Is Chandra Jayaratne supporting corrupt CA Sri Lanka?

Thursday, 13 July 2017

The deception of the Institute of Chartered Accountants of Sri Lanka (CA Sri Lanka) to cover up egregious professional misconduct within sections of its membership must be condemned.

In the midst of the open and shut case of appalling professional misconduct by the Sri Lankan affiliates of PwC and Ernst & Young (EY) in the fraudulent privatisation of the Sri Lanka Insurance Corporation (SLIC) confirmed by the Supreme Court, Parliament’s COPE, the Attorney General and even the CA Sri Lanka Ethics Committee itself and the reluctance/refusal of CA Sri Lanka to hold the partners concerned accountable, Chandra Jayaratne writes to the President of Sri Lanka informing him inter alia:

1.The Code of Ethics … of the Institute of Chartered Accountants of Sri Lanka … has been revised to include a specific set of stipulations governing their expected response to situations of Non-Compliance with Laws and Regulations

2.You are kindly requested to support and facilitate the professional accountants in their initiative to effectively respond to situations of Non-Compliance with Laws and Regulations

What is really hilarious is that Jayaratne refers to this piece of unprecedented duplicity by CA Sri Lanka as “groundbreaking, courageous and highly-professional commitment”!

It is disgraceful that CA Sri Lanka has still not concluded its purported investigation of my complaint made as far back as 8 August 2005 over the professional misconduct of PwC and EY in relation to the fraudulent privatisation of SLIC. It has reneged on all of its undertakings given to me and kept me the complainant in the dark. This is notwithstanding several written reminders. The undertaking includes “to complete the investigation early and transparently” (Ref. CA Sri Lanka e-mail of 13 March 2006).

While PwC (Indonesia and Sri Lanka) functioned as Consultant, Investment Banking and Legal Advisory Services to the Government of Sri Lanka, EY (Sri Lanka) were the auditors to SLIC.


Supreme Court

The professional misconduct of PwC and EY, even confirmed by the Supreme Court, has not prodded CA Sri Lanka to fulfill its statutory obligation. The Supreme Court (SC FR Application No. 158/2007) in its landmark judgment delivered on 4 June 2009, held the SLIC privatisation to be “illegal and invalid ab initio” and had ordered the removal “forthwith” of the auditors, EY.


COPE

The COPE Report to Parliament dated 12 January 2007 as recorded in the Hansard inter alia states as follows: (emphasis mine)

 i) Ernst & Young auditors and PwC Consultants were directly involved in the said fraudulent conduct.

 ii) The said sale has taken place on unaudited accounts and thereby it was not possible to enter into any kind of share transaction. It also appeared the accounts have been surreptitiously and intentionally adjusted.

 iii) Deva Rodrigo, Senior Partner of PwC has been a member of the Steering Committee selecting PwC as Consultants to the Government, and continuing thereafter as a Steering Committee member supervising the work of PwC and approving payments to PwC.

(iv) Chairman, PERC who handled this SLIC transaction and later Secretary to the Treasury, Dr. P.B. Jayasundara, has been a senior policy advisor to Ernst & Young, and had failed and neglected to act in the interest of the Government in this matter.


Attorney-General

The Attorney General through his letters dated 11 April 2005 to PwC (Sri Lanka & Indonesia) and EY (Sri Lanka) served notice of instituting legal action for professional negligence in relation to the SLIC divestiture.


Ethics Committee

The CA Sri Lanka Ethics Committee almost 10 years ago endorsed the findings of its Investigating Panel of a prima facie case of professional misconduct by PwC and EY and all their partners.


Act of Incorporation

The Act of Incorporation of CA Sri Lanka as per Section 17 (2) (b) clearly stipulates that when an 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” (emphasis mine).

What rational reason could there be for inaction by CA Sri Lanka other than a blatant cover-up? Why is this being tolerated?

The Auditor General H.M. Gamini Wijesinghe will enhance his credibility and moral authority if he uses his membership in the CA Sri Lanka Council to demand accountability for this open and shut case.


Open challenge to

CA Sri Lanka

In the context of the Partnership Law in Sri Lanka where all partners are jointly and severally liable for any wrongdoing, will CA Sri Lanka:

1) Forthwith disclose in the media, including Daily FT, the identity of those who were partners of PwC and EY at least three years prior to 11 April 2003, which is the date on which the fraudulent SLIC privatisation took place?

2) Forthwith specify in the media, including Daily FT, the disciplinary action it will take on the partners concerned.


Conclusion

There is no way large-scale corruption initiated by politicians and corporate bigwigs can take place without professional complicity. This particularly includes professionals at the Treasury, Ministry of Finance, Central Bank and Securities and Exchange Commission.

How could anyone be sincere in combating corruption when they ignore professional complicity and only focus on the role of politicians while being tardy over the involvement of corporate bigwigs?

For example, the alleged terrible corruption and abuse of power at SriLankan Airlines reported with banner headlines in the media, glaringly omits to identity its longstanding auditor – Ernst & Young. This is also avoided by purported good governance activists! Why?

(The writer is a public interest activist.)