PTL colluded with DFCC, BDO report says
View(s):The BDO report said that on February 27, 2015, the PDD discontinued the Direct Placements as a method for raising public debt based on the instructions given by Arjuna Mahendran.
Mr. Mahendran’s son-in-law, Arjun Aloysius, was the CEO and Director of PTL during 2014 till January 16, 2015. During the review of call log records available in Forensic Communication Analysis Report provided by the CB, communications between Mr. Mahendran and Kasun Palisena, CEO PTL were noted which indicates that he was also closely involved in the business operations of PTL.
Based on the above communications, it can be concluded that Mr. Aloysius continued to be involved in the operations of PTL, throughout the period when Mr. Mahendran was the Governor and the conflict of interest was not resolved.
Association between PTL and DFCC
During a review of Market Manipulation Report and media articles, it was noted that PTL was involved in transactions in the Secondary Market in collusion with DFCC. It was noted that PTL had sold bonds to DFCC at increased prices and they in turn sold to the EPF and earned huge capital profits in Secondary Market through DFCC acting as an intermediary. It was observed that Mr. Palisena and Mr. Nuwan Salgado had contacts in DFCC which could have resulted in market manipulation by PTL via its contacts.
It was evident that PTL in consort with Pan Asia and DFCC had entered transactions into the Secondary Market wherein a high volume of identified securities were obtained at low prices in the Primary Market by taking advantage of insider information and sold those securities at substantial high prices in the Secondary Market to the EPF. It was also noted that the EPF either did not participate or placed bids in less volume or at higher yield rates in Primary Market and at the settlement date, the EPF bought securities at higher prices in Secondary Market.
Meeting with state banks
As per the facts enumerated in PCOI on March 28, 2016, one day prior to the auction, senior officers from the state banks, namely, NSB, Bank of Ceylon and People’s Bank were requested to attend a meeting convened by Ravi Karunanayake, then Minister of Finance.
Representatives of the three banks were requested to co-operate by bidding at low yield rates at the auction the next day. Mr. Karunanayake prescribed a range of rates, lower than the prevailing market rates at the time, at which the three state banks should place their bids in coordination with each other.
The banks raised their concerns with regard to the risks being incurred in terms of an immediate mark to market loss if bids at higher yield rates were accepted from other PDs. In response to these concerns, Mr. Karunanayake assured the banks that bids at higher rates would not be accepted by the CB.
The fact that bids placed within the range of yield rates instructed to state banks indicates that PTL has access to insider information given to state banks and accordingly high allocation of bids were attained by PTL at substantially high yield rates as compared to yield rates instructed to state banks.
During the review of Electronically Stored Information on the device of Mr. Mahendran, it was noted that he interacted with Mr. Palisena as documented in the emails of April 4, 2016; May 16, 2016 and June 9, 2016. The emails of Mr. Mahendran with Mr. Palisena were identified for the matters which were not related to the CB. Additionally, during the review of call logs, various interactions between Mr. Mahendran and Mr. Palisena were noted during the review period. These communications of the former Governor indicate that he was also closely involved in the business operations of PTL.