BOND SAGA : AFTERMATH OF THE PRSIDENTIAL COMMISSON REPORT

BY Rusiripala Thennakoon

On -going public debate after the publication of the PRESIDENTIAL COMMISSION REPORT centers around several conjectures and concerns   regarding the future follow up steps. There are serious attempts to shelve the process recommended by the COI by interested parties. However the Presidential directives appear to be relevant and effective for the implementation of the recommendations of the Commission and other corrective measures.

PROPOSED PARLIAMENTARY DEBATE

It is interesting to note why so much of importance is given to a debate rather than insisting on the speedy implementation of the findings and recommendations. When the second COPE report was tabled in parliament by itsChairman SunilHandunnetti , the country witnessed what the parliament did. After protracted exchanges of insinuations, innuendos and allegations against each other it became evident that it was going to be the end of the chapter.  Those who were responsible to initiate meaningful action have already taken calculated steps to send the issue to hibernation. Before the Parliamentary debate the second COPE report had been sent to the Attorney General by the Prime Minister. It was reported that the AGs department had not concluded the decision whether action on the Bond issue should be taken as a civil matter or a criminal matter. It is in this context that the President decided to appoint a Presidential Commission of Inquiry. The gazette notification was issued on 27^th Jan 2017, a few days after the Parliament debate appointing the COI. The COI, after a lengthy inquiry assisted by the AG’s department has issued its report based on the evidence placed before them giving their conclusions, and determinations along with observations.

 RECOMMENDATIONS AND OBSERVATIONS

Chapter 33 of the report contains the recommendations made by the COI. It is pointed out that relevant Law such as the Monetary Law, Local Treasury Bills Ordinance and Registered Stock and Securities Ordinance need to be replaced in consultation with the CBSL.

APPOINTMENT OF THE GOVERNOR

COI has recommended that due consideration should be given to develop criteria and specified procedures to govern the selection of the person to be appointed as the Governor of the CBSL. The recommendation goes to explain the importance of the position of the Governor and asserted this view stating,”it is hardly necessary to emphasize that, Governor of the CBSL is a key official who hold enormous responsibilities and that, he must be a person of highest integrity and ability and also have the required knowledge and experience to effectively perform his duties in the best interest of the Nation and its people. They have suggested that it is best for such a selection be made at a level such as the Constitutional council. COI is of the opinion that even the appointment of the members to the Monetary Board should be done in this manner. ArjunaMahendran was appointed the Governor of the CBSL on 23^rd January 2015.The Commission report states that as this  is before the period of the mandate commenced they have no jurisdiction to determine the merits or demerits of the appointment. But they have stated the fact that they cannot be insensible to the concerns expressed in the public domain with regard to the propriety of Mahendran’s appointment following his alleged interventions in the Treasury Bond Auction held on 27^th February 2015 and his relationship with Arjun Aloysius of Perpetual Treasuries Ltd.which obtained the lion’s share of the bids accepted at that auction.

Among the concerns expressed about this matter in the public domain was whether it was unlawful or unsuitable to appoint him as he was a non- citizen. It was the PM who had telephoned him and invited him to serve as the Governor of the CBSL. It was a requirement for the appointment to be recommended by the Finance Minister but as the CBSL was then placed under the Minister of National Policies and Economic affairs, Mr.RanilWickramasinghe, he said in evidence that the Finance Minister made the recommendation with his concurrence. Regarding this the COI has opined that the issue was not “a question of law” but it was a ‘value judgement’ which had to be made by those who considered the wisdom of appointing Mahendran , who was not a citizen of SL,  as the Governor of the CBSL.

The wisdom of bringing the CBSL under the Minister of National Policies and Economic affairs too was a matter focused on by the COI. While observing that the CBSL was under the Finance Ministry before 2015, COI has pointed out that it is a decision taken by the executive which is entirely outside the scope of their Mandate.

As members of the Public we are yet to be clearly informed,

• Who has to bear the cost to the Nation due to this wisdom of choice?
• Whether correct ‘value judgment’ has been exercised?
• Whether the visible obstinacy displayed by some in authority when this appointment was firstchallenged is justifiable?
• Whether those who invited and recommended Mahendran to this position will take the responsibility to produce him before the Law of this country?

CONFLICT OF INTEREST

COI asked the PM whether he was aware that, Mahendran’s son-in-law, Arjun Aloysius was the CEO and a director of the Primary Dealer named PTL Ltd.in the year 2014 and upto January 2015, when he resigned from both posts .COI also asked the PM whether he considered this position raised a potential conflict of interest.

MrRanilWickramasinghe replied “I insisted that he should ensure that Mr Aloysius would resign as a Director of PTL Ltd.and not involve himself in the business activities of that company in anyway…….. This was conveyed by me to both Mahendran as well as to Alysious.”

It follows that MrWickramasinghe has personally requested Arjun Aloysius to resign!  Such a request could be made to a known person only.

The impugned bond transaction took place on 27^th Feb 2015. Many inquiries and debates followed. Conflict of Interest between Mahendran, the governor and his son-in-law Aloysius was a hot debate in the public domain.

Alas! When, on 20^th November 2017, the Commission of Inquiry asked the Hon Prime Minister whether he was aware that, Mr.Arjun Aloysius continued to be a Share Holder and Director of Perpetual Capital Holdings (Pvt) Ltd. And Perpetual Capital (Pvt) ltd., which are the ultimate owning companies of PTL Ltd., the Hon. Prime Minister said he was not aware of this fact.

