Columns

• SLFP ministerial committee proposes special presidential commission to probe Central Bank bond issue; parliamentary debate next month
• Stormy exchanges at Cabinet meeting, two ministers drop bombshells: Rajitha alleges leak of info while Champika threatens to go public
• Disagreements among ruling party politicians widen; Dilan accuses UNP of link with Basil

By Our Political Editor
Tuesday’s weekly meeting of ministers turned out to be stormy as a lengthy discussion ensued on Government’s inaction over investigations into major cases of bribery and corruption.

Two ministers, vociferous critics over these issues, dropped ‘political bombshells’ that shook colleagues. Minister Rajitha Senaratne, the official Government spokesperson, disclosed that those who were now being prosecuted had received files containing statements and other documents related to investigations against them. He said he had strong proof of such instances.

It was only last week that the Sunday Times (Political Commentary) underscored the dilemma of investigators. It raised issue over the “much talked of nexus between ruling political elements and those in the Opposition” and added that “contents of interim reports sought by some ruling politicians ended up in the hands of those under investigation and those looking after their interests.” It pointed out that “such documents have even been produced at legal consultations.”

With serious questions being raised about the delays in probing mega corruption deals, President Maithripala Sirisena was the chief guest at an anti-corruption day event in Colombo. It included an art exhibition by schoolchildren.

Minister Patali Champika Ranawaka issued an ultimatum. He said that at present he was bound by the principle of “collective responsibility” which debars him (or Ministers) from making public statements over any issue that is before the Cabinet of Ministers or make remarks against the Government. He said if no action was taken by January 8 next year against those involved in major cases of bribery and corruption, he would not respect that unwritten rule and go public. He said he would tell the country what had been going on despite the pious promises made during the presidential and parliamentary elections. Throwing his weight behind his two colleagues was Finance Minister, Ravi Karunanayake. He noted that none of the ‘mega’ cases had been concluded and action initiated in courts.

The ministerial discussion at Committee Room 3 of the Parliament complex (since the budget debate was under way there), was sometimes boisterous. It was joined by President Maithripala Sirisena who noted that there was a dangerous state of affairs. He observed that state officers were moving away from the Government. This had included even officers who are ‘politically loyal’ to his administration. It was the fear in their minds that a future administration, if hostile, would hold them to account before a crime investigation mechanism or the FCID.

Sirisena then re-iterated what he told the Sunday Times in an interview on November 6. He charged that the FCID had not been able to deal conclusively with any of the big cases. They were saddled with more than 400 investigations, most of them on unimportant issues. Weeks earlier, FCID head Senior DIG Ravi Waidyalankara told a meeting of his staff that all investigations handled by his agency were ones directed to the FCID by the Inspector General of Police. In most cases, such complaints, he said, had been forwarded to the IGP by the Anti-Corruption Committee Secretariat which accepts complaints regarding frauds and corruption. This Secretariat will cease to function from December 31.

The Secretariat was originally set up in February 2015 through a decision by the Cabinet of Ministers. The one year mandate given to it was extended till June 30 this year. Later, Prime Minister Ranil Wickremesinghe proposed that a further extension be granted till December 31. The Treasury has been paying Rs. 2.2 million a month for the functioning of this Secretariat. Premier Wickremesinghe justified a second extension on the grounds that “the restructuring of the Anti-Corruption Agency structure is under consideration and it has been proposed to establish a fully-powered Serious Frauds Office (SFO)“ similar to the one in Britain. However, the SFO has not yet been set up so far.

The ministerial discussion then centred on the Attorney General’s Department, which, one minister declared was in a “disgraceful” state. On the day the ministers met (Tuesday), the Attorney General had withdrawn the indictment on former Minister Basil Rajapaksa in the Colombo High Court on the grounds that there was a ‘technical flaw’ in the indictment. Rajapaksa stood indicted on charges of misappropriating Rs. 29 million to print five million almanacs during the January 2015 presidential election. There had been an error in the indictment. An amended indictment was filed the next day.

