Golden Key Co. was a scam, says Justice Tilakawardene Supreme Court Judge Shirani Tilakawardene, giving evidence on 7th December 2012 before the Parliamentary Select Committee (PSC) that probed the impeachment charges against former Chief Justice Shirani Bandaranayake, made many interesting revelations on the investigation on the Golden Key Credit Card Co. Janaka Ratnayake, Chairman of [...]

The Sundaytimes Sri Lanka

Supreme Court saga of the Golden Key case


Golden Key Co. was a scam, says Justice Tilakawardene
Supreme Court Judge Shirani Tilakawardene, giving evidence on 7th December 2012 before the Parliamentary Select Committee (PSC) that probed the impeachment charges against former Chief Justice Shirani Bandaranayake, made many interesting revelations on the investigation on the Golden Key Credit Card Co.

Janaka Ratnayake, Chairman of Trillium Residencies also revealed some hitherto unknown and incriminating facts when he gave evidence before the PSC.

Following are excerpts of Justice Tilakawardene and Mr Ratnayake’s submissions made to the PSC:

Justice Shirani Tilakawardene: I can just give you what I knew about it. I also think it would (have) needed for me to actually explain why the Supreme Court took the drastic step because after all, it was a matter of a finance company.

Nimal Siripala de Silva (PSC member):

That would be very helpful to the Select Committee.

Justice Tilakawardene: If you recall at that time, before it came to courts, there was a huge outcry in the country. We found thousands -I think it was 9,000 odd depositors. – who had good faith, deposited their monies in the Golden Key Credit Card Company and who found that the Credit Card Company had failed because it was what you call a pyramid or for which various terminologies were used. In other words, it was a scam.

Partly responsible

Actually, I was partly responsible because I had a very big burden. When these kinds of things happen and the law cannot meet what is there, one feels almost ineffective and one has to do something. Article 126 was there on fundamental rights and we took that up. It became a public interest litigation and we halted the number of applications coming into court because if not, we would have had 9,000 applications. So, immediately, we had to maintain the status quo because there were two important things that were happening. One was, there was a collapse of the Golden Key Credit Card Company. When we took even a cursory examination of the documents, we found that the money that should have been credited to the Golden Key Credit Card Company had gone to the rest of the Ceylinco Holding Companies. So, we had to immediately put a ‘Stay Order’ that no transactions would take place because the money had been siphoned off and it is what you call a Ponzi scheme. We just had experience of the Madoff case in America. In the MadOff case, up to date, nobody has been paid one cent. So, we had this whole thing before us and there was no experience anywhere else in the world as to how we are going to handle this. So, what we did was, we immediately stayed all action. We were studying it; we used to stay till 11 0′ clock or midnight. I really used to sit with these people because this was a new thing for us. This is not the ordinary one person vs somebody else case.

Golden Key depositors protesting

Seylan Bank

So, when going through it, we suddenly realised that if we stopped all transactions, the Seylan Bank transactions would also have to stop. The moment they come to know that there is a little problem with the bank; everybody withdraws the monies and that would collapse. If that collapsed, 14 other finance companies may have collapsed and there would have been a huge economic crisis in this country. So, what we did was, we released the Seylan Bank (from any freeze on funds disbursement). There was some sort of arrangement where the Government would to take it over and run it. But, there were monies of the depositors which had even gone into the Seylan Bank and other places, from the perusal of the documents. Then, we also called for the record as to how a finance company, with all the safeguards of this Act, came to be this. We found out that there was a minute which said this. The Special investigation Unit of the Central Bank had gone into the accounts of the Golden Key because there were many petitions that had been sent. When they had been sent, analyzing those, they found that there was a very big problem with the Golden Key company – the GKC. Then what happened was, there was a meeting. Mr. (Sunil) Mendis was the then Governor of the Central Bank. Shortly after he left (quit), there was a meeting that had been held on 24.11.2006.

I must say it was almost a fate because there were so many files and I just pulled one and I found inside it, this record. It said that all the proceedings were culminated. The minute said, “The Monetary Board is informed of the above and is invited to approve a discontinuance of the examination commenced in respect of the Golden Key Credit Company under Section 11″.

That was in 2006′. Long before many more, thousand other people, invested in that.

If that had happened at that time things would have come to a halt and there would not have been this huge loss that took place.
Nimal Siripala de Silva: So, the Central Bank had failed in its duty?

Justice Tilakawardene: That is why we came (in). That is executive action. It may have been difficult for the Central Bank, maybe, because it was a meeting between the Central Bank and Mr. Lalith Kotelawata. Maybe, Mr. Lalith Kotelawala gave them sufficient information and some way eased their fears. But it closed down the Special Investigation Unit and discontinued the action.

