The police are keeping close tabs on four so-called finance houses in the deep south, following the Nugegoda-based Sakvithi Finance Company scam, in which 5,000 investors have lost up to Rs. 900 million.
Members of the public who have lost money in the Sakvithi scam are blaming the Central Bank, the Inland Revenue Department and other government bodies for allowing unscrupulous or dubious persons to freely run finance companies, with no outside controls over their operations.
At least four such suspect finance houses have been identified in Hungama, in the Hambantota district. The Central Bank has given these recently set up firms a month to register.
“In the meantime, anything can happen,” warned Senior Superintendent of Police (SSP) Neil Daluwatte.
Speaking to The Sunday Times, SSP Daluwatte said the police were called in on Friday to calm a restive crowd that had gathered outside the residence of the owner of one of these new finance houses.
Anxious investors who had deposited money with the company were demanding their money back, fearing the same fate of those who were defrauded by the Sakvithi group.
According to the police, the businessman promptly returned the monies, but warned the depositors that he would not entertain them again as customers, should they decide to return to him, once he had obtained his Central Bank registration and resumed business. It is understood that the businessman paid out in cash, and then issued post-dated cheques when he ran out cash.
The businessman is known in the area by the nickname “Danduwam Mudalali”. According to the police, he earned his nickname “Danduwam” (punishment) when he was in school, where he was regularly punished by teachers for misbehaviour.
The businessmen running the other three recently set up finance houses in Hambantota also have nicknames: “Dedi Danduwam” (greater punishment) Mudalali”; “Maraneeya Danduwam (deadly punishment) Mudalali”, and “Lihil Danduwam (light punishment) Mudalali”.
A police report on the activities of these businessmen was sent to the Central Bank about a month ago, but there has been no response from the bank so far.
It is alleged that these “mudalalis” have underworld connections, that they trade in narcotics and illegal arms, and that they have the support of senior persons in the government. One such mudalali is already in remand, facing charges for drugs offences.
The finance houses run by these mudalalis have been in operation for the past two years, according to the police.
On Friday, police searched the homes of these businessmen, fearing the businessmen would use weapons to intimidate investors who came to claim their money back.
Meanwhile, the local police have launched a large-scale campaign to alert the Hungama public to the risks of investing in unknown companies. The campaign is being conducted at both school and village levels.
These Hungama finance houses are attracting investors with unusually high interest rates – seven percent. Investors are receiving their monthly payments on time, fuelling police suspicions that the capital may be invested in the illegal but lucrative narcotics and arms trade.