Desperate depositors of failed finance companies plead for help
“My husband was virtually killed owing to the negligence of (some) Central Bank (CB) authorities,” an elderly lady with tears in her eyes lamented at the AGM of the Citi Finance Depositors association held last at the Public Library auditorium in Colombo.
She told the meeting her husband died as they could not find money to treat him, as all their retirement benefits were deposited in this failed finance company.
Many of the depositors accused the CB of being the root cause for these finance companies to fail. Some depositors traced the history of the company and indicated that these failures are due to some corrupt officials. They pointed out that corruption was evident from top to bottom and the best example is the former CB’s Governor’s alleged involvement in the Rs. 15 billion bond scam.
They have pointed that Deepthi Perera alias Chulaka Gunawardene, former CEO, has transferred liability to an unlicensed ‘fake’ company where he took the deposits illegally. It took place in 2008 and due to this scam old depositors are dying and some have committed suicide. In this context, some CB officials should be investigated and justice should be meted out.
In the meantime, Central Investments and Finance PLC (CIFL) acting under Section 37(2) of the Finance Business Act has objected to the decision of the CB to cancel its license and has requested the CB Monetary Board to revoke the cancellation and urged to consider the proposal made by the investor or to put in place systems to restructure CIFL. The company has indicated that the CB should assist them to recover its assets through litigation already instituted in accordance with Section 25 if the Act.
K.W. Gunawardene, President CIFL Depositors Association (CIFLDA), has endorsed all what CIFL has stated and said that if the CB is so keen to settle the CIFL rather than ‘beating around the bush’, the banking regulator should straightaway implement the CB’s 18 October 2016 media statement which said “the Monetary Board approves the Company Resolution Plans submitted by the Department of Supervision of Non-Banking Financial Institutions to repay deposits and investments annually commencing from 2017 over a reasonable period of time with a fair interest rate during this repayment period”.
He said that the CB suggested that (in the case of three finance companies – The Standard Credit Finance Ltd, City Corporation Ltd and Central Investment and Finance PLC) it would allocate Rs. 4,808 million to nearly 11,878 depositors.
He alleged that the authorities are attempting to delay the payment process while depositors have been waiting for more than 10 years. The latest attempt to cancel the licence of this finance company has prompted the depositors to seek legal action to obtain redress and in such a case would take another five years to seek a conclusion.
Already dozens of depositors of failed companies have died and, due to their old age and with no money for medical treatment, it would be inevitable that another large number would die during the further litigation.
He said that by that time the already poor depositors would become poorer and with no money to continue litigation.
He said that the investors who wished to work out a restructure process have told him that the CB has failed to provide these prospective investors sufficient information.
The constant failure of the CB to adhere to its promises has resulted in aggrieved depositors and potential foreign investors to lose confidence on CB.
I. Camillus, President, Depositors Association UB Finance, said that they have been fooled by the CB in indicating that their deposits were to be converted to Rs. 7 non-voting shares in 2011. While the shares are yet to be listed in the Colombo share market, the share value has been reduced to 50 cents. Furthermore the forms relating to the share issue has been issued in English, which Mr. Camillus says cannot be understood by many depositors who opted to convert their deposit into shares.
He said that they have asked for time to consider the CB process while requesting UB Finance Co Ltd to send the application in Sinhala and Tamil so that their members could understand the contents of the application. He said that the CB had earlier indicated that the shares would be valued at Rs. 7 but now it has come down 50 cents which is a very grave injustice to depositors.
He raised the question as to why the CB decided to make non-voting shares at Rs. 7 as the move is suspicious and this move appears to be violating the provisions of the stock exchange. He indicated that without obtaining an ‘Independent Advisory Report’, the CB decided on the price of the shares.