3rd March 1996

Cement mix-up:

LK:'ministers must be frank with Head of Govt.'

A: I first got involved on March 8 last year, when the President asked me to give a legal opinion to the Cabinet on the privatization of Puttalam Cement which led to a Cabinet decision on March 23. In her Cabinet memorandum I saw the name of U.L. Kadurugamuwa, a senior lawyer whom I have known and worked with for many years in the 1960s, early 70s, late 80s and early 90s. I called him for a chat to discuss his opinion, which turned out to be not an opinion of his - but it had been attached to the Cabinet memorandum.

For over nine months after that I did not know what had happened.

Then all of a sudden in December last year, Mr. Kadurugamuwa contacted me to verify whether the Cabinet decision taken on March 23 based on my opinion had been reversed. I had no independent recollection of this. Mr. Kadurugamuwa showed me a document filed in court where Rajan Asirwathan, Chairman of PERC, had referred to a Cabinet decision but there was no date to that Cabinet decision. Mr. Kadurugamuwa told me about a tape recordings ordering Ministers and officials being bribed to change this decision. It was a natural puzzlement to me. I was wondering perhaps, could Mr. Asirwathan's letter be a forgery? It worried me. I was puzzled at Mr. Asirwathan's letter because there was no ex-facie explanation of the Cabinet decision. I also saw Aritta Wickramanayake's letter almost to the same effect which had been filed in court.

If a responsible person brings to my notice something which has a possible impact on the public interest, especially in an area in which I have an official concern such as Foreign Investment, it is my duty, at least, to look into the matter. In this case, what was brought to my notice was a matter relating to a subject I had already looked into.

I then called Mr. Abeyratne, the Cabinet Secretary and asked him to check whether a second decision was made. He said no. I asked him to check again and he said no again. Then I felt at the very least I should bring the matter to the notice of the President and I started my letter saying that I was very deeply troubled about a development in the Puttalam Cement matter.

Why was I deeply troubled? How did this Cabinet variation come about?

I asked the President three questions.

(1) Whether the March 23 Cabinet decision was reversed;

(2) Whether Mr. Asirwathan's letter was authentic;

(3) Whether Mr. Wickramanayake's letter was authentic.

If those questions were answered in the affirmative I would have taken the view that the Cabinet is entitled to change its mind. New developments take place etc. If that was so, the PERC and the SEC would have acted properly. Equally if the letters were a forgery that too ends the matter, except of course any investigation as to forgeries etc.

I believe that a Cabinet Minister must always be open and frank with the Head of Government.

Q: When did you know that the original Cabinet decision had been reversed and that the letters were authentic?

A: When she sent me Mr. Asirwathan's and Mr. Wickramanayake's response to my letter to her on 19th February. In Mr. Wickramanayake's letter, he had attached the Cabinet memorandum and the Cabinet decision. This was the first time that I had confirmation of such a decision. The President asked me for any comments when she sent the documents to me, and I replied to her on February 22.

Q: When was this Cabinet decision taken?

A: There had been a Cabinet memorandum on June 16, 1995 and the decision had been taken on June 21, 1995.

Q: Was it a reversal of the March 23 Cabinet decision or a new decision?

A: It does not say in the documents that I have. In the June 16 Cabinet memorandum, there is reference to a minute on May 8, 1995 which recommends a course of action that should be initiated to regularise the takeover of Puttalam Cement by Tawakkal Group and a proposal by Vanik being reasonable, practical and commercially acceptable. It also says that the Vanik proposal however does not comply with the Company law.

Q: By whom is the Cabinet memorandum?

A: By the President. Very likely I was out of the country. I had no recollection at all. You see, after a Cabinet meeting Ministers don't remove the papers. They leave them on the table for the staff to collect and destroy. I don't think any Cabinet Minister keeps a collection of Cabinet decisions. I certainly don't have a collection. It is not proper to take them home. There was no way for me to check other than with the Cabinet Secretary, whom I told to make a thorough check. I gave him a period of March 23 - August 1st 1995, August 1st being the date of Mr. Asirwathan's letter referring to a Cabinet decision.

Q: And then?

A: My letter was hand delivered, 23rd (Friday) to the President. I left early next morning for Abu Dhabi. I also sent a copy to Mr. Asirwathan with a handwritten note. I will now proceed to read an extract from my letter which refers to Mr. Asirwathan and Mr. Wickramanayke (reads):

"Now it turns out that in fact there was a Cabinet decision of 26th June, 1995, (based on a Cabinet memorandum of 16th June, 1995) which does vary the 23rd March decision. What the Cabinet Secretary told me to the contrary was wrong. Had I known that the 23rd March Cabinet decision had been varied by the 26th June decision I would not have written my letter to you of 19th January, 1996. I would have regarded the matter as closed with the 26th June decision.

