Angry shareholders reject troubled City Finance accounts
The annual accounts of the struggling finance company, the City Finance Corporation Ltd (CFCL) was rejected by shareholders for the second year in succession after directors were unable to respond convincingly to a barrage of questions over missing funds. The company AGM was held at the Colombo Public Library auditorium last week. After completing reading of the annual report and its accounts, CFCL Deputy Chairman M.A. Chandrasagara, presiding in the absence of the chairperson Ms. K. Kulatunga, called for a vote. But shareholders instead demanded answers to a barrage of queries on missing funds valued at Rs. 800 million.
With no favourable response, shareholders opposed the accounts which was rejected by a majority vote, following a similar situation last year. CFCL, among many finance companies that have collapsed over the years in the aftermath of the 2008 Golden Key debacle, had Rs. 5 billion in deposits owned by 2,200 depositors which appeared to have been embezzled, according to the CFCL Depositors Protection Association (CFCLDPA). Lakshitha Bogollagama, CIFL’s majority shareholder with a 71.5 per cent stake, told the AGM that around Rs. 800 million is missing and written off and pointed out that a fund of Rs. 1.5 billion has eventually dropped to Rs. 198 million.
He demanded an explanation as to what happened to these missing funds. The Deputy Chairman accepted that the assets were accepted without proper deeds and they have been transferred without proper documents. Then Mr. Bogollagama questioned as to why the assets were written off and why no action was taken against the directors who were responsible at that time for this fraudulent act. Disgruntled shareholders also requested that a more reputed auditor should be appointed and a comprehensive forensic audit should be undertaken to find out the exact situation of the assets and liabilities of CFCL
According to the CFCLDPA, this company was earlier known as Industrial Finance and in 2008/2009 Deepthi Perera transferred funds of around Rs. 1.5 billion in liability from a company known as CIFLAM (Central Investment and Finance Ltd Asset Management). According to the association CIFLAM was created in 2007 and it raised deposits to the tune of Rs. 1.5 billion from the public which was transferred to Industrial Finance in 2009. According to the same source in 2010 ownership of Industrial Finance was transferred to one Upali de Soyza for just Rs. 10 and though that person promised to bring in funds that never happened.
An association official told the Business Times that the current state of affairs of the company arose as Deepthi Perera, main suspect in the CIFL fraud case, was allegedly running a complex financial scam which had in fact two companies named CIFL of which only one was licensed. CIFL marketers induced people to invest in the legally set-up CIFL but in fact the deposits went to the unregistered CIFLAM. The association said that in 2014 an international investor offered to rescue the CFCL with the Central Bank promising matching funds. But after the foreign investor pumped in Rs. 200 million on the promise of matching funds by the Central Bank, the banking regulator pulled out of the deal.