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Friday, 8 September 2017 00:05 - - {{hitsCtrl.values.hits}}
By Himal Kotelawala
The Presidential Commission appointed to investigate the controversial bond issuance yesterday heard arguments both for and against how sensitive inside information obtained by Perpetual Treasuries Ltd. (PTL) might have provided the company with an unfair advantage when placing bids.
PTL Chief Dealer Nuwan Salgadu, while testifying before the commission, was cross-examined by Counsel for former Central Bank Governor Arjuna Mahendran Attorney-at-Law Chanaka de Silva, who attempted to prove that information relayed to PTL CEO Kasun Palisena by former Director Arjun Aloysius was “utterly wrong.”
Referring to two telephone conversations between Aloysius and Palisena recorded on 29 March 2016 while the former was in Singapore with Salgadu, de Silva inquired if it was correct to say that as Salgadu claimed to have left the room after handing over the phone to Aloysius (Palisena had called Salgadu’s phone), he would not have known all the facts pertaining to the call, to which Salgadu responded: “I understood the conversation, but it was between two other parties.”
He also acknowledged that all three calls, including one call between himself and Palisena in August, last year, had been accurately recorded and had not been tampered with in any way.
In the first call dated 29 March 2016, taken at 9.18 a.m., Aloysius can be heard telling Palisena that he had found out through “some friends” at the National Savings Bank (NSB) and the Bank of Ceylon (BoC) that at a meeting of primary dealers from state banks held the previous day (28 March), a collective decision had been taken to bid low. When dealers meet prior to an auction and decide on bid value, Salgadu said responding to de Silva, it’s referred to as colluding or fixing - a practice that’s considered unethical.
Asked by Justice Prasanna Jayawardena who would be authorised to provide such instructions to state banks, Salgadu said it’s only the Central Bank or the Treasury which may do so.
Counsel de Silva, pointing out Aloysius’ claim (on the call) that the information had been given to him by NSB and BoC, questioned the likelihood of state bank officials getting together in such a manner. While agreeing that it was not likely, Salgadu said it did seem to have happened.
He also told Justice Jayawardena that he was not aware of fiscal requirements on a particular day. In his cross questioning of Salgadu, Counsel de Silva asked him if he agreed that the statutory reserve requirement (SRR) as allegedly mentioned by Aloysius on the phone was incorrect (it has been increased from 6% in 2015 to some 7.5% in 2016), to which Salgadu responded in the affirmative.
From 29 March, there had only been rate hikes, said de Silva, and not cuts.
Pointing to the second call and Aloysius’ supposed claim of Rs. 15 billion worth of bids by the Employees’ Provident Fund (EPF), de Silva said that only one bid amounting to Rs. 500 million had been placed by the EPF (two bids totalling Rs. 1 billion), as opposed to Rs. 15 billion as claimed.
Any information relating to the EPF bid, he said, was “utterly wrong.”
He also questioned Aloysius’ claim that he had received an SMS saying NSB was bidding Rs. 8 billion.
Armed with summary sheets with unique International Securities Identification Numbers (ISIN), de Silva said NSB’s total bids amounted to some Rs. 12.08 billion, way above the Rs. 8 billion purportedly mentioned by Aloysius.
This information too was “utterly wrong”, he repeated.
In one of the calls, it was also heard that state banks were going to bid between 13% and 13.5% but according to de Silva, there were a number of instances where state banks (particularly People’s Bank) bid well above 13.5%.
According to the ISIN, this information was also wrong, he said.
Either Aloysius had been “imagining something” or someone had fed him false information, he went on to say.
Referring to the third call from August 2016, de Silva said that his client Mahendran had by then ceased being CB Governor. The timing also called into question, he said, the alleged involvement of a female UNP politician whose name was mentioned on Wednesday in connection with the matter. Her son was alleged to have leaked a statement given to the Committee on Public Enterprises (COPE) headed by MP D.E.W. Gunasekara.
Justice Jayawardena remarked that “all the players were private citizens at the time.”
De Silva said that his client was not present at a COPE hearing held on 12 August last year under the purview of JVP MP Sunil Handunnetti, while Salgadu acknowledged that it was current CB Governor Dr. Indrajit Coomaraswamy who had been present. Mahendran, said de Silva, was not present at COPE hearings held since 8 June 2016.
Deputy Solicitor General Milinda Gunatillake, in his turn to question Salgadu, argued that contrary to the defendants’ attempts to prove otherwise, the inside information allegedly relayed by Aloysius was, in fact, not without its use.
Referring to ISIN C157, Gunatillake pointed out that PTL was indeed on the top of the list of bidders.
Of the Rs. 8.6 billion it had bid, Rs. 8.45 billion had been accepted - about 98%. Of the total bids accepted, some 37% had been by PTL, he said, with the next highest accepted being 19%.
On page 262 of the same ISIN for a 10-year bond, he said, People’s Bank was listed as the highest bidder at Rs. 250 million, with BoC offering to buy at Rs. 80.45. On page 269, the lowest bid accepted was by PTL at a price of Rs. 75.67. The next lowest bid was by People’s Bank at Rs. 162 million.
Of the 10 lowest bids, said Gunatillake, five were from PTL. The lowest face value was over Rs. 5 billion, Rs. 4.05 of which had been sold to PTL. According to Gunatillake, the company topped the list of successful bidders for 2026.
Rs. 7.6 billion was accepted from PTL (45% awarded to the company) while the EPF, on the bottom of the list, had been awarded Rs. 500 million.
On 282, PTL had the highest acceptance rate of 36%, said Gunatillake, with the Rs. 1.3 billion from EPF at 3%. For the 2030 ISIN, Seylan Bank had offered the highest price at Rs. 80.56 (from 288 to 291). On 291, the lowest price had been offered by Pan Asia Bank bidding on behalf of PTL at Rs. 73.09. The amount accepted was Rs. 5 billion.
Whomever that had been advising PTL was “not giving them bad advice,” concluded Gunatillake.
PTL CEO Kasun Palisena’s testimony was marked by nearly two hours of debating a technicality, with the CEO unable to satisfactorily explain via documentation an inter-company outflow of Rs. 707.9 million from PTL to Perpetual Capital Holdings.
President’s Counsel Nihal Fernando, who had hitherto been representing Perpetual Treasuries Ltd. (PTL) in the Presidential Commission of Inquiry hearings, yesterday announced his decision to withdraw from the inquiry.
Citing the alleged deletion of some 100 recordings of telephone conversations as a reason, Fernando said, in the absence of accurate information, it is not correct to say that one party or the other has lied before the commission until the investigations have formally concluded - hence his withdrawal.
However, Fernando said he will continue to attend hearings until PTL CEO Kasun Palisena’s evidence is concluded, given ethical considerations.
Noting the points raised, the commission accepted Fernando’s request.
