Powerful Dharmadasa brothers hauled up on price manipulation charges

The Securities and Exchange Commission (SEC) is exploring the possibility of including both investors and shareholders in the category of persons who are to be given stiffer penalties for insider dealing and price manipulation.

This follows Sri Lanka Cricket (SLC) Interim Committee chairman Jayantha Dharmadasa, his brother – Upali (a former cricket board president) and related parties being charged for insider dealing together with a host of other discrepancies.

This news soured an otherwise good week for Jayantha Dharmadasa when he was appointed to the board of Galadari Hotel.

The SEC action in the Magistrate’s Courts in Fort against Jayantha, Upali and nine others relates to offences on transactions connected to the shares of Nawaloka Hospitals Limited where the Dharmadasa family has a majority stake.

A SEC source told The Sunday Times FT that the commission will be discussing on how to be ‘more firm’ with investors and shareholders for such offences. “This is because there are allegations cast at SEC for ‘just compounding’ an offence instead of offering tougher punishment,” he added. The SEC has been considering barring ‘guilty’ stockbrokers from practising for a period of three years and now may consider a similar penalty – barring trading in the market – for ‘guilty’ investors.

NHL was listed in November, 2004 followed by a share split in December of the same year and a rights issue in March, 2005.

“From the listing to the share split, the price shot up from approximately Rs.20 per share to Rs.40. After the share split, the price per share increased from Rs. 3 to approximately Rs.9.75. These increases were against any fundamental norms,” the SEC source said, adding that SEC investigated everyone connected to the transactions for these reasons.

He said that some of the people were relations of the Dharmadasa brothers and some were employees at NHL. The SEC were prompted into checking the bank accounts of J. Dharmadasa, because he was conspicuously absent from the transactions, according to the charges.

Jayantha Dharmadasa declined to comment.” I cannot say anything” he said. The offences relate to conspiracy to commit acts to create a false/misleading appearance of an active share market (Rule 12 of SEC Rules read with Section 113B and 102 of the Penal Code) against D. A. Samaradiwakara, B. A. Jayasekara, U. H. Dharmadasa, K. M. N. Piyarathne, Michael De Saram, M. T. Ganhewage, L. C. Pallegedera, Mahanama Jayaweera, Jayantha Dharmadasa who are charged with committing acts to create a false/misleading appearance of an active share market (Rule 12 of the SEC Rules).

Jayantha Dharmadasa and Mahanama Jayaweera are also charged with aiding and abetting to commit acts to create a false/misleading appearance of an active share market.

Dharmadasa is the Deputy Chairman and CEO of Nawaloka Hospitals and is on the board of a number of companies.

Some months back, the Nawaloka Hospitals finance director, his wife and daughter were charged in courts for insider dealing in the same shares.