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The JVP has written three letters urging Central Bank (CB) Governor Dr. Indrajit Coomaraswamy to commence a probe into the controversial bond scam, accuses him of having a hand in the massive fraud which has incurred a loss of Rs. 145 billion. “He has been avoiding answering queries and requests for a probe into this biggest-ever financial crime. But over 2.47 million members of the workers of Employees Provident Fund (EPF) need to know about the fate of their hard earned money in the EPF,” Wasantha Samarasinghe, the Convener of the Voice Against Corruption said.
In an interview with the Daily FT, he said that former CB Governor Arjuna Mahendran and his son-in-law had robbed the bank as well as the EPF. Accusing top politicians in the Government and also the Opposition of safeguarding Mahendran, he charged they were trying to sweep the massive scandal under the carpet. “It is very evident that he has a strong blessing from the top politicians as no one, from former President Mahinda Rajapaksa to all other MPs and Ministers, is raising their voices against those two who played with the hard-earned money of the country’s labour force,” he stressed.
Samarasinghe, a member of the JVP’s Politburo, said they had given the opportunity to Dr. Coomaraswamy to clear himself of the allegations that he too had a hand in the bond scam but if he failed to answer by tomorrow (18), employees belonging to over 200 private sector institutions would storm the Central Bank on Thursday afternoon.
Following are excerpts of the interview:
By Shanika Sriyananda
Q: The JVP has continuously spoken against the CB’s bond scam. What is the progress?
A: This is the biggest-ever financial fraud that has taken place in Sri Lanka’s history. We all know the previous Government is facing a lot of allegations on misusing pubic money and corruption. But the bond scam is a more serious financial crime, which has put the economic landscape of the country in a dilemma. Have you ever heard of robbing a central bank of a country? The CB’s former Governor, its Monetary Board, the Prime Minister and the Finance Minister are directly or indirectly accused of this massive financial fraud. Unfortunately, the people of this country are forced to bear the burden of this scam while the culprits are still free.
Soon after his appointment, CB Governor Arjuna Mahendran in 2015 had changed the ‘Auction cum Direct Placement’ system, which was used for over 18 years, with no consultation with the CB Monetary Board. When questioned at the COPE hearings, he said Premier Wickremesinghe had instructed him to introduce the ‘Auction only’ system in issuing Treasury bills and bonds. The ad hoc change of the Treasury bills and bonds auctioning procedure had paved the way for the biggest-ever financial scandal in the country. This has incurred a loss of Rs. 55,850 million to the CB from 2015 first quarter to 2016 third quarter.
This deal started by calling tenders for Rs. 1 billion and Governor Mahendran’s son-in-law Arjun Aloysius had invested Rs. 5.5 billion in bonds while the Employees’ Provident Fund (EPF), which had Rs. 1,300 billion, and other companies were there to bid. The interest rate started from 9.5% but it shot up to 12.5%, which resulted in an increase in interest rates in the whole country. When the bond scam was exposed, the Government announced that it was going for direct placements while the interest rates shot up from 4% to 15%. Within a year, interest rates increased by 50%.
At the end the Government had to pay Rs. 60 billion in loan interest due to the increase in interest rates in Treasury bills and bonds, burdening the people of this country. The bond scam resulted in CB losing Rs. 145 billion due to increased interest rates, which shot up from 9.5% to 14.75%.
While as a policy no off-market rates were allowed by the CB, Perpetual Treasuries – belonging to Arjun Aloysius, Mahendran’s son-in-law – had always bid for off-market rates but the CB was silent about this. There was a conflict of interest as the CB Governor’s son-in-law was placing bids while he was holding office.
We have some published reports which reveal the profits of Perpetual Treasuries which amounted to a net profit of over Rs. 5 billion for 31 March 31 and over Rs. 12 billion for the 21- months from 2015 first quarter to 2016 third quarter. In September 2016, Perpetual Treasuries had purchased direct bonds worth Rs. 125 billion and out of the total Rs. 115 billion worth bonds were sold to the EPF and again over 85% indirect bond purchases had been sold to the EPF.
This shows a clear close connection between the CB, EPF and the PTP. The funds of the CB are under the Governor, the CB Monetary Board and the Investment Board of the EPF. Finally both the CB and the EPF suffer losses while Perpetual Treasuries thrives with exorbitant profits. The people of Sri Lanka too suffered due to high interest rates. This is why VAT came into effect.
