War of words between Lankaputhra CEO and Chairman over termination

By Charumini de Silva

Controversies at the State-owned Lankaputhra Development Bank continueto take centre-stage with the dismissal of its Chief Executive Officer and General Manager Lasantha Amarasekera from his post from 28 June.

The saga has triggered a war of words between the axed CEO and the Chairman Lasantha Goonewardena.

“I don’t accept this as termination because when the Chairman has been challenged as disqualified by the banking regulator itself, he has no right to remove me. Hence, I don’t think this is a legally - valid termination,” Amarasekera told the Daily FT.

Despite the letter of termination stating that the CEO was removed from the post due to his inefficiency, Amarasekera categorically denied all charges and highlighted that it was mainly due to the mismatch of opinions between him and the Chairman as well as for not supporting his malpractices.

However, he pointed out that the immediate reason could be an investigation which was conducted by the COPE on a manipulation done by a particular branch of the bank.

He said in spite of him and the Chief Financial Officer (CFO) highlighting the manipulations a couple of times to the Board of Directors even before COPE intervened, the Board had disregarded it. However, after the Auditor General’s report mentioned it, COPE directed to investigate on it and thereafter COPE requested the Ministry of State Enterprise Development and Auditor General to conduct an investigation.

In the meantime, the bank also conducted an internal audit and submitted it to the Audit Committee, which the Chairman later converted to a Board decision. Later he called for a Board Meeting on a bank holiday (23 May) for which Amarasekera wasn’t invited where he sent extract of the minutes informing to reverse all transfers and informing the investigation should be handed over to an external party noting that the internal audit report was controversial.

“I wanted to remove five people involved in the manipulation activities in that particular branch until the investigations were over, but the Chairman disregarded it and asked to reverse the transfers. I had no optionbut to reverse it,” Amarasekera noted.

Noting that the Chairman was conducting a lot of malpractices, he stated: “When the Chairman’s appointment is not valid, I cannot do whatever he wants. He is confirming employees without basic qualifications and in some instances he’s recruiting employees with a certificate diploma issued by his own company, but we are compelled to take them. I have always voiced my concerns in writing and he’s not happy with it.”

In addition, the Chairman is disbursing loans at a rate without properly evaluating repayment capacities of those people with short-sighted vision whereas the actual impact would be felt after six months of maturity, Amarasekera said, adding that the Chairman had also opened four branches without Central Bank approval.

“I informed the Board couple of times and at the last Board meeting I asked them to close these branches. The Central Bank also sent letters to close them, but the Chairman didn’t adhere. I am helpless. As the CEO of the bank I am responsible and Central Bank as the regulator is responsible, but unfortunately no action was taken. What is the position of the industry? What will happen if other banks start doing the same?” he questioned.

He further said that the Chairman provoked the union against him, and held Board meetings without himfor which even after requesting minutes they were not provided and at certain Board meetings only the extracts were mailed to his residence.

Amarasekera said he would file a case against his dismissal and would seek legal assistance in this regard. 

Justifying the dismissal, Lankaputhra Development Bank Chairman Lasantha Goonewardena said it was a collective decision by the Board of Directors of the bank including the two Treasury representatives considering the irregularities which had taken place during the General Manager’s tenure.

“This was a step taken purely to develop the bank. There’s nothing personal, but just to develop the bank,” he added.

He asserted that when he took over the bank in February last year, there was a credit audit review done by the PricewaterhouseCoopers (PWC) and after receiving the findings, they appointed a three-member committee to go through and recommend actions to rectify the situation. Thereafter, based on the recommendation of the PWC report, three-member committee, Central Bank report and COPE report, finally the Board decided to terminate his services.

“We found that even during the 2015presidential electionssome loans have been granted without any basis. Some of the loans were disbursed with one-year grace period and most of them had caused to increase the NPA ratio during last few months. He had also issued some cheques during election dayas well. We have investigated and found that he is responsible for most of these things. Considering all these irregularities and inefficiencies caused from the day the General Manager had been appointed, we requested the GM to resign,” Goonewardena pointed out.

He further emphasised that despite the Board on several occasions advising Amarasekera to rectify certain matters and implement some of the Board directives, he failed to do so. Therefore, at last month’s Board meeting, the Board went through all the things and requested him to resign from the post.

Noting that Amarasekera was terminated from his position as the Chief Executive Officer and General Manager from 28 June, he said the Board had given him 14 days, leaving the option open for him to appeal to the Board.