The judgment in the Sri Lanka Insurance Corporation (SLIC) privatisation case is opening the doors to possibly other fundamental rights against earlier privatisation of state companies.
Coming on the back of the other landmark judgments against John Keells Holdings (JKH) and its directors in the privatisation of Lanka Marine Services where the Supreme Court slated former Treasury Secretary Dr. P.B. Jayasundera and JKH Chairman Susantha Ratnayake, and against the Waters Edge privatisation, privatisation per se is coming under serious scrutiny.
Public interest campaigners Vasudeva Nanayakkara and Nihal Sri Ameresekere have both gone on record in the past saying they were considering more actions against ‘doubtful’ privatisation of state companies. Mr Nanayakkara -- petitioner in the SLIC case --, after being ‘carried’ by jubilant SLIC employees on Thursday following the court verdict, told reporters that the government is the custodian of state assets which are owned by the people and that no one can take them away.
The flurry of judgments on privatisation has raised some crucial issues. Would there be more fundamental rights cases filed against past privatisation; will these judgments discourage the private sector from investing in state companies in future and would the government be able to convince the private sector to invest in public-private partnerships if these may be legally contested in the future, and end up the way of LMS, Waters Edge and SLIC?
Furthermore, corporate leaders say this could deter foreign investments and foreign banks like the hedging deals in which payments to foreign banks have been blocked.
No one, however, can deny – not enough the corporate sector – that if a law or regulation has been broken, the party, institution or individual must be penalised, whatever the consequences it might be to local or foreign investment sentiment. This is the course of action any country would take.
Since controversy has shadowed powerful businessman Harry Jayawardena for many years following his spate of takeovers and acquisitions using companies in the various groups that he controls, losing SLIC is not a big issue. Imagewise too – and unlike the ‘image’ dent in JKH and Ratnayake – Jayawardena will take this reversal, smoothly, in his stride. He must be already lining up his next acquisition to make amends for the loss of the insurance business, and key stakes in telecommunication and hospitals.
The court also ordered that the money paid by Milford Holdings, headed by Jayawardena, of Rs 6 billion to secure 90% of SLIC be returned by the government through the issue of treasury bonds.
Jayawardena is an arch businessman and groups that he control are through cross-holdings and complicated, rather jigsaw-puzzle, type structures that are difficult to understand for the layperson. While the general perception is that he has direct control through shares in all these companies, it is more to do with a mix of brute power and boardroom wrangling that he has succeeded over his other founder directors in the organisation – Raj Obeysekera, Zaki Alif and the late V.P. Vittachi. However these directors, after they fell out with Jayawardena some years back, have filed action in court seeking an order that they buy out his stake or that he buys them out, and the case is pending.
While Jayawardena informed the Colombo Stock Exchange soon after Thursday’s judgment that immediate action has been taken to vest the 90 % stake held by Milford in the government, the question that needs to be asked is how fast did the Treasury move to take control of SLIC (while Jayawardena’s handpointed officers are still there)?
As of Friday morning, the Treasury was yet to move and take over SLIC – lock, stock and barrel. Given the speed of events and government bureaucracy, one wouldn’t expect the Treasury to move at the pace of the private sector but any delay can lead to other issues like for example an inventory of documents, etc being tampered with.
An example of not acting fast was seen in the Golden Key fraud issue where the failure by the authorities to seize the office – just like the Central Bank sealing the Sakvithi office – led to all kinds of documents being taken away. Even the list of depositors dropped to 7,200 from over 9,000 and serious repercussions followed. There are allegations that backdoor payments were made by Golden Key to VVIPs who had investments but didn’t want to reveal themselves.
Jayawardena’s associates feel their group has not lost badly – in terms of cash – from the judgment, but this view may be shortlived. The petitioners are considering moving court, when the SLIC case is to be heard on June 18, to impose a penalty on some respondents for perpetuating a fraud on the state. Additionally it is expected that a request would also be made for the authorities to investigate whether there has been bribery and corruption involved in the transaction.
The woes of Jayawardena and his associates are not over yet. |
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