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No returns on EPF’s Rs. 500m investment in SriLankan sans approval
View(s):Employee Provident Fund (EPF) monies amounting to Rs 500 million was used to buy SriLankan Airlines (SriLankan) Shares, without Central Bank of Sri Lanka’s ((CBSL) Monetary Board (MB) approval, which failed to generate a single cent of return, even after 8 years, EPF Superintendent Mrs Malkanthi Bandara, on Friday, told the Commission of Inquiry (CoI) investigating irregularities at SriLankan, SriLankan Catering and Mihin Lanka (Mihin).
Mrs Bandara told the CoI the EPF Fund Management Division (FMD) officials did not follow proper procedures when they invested a large sum of workers’ money in an unlisted entity.
“I can’t exactly say how they decided to invest in SriLankan. I could not find any document at the EPF, suggesting supportive documents or evaluation reports, before the decision to invest was made,” Ms Bandara, who took over as head of EPF in 2016, said, while referring to the documents she submitted before the CoI.
On July 2, 2010, the FMD’s Investment Committee decided to invest Rs 500 million without any sort of research, financial analysis or evaluation before buying 43.63% of SriLankan Shares from Emirates, as it decided to leave the management at that time.
The CoI was also told there was no approval sought from the CBSL MB, as per relevant circulars indicate, when investing in an unlisted entity, before executing the transaction. However, the EPF Department submitted a Board paper for mere ratification, a week after the transaction was made.
Four days later, Bank of Ceylon (BoC), Assistant General Manager (Treasury)- P.A. Lionel sent a letter requesting EPF to transfer the amount into BoC’s current account, while indicating that other entities such as National Savings Bank, Employee Trust Fund, Sri Lanka Insurance, Peoples Bank and Civil Aviation Authority were also to buy SriLankan Shares, along with the EPF, as a joint venture, claiming that the Cabinet of Ministers had decided on the matter. The CoI was also told that many of these entities backed out from buying SriLankan Shares, while those who bought were reimbursed with government guaranteed Treasury Bonds issued later.
Additional Solicitor General (ASG) Neil Unamboowe brought to the attention of the CoI that the letter failed to indicate who had decided that “Boc should buy SriLankan Shares”, as letter instructed, and the failure of EPF officials to verify the contents of the letter, before taking the next step.
Retired High Court Judge Piyasena Ranasinghe intervened to ask whether the Cabinet has any powers or jurisdiction to decide on the funds belonging to workers of this country, other than the CBSL MB, which is designated as the custodian of EPF funds. During this period, Ajith Nivard Cabraal was CBSL Governor and Dr P.B. Jayasundara who, as Treasury Secretary, was also a permanent member at the CBSL MB.
SriLankan Head of Finance, Yasantha Dissanayake testifying before the CoI, said SriLankan had faced large losses during the sale of 2 government TBs, to settle outstanding fuel bills to Ceylon Petroleum Corporation.
As SriLankan was struggling to stay in the business, sans adequate revenue, compared with increasing expenses, the government decided to intervene and issue 2 TBs worth Rs 26.8 billion in 2012 and 2013 respectively, to infuse funds.
Mr Dissanayake noted that losses of Rs 673.57 million and Rs 728.28 million were recorded by SriLankan in 2012 and 2013 respectively, due to the longstanding delay in selling the TBs, as their worth depreciated significantly. He told the CoI that, this loss-making scenario could have been avoided if the government arranged for a cash bailout as anticipated by the airline.
The CoI was also told that, the then Treasury Secretary Dr P.B. Jayasundara refused to grant approval for SriLankan’s management to go for an Initial Public Offering of SriLankan Catering, a move to generate funds from the public by offering sales of Shares at the last minute.
In SriLankan’s annual report for financial year 2013-2014, then Chairman Nishantha Wickremasinghe noted that, out of a total loss of Rs 6.71 billion incurred by SriLankan, Rs 2.1 billion was due to the sale of TBs.
Both evidence were led by ASG Niel Unamboowe, assisted by Senior State Counsel Fazly Razik and State Counsel Sajith Bandara.
The CoI comprises Retired Supreme Court Justice Anil Gooneratne (Chairman), Court of Appeal Judge Gamini Rohan Amarasekara, Retired High Court Judge Piyasena Ranasinghe, Retired Deputy Auditor General Don Anthony Harold and Sri Lanka Accounting & Auditing Standards Monitoring Board Director General Wasantha Jayaseeli Kapugama. The CoI hearings will continue tomorrow.