Sunday Sep 22, 2024
Sunday Sep 22, 2024
Wednesday, 18 September 2013 00:00 - - {{hitsCtrl.values.hits}}
More than 1,500 depositor representatives and committee members were present at the meeting and protest held on the same day.
CIFL is a finance company registered with and approved by the Central Bank of Sri Lanka under the finance Act No. 78 of 1988 and is a billion rupee company in terms of its assets and liabilities.
By 31 March 2012 the company’s total assets amounted to Rs. 3.6 billion, out of which its deposit liabilities amounted to Rs. 2.6 billion. In 2011 it successfully launched its first public share issue worth Rs. 400 million, which was oversubscribed. In the two years since the Initial Public Offering, the institution has found itself facing a dire liquidity crisis.
However, the new Central Bank appointed investor in CIFL, the Maloney-led Touchwood Group, failed to make the necessary capital infusion of $ 12 million on or before the stipulated date. When depositors’ pay back payments were delayed, the Central Bank agreed to an infusion of foreign investment by the owners of Touchwood and its subsequent takeover. Touchwood also took over management of the company, making major changes to the Board of Directors, including a new Chairman, and the changes took effect from 2 May.
Roscoe and Swarna Maloney and Dulan Hettiarachchi were appointed as the three members of the Board of the company. Former Chairman K.A.L. Rupasinghe resigned from his position on the Board and was hence replaced by Roscoe Maloney.
Section 25 of the Finance Business Act No. 42 of 2011 stipulates that the Central Bank must appoint a person to manage the affairs of a company, if it is of the opinion that the company has been following unsound practices.
The Central Bank subsequently appointed People’s Leasing and Finance PLC as the new Managing Agent of CIFL, ordered it on numerous occasions to rectify its shortcomings in financial management. In addition, the Central Bank ordered the preparation of an audit report that would reveal the management issues and shed light on the current crises within CIFL.
According to the statement made by the CIFL Depositors’ Association President Piyasena Weerasinghe, it succeeded in submitting the current financial status of CIFL but the Central Bank has failed to reveal the truth and formulate a process to solve its problems.
However, the depositors are of the opinion that it is the Central Bank that has to claim final responsibility in this issue and have complained directly to the Central Bank querying as to why steps had not been taken to prevent CIFL from going bankrupt and leaving its depositors in the lurch. The depositors also pointed out that the Chief Executive Officer of the new Central Bank appointed Board have connections with the Central Bank and that is the reason why the bank did not take action to prevent the misdeeds.
They also accused the Board of Directors of making irresponsible and reckless investments using people’s deposits. The findings have hence been submitted to the CID for action to be instituted against the culprits.
The President of the Depositors’ Committee pointed out that the suspects have left the country and questioned as to why the Government did not impound their travel documents even after complaints were made to the Police.
The current financial backlash of the fiasco stands at Rs. 3.5 billion and depositors are now accusing some individuals within the Central Bank of having made deals with CIFL even though they were aware of the company facing bankruptcy.
They claim that the modus operandi of the company was to allow the devaluing of certain assets which were then transferred to the close business associates of their choice. Prudent action, they believe, is immediately necessary to safeguard the deposits valued at over Rs. 3.5 billion.
The depositors stated that they do not agree with the Central Bank proposal and that they consider it as an “investor-oriented proposal,” while the Central Bank claims it to be “in the interest of the depositors”.
According to the proposal, the Central Bank requested the depositors to give CIFL a grace period to pay back the money which will be done after finding an appropriate investor. After the two-year grace period they will be paid Rs. 120 million by the third year, Rs. 320 million by the fourth year, Rs. 300 million by the fifth year and Rs. 640 million in the final year. But they have kept the interest rate at a very poor 5% per year. The payment schedule however may be subject to an anonymous investor investing in the company or not.
The President of the Depositors’ Association said that prior to resorting to legal action, the association requested the Central Bank to obtain Rs. 1 billion of their defaulted money from Aspic Homes, a subsidiary of CIFL, that operates a housing scheme in Homagama and to oversee the plan initially and find an investor that would make a capital infusion later.
Depositors have agreed to block their deposits for two years and receive interest at 12% per annum, till the company is revived in accordance with the plan. Depositors have put the blame on the Central Bank as they claim that it has failed to take any action to protect the company from collapsing.
The Maloneys have failed to infuse the capital investment they promised, placing the company in dire straits. The restructuring plan proposed afterwards aimed at converting 60% of deposits to non-voting shares cannot be acceptable, they said as they will have to wait for seven years to receive the balance 40% of their deposits.
They also urged depositors to push the Central Bank to guarantee the interest payments. The depositors said that they have also informed the current situation to President Secretary Lalith Weeratunga, even though no reply has been received yet.
The President of the CIFL Depositors’ Committee requested those who haven’t made Police complaints as yet to hurry up and do so, while depositors whose deposits have expired and anyone with deposits of more than five lakhs have been asked to go to the CID in Wellawatte as soon as possible. Depositors from Colombo and Gampaha are requested to make their complaints with the Slave Island Police. The Depositors’ Committee also stated that a famous cricketer who endorsed the CIFL scheme in the company’s advertisements should also take responsibility for the issue as people who trusted and believed in him were motivated to deposit money without any doubts.
The committee urged him to pay back even half of money he charged for the advertisement to the innocent depositors. They also berated a State radio channel that broadcast the company’s commercials.
Pix by Sameera Wijesinghe