Within six months, how can this company, which has less than 10 workers, have a profit of Rs. 6,815 million whereas companies with over 30,000 workers earn profits less than Rs. 2,800 million?
Q: Since no action has been taken so far, what does the JVP plan to do?
A: We have written three letters – 5 September 2016, 19 October 2016 and 4 January this year – asking CB Governor Dr. Indrajit Coomaraswamy to have a full probe into the massive corruption which has happened and is still taking place in the CB. We received a response only for the second letter, just stating: “I have received your letter, and issues highlighted in the letter are being examined by COPE.” He has avoided answering the controversial issue of the bond scam and the probe which we have requested. His behaviour has confirmed us that directly or indirectly he too is a part of the bond scam or he is trying his best to sweep this issue under the carpet.
Meanwhile, we were informed that he has already violated some of the legal requirements needed to hold the post of the Governor of the CB. According to our information he has not fulfilled five aspects – not obtained or got the approval from the Committee of High Posts of the Parliament, which is a must to check into the suitability of the person to hold the post, failed to submit the declaration on his assets and liabilities according to the prevailing law, failed to shed overseas assets held by him, which raises serious issues of conflict of interest and unethical behaviour, violated the administrative recruitment policies of the Government by accepting an appointment as the Central Bank Governor when he is over 66 years old, and failed to submit the required health reports.
We have also found that Dr. Coomaraswamy is not a Consultant of the ‘Galleon Fund’ belonging to Raj Rajaratnam, who is now known as the world’s largest ‘insider trader’ and who is now in jail in the US, but a member of the Director Board. Here also he has lied to the people of Sri Lanka. We have proof to show he was on the Director Board of the Galleon Fund.
An internal report of the CB has clearly informed that the country’s largest private sector pension fund – the EPF – had lost over Rs. 15 billion due to the CB bond scam, which caused huge losses to the economy. The previous Governor and his son-in-law robbed the hard-earned money of over 2.47 million workers. But he has failed to taken the required action as the new CB Governor during the past six months.
We also urge him to take immediate disciplinary inquiry into the activities of Deputy Governor P. Samarasiri, who also played a vital role in the bond scam. He advised and guided Mahendran in the bond scam, continues to retain his senior post, and is trying to conceal financial irregularities that happened during Mahendran’s tenure.
Q: You said Voice Against Corruption has forwarded five main questions via your third letter to the Governor. What are they and what are your plans if he doesn’t answer?
A: We have asked some simple questions which he can answer within two days. We have asked him to reveal the total amount of investments made by the EPF from 1 January 2015 to 30 June 2016, the total amount of investments in Treasury bills and bonds in the Primary Market made by EPF from 1 January 2015 to 30 June 2016, the necessary approvals obtained for each of those bond investments from the Investment Committee of EPF, and the list of actions that he has taken as the CB Governor following the CB’s Internal Report which revealed that CB has incurred huge losses.
We have also expect him to answer the difference between the interest rate that was receivable from the Primary Market and that received from the Secondary Market, on each particular bond, the loss incurred by the EPF as a result of purchasing each bond from the Secondary Market instead of the Primary Market and the values of the bonds that had been purchased by the EPF at yield rates lower than the prevailing yield rates in the Secondary Market.
We have given him 14 days to respond and if he fails to reply us on 18 January, employees of over 200 private sector employees have unanimously agreed to meet him at the Central Bank to get answers to these questions, to get a clear idea on the bond scam. If he is not a party to the bond scam, we hope he will reply us. It is the right of the workers to get answers to the bond scam as over 15% of their fund has been robbed.
Q: There are claims that the FCID is a politically-influenced arm. What is your view?
A: As we all know, the FCID was established to probe financial crimes. We also complained about the bond scam to the FCID and to the Commission to Investigate Allegations on Bribery and Corruption but no action has been taken yet to probe this massive fraud. The investigation officers of the FCID are engaged in a genuine attempt to expose shady deals of corrupt politicians and top officials but some of the top politicians have forced them to abandon or go slow with certain cases due to political gains. But we strongly believe those who robbed public money should be punished.
Q: Do you think that the former Governor of the CB has the blessing of some of the top politicians?
A: Yes, certainly. We say with responsibility that this Government protects the culprits of this massive shady deal. They want to delay the legal process. The Government says that they will take this up for debate in Parliament on 24 January. They are above the law of this country, where an ordinary worker who steals a few thousands will be sent to jail but not those who have close connections with corrupt politicians.
