BY Shonel Perera

In February 2015, the Central Bank of Sri Lanka (CBSL) announced the issue of thirty-year sovereign bonds, with an objective to raise 1 billion rupees but despite the initial indication of 1 billion rupees, the CBSL’s Public Debt Department went on to accept bids of up to 10 billion rupees, without informing the primary dealers of their decision to gain more funding.


There on many allegations were raised that Perpetual Treasuries Limited, a company which is linked with the Son-in-Law of the infamous former Central Bank Governor Arjuna Mahendran Arjun Aloysious was privy to this information.


It was later revealed that the address of Perpetual Treasuries Ltd and that of Arjun Aloysius, were the same.


The former governor had also admitted that there indeed was a miscommunication in failing to inform the primary dealers of the increased need for funds.


Prime Minister Ranil Wickremesinghe then appointed a committee to inquire into the matter and commissioned a report and thus the Committee on Public Enterprises or COPE was brought into the action.


The issues arising from the controversy – or criticisms that can and are being made – of the auction of February 27 and its outcomes can be briefly stated as follows:


1) The amount of debt accepted by CBSL at the auction was vastly in excess of the amount that had earlier been communicated to the primary dealers who would be bid at the auction.  Whereas the original announcement was for Rs 1bn, the amount accepted at the auction was Rs 10bn.


2) Whether there was any need to issue 30-year bonds as opposed to those of shorter tenor.


3) The interest rate resulting from the auction was much higher than the rate indicated by CBSL to the primary dealers before the auction and the country has quite arbitrarily been landed with sustaining a very large debt at an unnecessarily high rate of interest.


4) That the pattern of activity of Perpetual Treasuries before, at, and after the auction gives rise to reasonable suspicion of that company having acquired some inside, privileged knowledge.




Fast forwarding to 2016, the COPE has dominated the news cycle, as the committee set about its most controversial business since it was reconstituted after the August 2015 parliamentary election.


Scandal erupted in the financial sector, weeks after President Maithripala Sirisena and ‘Prime Minister/Arjuna Mahendran’s Safe Haven’-Ranil Wickremesinghe were sworn into office.


Shortly after Mahendran’s appointment as the Governor of the Central Bank, Red Flags were raised from all corners with concern over his relationship to a “certain” Director at perpetual holdings. In Opposition, the UNP highlighted several stock dumping transactions, especially involving the Employees Provident Fund, a private pension fund, and campaigned heavily against Perpetual Holdings and subsidiary Perpetual Treasuries.


Within two weeks of Mahendran’s appointment, Perpetual Treasuries was alleged to have profited unduly.


As a primary dealer, appointed by the Central Bank, it is obligatory for Perpetual Treasuries to publish their annual accounts and therefore the total comprehensive audited income for the year ended 31st March 2016 was Rs. 5,124,321,124 -which is USD. 34,526,702.11- against the 2015 income of 959,529,416 rupees.


According to reports Perpetual Treasuries was issued with Rs. 5 billion worth in Bonds at 12.5%.


Thereon the COPE report recommended that action be taken against the former Central Bank Governor, who as said by COPE, should be held directly responsible, and as well as institutions involved and to take measures to recuperate the losses or damages caused to the state and to the people by those responsible.


COPE also called for an update to be made on the ‘Guidelines on Public Debt Management’ and an amendment to be made on the exchange commission act to thereby maintain lucidity and trust in the Central Bank.



Sri Lanka’s total current outstanding government debt now stands at a staggering rate of 9,382 Billion rupees as of the end of July 2016. That is an 878.7 Billion rupee increase from the end of 2015.


The Central Banks special report significantly mentions of the 70.1 Billion rupees debt incurred. This 70.1 Billion rupees debt was incurred as a result of issuing securities including bonds at higher rates than normal.


Recently the IMF also released a second tranche of loans worth USD.162.6 million to Sri Lanka.


The “Central Bank Bond Scam” remains the single most devastating corruption scandal abrading the legitimacy of the Yahapalanaya Government in general and the United National Party in particular.



Allegations Regarding Perpetual Treasuries


That Perpetual had access to information that other dealers did not have, which enabled them to come to the 27 auction fully prepared to bid for bonds worth Rs 10.0b or more and also get the Bank of Ceylon to bid on its behalf for an additional Rs 3.0b.


That the Perpetual bids were at the higher end of the interest rate spectrum which would not make much sense if the total amount on offer was only Rs1.0b or even double that. Thus Perpetual had to be very confident that the amount that would be taken would be far higher than Rs 1.0b. The reason for this confidence could be that they had information others did not have.


That Perpetual sold large amounts of bonds in the market on February 26 when the market generally was under the impression that CBSL policy interest rates would remain unchanged as per the CBSL press release on February 24, and were not aware of the CBSL decision to scrap the 5.0% SDF rate that would have caused interest rates to rise and bond prices to fall.


