sums are not itemised.
But they did include payments to Dominique Strauss-Kahn, the International Monetary Fund (IMF)’s scandal-hit former Managing Director who was hired as Advisor to the CBSL. The actual figure is much larger.
The Central Bank became the preferred channel for such payments because its accounts do not go before Parliament.
“The irregularities are usually revealed many years after the event,” explained Mr. Wijewardena. “For this very reason, the Central Bank is a goldmine for any politically-oriented person to exploit for his political masters.”
The Treasury or any other Ministry would have needed Parliament’s permission to make such large outlays. So the Central Bank conveniently became the main disburser, with the politically-appointed Monetary Board acquiescing. Parliament and Cabinet were circumvented. In the case of most payments, the External Affairs Ministry was also bypassed.
In 2014, the bulk of disbursements skirted the Sri Lanka mission in Washington, DC. (The lobbyists and PR companies were predominantly American).
Even after extended research into the former Government’s dalliances with these companies, it was a challenge to determine just how much had been spent. Transfer records of some payments are unavailable.
Former Central Bank Governor Ajith Nivard Cabraal has covered his bases. The paper trail shows him to be obeying instructions from Sajin de Vass Gunawardena, former Monitoring MP to the Ministry of External Affairs and former Presidential Secretary Lalith Weeratunga.
The latter’s signature is on many documents, including the controversial contract with Imaad Zuberi, a US influence peddler. The Monetary Board of the Central Bank is represented in paperwork by two Deputy Governors.
Mr. Zuberi filed his registration papers in keeping with the US Foreign Agents Registration Act (FARA) only on September 9, this year — about a week after the Sunday Times and Foreign Policy, a US publication, featured articles about massive fund transfers from the CBSL to his personal account and to WR Group, a company he set up in July 2014.
It is also a full year since his Sri Lankan “experiment” was suspended. Under US law, however, it is mandatory to register within ten days of agreeing to become an agent and before performing any activities for the foreign principal.
According to documents traced by the Sunday Times, Mr. Zuberi got an initial tranche of US$ 3,500,000 to his personal Bank of America account in May last year. It was for “Settlement of invoice per contract-Sri Lanka project”. He received a second payment of US$ 1,000,000 to his account in June last year.
The third installment of US$ 1,000,000 was made to the WR Group on July 17, 2014, just three days after it was incorporated. A final tranche of US$ 1,000,000 went from the Central Bank to the WR Group in September, 2014. That is a total of US$ 6.5 million. None of these facts would have come to light without media exposure.
In his FARA filing, Mr. Zuberi admits to having received US$ 4.5 million from the Sri Lankan Government through the CBSL. He says it was for “business consulting services, including non-specified amount for public affairs”.
He has charged expenses for airline tickets, hotel stays, food and related travel expenses, including visits to Sri Lanka. He claims to have paid US$ 581,500 to two companies — Beltway Government Strategies and Nelson Mullins Riley & Scarborough — which he subcontracted.
On paper, Mr. Zuberi shows no connection to the WR Group. But he says he provided funds to Beltway pursuant to the agreement between the WR Group and the Government of Sri Lanka. The relevant contract is attached.
The WR Group made its own FARA filing only ten days ago. It is signed by Mark Skarulis, a business associate of Mr. Zuberi. It makes no mention of Mr. Zuberi .
It says Mr. Skarulis is the company’s only partner, officer, director, etc. And it offers a lengthy explanation when asked to disclose its doings on behalf of Sri Lanka, the main premise of which is: “Most activities under the attached contract are not reportable activities.”
The contract is signed by Mr. Weeratunga in his official capacity as Secretary to the President. It reveals an interesting discrepancy. Mr. Skarulis’s FARA filing says the WR Group was incorporated in Washington, DC, on July 14, 2014.
But the contract plainly states that it is a Delaware limited liability company based in Los Angeles, California. Delaware has long been called the “shell corporation capital” of the United States.
The four-page document is revelatory in other ways. It divulges that Mr. Zuberi’s and the WR Group’s deal with entities in Sri Lanka — it is difficult to say who– was even beefier than earlier thought.
The total fee was to have been US$ 8.5 million over six months! The Government through the Central Bank had agreed to pay a first installment of US$ 3.5 million followed by five tranches of US$ 1 million each. Both filings and contract are bristling with jargon. There is ambiguity in almost every line.
Take, for example, this sentence: “Contractor agrees to provide consulting and research services and/or other related services to The Government of Sri Lanka and to The Central Bank and other instrumentalities of the Government of Sri Lanka and agreed to by Contractor in advance and in writing.”
The Contractor will offer “strategic advice related to commercial and public policy considerations related to the US and other parties”.
It will also contribute towards “identification of consultants or other legal or non-legal advisors to The Government of Sri Lanka and to The Central Bank as may effectuate Sri Lanka’s commercial and diplomatic objectives” (whatever that means).
There would, however, be no lobbying.
