Saturday Sep 21, 2024
Saturday Sep 21, 2024
Thursday, 9 April 2015 00:00 - - {{hitsCtrl.values.hits}}
Former SriLankan Airlines CEO Kapila Chandrasena
The BoI had an extensive interview/discussion with the former CEO Chandrasena and also submitted a questionnaire to him, which he duly completed and submitted to the BoI.
Observations
1] Entry of Kapila Chandrasena as CEO – Background of his appointment
(i) Kapila Chandrasena assumed duties as the ‘Chief Executive Officer – Designate’ with effect from May 2011 and was appointed the Chief Executive Officer with effect from 1 August 2011 on the ‘recommendation made by the Chairman’ – Nishantha Wickramasinghe. This was unanimously agreed to by the Board of Directors. On being questioned, Mr. Wickramasinghe categorically said that he had reservations on this person as he was not suitable due to his “bad record” and lack of any airline experience. He further said that he commenced a headhunt for a person with international airline experience when Chandrasena was appointed.
Mr. Wickramasinghe said that he in fact informed his brother-in-law (former President Rajapaksa) not to appoint him but his request was ignored. In his view, the Government wanted Chandrasena, though not suitable. On being questioned exactly who was interested in appointing him to be the CEO, he said the Government was interested in appointing him but he did not support because he had “a bad track record”. BoI concludes that there was no competitive process to select Mr. Chandrasena as the CEO and his appointment could most certainly have been part of a much bigger scheme.
(ii) Mr. Chandrasena’s appointment preceded an important episode in the Mihin Lanka where he had then served as CEO. There was a suspicious purchase of an MA 60 aircraft by Mihin Lanka and thereafter transferring those aircraft to the Sri Lanka Air Force. There is prima facie evidence that the purchase of MA 60 aircraft fails to meet expected bona fide framework of transparency, competitive sourcing, and accepted procurement standards. BoI has already made the observation in its first interim report that Mr. Chandrasena was not fully truthful with the BoI, with most of his evidence on MA 60 transaction, which contradicted other documentary evidence.
BoI also recommended that the Commission to Investigate allegations of Bribery and Corruption and the Police should investigate into the purchase of the MA 60 aircraft as a matter of priority and urgency. A detailed analysis may be found in Annex 1 of this Report.
(iii) Mr. Chandrasena was appointed CEO initially on a three-year Fixed Term Contract, and thereafter the fixed term contract was extended for a period of five years, ending 31 July 2019. There was no evidence suggesting that he was evaluated on his performance before the extension.
(iv) Mr. Chandrasena attempted to justify his selection on the basis of his competence and him being selected on the basis of an interview conducted by the former Chairman and few members of the Board. This is not supported by evidence.
The former Chairman categorically said that there was no selection process but purely because the Government wanted him. The Minutes of the Board of Directors does not disclose such an interview. In fact, the Minutes of the Board of Directors on 3 May 2011 only state the following:
“Subsequently Mr. Chandrasena was called in to the meeting and the decision was conveyed. The offer was accepted by Mr. Chandrasena. There being no other business the meeting was terminated.”
(v) Chandrasena’s experience and qualifications, on his own disclosure, appear to be limited to the telecommunication and/or information technology. His only airline experience was his engagement as the CEO of Mihin Lanka Ltd. with effect from October 2009.
(vi) In such circumstances, it is apparent that the appointment of Mr. Chandrasena as the CEO was NOT on merit but due to some extraneous factor, as no apparent attempt has been made to secure a suitably qualified CEO with wide airline experience, through a competitive selection process.
(vii) He has also concurrently served as a Director of the Sri Lankan Catering Ltd. as well.
2] Remuneration
(i) Chandrasena’s monthly remuneration was over Rs. 1,500,000 in addition to the other allowances and benefits in his first fixed term contract. He is a fulltime employee. BoI does not wish to comment on the adequacy or sufficiency of his emoluments, having regard to the competitive business perspective.
(ii) We also noted that, the Contracts of Employment also specified that, SLA would make full payment of the Employees monthly contribution to EPF and the PAYE Tax applicable to the CEO’s monthly remuneration. In addition to the above remuneration, allowances and benefits, Chandrasena was also remunerated as the CEO of Mihin Lanka until he left that position.
3] Failure to
disclose interest
(i) Chandrasena has failed to fully disclose his interests in other institutions and companies, while functioning as the CEO of SLA. These include:
(a) His remuneration as CEO in both Mihin Lanka and SLA, even though specifically required to do so in the year 2013 and 2014;
(b) The fact that he was CEO (Acting) of Mobitel Ltd. from June 2013 to June 2014;
(c) The fact that he was Consultant at Mobitel Ltd. from July 2014 to January 2015.
(ii) It appears that Chandrasena has not obtained approval from the Board of Directors of SLA to take on his executive functions at Mobitel Ltd. Chandrasena in his response to the questionnaire has stated that, he has ‘DISCLOSED TO BOARD’ of his above involvement and in his interview maintained that Board approval was obtained for his involvement at Mobitel.
