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World
business empires of VAT mafia Central
Bank officials confirm that the monies derived from the scam have
been illegally transferred out of the country and invested in Dubai. The Detectives said that CID had evidence to show that shipping tycoon Kamil Kuthubdeen and his accomplices Rashid Murshid, M. Ashroff and Hamza Kathubdeen -- some of the suspects involved in the scam had invested huge sums of money in several businesses not only locally but also internationally -- in countries such as Dubai, Singapore, Malaysia and Australia. The CID detectives are finding it difficult to trace most of the foreign transactions by the VAT mafia, as by now these funds may have gone through money laundering and also as the money must have been spirited abroad illegally the Central Bank too is unable to pin point exact amounts or provide details of such transactions. This
was one of the main reasons to ask Interpol for help. Kuthubdeen
and Murshid are also known to have made a Rs. 750 million investment
on four Gantry Cranes from Singapore for Kuthubdeen’s shipping
company called K Port Shipping (PVT) Ltd which is involved in cargo
and logistics. This too is not recorded in the Central Bank reports.
Kuthubdeen and Murshid had started K Port by initially dumping one billion rupees as capital and by building its warehouse at Orugodawatte. By managing to register K Port as a Board of Investment project with the approval of Ports Minister Mangala Samaraweera in 2004, the suspects had for all appearances shown their business to be above board. K Port is located in close proximity to the Colombo Port on a land ten acres in extent. The Sunday Times learns that K Port was used as a cover up for Kuthubdeen and the VAT mafia to smuggle textiles into the countrywhich in turn gave them the opportunity to get exorbitant VAT refunds when the imported textiles were later re exported. Detectives also believe that some of the suspects wanted in connection with the VAT scam have fled the country with Kuthubdeen’s brother Hamza known to be hiding in Kuthubdeen’s Dubai hotel while Murshid is hiding in his house in Malaysia. This is not the first time that the two VAT scam masterminds had come to the attention of the authorities. Kuthubdeen was earlier wanted for smuggling imported cigarettes into the country while Murshid had been wanted for a credit card fraud in Singapore. Following the arrest of former Inland Revenue Department VAT section Deputy Commissioner Gnanasiri Z. Jayathilake, the CID also arrested Assistant Commissioner A.W. Ambeypitiya and an auditor M.H.M. Rizwan. Textile tycoon S. Subramanian surrendered to the CID through his lawyers and M. Ashroff was arrested when he was about the flee the country. The other suspects wanted by the police are, M.K.M. Shaffik of 133/1, Purwarama Road, Colombo 5, M.S. Fawzul Awam of 17/4 St. Joseph Lane, Colombo 4, M.H.M. Mirzan of E2/2 Kamkarupura, Orugodawatte, Bakir M. Riyaz of 53, Awwal Zawiya road, Colombo 14, S.L Abdul Kareem of 103/11, Amunuhena Road, Wattala, Mira Sahib Liyakath Ali of 204/C 1, Wennawatte, Weligampitiya and A. K. Kularatna. The CID investigation has given rise to more questions than answers as the number of cheques that had been traced so far has risen to 142 with the possibility of pushing the earlier figure of Rs. 3.57 billion nearer the ten billion mark once all 235 cheques are found. According
to the CID report 20 fake identity cards were used in the illegal
transactions which began from November 15, 2002 to August 25, 2004. The
mafia style scam that had been going on for about of two years went
undetected by the CID and the Bribery Commission officials who earlier
probed the discrepancies in the VAT refund account Not only businessmen
and public officers but also politicians are known to have been
involved in the scam. The names of several politicians in the government and the opposition were mentioned when the CID questioned the suspects about their political affiliations. The Sunday Times learns that Kuthubdeen and his brother Hamza had been supporters of the UNP for some time with Kuthubdeen serving as an an executive committee member of the UNP. The Sunday Times learnt that Kuthubdeen and Hamza had associated themselves with UNP politics in 1994 when Hamza was co opted into the UNP media unit at a time when the party was looking for a person who could converse in Tamil. Years
later when the UNP was collecting funds to launch its first official
Tamil paper one of the first persons to make a donation was Kamil
Kuthubdeen. The
two partners had made arrangements with the University of Manipal
in Nepal. The idea was shelved when they did not receive a positive
response from the the Sri Lanka Medical College which they hoped
to tie up with. Following
reports that former UNP parliamentarian Imtiaz Bakeer Markar was
being implicated in the fraud, he told The Sunday Times that it
was for political reasons that he was being implicated in a certain
forum but he insisted that he was in no way involved in the scam
or with the suspects. “Even before he became my secretary he was in the UNP media unit. The Kuthubdeens knew several other politicians as well. I don’t know why my name has been implicated”, Mr. Bakeer Markar said. “Those who implicated me said that I had got them a telephone dealership in Mobitel which I totally deny. The Ministry has nothing to do with the giving of dealerships to private people. It is to do with the management of the company”, he said. “The
Commissioner Jayathilake and I were in University together. Because
I know them it is unfair for people to paint me with the same brush.