“If the AG’s Department cannot file an indictment properly, how can it arraign in courts those who would be charged with major cases of bribery and corruption,” asked one minister. Another factor that has weighed in against the AG’s Department is the complaint from investigators that there were inordinate delays when they sent files after completion of investigations. On the other hand, AG’s Department officials argue that such files required careful study by a limited number of officers and hence it was time consuming. Often the files sent up are ‘half baked’ and require further investigation. The principle in the AG’s Department is that there should be a reasonably good chance of a conviction before indicting someone. Thus, it is clear that delays are two-fold, on the one hand with the inadequacies at the Police-level and then the shortcomings at the AG’s Department.

That the issue of concluding some of the major cases of bribery and corruption seems uppermost in the minds of senior ministers was evident. The people are asking questions daily. One of them, an SLFPer, who did not wish to be identified said, “If we continue to pay lip service over this issue, there will be serious political consequences. People have not only begun to distrust us but are also levelling allegations of bribery and corruption, which they claim is much the same way it existed in the previous regime or worse. This may be true or untrue but that is the public perception. As the President said, even officials have veered away from us. This is a very serious situation.”

For the United National Party (UNP), however, constitution making and economic issues continue to dominate its agenda with little being said now about major bribery or corruption cases that are in limbo.

Interestingly, this comes at a time when the SLFP and the UNP, the principal partners in the Government, have begun a proxy war whilst projecting an outward image of closer co-existence. State Minister for Highways, Dilan Perera told a news conference on Thursday at the SLFP headquarters in Darley Road that the UNP was in cahoots with Basil Rajapaksa, the convenor of the pro Mahinda Rajapaksa Sri Lanka People’s Party (SLPP) to destabilise their party (SLFP). He accused UNP Minister Lakshman Kiriella, the Leader of the House, of having talks with Rajapaksa towards “a deal.” Kiriella has laughed off the accusations. However, the point at issue is different. Could Perera, the spokesperson, air such views without the approval or blessings of President Sirisena, who is the leader of the SLFP? If indeed the answer is “No,” then he is liable for disciplinary action for endangering the unity of the Alliance. If the answer is a “Yes,” it only suggests a two tier relationship with the UNP. One tier projects unity and ‘harmonious’ co-existence and the other highlights divisions.

It is no different in the case of the UNP. In what appears to be a counterattack, Colombo District MP Mujibur Rahman and Puttalam District MP Hector Appuhamy held a news conference on Wednesday. “We don’t know whether those seated in the Government benches are working deals in collusion with Mahinda Rajapaksa. It looks like a contract given to them. If the SLFPers have any problems, let them settle it at their Darley Road headquarters,” Rahman said. The news conference was held at Siri Kotha, the UNP headquarters in Kotte. There is no gainsaying it would require the approval of the UNP leader, Premier Wickremesinghe, for the two MPs to counter accusations made by SLFP spokesperson Dilan Perera. That such a counter did come once again goes to further confirm the divisions.

Alas, in all these developments, some senior politicians tend to blame the media for what they call attempts to break the unity within the Sirisena-Wickremesinghe Alliance. This is the basis on which they claim that the 2020 elections cannot be won if the media are allowed a ‘free run.’ The two news conferences, held with the specific purpose of getting the media to report what transpires against one side or the other, prove that the media are being made a scapegoat. If they do not report on the news conference too, they are accused of a blackout. On the other hand, some of the exposures involving bribery and corruption do hurt some to the point that they seek to bring pressure on the media.

Within hours after the ministerial meeting, President Sirisena chaired a meeting of SLFP ministers, Deputy Ministers and State Ministers. The focus was on measures to strengthen the SLFP. Some important decisions were made. Main among them was not to postpone any further the conduct of local government elections “whatever its outcome would be.” Local Government and Provincial Councils Minister Faiszer Musthapha was asked to make arrangements for the conduct of these polls before March next year.