COI has asked PM whether he subsequently inquired from Mahendra with regard to the potential conflict of interest, PM replied “I did so on several occasions………”

COI having considered all these have stated as follows; “We are of the view that the more prudent course of action would have been for the Hon.Prime Minister to have independently verified whether Mr.Mahendran was, in fact, honoring the assurances he gave the Hon. Prime Minister. We regret that, Hon. Prime Minister did not take that course of action”

It is not wrong for the People to think that it is this failure on the part of the Prime Minister that caused the country such a huge loss running into billions of Public money!

STOPPING OF DIRECT PLACEMENTS

The  Directive or Instruction said to be given by the PM to Mahendran  to stop or suspend  the Direct Placements in Bond issues would have been dealt with differently if the COI could give due consideration to the Statement made in Parliament by the PM. According to evidence before the Commission the PM fully expected Governor Mahendran to comply with due procedures and conduct a comprehensive study into the matter and for his study to be considered by the Monetary Board before a decision was taken with regard to Direct Placements. This however appears to be in complete contrast to what the PM stated in parliament, viz.”I insisted on a public auction because private placements have led to corruption and lack of transparency…….”

When the PM made this statement to Parliament on 17^th march 2015, 3 weeks after the alleged Bond Scam of 27^th February he was not aware as to how Mahendran has carried out his instructions. Nevertheless he vehemently defended him. He said, “he has done no wrong……..”

However the COI has qualified their position by stating that,“…we do not for a moment , presume to make any pronouncement on events that transpired in Parliament, we consider that , the Hon PM would have been better advised , if he had independently verified what had happened at the CBSL on 27^th February 2015 , before making any statement, instead of relying on the briefing note and report submitted to  him by Mr.Mahendran and Deputy Governor Samarasiri”

We the innocent Public to whom all these information is publicly available and not bound by any specific mandate or special considerations would tend to raise the following seeking clarifications from political authorities in the country in public interest to inform us,

a)After it was exposed that Samarasiri  jointly with Mahendran , prepared and submitted misleading Briefing Notes, why did the PM insist on granting extensions to Mahendran and recommend to appoint Samarasiri as  one of his Advisors?

b)When did PM give this directive to Mahendran, Date and Time , as it is important to establish that such instructions were given  with sufficient time for Mahendran to obtain the approval of the Monetary Board as was expected by the PM?

c) How did the PM come to the conclusion that the previous Bond issues of the CBSL were done on a favored basis due to the Direct Placement system of auctions.? Because we the Public were never told before by the then opposition that such a thing was happening!

COI has recorded the following observation with regard to the PM’s decision to appoint a committee of inquiry of his own, called the Pitipana Committee:

“Hon .PM’s act of appointing an investigative committee would have been more effective if the “PITIPANA Committee” also had members who had knowledge and experience in technical and practical aspects of the matter being inquired into “

We have the following doubts not yet cleared;

1. Was the appointment of persons with no technical knowledge or experience an act of negligenc or lapse? Who is responsible?
2. Doesn’t it suggest that the PM has taken an ineffective step and that it was a wrong decision that paved the way to further abuses later on while negating the possibility of an early discovery of what has transpired?
3. Why did the PM not pay any attention to the views of the Parliament when they raised the issue of the Competence and independence of the Pitipana Committee?
4. Should he not now accept responsibility for his lapses and unilateral decisions that has led to huge financial losses and to the image of the country?
5. Was it an exercise designed to obtain a certificate that there was no impropriety in the duties of the Governor rather than unearthing facts?

The COI has endorsed the view that the appointment of Pitipana Committee did not serve any useful purpose by stating as follows;

“we consider that the position may have been different if the Committee or other body which carried out this inquiry had the benefit of members who had knowledge and experience in the technical and practical aspects of the matter being inquired into “

So the Public can now conclude that the PM has done something of no value and this has contributed in a big way to prolong the discovery of the fraud and the subsequent repetitions of unsavory acts by the same parties to amass huge illegitimate profits at the expense of the Government. This is a Judgment that has to be considered seriously by the Public and dealt with politically.

The PM has absolved his responsibility in dealing with the matter as the Minister in charge of the Subject of the CBSL by attributing it to the on- going COPE inquiries.

The COI has noted in the report as follows;

“WE note that, in his evidence, the Hon PM has stated that, since the matter was in the hands of the Parliament, the Hon PM could not have taken further steps in this regards”

It remains to be clarified inter-alia;

1. a) After the Pitipana Committee No action was taken at least to the limited extentsuggested by them to carry out further investigations. Why?
2. b) The first COPE that investigated into the matter was obstructed in many ways by certain UNP MPs who were determined to sabotage .Under whose guidance?

c)After  the parliament was dissolved there was a period of several months during which no investigations were initiated but the PM as the MINISTER in charge did not consider it necessary to conduct or initiate any inquiry.  Why?

d) in the context of the hurry in which a committee of inquiry was said to be appointed, on the 27^th Feb itself, the day of the BOND scam, it is strange why subsequent follow up action was not initiated  during periods when the parliament was not engaged in any such inquiry.

Several questions now arise in the aftermath of the COI report.

Will legal action be initiated against the wrong doers as recommended by the COI?

Will the executive actions that did not come under the purview of COI be addressed by the authorities now? (Such as the placement of the CBSL under a different Ministry)

Should the Monetary Board be asked to resign and a new Board constituted?

Will the Minister in charge of the subject Hon RanilWickramasinghe resign from the portfolio setting an example under the true democratic functions of the Westminster system of government, acting in response to the lapses, shortcomings, commitments that have been pin pointed in this regard?

We hope that such actions can precede prolonged legal actions and such steps will rekindle the public confidence placed towards good governance!