Issues of former regime pertaining to fraud at finance companies haunt Central Bank
The woes of, and accusations against, the Central Bank of Sri Lanka (CB) ever since the days of the former regime and under the watch of (former) Governor Nivard Cabraal don’t seem to be over yet.Just a few weeks after Maithripala Sirisena was sworn in as President in January 2015 and veteran banker Arjuna Mahendran, a choice of new Prime Minister Ranil Wickremesinghe, was appointed CB Governor, hell broke loose over the now-famous Rs. 10 billion bond.
Mahendran is still facing questions of impropriety and conflict of interest after his son-in-law’s firm secured half the bond issue which was originally intended to be a one billion-rupee offer. The governor has vigorously defended himself saying the due process was followed, that a CB committee examined the bids (in which he was not involved) and that the Supreme Court rejected a petition challenging the transaction. However the deal continues to haunt him as the opposition is strongly pushing for a continuation of a parliamentary probe on the issue that abruptly ended due to the August general election. Earlier this week, the CB was forced to take over Entrust Securities, a primary dealer powerfully connected to the former regime, and hand its management over to the National Savings Bank. The firm is being investigated over alleged fraud and misuse of funds amounting to between Rs. 5 and 6 billion.
Apart from that, the CB’s decisions and recovery policies on the failed City Finance Corporation Ltd (CFCL) are being questioned.This week, Dakshitha Bogollagama, Head of South Asia, One Asia Investment Partners, Singapore and One Asia Investment Partners (Pvt) Ltd Sri Lanka, told the Business Times that One Asia Singapore had infused funds in September 2014 (during Cabraal’s time) to the tune of Rs 198 million to resurrect the failed CFCL on the acceptance of the CB that it would provide an equal sum in ‘maching funds’Mr. Bogollagama, son of the former foreign minister Rohitha Bogollagama, said the CB is now non-committal in granting the matching funds and notes and this is affecting his own career as One Asia Singapore had granted funds on his recommendation.
He says his company is a globally reputed financial institution and this would become a black mark on the company and, due to the unreliable way CB is handling foreign funds and this would discourage foreigners investing in Sri Lanka. The failed CFCL appears to be another fraud perpetrated by Chulaka Gunawardena alias Deepthi Perera, former Chairman of the failed Central Investment and Finance (CIFL), as CFCL is a company coming under Aspic Corporation which Perera owned. The former CIFL chief, who emerged from hiding abroad to be arrested at the Colombo airport last year, has been in remand custody since his return.
Mr. Bogollagama says that the CB along with the Securities and Exchange Commission and the Colombo Stock Exchange came to Singapore in February 2014 on a roadshow inviting foreign investors to invest in the “Financial Institutions Consolidation Process”. He said that he has been with One Asia Singapore for about eight years and relied on the concept paper given by CB on City Finance and on his recommendation to his company he was authorised to deal with the matter. He says, with the share of funds infused by One Asia it became the majority shareholder of the City Finance with 71.5 per cent of shares and he became the Executive Director of the company.
Thus, he had access to all the CFCL files maintained by the earlier management and then, unfortunately, discovered he was sitting on a heap of financial ‘muck’.He also found that some of the facts given in the concept paper on CFCL by the CB, during Cabraal’s tenure, were not factually correct. Mr. Bogollagama said that he got only three months from his mother company to straighten these issues at CFCL but even after one year he is unable to resolve the matter. Disgusted, Mr. Bogollagama lamented that almost everything is corrupt in Sri Lanka, when compared to Singapore where he has been located for more than 16 years and where financial frauds of this nature would never have happened.