Nimal Siripala de Silva: Was that decision taken by the Monetary Board?

Justice Tilakawardene: That decision was taken by the Central Bank and the Monetary Board. Though “X” or “Y” takes it, it goes as a decision of the Monetary Board. Being lawyers, you understand that. It’s called chain command responsibility. So, they discontinued it. After 2006, there were a large numbers of investors. When that came up again, we had to take steps to immediately alleviate what was going on. As I told you, there were several companies. So, what we did was, we halted all the cases coming to us because the court house was almost surrounded with heaps and heaps of cases and it was not a very practical thing to do. We gave a series of orders, which said that no transactions, except that of the Seylan Bank, could take place without the permission of court. That included all the cases.

Nimal Siripala de Silva: You appointed the (Lakshman) Watawala Committee to take over the assets at the whole company, did you not?

Justice Tilakawardene: Absolutely.

Why I am going in a methodical way, is because all these assets were there. The investors were not only from the Golden Key Company. Money went into other places like the Ceylinco Shriram Capital Management Private Limited, which is the 262/2009 case.

Trillium issue

Trillium Residencies comes under that case. So, we named particular cases. There was the Golden Key case, the Shriram case and there were some other cases that came up. All these cases were there and we were wondering how we were going to manage those. I can remember sitting down and thinking of what to do. There were 9,000 odd depositors. You cannot take case by case; it was meaningless. By then, the Chief Justice was moving out and he was asking me to take more control of it because this was a case nobody else could handle and we had been involved from the beginning.

He said, “‘I am going to appoint especially you” because I had virtually studied every paper in the case. So, I knew about the details. I said ok. I told the depositors “if you are going to work with the court, first you are entitled to go to District Court, invoke the law, take it from there onwards and then on your own. You can do that. But, we have given a Stay Order”. I said. “So, till this matter is settled, you will not be able to collect it whatever process you go through.” The paramount and the most important people were the depositors, especially the small depositors. That is what made this case so special to me as a person.

Janaka Ratnayake’s role

The Trillium Residencies become relevant here because of Mr. Janaka Ratnayake. At that time, when certain orders were given, Mr. Ratnayake was the Chairperson of the Merchant Bank. Now, monies had gone into the Merchant Bank and I think one of it was on a direction of the court. You know if their shares are belted up, they lose their price. They have to go to etc, the trading market. If properties are locked up, they lose their value. So, they have to run. They need money, they need working capital to go on, to pay salaries and do various things. Then, the employees needed money. Every one of these categories had to be put aside. But Mr. Ratnayake became important in the case, because he had been asked to take 500,000 shares and put it into the Merchant Bank so that we get money coming back. Then, that investment would not be static or start decreasing in value.

So, Mr. Ratnayake took that and put it into his own personal account. That document came to me. Then, with it, we immediately ordered that he put it back into the Merchant Company. That was a fraud on the face of it. I immediately made an Order which said, “In his equitable orders” and directions, he is not to be put in charge of anyone of these assets or whatever”. He is not a fit and proper person. Here, we were looking for one thing – people who are going to be honest, who are sacrificial and who think of the depositors. I was later told that he became Chairperson of Trillium Residencies.

Janaka Ratnayake before the PSC:

Janaka Ratnayake – A person called Pradeepa Kariyawasam called me and introduced himself as the chairman of NSB I did not know him. He further said that his wife is a judge of the Supreme Court.
Nimal Siripala de Silva – Who was hearing these cases?

Janaka Ratnayake – No .. No, he said his wife was a judge of the Supreme Court and his wife’s sister wanted to buy an apartment from Trillium. I said yes we are selling apartments. He said that he wants to have a good price.

Nimal Siripala de Silva – He wants to have a good price?

Janaka Ratnayake -Yes but the usual way of selling these apartments of Trillium is that we have a fixed price. I have given a good discount as he told me his wife is a Supreme Court Judge and he is the chairman of the NSB.

I told him that this was the fixed price. We have two price lists and this was the better price. I have never met Pradeepa Kariyawasam but I met the Chief Justice (his wife) on two occasions. If we have some sort of friendship we used to give a little discount. Not to everybody to some persons with the aim of selling the property.

Wimal Weerawansa – Have you given any such discount to any other person?

Janaka Ratnayake – Yes some others were given.

Wimal Weerawansa – What is the discount is it Rs. 2 million?

