Investigations still on for Ernst & Young, PricewaterhouseCoopers

An investigation launched by the ethics committee of the Institute of Chartered Accountants of Sri Lanka (ICASL) into the conduct of Ernst & Young and PricewaterhouseCoopers (PwC) more than seventeen months ago has still not concluded.

According to public complainant, Amrit Muttukumaru, who instigated the ICASL investigation the ethics committee already determined a prima facie case but failed to appoint a disciplinary committee as is statutorily required by Section 17(2)(b) of the Act of Incorporation of the ICASL.

The act states that after the investigating committee appointed by the Council 'reports to the Council that a prima facie case of professional misconduct has been made out against a member, the Council shall appoint a disciplinary committee for the purpose of inquiring into the conduct of such member.'

The complainant further continues that three months have passed since the ethics committee found there to be a prima facie case of professional misconduct against Ernst & Young and PwC.

President of the ICASL, Yohan Perera told the Sunday Times FT that the investigative report had not been put to the Council as of yet. "The report would have been issued about a month ago but there is a judicial process," Perera said. He added that they are seeking advice from legal experts before proceeding in the matter and is hopeful that the Council will decide on what action to take one way or the other. "The matter will be take up in Council in the month of February 2007."

As previously reported in The Sunday Times FT, Asitha Talwatte, Senior Partner of Ernst & Young, the accounting firm representing SLIC was also a member of the Council of the ICASL. Talwatte was appointed to the Council by Minister of Trade, Jeyaraj Fernandopulle at the recommendation of the Governor of the Central Bank, Nivard Cabraal. However, Lakshman Perera, former Secretary of the ICASL, maintained that this did not constitute a conflict of interest.

"There is no conflict of interest because in the past, there have been complaints made against other members of the Council. If a complaint is made against one of their firms, they cannot be removed from the Council but they are not permitted to sit in on the meetings."

In addition, Deva Rodrigo, former President of the Ceylon Chamber of Commerce and Senior Partner at PwC as well as a member of the steering committee responsible for selecting PwC as consultants to the government of Sri Lanka in a lucrative contract worth close to US$2 million.

Rodrigo stated publicly that he was not present at any of the meetings but sources familiar with the case maintain that Rodrigo was privy to all the information through the minutes of the meeting.

In other investigations into the SLIC privatization, the COPE (Committee on Public Enterprises) subcommittee inquiry into SLIC is expected to meet early this month for a final discussion and will subsequently release a report of their findings.

COPE Chairman Wijedasa Rajakapkse told The Sunday Times FT last week that he was awaiting the findings of the report in order to make his recommendations to Parliament.

Chairman of the subcommittee Dilan Perera told The Sunday Times FT that the report of the SLIC inquiry will be submitted to COPE this past week which Rajapakse will then present to Parliament.

"All inquiries have been wrapped up and all evidence has been heard. Our observations and recommendations have also been heard," said Perera. "I think the inquiry went on very well. All the members took part in the inquiry and supported the inquiry proceedings very well." He stressed that the inquiry was very impartial and expects the report to also be 'impartial and substantial.'

However, the inquiry ran into some difficulties, mainly due to the lack of cooperation by certain individuals and organizations.

According to Perera, certain parties who were summoned for questioning did not appear. "There are some individuals and organizations that didn't come after we summoned them. There are some individuals and organizations that didn't cooperate with us and didn't support ways and means to come to an amicable settlement."

The Sunday Times FT previously reported that Ernst & Young were directed by the subcommittee to turn in the net working capital of SLIC but to date, they have failed to do so. Perera said the lack of assistance and failure to comply with the subcommitee's directions would also be included in the report. (NG)