Third year anniversary of bond scam

by Staff Writer 27-02-2018 | 11:25 PM

COLOMBO (News 1st) - Today marks the third anniversary of the infamous bond auction of February 27, 2015.

Three years ago the Central Bank of Sri Lanka, under Governor Arjuna Mahendran, advertised a bond of Rs 1 Billion for 30 years.

When the auction closed, the Governor decided to take up twenty times that value - Rs 20 Billion.

In the face of opposition from Central Bank personnel, he decided to reduce that to Rs 10 billion.

Perpetual Treasuries ended up with the lion's share of the Rs 10 Billion, and part of it was achieved at an extraordinarily high rate of 12.05 %.

The rate prevailing before this auction was in the region of 9.85%.

Significantly, the Bank of Ceylon, also a primary dealer, made a bid for and on behalf of Perpetual Treasuries.

As public concern grew and the media interest reached new levels, Prime Minister Wickremesinghe decided the matter was worthy of his interest and intervention. However, the

Prime Minister was ambiguous. He said that he 'insisted' on a change of system and blamed it on corruption in the previous administration.

Speaker Chamal Rajapaksa invited D.E.W. Gunasekera to be Chairman of COPE in order to investigate the Bond auction on February 27.

On the day the D.E.W. Gunasekera report was to be tabled in parliament, fortuitously for those involved in the bond scam, parliament was dissolved.

With that, the inquiries into the bond scandal came to a halt.

A notable feature of the COPE report was that Arjuna Mahendran, under oath, stated that he had 'only followed the Prime Minister's instructions'.

Three months after parliamentary elections in August 2015, the Prime Minister Wickremesinghe appointed Sunil Handunnetti as Chairman COPE to restart the investigation on November 26, 2015.

The UNP members of COPE signed off the report by adding what has become known as "Footnotes" challenging some of the conclusions of the COPE report.

On January 27, 2017, responding to growing parliamentary and public sentiment, President Sirisena appointed a Presidential Commission of Inquiry to look into the issuance of bonds from February 2015 through to March 31

2016.

For over eleven months the nation looked on in disbelief as the scale of the bond scam was revealed during the Inquiry.

On December 30, 2017, the PCOI delivered the report to President who sent it to the Attorney General's Department.

In January, the report was delivered to the Speaker of the House.

Findings on key people in the report were:

1. Arjuna Mahendran acted mala fide and had shared sensitive information that had benefited Perpetual Treasuries.

2. His son-in-law Arjun Aloysius, part owner of Perpetual Treasuries, was alleged to have used his relationship with Mahendran to obtain inside information and make massive profits at the expense of government institutions.

3. Ravi Karunanayake faces allegations of bribery. He was moved out of the post of Finance Minister and was given the Foreign Affairs Ministry. He then resigned in August 2017, following revelations made during the inquiry.

4. Prime Minister Ranil Wickremesinghe was found to have been ill-advised by Mahendran and Dept Governor Samarasiri.

Two key recommendations were made by the PCOI:

1. A Forensic Audit of all the trades conducted by Perpetual Treasuries and other primary dealers involved in the bond auctions be carried out.

2. To Institute legal action against those accountable.

To this effect, a notice has been issued on Arjuna Mahendran. However, efforts to locate Mahendran in Singapore have failed. He continues to be out of the reach of Sri Lanka's law enforcement.