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SEC securities scam snowballs
By The Sunday Times Economic Affairs Correspondent
The country's alleged share market scandal that kept the city guessing which way the wind was blowing on a major insider-dealing exercise indulged in by some of the securities watchdogs themselves is now heading for an apparent showdown and what might turn out to be a snowballing scandal.

After weeks of speculation, the speculation trade itself which was under scrutiny by the Attorney General and the public at large, has come up with a clean certificate -- certified by a retired Supreme Court judge and a chartered accountant, exonerating its own boss and others.

Stanley Gunawardene, a retired SC judge and Lal Nanayakkara, currently Chairman of the People's Bank, are reported to have cleared Securities Exchange Commission Chairman Michael Mack and his one-time co-directors at Aitken Spence, the hotel and travel industry conglomerate Norman Gunawardene and Manil de Mel of insider dealing in the sale of Spence shares.

The unprecedented move by the watchdog SEC to probe its own chairman by referring the issue to a separate inquiry after the Attorney General has given an opinion saying there was a prima facie case to indict Mack Gunawardene and de Mel, has raised questions in business circles.

Business circles have complained of the motives for the unprecedented move stating that the selection of the inquiry team left much to be desired particularly in view of the fact that the retired Supreme Court judge was actively engaged in commercial arbitration proceedings as an arbitrator.

An arbitrator in commercial proceedings is picked by private companies that are in dispute. It was the SEC that nominated the two-member team to probe the conduct of its own chairman. "Justice must not only be done, but it must appear to be done" complained a broker involved in the country's still fledgling stock exchange.

The Government has also come in for some flak for its refusal to intervene on a matter that involved the credibility of the Securities and Exchange Commission and the Colombo Stock Exchange at a time it was state policy to attract foreign capital and promote investor confidence in the share market.

The two-man inquiry team has held that Mr Mack and his co-directors were innocent of insider-dealing in a sale of shares of Aitken Spence after they were privy to confidential price-sensitive information on one of its apparel subsidiaries.

The report also hints very strongly that the AG had not been provided with all relevant documentation and had been misled by the SEC Secretariat. The SEC has now decided to refer the inquiry report back to the Attorney General for his views.

Legal circles stated that the stand taken by the SEC is "scandalous" to appoint a two-member team on a fee paid by the SEC in respect of the conduct of its own Chairman when the AG has already expressed an opinion regarding the complicity of the Chairman in the scandal.

These circles also raised the question why this special procedure was adopted in the case of the chairman when a number of other persons such as Ana Punchihewa, former chairman of Pure Beverages, and some others were charged on the advise of the AG without calling for separate inquiries. When the AG's Department was contacted, a spokesman said they knew nothing of this independent report.

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