It was also wrong for certain media institutions to carry my photo
and project me as being involved in the scam. This is defamatory
to my character”, he said. The counsel for the fourth suspect S. Subramaniam had requested the magistrate to give permission for Mr. Subramaniam to have access to his bank account as he has 1000 employees working in the five factories he owns and has to pay their wages. However this request was turned down by the Magistrate. Subramanian who lives in Colombo 7 is the owner of five garment factories in India and two in Vietnam. He owns Lotus Apparel (PVT) Ltd, Lotus Garments (PVT) Ltd and Lanka Universal Exports (PVT) Ltd. Subramanian had received VAT refunds amounting to Rs. 98 million for Lotus Apparel (PVT) Ltd, Rs. 127 million for Lotus garments (PVT) Ltd. and Rs. 139 million for Lanka Universal Exports (PVT) Ltd. He had also deposited Rs. 540 million in the Indian bank, Colombo and HNB, Narehenpita. The Sunday Times learnt that Subramaniam had recently purchased a bunglow in Trichy, India valued at one hundred million Indian rupees Subramaniam who had also owned several factories in Uganda had raised concerns amongst the Ugandan government as to where his money camefrom. Due to questions arising over Subramaniam’s businesses in Uganda the Ugandan government deployed a fact finding committee to probe the source of Subramaniam’s wealth in Sri Lanka. However
it was later revealed that the matter had eventually died down.
Most
of them were on the brink of bankruptcy and some were not even registered.
He allegedly began to register all his factories in the name of
one company known as MASS World Garments (Pvt) Ltd in order to cover
his tracks and transferred most of his assets to his family members
and relatives. VAT
scam tentacles go far and wide Detectives said they had got a court order to check details of calls from more than 40 mobile phones while 140 of some 235 fraudulent cheques amounting to billions of rupees have been traced. The CID has also obtained court orders to check the bank accounts of the suspects and most of the accounts had been frozen. Five suspects were produced in court on Wednesday and further remanded while the probe continues to reveal tentacles of the VAT scam far and wide with the racketeers investing hundreds of millions of rupees in huge business in different countries including a luxury hotel in Dubai. Highlights
of the draft National Audit Act
Scam,
only the tip of the iceberg: AG “Larger fraudulent transactions in government institutions cannot be ruled out,” Mr. Mayadunne said adding that such exposures only underline the case for strengthening the AG’s powers. It
was in June last year that the AG’s department first detected
the massive fraud and queried from the Department how one person
using 13 forged ID cards was authorised a VAT refund to the tune
of Rs 3.57 billion. The Auditor General said due to lack of professional competency and technical training for audit officers as well as lack of resources, the AG’s Department was finding it difficult to act as efficiently as it should be doing in an era when criminals were far ahead of law enforcement agencies’ ability to track down perpetrators of fraud or the commission of any other crime. Referring to the VAT case, he said the fraud was detected mainly because of the commitment and dedication of the audit officers who examined the Inland Revenue Department audit reports. “The most important thing is that the state audit should contribute to the betterment of the country by blowing the whistle in time and not after the damage is done”, Mr. Mayadunne said. He said a draft National Audit Act was prepared in 2004 but was yet to be presented in Parliament. The Bill is the culmination of a process that began in 2000 with World Bank assistance and a study by the Netherlands Court of Audit recommending how best to strengthen the AG’s Department in Sri Lanka in keeping with international standards. Mr. Mayadunne said he needs a core group with a high rate of competency to handle today’s computer assisted transactions involving millions and billions of rupees. “When you look at the large volumes of international transactions taking place today and the need to quickly analyse, examine and detect fraud in time, the audit staff needs to be well trained and capable enough to come out with meaningful and constructive observations”, he said and added that the state audit should be in a position to look at these wasteful and corrupt practices and alert the general public through parliament as all this means an added cost to the public. If
the proposals for the new Audit Act are approved, the AG will have
the power to issue surcharge certificates and get unauthorised spending
and other wasteful expenditure reimbursed to the government without
much delay. These cases need to be addressed then and there. The authority to compel it to be done is bound to alarm the offenders and act as a deterrent,” Mr. Mayadunne said and added that the need for the AG to speak to the media freely was also very important. “I strongly believe that exposing corruption and malpractice together with the names of those involved will be the best solution in combating this problem. We need a strong framework to safeguard our public property”, he said. A
small step in countering frauds in state institutions He said the group consisting of persons drawn from all walks of life and calling itself the National Observation Committee on Corruption, which began work last month has in a few days been inundated with information regarding large scale acts of fraud and corruption by politicians and state-run institutions including minor acts of misuse of state funds.President Mahinda Rajapaksa too has pledged his fullest co-operation and directed his Secretary to attend meetings of the committee on corruption and promised follow up action subsequent to a proper inquiry of information provided by the Committee. The Thera revealed that some of the institutions against which there were many allegations include the Customs Department, the Ports Authority, the Registration of Motor Vehicles Department (RMV), the Immigration and Emigration Department and the Ceylon Electricity Board (CEB). “We
are gathering information and will verify their authenticity before
handing over the files to the President”, Ven. Elle Gunawansa
Thera said. He
said what the trade unions and other organisations were doing was
to make individual demands such as for better pay or better working
conditions but no one was taking to the streets to protest against
corruption, waste, inefficacy and the plunder of national resources
such as water and forests. When asked how effective such a Committee would be in fighting corruption, Ven. Gunawansa Thera said their attempt was similar to an “ath behetha” for a deep-rooted cancer that had spread all over and not a major surgical operation that could cure the disease. “The problem of corruption is a very serious one in this country. It is time the public woke up to this reality and reacted to pressurise those in high authority to curb this menace. Their civic duty must not end with casting the vote” Rev. Gunawansa Thera told The Sunday Times. Those wishing to give details of financial and other irregularities can hand over the information to the Dharmaaytanaya at Bauddhaloka Mawatha, Colombo or send the details by post. The Thera said all information provided would be treated with the strictest level of confidentiality. |
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