The contract expressly states: “Contractor shall not engage in lobbying activities or in any representation or support activities that involve lobbying activities or the payment of any monies, without prior authorization by Manager.” It is poorly drafted throughout.
The WR Group’s registration says the company received US$ 2 million from the Government of Sri Lanka (executed by the Central Bank of Sri Lanka) for “business consulting services, including non-specified amount for public affairs consulting services”.
It then paid Beltway Government Strategies US$ 78,500 for “public affairs consulting for GOSL”. The head of Beltway is also Mark Skarulis.
There is no record of whether any of these lofty goals were achieved. The dodgy business relationship between Mr. Zuberi and the Sri Lankan government does not seem to have endured beyond September 2014 — just four months after it began.
But FARA data shows the WR Group and Mr. Zuberi to be “active” registrants, or that they continue to work for Sri Lanka.
Anyhow, the former Central Bank Governor must be thrilled to see his name printed in Mr. Zuberi’s FARA filing.
Asked the name of officials with whom he deals, he provides: “Lalith Weeratunga, Principal Secretary; Nivard Cabraal, Governor.”
| Despite controversy, hiring of lobby firms continuesPM’s office paying US 25,000 a month to PR company By no means was the Mahinda Rajapaksa administration unique in enlisting foreign lobbyists, consultants or US public relations companies. The Foreign Agents Registration Act (FARA) database shows that one of Sri Lanka’s earliest contracts was with the Tea Council of the United States of America, Inc. That deal was signed in 1965 to promote tea consumption in the United States. India and Indonesia were co-signatories. It continued until 1997 with the Sri Lanka Tea Board. In 1973, the Ceylon Tourist board signed up Tribune Films, Inc. This was to distibute 16mm, sound motion picture films on Sri Lanka tourism around the US on a free-loan basis. It lapsed in 1986. In 1980, the Greater Colombo Economic Commission Chairman Upali Wijewardene engaged Burson-Marsteller “to perform selective public relations functions consisting principally of arrangements for interviews by the news media, speaking platforms for GCEC officials and a series of seminars for banking and industry officials”. That ended in 1981. Between 1982 and 1998, Government entities hired six other firms. In 2002, the United National Party was in power. Ranil Wickremesinghe was Prime Minister and Chandrika Kumaratunga President. The Government signed a contract with the London-based Bell Pottinger Communications Ltd which, in turn, hired a reputed firm called MWW Group to “provide information and assist in contacting Government officials regarding US-Sri Lanka bilateral relations.” In 2003, the Embassy of Sri Lanka in Washington, DC, employed Sandler, Travis & Rosenberg, PA; Patton Boggs; and Daniel J. Edelman, Inc. No new contracts were entered into between 2003 and June 2008. From 2008 onwards, there was an avalanche of agreements. It reached a peak between April and November 2014. A small group of decision-makers enlisted several firms and some Congressional aides to provide various services to the Embassy, the Central Bank and, apparently, the Government. Among them were companies of high repute, such as Patton Boggs or Nelson Mullins Riley & Scarborough. The first is an international law firm with 44 offices in 21 countries. It is also the foremost lobbying company in the US. That agreement lasted from 2009 to 2013. Patton Boggs successfully defended Mahinda Rajapaksa, the then President, in litigation filed at the US Federal Court in Washington, DC. Patton Boggs was paid US$ 35,000 a month. Insiders say substantial work was done for that fee, including keeping Sri Lanka off the sanctions list of the US Trafficking in Persons Report (it remains on the watch list). The company lobbied for higher development and other aid from the US to Sri Lanka. It supported the Government when the US tabled a resolution at the UN Human Rights Council in Geneva. Nelson Mullins is also of high repute and has around 600 lawyers worldwide. It continues to be retained by the Embassy in Washington for the work it does. It was observed in an earlier article that this company had received a US$ 4 million payment from the Central Bank but had not declared the full amount in its FARA filing. US-based sources said the difference was likely to be fees for legal work. “Business development and legal work are paid differently and filed in FARA,” one of the sources said, requesting anonymity. Things became messier when the Central Bank and the Office of the Monitoring MP of the Ministry of External Affairs started taking on more and more firms. The potential for duplication of services was high. The companies included Thompson Advisory which paid out a large amount of money to a Sri Lankan limousine driver called Thilak Siriwardana. “The quality of the work at the Embassy was part of the reason why there were a lot of people hired to write speeches and do things that are very basic,” the source said. There were probably people capable of doing them at the Ministry but they were not necessarily at the Embassy.” Some countries use lobbying quite effectively. Japan is one of them. It employs just two lobbyists — one for the US Democrats and one for the Republicans. India is the same. “This way, you get a breadth of the relationship,” the source explained. FARA data show that Sri Lanka still have four companies on its payroll. In April this year, the Office of Prime Minister Ranil Wickremesinghe hired Sorini, Samet & Associates at US$ 25,000 a month. Nelson Mullins’s contract continues from last year. Curiously, Mr. Zuberi and the WR Group are also on the list. Perhaps they are waiting for the remaining two million that the Government owes them. |