CIFL bail-out plan: Setting a thief to catch a thief?
A decision by the Board of Directors of the failed Central Investment and Finance Ltd (CIFL), which is discussing a bail-out plan with the assistance of court, to propose the name of Deepthi Perera as the new managing agent is akin to “set a thief to catch a thief.” The recommendation was communicated last week to the Colombo Chief Magistrate Gehan Pilapitiya who then put off the case involving the misappropriation of Rs. 800 million at CIFL for December 9 to enable all parties concerned to examine the proposal. Deepthi Perera alias Chulaka Gunawardena was the former chairman of the company who was on the run overseas for two years hiding , ostensibly in Cambodia.
He was arrested on arrival at the airport in August 2015 with a fake passport. However since then Mr. Perera has offered his own plan to resuscitate the institution and all parties including the Central Bank (CB), the managing agent – People’s Leasing Co appointed by the CB three years ago and the depositors have been trying to work out a recovery plan. The July 27 letter to the Department of Non-Bank Financial Institutions, Central Bank (CB), signed by CIFL non-executive director Lakshman Rupasinghe and submitted to court states that Mr. Perera has returned to the country despite all the allegations and facing legal action filed against him.
The CIFL Depositors’ Association refrained from commenting on the proposal to appoint Mr. Perera as Managing Agent of CIFL. But the Business Times reliably learns that depositors are not happy with this recommendation. The CB, responding to the CIFL directors’ July 27 letter a copy of which was obtained by the Business Times, said that in the appointment of a new CEO replacing the managing agent (People’s Leasing), “if the Board of Directors is of the view that appointment of a new CEO will facilitate the company to resolve the current issues, the board can nominate a suitable person to be appointed as CEO along with the resolution passed by Board of Directors for aforesaid appointment.
” The letter also stated that if the Board of Directors agrees with the request by depositors that the latter should be included as directors, the (board) request should submitted with “duly filled affidavits and declarations under the Finance Companies (Assessment of Fitness and Propriety of Directors and officers Performing Executive Functions) Direction No.03 of 2011 along with board resolution.” If the ‘fit and proper’ process is to be followed by the CB in the case of depositors being appointed as directors, then banking experts argue that the same process should apply to the recommendation that Mr. Perera be considered for the post of Managing Agent.
Here are more extracts of the July 27 letter from the CIFL directors:
“The appointment of an effective CEO is not a reality as the price demanded by a quality candidate is beyond our reach. The proposal to appoint Mr. Samantha Nandirathna was also discussed and the Board felt that this is not a feasible option as he is already acting in this capacity since the previous acting CEO left the company. With due respect and appreciation to the service he is currently performing the Board was of the opinion that we need to appoint somebody who is more of an ‘operations oriented motivator’ for this position. “The property mortgaged to Commercial Bank against the credit facility in question is owned by Aspic Homes (Pvt) Ltd and the mortgage is a 3rd party mortgage given to them on behalf of CIFL.
Therefore, the sale of the property needs the approval of the Aspic Homes (Pvt) Ltd. “The transfer of the Aspic properties to CIFL could be done by two ways, ie either by getting a court order to enforce CIIFL rights under the joint venture agreement signed between Aspic and CIFL or by mutual agreement with Aspic Homes (Pvt) Ltd. Also the transfer of properties requires approximately 4 per cent of the market value of the said properties which could be as high as Rs. 40 million. The Board was of the opinion that paying this level of sum is not feasible at this point of time. “Under the above circumstances, the Board decided to consider assigning Deepthi Perera to get involved in the Management and commence the operation within the available resources.
“As far as the current Board members are aware, Deepthi Perera has guided the company to safety sometime in 2009 when the company ran into trouble during the industry crisis. It was understood that CIFL became insolvent and the depositors of over Rs. 1 billion were demanding their money. He has even sold some of his personal assets and funded the operation during that time. “Our recent discussions with Deepthi Perera has revealed that he has made arrangements to re-gain control over Aspic Homes (Pvt) Ltd which he lost three years ago as a result of selling the entire group to Roscoe Maloney. If this could be achieved, the best option will be to get his support to revive the company.”