That Perpetual purchased bonds in the market the following week (the interest rate having gone up, the price of bonds would have come down) thus making a massive profit.


Arjun Aloysius and Perpetual Treasuries.


The main man behind the drama surrounding the central bank bond scam, Arjun Aloysiusaccused for stealing public funds and running the country to the ground in the bond scam issue, in a recent court case, was lucky enough to find himself in the safe zone after it was ruled that he cannot be compelled to provide evidence in the case against him. The decision made however was appropriate and by the law.


At the case proceedings almost two months ago, Aloysius entered the premises cool and calm, passing small talk with a few individuals around and looked less stressed than usual.

In a lengthy order the Bond Commission had informed that the Commission cannot compel Arjun Aloysius to give evidence, if he is unwilling to do so, although his evidence is required to ascertain the truth.


Chairman K. T. Chithrasiri reading out the order which only lasted a mere 20 minutes said that the principles of natural justice and others which protect the right of those “implicated” prevail over the need to ascertain the truth.


Earlier, Gamini Marapana the brother of Thilak Marapana made a submission saying that Aloysius is implicated and as such an accused cannot be compelled to give evidence against himself.


The Commission then agreed with Marapana’s submission but went onto list down reasons as to why Aloysius must give evidence. 15 of them in fact.


Acting Solicitor General Dappula de Livera said that the Attorney General’s Department is not in consensus with the decision made by the Presidential Commission of Inquiry regarding obtaining evidence from former Perpetual Treasuries Director Arjun Aloysius.


However earlier that day, Arjun Aloysius’s council submitted an application refusing to be compelled to provide evidence.


Among them were his insider dealings, who his friends in “high places were”, his relationship with Ravi Karunanayake, and his threatening of witnesses were cited.


Following the order Marapana informed court that his client was not willing to give evidence. Justice Prasanna Jayawardena then told Marapana to take time and re-think about his position. Marapana first requested time till Monday, However the Justice rejected his request and ordered that he conveys the decision to the Commission.


His father-in-law Arjuna Mahendran would also most probably take the same stance, rendering the entire process a sham.


Arjun Aloysius accompanied you his fleet of lawyers on Thursday, arrived at the Bribery Commission and officially announced that he will not provide evidence nor speak before the Presidential Commission of Inquiry.


Steve Samuel, the Personal Assistant to Arjun Aloysius was once again at the Presidential Commission of Inquiry to provide a statement to the detectives assisting the Commission.


Kasun Palisena the CEO of Perpetual Treasuries Limited was cross-examined yet again, by Deputy Solicitor General Milinda Gunetilleke.


The Deputy Solicitor General pointed out that the Employees Provident Fund was used as a financier whenever Perpetual Treasuries Limited suffered a financial crisis.


The Attorney General’s Department, once again, played the previously deleted phone conversations recovered from the Perpetual Treasuries Limited system.


Deputy Solicitor General, Milinda Gunetilleke said the reason Perpetual Treasuries Limited made phenomenal profits was because it knew precisely when and how to bid – and because it finally unloaded bonds with the Employees Provident Fund at higher prices.


He added that Kasun Palisena was guided by Arjun Aloysius who gave them the precise cut-off mark for bond auctions.


The Presidential Commission has now focussed on finding out who made recommendations to the Monetary Board to not to go ahead with a rate cut, which is mentioned by Arjun Aloysius in one of the previously deleted phone conversations.



Government and Bond


Two powerful ministers were said to be involved in the controversial Central Bank Bond Scam as well. Ministers Malik Samarawickrama and Kabir Hashim were summoned this past week to the Presidential Commission of Inquiry as evidence has been presented revealing that these two ministers have been present at a Breakfast meeting which took place on the 26th of February 2015 just ONE day before which the highly controversial bond auction took place at the Central Bank. At the time Malik Samarawickrama attended the meeting as a Senior Advisor to the Prime Minister as he was not a minister. Kabir Hashim who is the General secretary of the United National Party attended the meeting as the minister of highways and investment promotions. Later It was confirmed by the pair that there was in fact a breakfast meeting on the day prior to the auction. They also made it aware that the Former Minister of Finance, the infamous Ravi Karunanayake was also present at this breakfast meeting along with individuals from the Road Development Authority, Central Bank, and the Treasury as well. It was made known recently by the pair that the meeting was mainly focused on a requirement of sorts after the Ministry of Highways had uncovered unsettled bills for Road Construction work that had commenced during the Mahinda Rajapaksa period which amounted to approximately 18 Billion rupees. Kabir Hashimthen stated that the ministry had a value of 3 billion rupees and that they had written to the treasury requesting the remaining 15 billion rupees to settle these bills and that was in fact how the so called “Breakfast meeting” had transpired. However it should be highlighted that previously, the Prime Minister had informed at a session in Parliament on the 17th of March 2015 that the amount was 15 Billion rupees but later on a sudden requirement of 75 Billion was needed. When the two Ministers were questioned this past week they stated that there was no discussion regarding the treasury bond auction or any talk of the matter. However there was a gap in the amount, in an undated later from Arjuna Mahendran it stated that the requirement reached at the Breakfast meeting was of 75 Billion rupees. The letter although was granted to him in June 2016 by former Minister of Finance Ravi Karunanayake for Mahendran to produce to COPE at the time to make it known that there in fact was a meeting and discussions on matters pertaining to this didtake place. However when Ravi Karunanayake was summoned to the commission, he informed them that he issued the letter only upon the request of the Former Governor of the Central Bank and there on he too confirmed the existence of this meeting. Ministers Malik Samarawickrama and Kabir Hashim’s statement were therefore quite contradictory to the statements of Ravi Karunanayake and Arjuna Mahendran where the latter pair speaks of 75 Billion and the former speaks of an amount of 15 Billion. A witness by the name of S.R. Attygalle, who is the Deputy Secretary to the Treasury, said that there was no additional money required for February 2015. This definitely does cause quite a stir!


