Serious misconceptions within Government circles, COI can’t impose any punishment PM proposes state of emergency to deal with drought, but situation eases By Our Political Editor The warrant signed by President Maithripala Sirisena last week for a Commission of Inquiry to probe the Central Bank bond scam of 2015 and 2016 will essentially be a [...]


Bond issue: Only fact-finding role for Commission of Inquiry


  • Serious misconceptions within Government circles, COI can’t impose any punishment
  • PM proposes state of emergency to deal with drought, but situation eases

By Our Political Editor
The warrant signed by President Maithripala Sirisena last week for a Commission of Inquiry to probe the Central Bank bond scam of 2015 and 2016 will essentially be a “fact finding” one, according to its ten-point terms of reference.
It has not been mandated to probe any contraventions of the law, but only “irregularities” and “procedures.”
Gazetted on January 27, the Commission’s main objective will be to “investigate and inquire into the management, administration and conduct of affairs of the Central Bank of Sri Lanka (CBSL).” This is in respect of the issue of Treasury Bonds during the period from February 1, 2015 to March 31, 2016 and related issues. That includes a provision on “whether there has been misuse or abuse of power, influence, interference, fraud, malpractices, nepotism or any act of omission connected with corrupt activity.”

The warrant lays down; “that the provisions of Section 14 of the aforesaid Commission of Inquiry Act shall apply to the Commission.” This provision means, “no person shall, in respect of any evidence, written or oral, given by that person to or before the commission at the inquiry, be liable to any action, prosecution or other proceedings in any civil or criminal court.”  The provision also adds that; “no evidence of any statement made or given by any person to or before the commission for the purposes of the commission shall be admissible against that person in any action, prosecution, or other proceedings in any civil or criminal court.”

In layman’s terms, these provisions make clear that persons testifying before the Commission of Inquiry enjoy immunity and cannot be prosecuted in courts. That is even in the unlikely event of any person admitting to any wrong doing before the Commission. Thus, it would necessitate another inquiry where investigators would have to independently elicit what transpired before the Commission. Such a process would have to be totally unmindful of what transpired before the Commission. The Presidential warrant empowers this Commission to; “hold all such inquiries and make all other investigations”. It requires the Commission to transmit to the President a report “setting out the findings” and “recommendations relating thereto.”

Yet, there are other salient features. The Evidence Ordinance does not apply to this Commission. This means evidence not admissible in an ordinary Court of Law, like hearsay for example, would be allowed. Even the production of documents could be made directly instead of summoning the relevant authority to do so. Section 8 of the Commissions of Inquiry Act provides for the Commission to request the President to confer on them powers to call for a statement of bank accounts and taxes. Once such power is conferred, it is empowered to issue written notice to a bank to furnish certified copies of bank accounts of persons they are probing or that of their spouses or children.  It will also empower them to require the Commissioner General of Inland Revenue to issue a certified copy of any document including tax returns of persons, their spouses or children.

The CBSL bond scam was earlier probed by the parliamentary Committee on Public Enterprises (COPE) chaired by Janatha Vimukthi Peramuna (JVP) MP Sunil Handunetti. It was tasked on May 22, 2015 to go into the scam. Most details relating to the matter transpired. Its report after 17 months and 14 sessions, held that the CBSL’s former Governor Arjuna Mahendran was directly responsible for the scam. It also held that Perpetual Treasuries Ltd., where Mahendran’s son-in-law Arjun Aloysius was associated, was able to earn a large profit through the bond transactions. The Committee called for legal action against them and some Central Bank officials.

Commenting on the COPE report, President Maithripala Sirisena told a religious event at the Abhayarama Temple in Narahenpita on January 25, “It has come to my attention that the (COPE) report had been forwarded to the Attorney General’s Department and then to the IGP for their observations before the report was approved by Parliament. I inquired into this. According to investigations already conducted, they have ruled that the probe should be conducted not as a criminal case but as a civil one. I disagree with that. I want this to be done right. I have to emphasise this to the country.” Thus, provision has been made in the Presidential warrant that the Commission is to function; “without prejudice to any measures that have been taken or which will be taken by relevant authorities including the CBSL, in the exercise of their statutory and legal responsibilities.”

There have been some serious misconceptions in Government circles about the role of this Commission of Inquiry. Sports Minister Dayasiri Jayasekera said at the weekly Sri Lanka Freedom Party (SLFP) media briefing on Thursday that the Commission was mandated to recommend punishments to persons, if any, found guilty of criminal acts. In reality, however, this Commission of Inquiry has not been mandated in the President’s warrant to probe whether there has been a contravention of any law. Therefore, the question of investigating criminal acts or finding any person guilty does not arise.