Another decision was that the SLFP will adhere to a mixed system of proportional representation (30 percent of the votes cast) and first past the post (70 percent of the votes cast). “We regret that some of those in Parliament say we should revert to the old system (only PR),” said Minister Mahinda Amaraweera at a news conference on Wednesday. Amaraweera was alluding to UNP parliamentarians who said that local government elections should be held under the present system. Persons who said that elections should be never held without changing the electoral system and went on to leave the country are now going back on their statements,” said Amaraweera without identifying who made such remarks.

Sirisena said he was happy that SLFP Bala Mandalayas were performing well and declared that new ones would be named in places where they did not exist now. During other discussions, the SLFP parliamentarians have also decided that they would not support any constitutional amendment that would not require a referendum. An SLFP parliamentarian remarked jokingly “we don’t want what happened to Italian Prime Minister Matteo Renzi to happen here.” The latter went for a referendum to make constitutional changes and said he would resign if the Government lost. It lost and the PM resigned.

Another issue which the SLFP is pushing hard is an investigation into the Central Bank bond scam. The subject was examined by an SLFP Committee comprising Nimal Siripala de Silva, Anura Priyadarshana Yapa, John Seneviratne, Sarath Amunugama, Lakshman Yapa Abeywardena, Dilan Perera, Faiszer Musthapha, Lasantha Alagiyawanna, Dayasiri Jayasekera and Kesaralal Gunasekera.

They handed over a six-page report to President Sirisena. The report, among other matters, recommended that President Sirisena should use his powers and appoint a Presidential Commission of Inquiry including a sitting Justice of the Supreme Court or a retired Judge, and an expert in the field of finance to probe the bond scam. It is significant that the Committee has said “this should be done irrespective of the actions taken by Parliament.”
Here is an edited English translation of the report:

“The SLFP Central Committee on October 31, 2016 decided to appoint a committee comprising……….. to study and submit a report about the issue of Treasury Bonds on February 27, 2015. This was done considering the facts of the COPE report, statements made by Government and Opposition members, views by academics published in the media, in view of the controversy created and the impact on the ‘Yahapalana’ (good governance) Government and the impact on the economy……………..

“The Committee members met on four occasions, studied relevant reports and heard presentations by Minister Susil Premajayantha who was a member of the COPE Committee, several President’s Counsel and academics in the study carried out.
“Initially we wish to place the relevant background.

“The Public Debt Department of the Sri Lanka Central Bank raises funds, in accordance with the Finance Act when the Government informs the Central Bank of the requirement of funds. On the long term Treasury Bonds are issued and for short term Treasury Bills are issued to raise funds. The system has been in existence from 1997. Selected Primary Dealers are used for the purpose to raise funds.

“Primary Dealers are banks or Financial Institutions with a capital over Rs. 250 million and registered with the Central Bank to raise funds. At the time of the transaction there were 16 Primary Dealers including commercial banks registered with the Central Bank. Since 2016 the minimum capital was raised to one billion rupees. Treasury Bonds are issued for a period above one year and usually investors do not invest in Treasury Bonds more than 10 years. It is the Employees Provident Fund (EPF), Employees’ Trust Fund (ETF) and Insurance companies invest in Treasury Bonds on long term for 15, 20 or 30 years.

“The objective of issuing Treasury Bonds on February 27, 2015 was to raise Rs. 13 billion of which one billion rupees was from the auction and the rest from direct/private deposits. The monthly financial requirements from January 2014 to May 2015 had been obtained in the same manner. It was observed that funds also had been raised by direct/private means without auctions.

