Three top former civil servants, including a former Central Bank Governor, are in the spotlight after Environment Resource Investments Plc (ERI) and three of its directors were fined over Rs 10 million by the Securities and Exchange Commission (SEC) after compounding offences on related party transactions over a platinum mine trade.
The regulator announced this week that it has fined ERI's two executive directors - Kosala Heengama and Scott Newsome with Rs.3.3 million each - while the company itself was fined Rs 3.3 million and ERI Chairman Lalith Heengama was fined Rs 500,000. Last month the SEC issued a “Notice of Action” against ERI indicating that it will take legal action against the firm for not adhering to related party disclosure rules.
Lalith Heengama is former member of the Sri Lanka Administrative Service (SLAS) who served as Director General of Customs and retired as State Secretary to the Ministry of Trade Commerce & Food.
Other ERI directors - H.B. Dissanayake, a former Central Bank Governor and also a Director General of Customs, and Gamini S. Munasinghe, a former diplomat and Sri Lankan ambassador - were warned by the SEC.
While the regulator’s decision in compounding this offence was raising questions in the market, the missing information pertaining to this case was the real issue SEC had with ERI’s platinum mine.
In 2009, ERI bought Eastern Platinum, which owned a platinum mine listed in South Africa through its subsidiary Environmental Resources Ltd (ERL), incorporated in British Virgin Islands, through the purchase of some 24 million shares in Eastern Platinum. This year ERL sold the platinum mine realizing a capital gain of CA$ 41.3 million (equaling Rs 4.5 billion).
A source close to the SEC told the Business Times that what ERI didn't disclose was that ERL bought these shares in Eastern Platinum from Lionhart Investments, who are the major shareholders of ERI itself with more than a 95% stake. “It was a left-to-right transaction which is price sensitive,” he added. |
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