Govt. to institute legal action against SLIC auditors, buyers

The government is to institute legal action against the Sri Lanka Insurance Corporation’s (SLIC) auditors Ernst & Young and the consortium of buyers over a disputed claim in the controversial 2003 privatisation of the state insurer.

“Ernst & Young has failed to perform its duty as the auditors of SLIC as they have delayed publishing the audited final accounts of SLIC. We will be taking action against them on grounds that they have failed to perform their duty, and then the purchasers for not paying the due amount to the government,” Skills Development and State Enterprises Restructuring Minister Sripathi Suriyaarachchi told The Sunday Times.

The minister is responsible for the Public Enterprises Reforms Commission (PERC) which earlier rejected a payments claim from the buyers and instead submitted a counter claim over the deal. The whole issue was triggered last year by SLIC after the Harry Jayawardene consortium demanded rupees two billion from the government after its audit report suggested that it was entitled to this from the state in terms of the sale agreement.

The 90 percent stake in SLIC was concluded without the audited accounts for the period 31-3-2002 to 11- 4-2003. The purchase price was to be subsequently adjusted once the audited accounts were ready. But the government submitted a counter claim, saying SLIC made substantial profits and should pay the government in line with the agreement.

Some weeks back, PERC chairman W.M. Bandusena told The Sunday Times that “the case against SLIC is still on” but declined to give details. Counsel from the Attorney General’s office handling the case, also made a similar response with no details.

Informed sources said some of the delays involved in the case were due to the change in the PERC chairmanship, after Nihal Sri Amarasekera – who pursued this matter – quit when former President Chandrika Kumaratunga relinquished office. Leel Wickremarachchi, PERC Director-General also left some months ago and was replaced by a Finance Manager who had worked with the Connaisance Group.

Asite Talwatte, Senior Partner at Ernst & Young, declined to comment on the government’s proposed action while Mr. Jayawardene was unavailable for a response.

The buyers’ consortium that bought SLI comprised Milford Holdings (Pvt) Ltd of No. 110, Norris Canal Road, Colombo 10, Greenfield Pacific EM Holdings Ltd, Gilbralter, and Asia Box Consultants Services (Pte) Ltd, 61, Club Street, Singapore. It was guaranteed by the Distilleries Company of Sri Lanka, Aitken Spence & Co. Ltd and Aitken Spence Insurance (Pvt) Ltd – all controlled by Harry Jayawardene.