"With regard to Mr. Asirwathan's letter to you, I do not see what derogatory and damaging comments I have made about him. On the contrary, it was because I could not imagine that a person of his standing would have disregarded the Cabinet decision of 23rd March (if that was the only relevant decision) that I thought his letter might have been forged; hence my reference to it as a 'purported' letter. Suffice it to say that I hold Mr. Asirwathan in the highest esteem, personally and professionally.

"With regard to Mr. Wickramanayake's letter to you, he seeks clarification from me as to whether I have any doubts about the propriety of the actions of the SEC in general, and him in particular. Once it is recognised that I was wrong to believe that there was no Cabinet decision on this matter subsequent to the 23rd March decision it follows clearly that SEC and Mr. Wickramanayake acted with propriety in giving the advice which they tendered to PERC based on the 26th June Cabinet decision. I have no doubts whatsoever on that score."

Q: If the Cabinet Secretary has told you that there was no Cabinet decision, are you satisfied there has been a Cabinet decision. Cannot the Cabinet decision documents be forgeries?

A: I went on the assumption that there was no second decision. I asked the Cabinet Secretary. Now there seems to be a second decision.

Q: In your letter to the President you had also referred to a tape recording of a conversation referring to a Cabinet Minister being bribed?

A: Yes, I sent a transcript of the tape, as filed in court, to the President on 26th January.

When this matter was brought to my attention, I felt it was sufficiently serious to inform the President. Of course, it may eventually turn out to be mere airy talk, but if true, it is serious. Those of us citizens who wish to see clean government would also wish to see such allegations investigated and substantiated if possible.

UNANSWERED QUESTIONS

Why did President Chandrika Kumaratunga submit a Cabinet memorandum on March 8 last year annexing thereto a letter by U.L. Kadurugamuwa claiming it to be an opinion by him, that the Puttalam Cement Company had not violated Section 55 of the Companies Act? Who drafted this Cabinet memorandum to the President?

Why was the Cabinet decision of March 23, 1995 not implemented? There is proof that a decision was taken and that the decision was conveyed to the Chairman of Puttalam Cement Company. But there is no evidence whatsoever to show any effort in the implementation of that Cabinet decision.

How is it that the Cabinet Secretary Abeyratne did not know - on two occasions - that there was a new Cabinet decision particularly when copies of such a Cabinet decision had already been filed in court even before Minister Lakshman Kadirgamar had asked him to make a search?

Are there any Cabinet Ministers who can recall a Cabinet meeting on June 21, 1995 at which the Puttalam Cement decision was discussed and a decision taken, in effect to reverse the March 23 Cabinet decision?

Why did not the Cabinet memorandum dated June 16, 1995 under the name of the President presenting the proposal submitted by Vanik as one proposal for consideration, not make any reference whatsoever to at least refresh the memory of Cabinet Ministers, to the earlier Cabinet decision of March 23 rd?

Why did Rajan Asirwathan, Chairman of PERC, having written letter dated July 17,1995 to the SEC and another letter dated August 1, 1995 to Vanik referring to a Cabinet decision accepting the Vanik proposal not mention any such fact to the foreign investors from Hong Kong when they met him - nor communicate to them such news during this period?

Why did not Mr. Asirwathan being privy to this news, not communicate this to Mr. Kadurugamuwa, the lawyer looking after the interests of the Hong Kong investors when they met on November 1, 1995 on which occasion Mr. Asirwathan encouraged Mr. Kadurugamuwa to file action without delay to remove Tawakkal Group from the Board?

Has the Cabinet of Ministers the powers to make legal what is illegal under the Companies Act?

Has the Cabinet given a direction by virtue of its Cabinet decision on June 21, 1995, in fact and in law to adjust the books of Puttalam Cement?

Having said in the Cabinet memorandum of 16 th June 1995 that the Vanik proposal is against the Company law (why) did the Cabinet go ahead and pass it nevertheless?

Did a Minister, a secretary or any official take a bribe to get the Cabinet decision of March 23 reversed on June 21st?

Eminent lawyer U.L. Kadurugamuwa has reiterated that he gave no firm opinion to Vanik regarding the violation of the Section 55 of the Companies Act.

In an interview with The Sunday Times, Mr. Kadurugamuwa clarifies the role he is playing in the matter.

Nimal:nothing to do

Housing and Construction Minister Nimal Siripala de Silva has said he has nothing to do with the Puttalam Cement Company and nothing to do with the current controversy over allegations that the Tawakkal Group had bribed a VIP and an official.

"I have got nothing to do nor does it come under my purview, it's the Treasury that is handling the Puttalam Cement Company," Mr. De Silva told The Sunday Times.