The other terms of reference of the Commission, which further underscore this position, are:

  •  Whether there has been any malpractice or irregularity, or non-compliance with or disregard to the proper procedures applicable in relation to, management, administration and conduct of affairs resulting in damage or detriment to the Government or any statutory body including the CBSL.
  • Whether any contractual obligations have been entered into or carried out, fraudulently, recklessly, negligently or irresponsibly, resulting in damage or detriment to the Government or any statutory body including the CBSL.
  • Whether there has been non-compliance with, or disregard of, the proper procedure applicable to the calling of tenders or the entering into of agreements or contracts relating to such matter on behalf of the Government.
  • Whether such non-compliance with, or disregard of proper procedures has resulted in the improper or irregular or discriminatory award of such tender for sale of bond.
  • Whether proper procedures and adequate safeguards have been adopted   resulted in the obtaining the optimum price or benefit for the Government.
  • The person or persons responsible for any act, omission, or conduct, which has resulted in such damage or detriment to the Government or any statutory body including the CBSL.
  • Whether any inquiry or probe had been obstructed or prevented in any manner, resulting in damage or detriment to the Government or any statutory body including the CBSL, and, if so, the person or persons responsible for such obstructions.
  •  The procedures which should be adopted in the future are carried out with transparency and with proper accountability with a view to securing the optimum price or benefit for the Government.
  • Whether there has been misuse or abuse of power, influence, interference, fraud, malpractices, nepotism or any act or omission connected with corrupt activity.

Some legal experts say it is abundantly clear from the Commission’s Terms of Reference that it has not been asked to probe violations of any law. They all relate to probing issues like; “irregularities,” whether “proper procedures,” were followed, “malpractice,” committed in respect of the bond issues. Examples from the warrant, these experts further point out, are:

  • It has become necessary to inquire into and investigate to identify persons alleged to have been so involved in irregularities committed, in case such irregularities are found to be true;
  • It has also become necessary to identify the person or persons responsible for such irregularities.

It is therefore beyond any doubt that contrary to Minister Jayasekera’s claims, the Commission has not been mandated to probe contraventions of any law according to its Terms of Reference. The reference to “irregularities,” “proper procedures,” malpractice” all come within the ambit of civil laws, these experts opined. They pointed out that the Terms of Reference in past Commissions have included provision to probe violations of the law, including criminal matters.
The Commission of Inquiry (CoI) is headed by Justice K.T. Chitrasiri, Judge of the Supreme Court, Justice Prasanna Jayawardana, Judge of the Supreme Court and Kandasamy Velupillai, Retired Deputy Auditor General. They will be assisted by counsel from the Attorney General’s Department.

A Government source closely associated with the process that led to the appointment of the CoI said yesterday that the new process would help President Sirisena obtain “a full picture” of the CBSL bond scam — how it originated, the person or persons including politicians who, if any, were involved and whether colossal sums of public funds were misappropriated among other matters. “The President would have to decide thereafter the course of action he proposes to take based on the recommendations that would come from the CoI,” the source said.

By Sirisena’s own admission, a Police ‘criminal’ investigation is already under way based on it being declared a scam by the COPE report. Hence, one could safely assume that whatever recommendations from the CoI would help Sirisena obtain details of the origins of the bond scam including those involved and identify areas where corrective action has to be taken to prevent any recurrence.
In fact, he notes in his warrant that “I am of the opinion that it is in the national interest” to conduct an investigation and inquiry “in order to determine what measures should be adopted to ensure that there will be no recurrence of such acts in the future.”

For Sirisena, the CoI report would be an authoritative account brought out by those serving in the highest positions in the country’s judiciary and a onetime public official whose name has been suggested even for the proposed Audit Commission. At the COPE, however, the United National Party (UNP) members were steadfast in their assertion that there was no wrongdoing whilst other members, who were in the majority, concluded there was misappropriation of public funds and identified those directly involved. The UNP members, in an unprecedented move, ended up adding footnotes in the COPE report contesting the findings. This gave the COPE report a political flavour and that the findings, or more so, the footnotes were based purely on political lines.

The Presidential warrant requires that the CoI transmits its report to him within three months from the date it was issued – i.e. January 27. This means the Commission would have to hand over its report on or before June 27. However, there is no bar to the Commission seeking an extension as has been the practice if the workload increases. Unlike the COPE inquiry, there are many other parties who want to testify. This includes members of the ‘Joint Opposition’ and even other CBSL officials since the Commission is empowered to extend confidentiality by conducting sittings in camera.