“In this instance, it was revealed that that the Central Bank approved to raise one billion rupees through the auction and Rs. 12.55 billion through direct investments. The auction on February 27, 2015 ended at 11.00 am and there were 26 bids amounting to Rs. 20,708 billion. Also there is a minute recorded that it was on the advice of the (former) Governor Central Bank (Arjuna Mahendran) that the amount of one rupees billion was raised to Rs. 10 billion.
“The evidence available reveals that during the auction the (former) Governor Central Bank had visited the Public Debt Department on two occasions and inspected the bidders list. The Central Bank had initially been instructed to receive Rs. 20 billion. But the Superintendent of the Public Debt Department Ms. C.M.D.N.K. Seneviratne and Additional Superintendent Dr. M.Z.M. Ashim had not agreed to the proposal. Thereafter, the (former) Governor Central Bank had informed these officers to inform the Tender Committee to raise the amount to Rs. 10 billion.

“Under the usual circumstances, since the auction is for one billion rupees it should be issued to the first seven persons.
Perpetual Treasuries bid was placed at 16,17,20,21 places and the Bank of Ceylon on behalf of it was placed at the 26th place.
“Perpetual Treasuries raised Rs. two billion and the Bank of Ceylon Rs. 13 billion.

The total demand was Rs 20,708 billion. Of that, Rs 15 billion or 75 per cent was on behalf of Perpetual Treasuries. However, since the issue was restricted to Rs 10 billion, Perpetual Treasuries was issued Rs 2 billion and of the Rs 13 billion required by the Bank of Ceylon Rs 3 billion was issued. Thereby the total is Rs five billion or 50 per cent.

Thereafter Perpetual Treasuries has sold (bonds) amounting to Rs. 5 billion to the EPF and gained a profit from the interest. Rs 10.058 billion – 11.75 per cent.

The Chief Dealer of Bank of Ceylon had used the words ‘Awoth Ethaa Thamai’ (It is a big gain if it comes). The meaning of it is a large profit.
The following questions could be raised considering each of the points.

1. How was the demand raised to Rs. 20.708 billion when the requirement was one billion rupees?

2. Why was it that the Bank of Ceylon requested for Rs 13 billion on behalf of Perpetual Treasuries and Perpetual Treasuries requested for Rs 2 billion amounting to a total of Rs 15 billion (75 per cent) of the total of Rs 20.708 billion.

3. The (former) Governor Central Bank issued instructions to raise the amount to Rs. 20.708 billion after looking at the Bid Sheet. (Thereby it could be assumed that it was known that Perpetual Treasuries had requested for Rs 15 billion).

4. According to the chart the figure was reduced to Rs. 10 billion and of that Rs. 10 billion Perpetual Treasuries were given Rs 5 billion (50 per cent).

5. No other bid was made for more than Rs 2 billion.

6. In that case why did Perpetual Treasuries request for Rs 13 billion when one billion rupees was being issued.

7. Without advance information how did Perpetual Treasuries request for Rs 13 billion assuming that the amount will be raised to Rs 10 billion or Rs 20 billion when the original request was one billion rupees.

8. Were there other bids? If they bid there would have been competitive interest rates.

9. For the first time one Primary Dealer had bid on behalf of another Primary Dealer (Bank of Ceylon on behalf of Perpetual Treasuries).

10. The Bank of Ceylon had bid only for Rs 508 million when it had bid for Rs 13 billion on behalf of Perpetual Treasuries. What is the rate 9.35 percent or 9.99 percent? On behalf of Perpetual Treasuries: Rs 3,000 million -12.50 percent, Rs 5,000 million -12.75 percent and Rs 5,000 million -12.99 percent.

‘The last bid was at 11.05 a.m. The auction was due to end at 11.00 a.m. On the request of the Bank of Ceylon Chief dealer it had lasted until 11.05 a.m.
The Bank of Ceylon bid for Rs 508 million as the amount on offer was Rs 1,000 million. Why did the Chief Dealer, on behalf of Perpetual Treasuries request for Rs 13 billion.

“It was revealed that Perpetual Treasuries gained Rs. 5.2 billion as profit while other Primary Dealers gained a profit only of Rs. 544 million.
“This confidential information has been revealed. Accordingly, Perpetual Treasuries obtained unusual profits.

