The President and the Vice President of one of Colombo's leading social clubs have been found guilty of violating their own rules and their own constitution over a VAT issue involving the club.
A special select committee of the club membership has found that President Morgan Fernando and Vice President Ananda Chittampalam had circumvented club rules by hiring a tax consultant without involving others in the management committee and paid him a princely sum of Rs. 575,000 as his fees. This is to settle an Inland Revenue Department VAT claim that amounted to only Rs. 528,000.
The 57-year-old Capri Club, located centrally in Kollupitiya, has a wide cross section of members ranging from honourable gentlemen, professionals, businessmen, planters and arms dealers among them.
The select committee has ruled that Mr. Chittampalam had "overstated" by as much as Rs. 1.8 million the amount the Inland Revenue Department had claimed from the club "for reasons unknown to the committee" and rushed through with the payment to the tax consultant, stating that this needed to be done to obtain the bar licence before January 1, 2010.
The select committee that was mandated to go into the matter by the general membership which called this nothing but a "fraud" stated that no correspondence between either Mr. Fernando or Mr. Chittampalam and the tax consultant was furnished to the inquiry committee. No invoices from the tax consultant for these fees were shown to the committee.
As the club rules stipulate that no payment of over Rs. 250,000 be made without the approval of the management committee or at a special meeting of the general membership, Mr. Fernando and Mr. Chittampalam had made three separate cheques, each below Rs. 250,000 but totaling Rs. 575,000.
A fourth cheque for Rs. 75,000 had been paid to the Inland Revenue Department in settlement of the VAT claim.
The committee report says they do not want to go into how the income tax claim was reduced to Rs. 75,000.
The committee says that eventually the club paid Rs. 650,000, of which only Rs. 75,000 was paid to the Tax Department, compromising "the dignity and honour of the club's membership".
It held that Mr. Morgan Fernando and Mr. Ananda Chittampalam broke all aspects of financial regulations, delegation of powers, definition of duties which are partly to blame for the financial crisis in the club and that both of them are guilty of "serious violations concerning the finances of the club".
The report that was handed over to the President ten days ago has not been circulated among the general membership that is clamouring for copies. A written request for a copy by a former President of the Club has been ignored.
Mr. Morgan Fernando admitted that there had been an irregularity but said he had done what he did "in the best interest of the club". He said that the Tax Consultant was prepared to return a portion of his fees.
Mr. Ananda Chittampalam told The Sunday Times that this was a private club and this was all the work of 12 members of the club who had petitioned the Inland Revenue Department.
Three Trustees of the Capri Club, once a prestigious social club of the Colombo elite, along with the Secretary, Treasurer and several Committee members have resigned over the year. Forty new members have been enrolled to swell the membership before scheduled elections to office-bearers next month, while at least one long-standing member has taken his complaint to court. Several members have been suspended by Mr. Fernando and Mr. Chittampalam. They have been accused of 'violating club rules, something the duo seem to have done themselves.