The bond commission posed both Ministers Kabir Hashim and Malik Samarawickrama the same question asking the pair if perpetual treasuries or any company of perpetual treasuries or free lanka group or if Arjun Aloysius or anyone in his family grant any money to the United National Party during the period of this issue, However, both ministers stated that no payment or money had been given during this period to the party.


Meanwhile the notorious Steve Samuel was also summoned to the commission this past week but had failed to appear as he was hospitalised following a chest pain, according to his lawyers. Notices were also issued to Arjun and Jeffrey Aloysius to submit the so called “To-Do Files”. The files caused another turn in the case as the document refers to a certain ‘RK’ and ‘AM’ and has caused multiples questions regarding what or WHO it stands for.


Chief Dealer at Perpetual Treasury produced a document to the bond commission informing the commission that the said document was maintained under instructions of Kasun Palisena the Chief Executive Officer.. In this document, all payments by perpetual treasuries to perpetual asset management private limited, perpetual capital private limited and W M Mendis and Company Private Limited are recorded for forward payment to 3 individuals by the Code Names “Charlie”, “Tango” and “Car” (not the best code names but we’ll let that slide). According to Nuwan Salgado, “Charlie” refers to the main person of contact and inside man that Perpetual Treasuries had in the Employees Provident Fund. That person was identified as “Udayaseelan” and after September 2015 however another person identified as “Indika Saman Kumara” was then referred to as “Charlie”. Another name which transpired was “Little Johnny” who worked at the DFCC bank. There on another name was revealed who went by the code name “Wolverine”, he was identified as Naveen Anuradha who was a dealer in market related activities to government securities and was attached to the NSB. It was also revealed that from the 30th of December 2014 to the 17th of July 2017, the so called “Charlie” had been paid over 94 Million rupees and According to Justice Prasanna Jayawardena had noted that since 2014 perpetual treasuries limited had been bribing their contact persons and this was also confirmed by Nuwan Salgado and it was noted that this was done to gather all Market sensitive information. So, Perpetual Treasuries had in fact Bribed the Employees Provident Fund. This is a significant mark on the case that has been catching the public eye and the case which has now gone on to be one the biggest scandals in Asia.


Meanwhile, The Colombo Fort Magistrate issued a travel ban on Perpetual Treasuries Ltd owner Arjun Aloysius, CEO Kasun Palisena, Perpetual Treasuries Chief Dealer Nuwan Salgado and IT Executive Sachith Dewathantri earlier this month.


The Attorney General’s Department on August 31 informed the Commission that Chief dealer of Perpetual Treasuries Limited Nuwan Salgado would be arrested.


Senior Solicitor General Dappula De Livera told the Commission that Salgado has committed an offence by fabricating and destroying evidence. IT officer of the company Sachitra Devathanthri giving evidence before the Commission said Salgado ordered him to delete 15 voice recordings of the telephone network.


The Presidential Commission of Inquiry into Bond Issuance will be ending it’s mandate on December 8, 2017.


While the day is over a month away, the Commission has announced that it will hold only just two more sittings before the date.


These two sittings will see two people testify before the commission, A communications expert and the other, the notorious Prime Minister Ranil Wickremesinghe.


Since the inception of the inquiry into the Central Bank Bond Scam, the largest scam in Sri Lanka, several witnesses have mentioned the Prime Minister’s name in their testimony.


Just last month, the PM himself said that he is ready to offer clarifications to the Commission investigating the issue ‘at any time’ in light of the references to him.Recently the Commission’s Chairman Justice K.T.Chitrasiri sent a questionnaire to the Prime Minister and Premier Wickremesinghe responded to the questionnaire through an affidavit.


Since the Commission requires more explanations on this issue, the Premier will be requested to attend a hearing -of which the date is yet to be decided.