121 days of Treasury Bond Commission

BY Kavindya Chris Thomas-2017-10-22

The days of the Presidential Commission of Inquiry into the Treasury bond auction of the Central Bank of Sri Lanka are numbered.

With the 27 October deadline on the horizon, officers of the Commission, the Attorney General's Department and the defence counsel are caught in a tight race against time to make their final leap in the case. However, the three commissioners are confident after interviewing and listening to over 50 witnesses, stock load of documents, text messages and extracted phone call recordings – a pioneering moment in Sri Lanka's judicial history – to claim that there is adequate evidence to compile the final report, according to the Commissioner, Supreme Court Justice Prasanna Jayawardene.

One would not presume to know what the final report might include and one would not risk assuming either. Whatever the report may announce – be it the damnation of all the wrongdoers, the specific condemnation of the scapegoats or the denial of any wrongdoings whatsoever – we can be sure that the content will make headlines in the country. With less than a week left in the ticking clock, here is a recap of what happened at the proceedings since its inception.

On 17 October (Tuesday ) the official recording of evidence at the Presidential Commission of Inquiry into the Treasury Bonds auction at the Central Bank of Sri Lanka came to a conclusion. The Commission Chairperson Supreme Court Justice K.T. Chitrasiri marking the final evidence examined noted that the Commission may reconvene if testimony arising from any additional material evidence calls for more hearings.

Official request

He also said an official request has been submitted to President Maithripala Sirisena to extend the 27 October deadline, in view of this matter.

Commissioner Chitrasiri pointed out that since the establishment of the Commission in January 2017, which commenced hearing evidence on 21 February 2017, it has spent 121 days listening to evidence put forward by 64 witnesses and has collected 450 documents. The Commission proceedings also record the forensic act of extracting information from electronic devices as a pioneering moment in the judicial history of the country.

Despite the evidence hearing commencing in February, it was only in March the Commission proceedings started peaking public interest again, after being in hiatus. This was when retired Deputy Governor of the Central Bank of Sri Lanka, W.A. Wijeywardene claimed that the government's long-term loss for the next 30 years, would be Rs 10 billion due to the failure of not meeting the appropriate terms in the process of issuing treasury bonds which took place on 27 February 2015.
His personal computation had also indicated that the immediate loss after the issuance of the bonds incurred to the government was Rs 532 million. Later a similar view was shared by Wasantha Samarasinghe of the Voice Against Corruption Movement.

In June, Auditor General Gamini Wijeysinghe was summoned to give evidence before the Commission. In his testimony the Auditor General claimed that the decision to go for a 30-year bond at a high interest rate, cannot be rationalized since the Ministry of Finance had previously explained that the government wanted borrowings largely to settle the interest payments of the previously issued bonds.

Primary auction

Initially, the government needed borrowings amounting to Rs 13. 5 billion by 2 March 2015 and subsequently, the Central Bank of Sri Lanka (CBSL) had originally intended to sell Rs 1 billion of 30-year bonds at the primary auction held on 27 February in expectation of obtaining funds for the government via bond auctions.

The Auditor General revealed that 10 billion out of the requirement was generated due to the amount payable as interest payments for previously issued Bonds.

He said there was no need to raise money solely from the bond auction because the funds could have been raised using Direct Placement Method from the Employee's Provident Fund and by means of short-term Treasury bills.

However, in his most controversial report to Parliament he stated that relevant authorities at the CBSL should be responsible for the loss totalling Rs 1.674 billion incurred. Referring to the two Treasury bond auctions held on 27 February 2015 and 29 March 2016, he claimed that the government losses were avoidable and explained that the value of the bids offered by the CBSL initially at the auction was Rs 40 billion but had unusually accepted Rs 77.732 billion bids exceeding Rs 37.732 billion.

However, the funds requirement of the government at the time was around Rs 80 billion. He claimed that the decision to raise funds solely from the bond auction was irrational because it could incur financial losses to the Direct Placement Method.

Direct Placement Method

The CBSL could have stopped accepting bids at the 40 billion cut out and raise other funds requirements of the government through using Direct Placement Method.

Later that month it was revealed that the Auditor General's Department had not conducted a single audit relating to the domestic debt management at the CBSL over the years in relation to the government securities. Wijesinghe clarified that the nondisclosure of data relating to government securities by the Public Debt Department of the CBSL was the cause of the failure.