(iii) This is a gross misrepresentation since this cannot be substantiated through any of the Minutes of the Board of Directors or any other document. The only reference pertaining to Chandrasena’s purported involvement in Mobitel is contained in one Paragraph in the Minutes of the Board of Directors on 1 November 2013, with respect to a response received from the Ministry of Finance and Planning: “In respect of a full time appointment of a CEO to SLA (as CEO also functions as CEO to Mobitel), he had been informed that Mobitel was head-hunting a CEO and once the appointment was finalised, CEO/Mr. K. Chandrasena would discontinue functioning as CEO of Mobitel.”
(iv) The BoI is of the view that this cannot be construed as an “approval” granted by the Board of Directors of SLA.
4] CEO as a Director
of SLA
(i) Chandrasena was appointed to the Board of Directors of SLA in or about the Year 2010 and continued to function as a Director until his resignation as a Director in January 2015.
(ii) Chandrasena as the CEO of SLA has also been a member of the Board of Directors of SLA. This is not an appointment to address an exigency in the best interest of the organisation.
(iii) This is in contrary to Article 82 of the Articles of Association of the company which states as follows: “The qualification of a Director shall be as prescribed in the Act unless and until fixed by the Company at a General meeting provided however that no employee of the Company shall be eligible to be appointed as a Director”.
(iv) In the Interviews with the BoI, Chandrasena admitted that he is an employee of the SLA and that his function as Director while being the CEO of SLA is a violation of the Articles of Association. Former Chairman Wickramasinghe too agrees that this twin appointment is not in order but was made on a directive of P.B Jayasundera.
(v) This is contrary to violation of S: 188 of the Companies Act, which specifies that a Director shall not act in a manner that contravenes the Articles Association of the Company. The inclusion of Article 82 is to, inter alia, prevent a possible conflict of interest, and to ensure that, the CEO, who is the head of the Management Team of the Company is continuously scrutinised by the Board of Directors of the Company in order to ensure that all decisions are made in the best interest of the Company. However, neither the Board nor the main shareholder, the Treasury saw this conflict.
5] Dereliction of duties of Chandrasena as the CEO/Director:
(i) The BoI has found sufficient evidence to establish that Chandrasena has failed in his duties and responsibilities as the CEO of SLA. The former Chairman informed the BoI that the CEO was running the company with direct links with the Government and bypassing him and the Board. It appears that there was a mutual dislike between the CEO and the Chairman but for inexplicable reasons, they appeared to have protected each other. However, both had worked closely to support each other in relation to their own interests such as emoluments, facilities, etc., not to mention the re-fleeting exercise.
(ii) The BoI has also found prima facie evidence that many procurement contracts and other contracts have been made without following the due process required under the Procurement Manual of SLA and ensuring good governance. These instances are more fully detailed in relevant chapters in this Final Report elsewhere.
6] Suppression of information relating to the former Chairman
(i) It is evident that Chandrasena, as the CEO of SLA, has attempted to conceal certain relevant information pertaining to the former Chairman’s Salary, allowances and items assigned to the former Chairman. This is evident from Chandrasena’s response to a letter 19 January 2015 from the Additional Secretary to the Minister of Ports and Aviation which requires Chandrasena to detail total perquisites given to the former Chairman.
(ii) Mr. Chandrasena has given incomplete details in reply. In his response to the Additional Secretary to the Minister of Ports and Aviation has failed and neglected to place the following information and/or items that were assigned to the Chairman:
(i) The quantum reimbursed for medical bills;
(ii) Vehicle No: WP-KV 3836 Mitsubishi Montero which was procured by Sri Lankan Catering Ltd. for the use of the former Chairman;
(iii) Vehicle No: WP-CAB 0707 Toyota Land Cruiser Prado which was procured by SLA for the use of the former Chairman;
(iv) 03 Numbers and units mobile phones given to the former Chairman;
(v) The Apple iPhone given to the former Chairman;
(vi) An HP 2540p Laptop given to the former Chairman;
(vii) An internet dongle given to the former Chairman.
(iii) The BoI is of the opinion that Chandrasena has intentionally concealed the above items to the Ministry of Ports and Aviation in order to misrepresent and mislead the Ministry of the total perquisites given to the former Chairman.
Compromising professional standards of pilots – Attempt to lower pass marks of the simulator test for cadet pilots
The 2013 cadet pilot intake drew attention due to the resignation of the Chief Pilot (Training & Standards – T&S) Capt. Patrick Fernando and Deputy Chief Pilot (T&S) Ranga Amadoru.
The issue involved was in relation to the pass mark required to pass the simulator evaluation examination that was fixed at 70 marks.
While the evaluation marks were being considered, there had been “an external pressure” directed through the Chairman, towards the Chief Pilot T/S & Deputy Chief Pilot T/S, to reduce the pass mark to 65, in order to accommodate a few identified individuals. The Chairman’s directive to reduce the pass mark may have emanated from certain political sources.
Neither the CEO nor the COO (together with the HHR), who had the main responsibility to prevent any undue influence or interference with the selection process of pilots, did anything meaningful to prevent such interference.
Capt. Fernando and Capt. Amadoru refused to act on the Chairman’s direction and resigned from their position of Chief Pilot T&S and Deputy Chief Pilot T&S respectively, thereby not compromising professional standards.
Their resignation effectively prevented the selection of unsuitable candidates in the 2013 cadet pilot intake. In view of their bold stand taken to protect professional standards, BoI recommends that they be commended.