11. According to the Auditor General’s report the loss to the Government is around Rs 1,700 million. It could be higher, based on the calculations.

12. Accordingly, Perpetual Treasuries gained very high profits as the government suffered losses.

13. For Perpetual Treasuries to gain a profit and the Government to suffer losses.

1. Was it because information was provided in advance?

2. Was it because of the decision to increase the amount from one billion rupees to Rs 10 billion?

14. The interest rates for the Treasury Bonds offered to the EPF and ETF was at a higher rate than offered to the Primary Dealers and therefore the losses would have been to the EPF-ETF.

15. The Auditor General has reported on his audit. The (UNP) Committee report by Attorney at law Pitipana and the extracts of the D.E.W. Gunasekara report have cited these observations. It has been done rightfully.

“Therefore considering the COPE report, on the face of it, there are large financial irregularities and as a result the Government suffered a large financial loss. Perpetual Treasuries gained a large profit in a short period and it is unusual in normal commercial transactions. Particularly, the close relationship between the (former) Central Bank Governor and Arjun Aloysisus of Perpetual Treasuries creates serious doubts. The actions of the (former) Governor Central Bank, officials of the Central Bank and officials of the Bank of Ceylon also create serious suspicion.

“Therefore, this Committee unanimously believes that an investigation, beyond the findings of the COPE should be carried out. Particularly, the actions of the (former) Governor of the Central Bank, officials of the Central Bank and officials of the Bank of Ceylon should be widely investigated.

“According to Parliamentary Standing Orders, a COPE report once submitted should be debated and approved. After it is approved it could be referred to the Attorney General. However, we do not believe that only through this process should the situation be corrected. We propose that a suitable mechanism be set up so that persons responsible could be punished for causing major losses.

“Considering the legal options available:
1. We propose that making use of Presidential powers, a Presidential Commission comprising a sitting Justice of the Supreme Court or a retired Justice of the Supreme Court, an expert in the field of finance and a professional expert in the field of audit should be established and based on its recommendations action should be taken. This should be done irrespective of the actions taken by Parliament.

2. The Commission should reveal irregularities in the issue of Treasury Bonds, whether there were deliberate actions or negligence of persons, whether there was deviation of normal procedures in favour of certain persons and if so who were the persons responsible.

3. Since there is serious suspicion in the manner the officials of the Bank of Ceylon acted and how they released funds to Perpetual Treasuries the Commission should investigate this aspect.

4. The Committee also recommends a method and the possibility of the Government recovering the high profits gained by Perpetual Treasuries in a short period.

5. We propose that the Commission be empowered to recommend future steps to be taken to prevent the recurrence of similar situations.

6. We also propose that action should be taken to convince other party leaders to take up the COPE report in Parliament and approve it.

“We take the opportunity to thank for the kind hospitality of Ministers, Anura Priyadharshana Yapa, John Seneviratne, Dr Sarath Amunugama and Lakshman Yapa Abeywardena in hosting the meetings at their residence and the legal advice provided by Nigel Hatch, PC and the panel of experts.”
The parliamentary debate on the report of the Committee on Public Enterprises (COPE) on the Central Bank bond issue will be held in the second week of January. Speaker Karu Jayasuriya is expected to decide on a date in consultation with party leaders. January 9, 10 and 11 have been allotted for a debate on the reports put out by the Constitutional Assembly.

The all-important question, as a New Year begins, would be how the voting will take place after the debate on the matter is debated. Since the SLFP has already called for a Presidential Commission of Inquiry, even before the debate in Parliament, its members are sure to vote against any moves to stall the COPE findings. How the UNP parliamentarians, will vote remains a critical question.

Thus, in 2017, one of the major challenges to the Sirisena-Wickremesinghe Government would be how it would deal with major cases of bribery and corruption. That is after being in office by then for more than two years.