In July, Deputy General Manager of the Pan Asia Bank (PABC), R.A.B. Dias revealed that the owner of Perpetual Treasuries Ltd, Arjun Aloysius, had asked him "to conceal vital information" when testifying before the Presidential Commission of Inquiry.

"Arjun phoned me on 30 June and wanted to meet me, and he was pleading to meet me, I also wanted to meet him to get clarifications, and when we met he said next two weeks are crucial to him, therefore, need my support at PCoI proceedings ", the witness said in his earlier evidence.

July also saw the evidence by Anika Wijesuriya surfacing. Testifying before the Commission, she claimed that Former Finance Minister Ravi Karunanayake and his family leased out a penthouse at Monarch Residencies for eight months with the monthly lease rental Rs 1.45 million being paid by Arjun Aloysius.The witness said she entered into a lease agreement with the company called Walt and Row (Pvt. ) Ltd to which the Rs 7.3 million was transferred by the Perpetual Capital Holdings (Pvt.) Ltd to be paid to her. The Rs 145 million used in making the initial payment of Rs 16.5 million and thereafter to pay the monthly loan installment of Rs 11 million for the controversial purchase of the Monarch Residency Penthouse was revealed to have had no origin nor has it been accounted for.

This information was revealed by B.R. Chinnaiya, Chief Financial Officer of Global Transportation and Logistics (Pvt.) Ltd (GTLPL) owned by Onella Karunanayake, daughter of the former Finance Minister.

Mobile devices

Meanwhile, the Commission took custody of mobile devices used by Aloysius and the former CBSL Governor Arjuna Mahendran.

While Mahendran cooperates with the Commission, Aloysius refuses to give passwords and other information to the authorities.

He later went on to claim that he has forgotten his passwords, prompting the Commission to proceed without his cooperation.

Then Finance Minister, who prior to August is appointed as the Minister of Foreign Affairs, Ravi Karunanayake arrives at the Commission to testify in August. Here he pleaded complete unawareness about the matters relating to the Penthouse rental and the subsequent purchase, as they were conducted through a company, in which his wife and daughter were directors and they had taken decisions excluding him. He also said he did not know until accusations surfaced in Parliament that he was occupying an apartment which was rented by Aloysius' company.

Attorney General's Department submitted travel details between September 2016 and April 2017, pertaining to Aloysius and the Minister and said there were 13 visits to Singapore by both with coinciding dates.

When questioned whether he had met Aloysius in Singapore, the minister said he had met Aloysius there on a few occasions. The minister said he met Aloysius at the Finance Asia Conference, which was sponsored by the Perpetual Treasuries Ltd. and on the Christmas in 2016.

The minister said he did not travel to Singapore to meet Aloysius.

In August, Sachith Devathantri, the IT executive of Perpetual Treasuries Ltd today admitted that he had deleted several phone recordings from its data on the instructions of the Chief Dealer of PTL, Nuwan Salgado on 5 July 2017.

Previously, on two occasions, Devathantri had recorded statements with CID officials attached to the PCoI and in the second statement he admitted that he had lied in the first statement.

Later PTL Chief Dealer Nuwan Salgado went on to become a crown witness for the case after revealing that he had given orders to Devanthatri upon the instructions of his CEO Kasun Palisena. Salgado later revealed that the company earned profits in excess of Rs 11 billion due to Arjun Aloysius' possession of confidential inside information regarding bond auctions.

Individuals being referred to as RK, AM and PM in recorded- deleted or otherwise- phone calls, text messages and emails made a continuous reprisal during Commission proceedings in the last two months. After its first appearance back when former Finance Minister Ravi Karunanayake was under examination, the references to these unknown individuals continued until the final witness- Steve Samuels, personal assistant to Aloysius- was under examination. All individuals claimed that they were unaware of the true identities behind the references. However, by and large the matters were rather apparent to the Commission as well as to the general public seated for the proceedings.
This month also saw the evidence examination of Arjuna Mahendran, alongside several chairpersons from several state banks.

More importantly, on the final day of hearing evidence, AG's Department notified that Anika Wijesuriya has been forced to flee the country due to threats on her life. And in her absence, her family members continue to receive death threats from an individual who had identified himself as Shanil Nethicumara. Nethicumara had made unambiguous threats on the Wijesuriya family based on the testimony they had given regarding Karunanayake penthouse apartment. This has now resulted in a criminal investigation against Nethicumara, as ordered by the Commission, on the charges of criminal intimidation.