Financial crimes and Sri Lanka’s judicial system

The Permanent Colombo High Court Trial-at-Bar has released the former Governor of the Central Bank accused in the 2016 bond scam from the charges related to the Public Properties Act. Former Central Bank Governor Arjuna Mahendran, his son in law Arjun Aloysius and eight others were charged under the Public Properties Act. 

The case was filed by the Attorney General during the Yahapalana administration charging the defendants with conspiracy to commit criminal misappropriation in the issuance of Treasury Bonds with a value of Rs. 10.058 billion. The AG claimed that there was a criminal breach of trust by the Governor of the Central Bank which caused a loss of Rs. 688 million to the Government. Perpetual Treasuries, a Central Bank licensed primary dealer in government bonds owned by Aloysius was suspended after the bond scam came to light.

Last year the High Court Trial-at-Bar cleared former Finance Minister Ravi Karunanayake, from several charges filed against him related to the bond scam. Karunanayake and six others had been accused of links to the misappropriation of billions of rupees in a March 2016 bond auction. Karunanayake, the then finance minister was accused of living in a luxury apartment paid for by Arjun Aloysius. A presidential commission of inquiry found that Governor Mahendran, a close associate of current president Ranil Wickremesinghe, had interfered in a bond auction and had leaked inside information to help Perpetual Treasuries make billions of rupees in profits. Mahendran raised a policy rate floor outside the regular monetary policy meeting and pressured a tender board to sell bonds at high prices, the inquiry found.

The Central Bank bond scam was the biggest scandal to rock the Yahapalana Government. The close personal relationship between Mahendran and then prime minister Ranil Wickremesinghe was severely damaging to his government. Both the then Joint Opposition and President Maithripala Sirisena used the bond scandal to politically humiliate the United National Party and premier Wickremesinghe. The devastating defeat of Wickremesinghe and UNP at the 2020 general election at which it could not win a single seat in parliament other than through the national list had much to do with this scandal.

Whatever the technicalities cited for the dismissal of charges against those responsible for this financial scandal, what is clear is that justice is not being delivered. There is no debate or dispute regarding the financial loss to the Government through this transaction. There is also little doubt regarding the conflicts of interest and numerous inappropriate dealings that caused billions in losses. Yet not a single individual is held accountable for these crimes. Whether the mistakes and faults are in the investigations done by the police, prosecution done by the Attorney General’s Department or the judges who hear the case, what is abundantly clear is that the judiciary has failed to deliver justice for financial crimes committed against the people of Sri Lanka. 

Such judicial failures are coming in the wake of the UN Human Rights Council and the High Commissioner for Human Rights calling on the Government to address financial crimes. A report by the High Commissioner and a resolution passed at the UNHRC recently called on the Government to investigate and prosecute former and current public officials who triggered the country’s worst financial crisis in more than seven decades. However recent judgements by courts exonerating or dismissing cases against individuals, especially those with political clout, accused of serious financial crimes do not give much confidence towards justice prevailing in these cases. It is yet another systemic failure of the judiciary.