This is the first Commission of Inquiry to be appointed by Sirisena and comes as Sri Lanka marks the 69th anniversary of independence. Celebrations to mark the event at Galle Face Green yesterday would have come under a State of Emergency, though it was for different reasons. Prime Minister Ranil Wickremesinghe proposed to the Cabinet of Ministers that such a state of emergency be declared in view of fears of a severe drought. That was to ensure relief work by the Government was carried out effectively and the move would even facilitate the deployment of troops.

At a ministerial discussion, it was agreed that the proposal be discussed by a subcommittee chaired by President Sirisena that was dealing with matters related to the feared drought. Last week, Sirisena was on an Air Force flight to Mullaitivu when the VVIP helicopter pilot told him that he could not proceed due to poor visibility conditions caused by heavy rains. A happy Sirisena was to remark that his prayers for rains had been answered and directed that they return to Colombo.
For Sirisena, some of the key issues he has to tackle appear uppermost in his mind. Strong criticism that election promises to probe large-scale corruption and other malpractices have not been kept has prompted him to direct that the different Police agencies act without delay.

This has led to Police top brass busying themselves to seek the help of the Attorney General’s Department to file indictments. However, as one Minister points out, “there is always a slip between the cup and the lip.” He said they (the Police) have “dragged their feet” for more than two years and will now “have some reason” to delay matters further. He lamented that the public fallout was on the Government.

Another key area is the economy. Lack of adequate funds has prompted the Government to turn to the People’s Bank and the National Savings Bank (NSB) for funding to finance priority projects. This month, Finance Minister Ravi Karunanayake sought approval from his ministerial colleagues to raise Rs. 23.20 billion from the National Savings Bank and the People’s Bank to fund the second phase of the Central Expressway Project.

Pointing out that the project is “high priority”, Karunanayake said that the project has been awarded to a consortium of 16 local contractors and Rs 11.2 billion from the NSB and Rs. 12 billion from the People’s Bank would be required.
Karunanayake has told his ministerial colleagues the NSB has agreed to extend the facilities provided, however, on condition that the Government gave a time bound irrevocable Government guarantee in accordance with the National Savings Bank Act. He has pointed out that the NSB is 100 per cent owned by the Government of Sri Lanka (like the People’s Bank) and “there is no justification for one arm of the Government to insist on a irrevocable guarantee from the other arm” He has therefore recommended that the law be amended to have the General Treasury issue a ‘Letter of Comfort’ as the safeguard for the loan. Karunanayake told the Sunday Times yesterday that economically Sri Lanka was “out of danger” but added that “we are still in turbulent times.” The Q & A with him appears as a box story on this page.

Karunanayake also said that President Sirisena will soon chair a conference to be attended by Premier Wickremesinghe and himself. It is to discuss issues that have arisen with heads of the Central Bank, the Auditor General and the Customs and to ensure they do not make controversial remarks on his Ministry.

For President Sirisena, who is set to effect a ministerial re-shuffle as revealed in these columns last week, there are some formidable tasks. He has failed so far to re-unite his Sri Lanka Freedom Party (SLFP). His SLFP ministers who have urged him to contest the 2020 presidential election — a move on which Sirisena himself has maintained a deafening silence — want the Executive Presidency retained.

These pro-Sirisena SLFP Ministers have once again begun complaining that it was those within their ranks who were being subjected to FCID investigations whilst their partners in the UNP were ignored. Some of these Ministers are themselves facing corruption charges when they served in the Mahinda Rajapaksa Government. Hence, Sirisena has to walk a very tight political rope as he makes changes and fights to regain the credibility and popularity of his Government.

CBSL Governor, Auditor General become media darlings
Finance Minister Ravi Karunanayake says that Sri Lanka is “out of danger” economically speaking, but added that “we are in turbulent times.”
Here are edited excerpts of an interview he gave the Sunday Times:

Q: The state of the economy, some say, is in bad shape. What is your response?
A: Thank you for asking me that question. I must put it in proper perspective. What was handed to us on January 8, 2015 was an economy in chaos. It was dangerous. In military terms, it was a grenade, pin removed and waiting to explode any moment. We introduced several measures for financial discipline and fiscal consolidation. The revenue that was going into individual pockets was brought into the Treasury. With that we were able to bring financial discipline. Nobody thought revenue will increase and the budget deficit will be brought to that level. There are pundits who are talking. There are two types. One is from outside and the other from within; they speak because of jealousy.
I would say respectfully, that the economy is in good stead. We are off the danger level but certainly we are in turbulent times. I don’t dispute that.
I respect the World Bank, the International Monetary Fund, the Asian Development Bank and the Asian Infrastructure Investment Bank for assisting us and having confidence. The investments are bringing dividends today. We are a small leaf that blows away when (US President Donald) Trump decides to increase interest rates. What can we do?
That is how we are navigating through turbulent times. So anyone who is mischievous… you can paint things in different ways. It is how you look at it.
(Former President) Mahinda Rajapaksa handed over to us a port that they spent Rs. 200 billion and yielded a revenue of Rs. 200 million as a return. We will need 200 years to pay that loan. We are saddled with a Colombo Port losing money for the Hambantota expansion. Our problems are because of that. The Mattala Airport is another case. Remember what has to be spent on development had to go for debt servicing. Who took that money? Rs 1,784 billion was our outstanding debt then. When they handed over (the Government) to us, it was Rs 9,900 billion.

Finance Minister Ravi Karunanayake

Q: There is a claim that people had to pay more because of rash decisions taken soon after you assumed office in January 2015. You raised salaries of state service employees, reduced fuel prices and lowered prices of commodities to win the parliamentary elections in August 2015. Now you don’t have the money and are raising indirect taxes.
A: All I can say is that if they did not hand over a horrendous economy to us, some of these problems would not have been there. Are they (Rajapaksas) now telling us not to pay salaries?
Are they telling us not to lower prices of consumer goods? Don’t forget. When we reduced prices, the benefit went to the people. For 11 years they did not increase wages or lower commodity prices. Only one family made money out of it.

Q: Before the elections you said that monies stolen by the Rajapaksas will bridge your budget deficit. What happened?
A: Well, I would only say there is action being taken. I don’t want to say anything more. There are very serious things going on. Many will be surprised before too long.

Q: You once said you will enforce a “no questions asked” policy towards foreign investment. Didn’t that run against international and local money laundering legislation? What is the status on this proposal of yours?
A: When I said no questions, I was not referring to moneys raised through laundering, amassed from drugs or smuggling. Not even those obtained through corrupt means. If Sri Lankans have money overseas, I said, please bring it here. Don’t keep it in other countries. Why should anyone be worried? I am only saying bring the money here.
I have also offered resident visas to those who bring over US$ 300,000. There are many who want to come. We will go ahead with this arrangement. Some do not want things to happen. We will have a proper process of vetting and will not take everyone. Those who oppose this have moneys stacked abroad.

Q: Bloomberg said last week that Sri Lanka is a “high risk” country for investors. Transparency International says the corruption index in Sri Lanka is on the rise. How do you respond to these adverse overseas commentators?
A: We are startled at these revelations. At any given moment there has been transparency where we are concerned. We are looking into this matter. Our Ministry will respond soon.

Q: The Central Bank bond issues of 2015 and 2016 remain controversial. Bond issues, pyramid issues etc. by the Central Bank before 2015 have ruined its reputation. As Minister of Finance, what have you got to say when accusations have been made that you are protecting some of those whose names have transpired?
A: This is a peculiar thing. Three months after the new Government comes in and this group who created the Greek bond issue, (former CBSL) Governor Nivard Cabraal lost Rs. 76 billion through hedging. He lost billion rupees through Greek bonds. A huge amount was also lost through the pyramid scheme. Then the Ratwattes lost Rs. 13 billion of depositor’s money through their Entrust company. None of them has been raised by the Opposition. We opened it up.
The Commission to Investigate Allegations of Bribery or Corruption (CIABOC) is now investigating the bond scam. The Supreme Court took up the matter and it went before the COPE.  We are still being asked questions. Our issue is tell us where the loss is. Furthermore, there is a Commission of Inquiry. It shows we are not hiding anything.

Q: You have issues with the Central Bank Governor, the Auditor General, the Customs, and the Department of Inland Revenue among others. What are the reasons?
A: I believe in calling a spade a spade. Accusations always come on the politicians and I am politician. I am also a professional. On that basis I believe I must protect the institutions that I represent. The Inland Revenue Department has done a wonderful job. The Excise Commissioner has done a super job. I may have problems with the Customs but they have done their job. With regard to CBSL, we have a new Governor. It is not the Governor who is the problem. You have a bunch of crooks in the CBSL from the days of Nivard Cabraal.

They still remain. They are stifling the initiatives of the younger guys. They are the guys who are dictating terms. The conduct impacts on the President, the Prime Minister and the entire Cabinet of Ministers. Even the Auditor General must know his limits.

The Governor of the CBSL and the Auditor General should be seen and not heard. Suddenly they become media darlings. They are heads of institutions paid for by the people. I want a job done yesterday and not tomorrow.

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