Mystery of fifth company in SLIC deal

Businessman Harry Jayawardene, at the centre of the storm, was summoned before the subcommittee on June 7. According to its Chairman Dilan Perera, Jayawardene was in fact 'extremely cooperative.'

When the government entered into an agreement with a consortium of companies for the sale of the entire issued share capital of the Sri Lanka Insurance Corporation (SLIC) on April 11, 2003, that consortium included Milford Holdings (Pvt) Ltd, Greenfield Pacific EM Holdings Ltd, Distilleries Company of Sri Lanka Ltd and Aitken Spence Insurance (Private) Ltd.

Now, the Sunday Times FT has learned that another company, Asia Box Consultancy Services (Pvt) Ltd, was part of the original consortium during the pre-bidding phase and the Committee on Public Enterprises (COPE) wants to know what happened to that party.

This was the line of questioning for the Public Enterprises Reform Commission (PERC) officials who were to appear before the COPE subcommittee on Tuesday to clarify issues regarding the highly questionable privatization of SLIC. PERC Chairman W.A.S. Perera, Director General Alexis Silva and Director of the Evaluation and Monitoring Unit E. Arumugum appeared before the Parliamentary subcommittee.

Sources told the The Sunday Times FT that prior to the subcommittee probing for details regarding the fifth company which had been part of the Consortium, PERC was not aware that it had even existed. The source said PERC is expected to dig through its files in order submit a report to the subcommittee within ten days. An Internet search of the unknown company yielded no information. Businessman Harry Jayawardene, at the centre of the storm, was summoned before the subcommittee on June 7. According to its Chairman Dilan Perera, Jayawardene was in fact 'extremely cooperative.'

Perera said the pertinent issues relating to the 2003 agreement entered into between the government of Sri Lanka and the consortium of companies which purchased SLIC were 'discussed and clarified.'

At this meeting with Jayawardene, Asia Box Consultancy was disclosed as being part of the consortium during pre-bidding which is the reason behind PERC officials being summoned for questioning during this past week.

One of the other prevalent issues at hand is reconciling the discrepancies in the audited accounts for SLIC submitted by Ernst & Young.

PERC contends that in the audited balance sheets, the comparative figures restated on the balance sheet as at December 31, 2002 are materially different with the figures as at 31 December 2001, with no reasons or clarifications given. PERC has also stated in correspondence to SLIC that due to the differences in the audited accounts, the valuation of SLIC has been grossly undervalued and that the purchaser has dictated the purchase price to the government of Sri Lanka.

COPE Chairman Wijedasa Rajapakse has consistently been outspoken on the SLIC privatization, referring to it as the 'greatest disaster' detailed in the COPE report submitted to Parliament earlier this year. Rajapakse has asserted that the auditors, Ernst & Young, had assessed the value of the shares without having the proper figures and that the assets were not reflected in the accounts. In the report, COPE has estimated that SLIC should have been valued at Rs.15 billion.

Speaking to The Sunday Times FT this week, Rajapakse said he was in the process of preparing the next COPE report. Once the COPE members approve the final transcript and the procedural matters are sorted out, the report is expected to be presented to Parliament shortly.

In addition to Jayawardene, the COPE subcommittee also summoned representatives from John Keells Holdings including Chairman Susantha Ratnayake on the purchase of Lanka Marine Services (LMS). "We called in John Keells because we wanted to hear both sides of the story and we thought it fit," Perera said.