Janaka Ratnayake – Around Rs. 1.6 million.

Nimal Siripala de Silva – You are entrusted with the responsibility of getting the maximum price and did you inform the court that you gave a discount of Rs. 1.6 million because of the relationship with the Supreme court Judge?

Janaka Ratnayake – Not to the court but according to the directive given to us at the end of every transaction of every month, whatever transaction we do for the month.

Nimal Siripala de Silva – Then can you sell it at half the price, quarter of the price because you are in a position of the Trustee? Can you sell it like that to your friends and give reductions or discounts to someone by telling the names of Supreme Court judges? This means that you have sought some advantage of this transaction. So, you are guilty as a Trustee. I think you are guilty of a very, very grave offence that we have to recommend.

Wimal Weerawansa – If the sale of this house was not by publication of a notice how else did it happen?

Janaka Ratnayake – I will explain – (it was) after getting an order.

Dilan Perera (PSC member) – What order?

Janaka Ratnayake – Supreme Court order. The application was given later and after that an order.

Trillium residencies is a selling organisation. That is what you call trading stock. Besides that we have cars and an office which are fixed assets. We can’t sell even the furniture there. After that we got an order related to fixed assets.

Nimal Siripala de Silva – When was that?

Wimal Weerawansa: Today’s discussion is about that and no other. Therefore you should have known documents connected with it.

Anura Priyadharshana Yapa (PSC Chairman) – (tells Mr Ratnayake) – Go and bring the order.

Nimal Siripala de Silva – Bring the latter order said to have been by SC.

Janaka Ratnayake: Pradeepa Kariyawasam called me to give a price. I said there was a fixed price (but) we have two price lists.
Pradeepa Kariyawasam is a person I have never met. The Chief Justice met me twice at Trillium Residencies. If there is some relationship we consider reducing the price. Not to all. Only in the hope of selling.

Nimal Siripala de Silva – Because you said that the wife is a judge.

Janaka Ratnayake – Because she is the SC judge and he as chairman of the bank (National Savings Bank), a discount was given.

Wimal Weerawansa – How much?

Janaka Ratnayake – Rs 1.6 million.

Wimal Weerawansa – Have you given a discount to any other party?

Janaka Ratnayake – Some have been given.

Wimal Weerawansa – Who are they?

Janaka Ratnayake – If you (we) know someone I (we) can give a discount, not otherwise.

Wimal Weerawansa– What do you mean by that?

Janaka Ratnayake – If a friend buys something as a private institution.

Wimal Weerawansa – I am not talking of others – the discount given to Kariyawasam and (CJ’s) sister do not belong to that category.

Janaka Ratnayake – (There was) no such relationship (or friendship).

Wimal Weerawansa – Then what is the connection?

Janaka Ratnayake – One reason is that he said his wife is the SC judge.

Wimal Weerawansa – Did you identify the SC (judge)?

Janaka Ratnayake – Yes.

Wimal Weerawansa – Did he say Shirani Bandaranayake?

Janaka Ratnayake – Yes because I know SC judges.

Nimal Siripala de Silva – You mean that because she is a SC judge you gave her that discount?

Janaka Ratnayake – Primarily yes.

Nimal Siripala de Silva – By that time did you have the SC cases?

Janaka Ratnayake – Yes.

PSC chairman – Now explain the rest.

Janaka Ratnayake – After that my finance director was told by me to give the discount.The money was given accordingly and the value decided.

Nimal Siripala de Silva – You had a responsibility. These are times when companies do not pay dividends to depositors.

Janaka Ratnayake – We do pay.

Nimal Siripala de Silva – Why did you give such a big discount? Did you inform the SC that the discount was given on the basis of relationship with an SC judge?

Janaka Ratnayake – Directions were that whatever transactions done during the month….. (were informed).

Nimal Siripala de Silva – You are in a caretaker role. How can you give such a discount?You must have expected some return on this transaction.

Wimal Weerawansa – You know well that when (Pradeepa) Kariyawasam did the deal the case would be tacked by a (SC) team headed by Shirani Bandaranayake

Janaka Ratnayake – At that time it was Shirani Tilakawardene (hearing the case).

Wimal Weerawansa – Good by then it was Shirani Tilakawardene. But was it she who was hearing by the time the transaction was completed?

Janaka Ratnayake – The deal was completed a few months back.

Wimal Weerawansa – That means you had not finished the transaction?

Janaka Ratnayake – There is a stage that even though the transaction is completed it does not mean they have paid the full amount. By this time the judges hearing the case was Shirani Tilakawardene and her team.

