With the release of over Rs. 3 billion from the Treasury funds to complete the second phase of the repayment of 41 per cent of deposits ranging from Rs. 2 million to Rs.10 million of the failed Golden Key Credit Card Company (GK) depositors, the task of selling the GK assets to recover the public [...]

The Sunday Times Sri Lanka

Presidential commission becomes the order of the day to solve GK mystery


With the release of over Rs. 3 billion from the Treasury funds to complete the second phase of the repayment of 41 per cent of deposits ranging from Rs. 2 million to Rs.10 million of the failed Golden Key Credit Card Company (GK) depositors, the task of selling the GK assets to recover the public money and appointing a presidential commission to investigate the whole financial misappropriation has become the order of the day.
On July 24 last year, President Maithripala Sirisena pledged to appoint a special investigation commission chaired by a retired judge to probe the transactions in the GK before and after its collapse in December 2009 and take legal action against those who have misappropriated money and assets of the company.

Such a commission is essential because the large scale dealings in transferring ownership of GK’s subsidiary companies and valuable assets including land and property took place under the cover of appointing management agents and other underhand methods including the introduction of the Revival of Underperforming Enterprises and Underutilized Assets Act in 2011 by the Rajapaksa regime, disgruntled depositors and civil society activists stressed.

Collapsed like a ‘sand castle on the beach’
When GK collapsed like a ‘sand castle on the beach’ in December 2008, over 9000 depositors who had been earning a phenomenal interest of 30 to 32 per cent for their deposits, much higher than the established market rates, became disgruntled overnight and their money turned to just numbers on a piece of paper or a record sheet in the company computer data base. At that time, the Attorney General informed the court that Rs.14 billion of the deposit money of Rs.26 billion had been misappropriated, Rs.5 billion has gone missing, Rs.1 billion had been used for illegal payments and Rs.6 billion invested in related companies.

This shows the magnitude of the unethical practices of the company management. The crisis at GK and its subsequent collapse was partly due to its deficiency in the organisational structure, lack of an effective transparent strategy, inefficiency and improper management control, the AG informed the court in 2009.  Even in the aftermath of the GK collapse, there was no transparency in transferring the management of GK subsidiary companies and other financial dealings, GK depositors alleged.  In the midst of liquidity constraints in Ceylinco financial subsidiaries, mismanagement issues and depositors’ dilemma, the liabilities and risks of the balance sheets of crisis-hit Ceylinco Consolidated and its chairman, Lalith Kotelawala’s subsidiaries had been transferred to individually appointed representatives and state owned financial companies or Central Bank (CB), during the previous regime.

Deal with white collar crimes
The ill-effects of those transactions will gradually come into light with another financial and economic crisis of a different magnitude in the near future, an economic analyst told the Business Times.  The government should appoint a presidential commission very soon to inquire into this white collar crime and the dealings of the previous regime to tackle the impending crisis, he warned.

It has also been revealed that GK was engaged in transferring money from the company to other Ceylinco companies, feeding on each other by cross dealings. This practice has made it impossible to find out as to where the depositors’ money has gone. The management of all those companies had been changed during the previous regime and its activities are not known to the public, a GK depositor said adding that it is high time for the present government to probe the dealings and take appropriate action without waiting till the blast of the bubble.

Action against the directors
Meanwhile the Association of the Disgruntled Golden Key Women Depositors Unity is planning to file a case at the Colombo Commercial High Court making GK directors and Ceylinco Consolidated Ltd liable to re-pay the depositors, the Chairperson of the association Pushpa de Silva told the Business Times.She said that it’s appropriate now, after the termination of the fundamental rights case on 4th August 2015, to file action in the Commercial High Court against the respondent directors involved in this GK Fraud.

The association will seek permission from the Finance Minister for this purpose, she pointed out.GK depositors’ activist Alex Jayasinghe told the Business Times that they have made a request to the Finance Ministry to appoint a 12 member committee of depositors to assist the authorities to recover the money granted from the Treasury and reimburse it by identifying and selling GK assets. He added that they will also work towards finding money to settle all the money deposited in GK by depositors after selling assets of the company. Mr. Jayasinghe paid a tribute to the government especially to Finance Minister Ravi Karunanayake for his intervention in the settlement of long standing GK depositor’s repayment issue.

The funds amounting to Rs. 3.945 billion required paying the depositors holding deposits in the range of Rs. 2 million to Rs. 10 million was received by GK and the payments are underway for depositors numbering 2700, Dinesh Perera, CEO of the court-appointed GK company told the Business Times.  The payments in the range of Rs. 2 million to Rs. 3 million have already been completed where the total number of depositors is 1030, he added.  A few cheques have been held back by the auditors due to data mismatches. They will be cleared soon by obtaining the necessary documents from such depositors, he disclosed.  He said that that they are in the process of releasing the cheques in the next range of Rs. 3 million to Rs. 4 million and the cheques have already been handed over to the auditors for clearance.

95 % of depositors almost settled
With the completion of the Rs. 2 million to Rs. 10 million range, approximately 95 per cent of the total depositors would have received 41 per cent of their deposits through the repayment plan, he disclosed. Be that as it may, the appointment of the presidential commission is a must to find out as to how the Ceylinco group with around 500 subsidiaries and associates has run into a major crisis following a financial fraud of Rs.26 billion at GK. There was public conception that a very powerful politician of the previous regime was behind the collapse of the Ceylinco empire, depositors alleged.  Of the companies in the Ceylinco group, only Ceylinco Insurance has been able to raise its head and run successfully and efficiently after the 2008 collapse.

50,000 depositors, Rs. 50 bln liability when the Ceylinco empire crashed
There are around 50,000 depositors who are facing economic difficulties and they include 9000 GK depositors, 7000 F&G depositors, 7000 depositors of Ceylinco Shriram, 10,000 depositors of Ceylinco Profit Sharing and tens of thousands of depositors who are unable to withdraw their funds from other Ceylinco financial subsidiaries.
According to AG’s department submissions to courts, the total liability of the Ceylinco group was more than Rs.50 billion including Rs.26 billion in GK, Rs.13 billion in F&G, Rs.7 billion in Ceylinco Shriram, Rs.5 billion in Ceylinco Fast Cash, Rs. 800 million in Ceylinco Profit Sharing and many other subsidiaries.
The Ceylinco Group handled around Rs.300 billion of public deposits through Seylan Bank PLC, Ceylinco Savings Bank, Ceylinco Development Bank, The Finance Company PLC, Ceylinco Investment and Realty Limited, Ceylinco Building Society, Ceylinco Finance PLC, Seylan Merchant Bank PLC, Seylan Merchant Leasing PLC, Asian Finance Ltd and other failed financial subsidiaries

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