EPF losses and the bond scam connection: Finance Minister questioned (UPDATED)

EPF losses and the bond scam connection: Finance Minister questioned (UPDATED)

Written by Lahiru Fernando

09 Apr, 2017 | 10:30 pm

The Employees Provident Fund is the life savings of private sector employees in Sri Lanka. It is is accessible to those working in the private sector, upon their retirement.

Allegations of mismanagement of the vital EPF have been rife in the past decade.

Speaking on the loss incurred by the EPF due to the alleged bond scam, the Minister of Labour said the Fund was used to purchase shares in certain companies at first. He added that the money invested in “some of these companies” has been lost.

The Minister also said that the EPF has suffered a loss of Rs. 11.5 billion as a result of the recent bond scam, as testified by a Central Bank official.

Minister Seneviratne also pointed out that the EPF is governed by the CBSL Monetary Board, with no representation of the Labour Department.

According to the Minister, the Labour Dept. EPF management shortcomings are constantly being submitted by Trade Union leaders. In turn, the minister says that Labour Dept. officials are too, constantly vigilant on the issues.

The minister has taken steps to remind the government to include a Labour Department representative as a member of the Monetary Board.

“Initially, we were allowed to invest these funds in Treasury Bills. Recently, investing funds in the stock exchange was  allowed. When considering the position of some of the companies that funds were invested in, we can see that losses have been incurred”, the minister added.

All these factors must be considered in the future and a plan should be draft to securely administer the Provident Fund, said Minister Seneviratne.

Central Bank internal investigation

An internal investigation at the CBSL exposed a loss of around Rs. 10 billion incurred by the EPF.

Several individuals who testified before the Presidential Commission of Inquiry noted that transactions in the bond market by the EPF could result in losses.

Meanwhile, the Voice Against Corruption says that two reports have come to light regarding EPF losses due to the bond scam.

September 2016 Report: A loss of Rs. 11.9 billion
March 23, 2017 Report: A loss of Rs. 9.6 billion

Total Loss : Rs. 21.5 billion

Profits made by Perpetual Treasuries (In the 21 months ending on September 30, 2016): Rs. 12,988 million.

“This is the most serious harm that has been caused to the EPF.” – Voice Against Corruption

The VAC organisation charges that Arjun Aloysius and Arjuna Mahendran are “laundering the money they made from the bond scam and from the EPF”

According to the VAC, Aloysius and Mahendran are now;

  • Printing newspapers
  • Buying shares in banks
  • Have purchased shares in state banks
  • Made investments with a major liqour manufacturer

“When the time comes to catch the rogues, if the rogues flee, then all that will be left are the companies. Some of these companies may be entirely owned by them, some maybe not”, said Voice Against Corruption Convenor Wasantha Samarasinghe.

The Voice Against Corruption has called on the current CBSL Governor, the Monetary Board and the Labour Minister to immediately intervene with the cabinet and the government to “stop them from using this stolen money” and has also called to freeze all accounts belonging to them.

“That money belongs to the working people of this country. Give that money back to the working people. Take steps to return these funds to the EPF” added Wasantha Samarasinghe.

April 9 update

“This fund has around 2 trillion rupees, and successive government have used this money to sustain them”, said D.E.W. Gunasekara, Former Chairman – COPE).

The former COPE chairman says the EPF was brought under the Central Bank to protect it. “if this was taken away from the central bank, by now this fund would have been destroyed”, he added.

Gunasekara pointed out that the presidential commission report should be released before any action is taken.

He stated that if the report reveals a loss at the hand of the government, then it is the government’s responsibility to ensure future action to get back the lost money.

“This is money that was accumulated through the sweat of the working force, no one can touch this fund..”, said D.E.W. Gunasekara (Former Chairman – COPE)

More questions…

Meanwhile, the Frontline Socialist Party says the social security net for private sector employees is being “used by various rouges and racketeers to make profits”.

The party’s politburo member Pubudu Jagoda called for an immediate investigation into the losses and said -if proven- the money should be recovered from “the officials responsible”.

“We cannot sacrifice the lives of the working force for companies like Perpetual Treasuries and everyone else connected to the bond scam to make profits..”, said  Frontline Socialist Party.

The State Minister of Finance Lakshman Yapa Abeywardene has put forward a few questions regarding the incident;

  • Why couldn’t the EPF buy bonds directly?
  • Why did they have to go through someone else?
  • Why does a state institution need to go through a private company?

Minister of Finance questioned

Minister of Labour John Seneviratne had stated on a previous occasion that a Rs. 11.5 billion loss was suffered as a result of EPF and ETF funds being invested.

Journalists questioned the Minister of Finance Ravi Karunanayake on the matter. However, instead of answering the question, the minister decided to hit back at Minister Seneviratne by recalling a loss incurred by CEB during his tenure as the subject minister.

However, Minister Karunanayake said that a direct answer will be given to Minister Seneviratne.

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