Based on the bidding pattern of the Central Bank bond auction on February 27, 2015, there are indications that key information related to the auction had leaked to an outside party prior to its start, Central Bank Deputy Governor P. Samarasiri said. He was testifying before the Commission of Inquiry (COI) looking into the issue [...]

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Deputy Governor critical of Mahendran’s conduct

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Based on the bidding pattern of the Central Bank bond auction on February 27, 2015, there are indications that key information related to the auction had leaked to an outside party prior to its start, Central Bank Deputy Governor P. Samarasiri said.

He was testifying before the Commission of Inquiry (COI) looking into the issue of treasury bonds from February 1, 2015 to March 31, 2016. The Commission comprises Supreme Court Justices K.T. Chitrasiri, Prasanna Jayawardena and retired Deputy Auditor General V. Kandasamy.

Testifying on Monday, Mr. Samarasiri said the Central Bank’s Public Debt Department Front Office  was where important details relating to a bond auction were discussed. Officials at the office did have the ability to convey this information to an outsider, he added.

Regarding the bond auction held on February 27, 2015, Mr. Samarasiri said he had extensively analysed the bidding pattern of the auction and based on his experience, it was his conclusion that key details regarding the auction had been provided to an outside party before the auction took place.

Mr. Samarasiri, whose evidence was led by Additional Solicitor General Yasantha Kodagoda, said he served as the Chairman of the Tender Board of the of the Bond Auction held on February 27, 2015 in his capacity as the head of the Public Debt Department.

After former Governor Arjuna Mahendran took over the Bank Supervision Department, Mr. Samarasiri said the IT Department was brought under his (Mr Samarasiri’s) control while the Public Debt Department was brought under his control on February 9, 2015.

He said he did not get copies of decisions taken by the Public Debt Department or the details of the Bond auction.

Justice Prasanna Jayawardena asked whether this situation also prevailed in February 2015. The Deputy Governor replied that it was the case. Justice Jayawardena noted this meant there was no proper supervision by officials.

Justice K.T. Chitrasiri said the Commission had written to the Inspector General of Police (IGP) to release some officers to facilitate its work. However, the IGP had not even acknowledged the receipt of the letter. He told Mr. Samarasiri he was following the same example and this was the sad state of affairs in the country’s Public Service.

Continuing his evidence on Tuesday, Mr. Samarasiri said he only got to know that Arjun Aloysius, the Director of Primary Dealer Perpetual Treasuries, was related to former Central Bank Governor Arjuna Mahendran after the conclusion of the bond auction on February 27, 2015.

Mr. Samarasiri, who was led in his testimony by Additional Solicitor General Yasantha Kodagoda, also said Mr. Mahendran had changed decisions taken by the Central Banks Tender Board on four occasions during bond auctions held between February 1, 2015 and February 30, 2016. Mr. Samarasiri said he had worked under former Central Bank Governor A.S. Jayawardena and the Governor had not changed the Tender Board’s decisions during his tenure.

He also told the Commission that the final decision to issue 30-year treasury bonds at the bond auction was taken by Mr. Mahendran and not by the Central Bank’s Monetary Board.

According to Mr. Samarasiri, Mr. Mahendran had told the Tender Board on February 27, 2015 to accept the Rs.10 billion bid. As such, bid amounting to Rs.10 billion were accepted due to an arbitrary decision made by the then Governor, he said.

While stating that he only got to know of the relationship between Mr. Mahendran and Mr. Aloysius after the auction on February 27. 2015, Mr. Samarasiri said he made no attempt to investigate the matter further.

On Wednesday, Mr. Samarasiri continued his evidence. He denied accusations that he was responsible for any irregularities while he was chairman of the Tender Board.

In evidence led by Senior State Counsel Avanthi Perera, Mr. Samarasiri said Mr. Mahendran had transferred Central Bank officials on two occasions. They included 14 Department Heads transferred on February 9, 2015. He said he was angered by the decision to transfer Deepa Kanthi Seneviratne as Head of the Public Debt Department on the basis she did not possess enough knowledge of the field to effectively manage the department.

During cross-examination by Attorney-at-Law Chanaka de Silva, who appeared on behalf of Mr. Mahendran, Mr. Samarasiri said the Government had now replaced members of the Central Bank’s Tender Board until the conclusion of the probe by the Commission.

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