We have information that apart from some top political leaders of the country, some powerful UNP MPs and MPs in the Opposition are attempting to protect the culprits as they have all shared the profits. It is very evident that he has a strong blessing from the top politicians as no one, from former President Mahinda Rajapaksa to all other MPs and Ministers, is raising their voices against those two who played with the hard-earned money of the country’s labour force.
Those who were involved in this scam were not transferred or called for explanations and no new officers are being appointed to handle those duties. No independent probe has been launched by the CB so far. We have enough evidence and information about the people, including the prominent political figures of the country, who visited Arjuna Mahendran’s home in Singapore. He himself once said that he knows that no one would take him into custody as they have been entertained at his home. This statement clearly shows how confident he is that nothing will happen to him. We have some more information on how he had misused the CB’s money. He has spent Rs. 2.4 million for his suit and it was paid by the CB.
Q: Can’t it be that he had spent from his entertainment allowance as the Governor of the Central Bank?
A: Yes, he can use his entertainment allowance, but can he spend Central Bank money to get his full suits done? We have proof that he has spent Central Bank money for his private purposes. During his stint as the Governor of the CB, he has spent over Rs. 10 million in terms of his entertainment allowance. It is a big surprise that no one talks about this.
Q: Why do you claim that some politicians who were involved in the scam have got off scot free?
A: Yes. It is very clear when you analyse the recent incidents. When an ordinary man steals a loaf of bread, he will be sent behind bars but those who are openly involved in serious corruption are unharmed. Those politicians who are accused of committing serious financial fraud are scot free. Even if some of them are sent to jails, they are sent to get a rest.
Some cases of probing corruption are postponed for eight months. What we see is there is a secret operation to save the corrupt politicians. When analyses the behaviour of certain politicians, we wonder whether the top leadership of the country has given their blessings to these corrupt politicians.
Q: Are you satisfied with the actions taken by the Government to expose some of the corrupt deals?
A: The Sirisena-Wickremesinghe Government came into power with the promise of exposing all corrupt deals by the previous MR regime. People who were against corruption supported them to send the Rajapaksas home.
But if this Government practices good governance, they should serve both politicians in the Government as well as in the previous Government from the same spoon. It is sad that this Government has failed to take stern action against those who robbed people’s money and also to recover the amounts which they stole.
On the other hand, the politicians in the ruling coalition who came into power to stop corruption are now stealing billions. No action has been taken so far to punish those corrupt politicians in the Government and surprisingly the President is also keeping mum on their shady deals.
Under this Government they are robbing paddy, coal, Central Bank bonds, duty free concessions and even the VAT facility. This Government is wasting and misusing public money twice as much as the previous Government.
We think the good governance policy of this Government disappeared on 27 February 2015 with the bond scam, which is the biggest-ever financial fraud in the country’s history. Not only us, but the majority of the people who voted for this Government are not satisfied with what the Government is doing to tackle corruption.
Q: People who voted for change hoped for an economic boost under this Government. How does the JVP view the economic policy of the Government?
A: They don’t have an economic policy other than selling the country’s properties and lands. They are selling the Hambantota Port for $ 1,080 million. It is very clear this project is another failure of the MR regime. But if the Government has a good economic policy they could have managed these projects effectively to derive the benefits. What the Government could do was to spend another $ 200 to 300 to improve the facilities of the port and make if a popular port among shippers instead of selling it.
What we see is that this Government wants to sell everything possible during its five-year tenure. The next generation will face the repercussions. What we ask the Government is, what right do they have to sell the country in an ad hoc manner? They have a five-year term but they sell the country for 99 years. People of this country didn’t give a mandate for the Government to sell the country.
The Government had promised to create one million jobs but today it has become a daydream. Where are the industries that they plan to create jobs? They lied about Volkswagen establishing their company in Sri Lanka. This Government is not able to take the country even a step forward.
Q: Once you claimed that this Government is begging for money around the world. Could you explain?
A: If you take the revenue and the interest on loans of this country, both are equal. Both President Sirisena and Prime Minister Wickremesinghe make State visits around the world. Why? Is it to promote our tea, tourism, industries or labour market to promote investments? No. Why? To get more money saying they have huge debts and the Government needs money to pay loans. Leaders of a country have State visits to promote the country but these two are frequently flying to beg for more money.
The other reason they keep on going abroad is they know that they will not get the opportunity to have foreign tours after their stint of five years. Unfortunately they, just like the previous regime, waste people’s money. They have spent a lot on foreign trips but failed to bring back anything useful to the country.