When the down payment of Rs 1 million was made, Shirani Bandaranayake was not hearing the case. It was Shirani Tilakawardene. She signed an agreement after an advance payment of Rs 1 million. It was the same day that the power of attorney was signed. There is a problem there.

Wimal Weerawansa – Give a time frame.

Janaka Ratnayake – That time she was not the Chief Justice. She was not even on that bench. Since Pradeepa Kariyawasam said she was a judge of the Supreme Court I considered giving him a discount.

Wimal Weerawansa – I need to know who the judge was at the time the deal was concluded.

Janaka Ratnayake – It was Shirani Tilakawardene and her team who heard the case.

Wimal Weerawansa – Was it during the deal or after? You mentioned that there was a case pending regarding your rights.
Janaka Ratnayake – That case was before the deal.

Wimal Weerawansa – By June the Chief Justice was Shirani Bandaranayake. In which month was the case taken by her and her team?
Janaka Ratnayake – After about a month.

Wimal Weerawansa – Was it a team headed by her?

Janaka Ratnayake – Yes.

Nimal Siripala de Silva – Was the discount given after that (after she became Chief Justice)?

Janaka Ratnayake – Before.

Dilan Perera – You said the transaction was ongoing when the bench was changed?

Janaka Ratnayake – Yes while they were making the payments.

Wimal Weerawansa – Did the bench (change) before termination of deal?

Janaka Ratnayake – Yes.

Susil Premjayanth (PSC member) – I have a few questions in addition to ask beside what you said. You are giving evidence in connection with the case of the house purchased by Shirani Bandanayake’s sister and her husband from Trillium residencies?

Janaka Ratnayake – Yes.

Susil Premjayanth – Can you give the date that Kariyawasam inquired about the apartment?

Janaka Ratnayake – About a month before the deal he spoke to me thrice.

Susil Premjayanth – Was it before or after April 2011?

Janaka Ratnayake – Before that.

Susil Premjayanth – Were you aware that Shirani Bandaranayake was involved in this case as a special attorney ?

Janaka Ratnayake – Yes.

CB never gave impression that Golden Key was a regulated companyThe Central Bank (CB), referring to allegations made by an Opposition Member of Parliament that the losses by Golden Key Credit Card Company depositors could have been averted if due warnings were given by the CB, issued the following statement on Friday:On 23rd July 2003, the Central Bank published an advertisement wherein the public was informed that the 31 institutions that were named in such notice, were neither licensed under the Banking Act nor registered under the Finance Companies Act, and that therefore the activities of such institutions were not supervised or regulated by the Central Bank. Such list included the institution, Golden Key Credit Card Company Limited (GK) as well. Thereafter, in keeping with the settlement as per the Supreme Court Order on Application No.99/03 in July 2003, the Central Bank confined itself to publishing only the names of the institutions that were being regulated and supervised by the Central Bank, and were consequently empowered to accept deposits from the public.On that basis, from July 2003 to December 2008 at least 210 full-page advertisements were published in the national newspapers by the Central Bank setting out the names of institutions that were being regulated and supervised by the Central Bank. All such advertisements did not indicate GK as an institution that was regulated and supervised by the Central Bank, and therefore the widest possible publicity had been given that the GK was not an institution that was regulated or supervised by the Central Bank. In that context, any person who transacted business with the GK would have done so, knowing fully well that GK was not an institution that was regulated or supervised by the Central Bank.In 2005 based on a complaint made by a member of the public, the Central Bank examined the business model of GK to ascertain as to whether it was carrying on finance business, as contemplated in the Finance Companies Act. The examination culminated with submissions being made to the top management of the Central Bank in late 2006, on behalf of the GK and its Chairman, Lalith Kotelawala, by their Senior Legal Counsel, Wijedasa Rajapaksha PC.

After assessing the entirety of the material before the Central Bank, and the submissions made by the legal counsel of GK, the Monetary Board determined that the business carried out by the GK did not fall under the category of finance business, as contemplated under the Finance Companies Act, and that accordingly the Monetary Board was not empowered to prevent the conduct of the credit card business of GK. Nevertheless, at no stage did the Central Bank give any impression whatsoever, that GK was entitled to accept deposits under the Finance Companies Act, or that it was a company that was regulated or supervised by the Central Bank. In fact, the exact opposite was conveyed in the large number of advertisements, published by the Central Bank, in which the GK was not included in the list of institutions that were supervised or regulated by the Central Bank.

In the light of the above, it is clear that the allegations leveled at the Central Bank and its senior officials by the MP concerned, are without foundation and are baseless.

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