ADDITIONAL FUND REQUIREMENT FOR ROAD PROJECTS WAS FALSE: PCOI

Mahendran’s claim that it was necessary to accept Rs.10 bn to meet additional Govt. fund requirements has been demonstrated to be false The ‘Pitipana Committee’, did not possess technical knowledge or practical knowledge in the considerably complex arena

We have held that, no decision was taken at the ‘Breakfast Meeting” held on 26 February 2015, to raise money for Road Projects at the Auction of Treasury Bonds held on 27 February 2015 and that, Mr. Mahendran’s claim made to the PDD and Tender Board that, it was necessary to accept Rs. 10 Billion to meet additional Government fund requirements, has been demonstrated to be false

he Presidential Commission of Inquiry report on the Treasury Bond scam released to the public yesterday recommended legal action against former Central Bank Governor Arjuna Mahendran, his son-in-law and Perpetual Treasuries Limited owner Arjun Aloysius, PTL CEO Kasun Palisena and Perpetual Treasuries Limited. BOND COMMISSION REPORT OUT

The report published in the Presidential Secretariat website also recommended that the Bribery Commission and the Attorney General should consider legal action against former Minister Ravi Karunanayake on matters connected to the lease of an apartment and on giving ‘incorrect’ evidence before the Commission.

“We have held that, no decision was taken at the ‘Breakfast Meeting” held on 26 February 2015, to raise money for Road Projects at the Auction of Treasury Bonds held on 27 February 2015 and that, Mr. Mahendran’s claim made to the PDD and Tender Board that, it was necessary to accept Rs. 10 Billion to meet additional Government fund requirements, has been demonstrated to be false,” the report said.

“We have determined that, the Government of Sri Lanka suffered an avoidable loss of Rs. 688,762,100/as a direct result of Mr. Mahendran’s intervention in the Treasury Bond Auction held on February 2015 and the instructions he gave to both the PDD and the Tender Board that Bids to be value of Rs. 10.058 billion must be accepted at the Auction and we have determined that, Mr. Mahendran is liable and responsible for this loss. Accordingly, we recommend that, appropriate proceedings are instituted against Mr. Mahendran to recover this loss.,” the report said.

“While we do not, for even a moment, presume to make any pronouncement on events that transpired in Parliament, we consider that, Hon. Prime Minister would have been better advised, if he had independently verified what had happened at the CBSL on 27 February 2015, before making any statement, placing reliance on what was held out to him by Mr. Mahendran and Deputy Governor Samarasiri,” the report said.

“We are of the view that, the three person “Pitipana Committee,” (Comprising of three senior and reputed Attorneys-at-law) which was appointed by the Hon. Prime Minister to inquire into and report on this Auction, did not possess technical knowledge or practical knowledge in the considerably complex arena of Government Securities and Public Debt although, we see that, the Hon. Prime Minister has sought to supplement that lack of expertise by ensuring that, the members of the “Pitipana Committee” had the assistance of Dr. W.A. Wijewardena ( Former Deputy Governor of the CBSL) with regard to the technical aspects of the matter being inquired into, we consider that, a more effective Inquiry could have been done if the Pitipana Committee” also had members who had knowledge and experience in the technical and practical aspects of the matter being inquired into,” the report said.

Some basic and relevant extracts from the recommendations of the report follows:

As set out earlier in Chapter 19, we have also determined that, Mr. Mahendran directed that Bids to the value of Rs. 10.058 billion be accepted for the improper, wrongful and mala fide collateral purpose of enabling Perpetual Treasuries Ltd to obtain a high value of Treasury Bonds at that Auction, at low Bid Prices and high Yield Rates and that, Mr. Mahendran provided “inside information” [price sensitive information”] to Perpetual Treasuries Ltd, which Perpetual Treasuries Ltd used to its benefit at the Treasury Bonds Auction held on 27 February 2015 and that, Mr. Mahendran acted in collusion with Perpetual Treasuries Ltd.

Therefore, we recommend that, appropriate proceedings are also instituted against Perpetual Treasuries Ltd for the recovery of this los Rs. 688,762,100/-. In this connection, we consider that, the provisions of Section 21D (5) of the Registered Stocks and Securities Ordinance are likely to be relevant.

Further, we recommend that, the Hon. Attorney General and other appropriate authorities consider whether Mr. Arjun Aloysius and Mr. Kasun Palisena are parties to and directly responsible for the commission of an offence under section 56A(1) of the Registered Stock and Securities Ordinance and, if so, proceed against these two persons too, in terms of Section 56B of the Registered Stock and Securities Ordinance;

We further recommend that, in view of the determinations referred to above, the Commission to Investigate Allegations of Bribery or Corruption and the other appropriate authorities consider whether the aforesaid acts of Mr. Mahendran amount to acts of “Corruption” as defined in Section 70 of the Bribery Act and, if so, prosecute Mr. Mahendran under the Bribery Act and other applicable Law.

We have also stated that, given the complexity of the task and the expertise needed, a Forensic Audit or similar process should be carried out to accurately estimate the quantum of the sum to which Perpetual Treasuries Ltd gained and benefited from the “inside information” [price sensitive information”] at the Treasury Bond Auction on 2911 March 2016.

We recommend that, the Hon. Attorney General and other appropriate authorities examine whether prosecutions should be instituted, under the Penal Code or other relevant provision of the Law, against Mr. Mahendran, Mr. Arjun Aloysius, Mr. Palisena and relevant officers of the CBSL and the EPF on the basis of the facts and circumstances established by the evidence placed

before this Commission of Inquiry. We recommend that, the Commission to Investigate Allegations of Bribery or Corruption should consider whether Hon. Ravi Karunanayake, MP, while he was Minister of Finance, derived a substantial benefit from the Lease Payments made by Walt and Row Associates (Pvt) Ltd [which is an Associate Company of Perpetual Treasuries Ltd and which is owned and controlled by the same persons who own and control Perpetual Treasuries Ltd] for the lease of apartment occupied by Hon. Ravi Karunanayake, MP and his family and, if so, determine whether appropriate action should be taken against Hon. Ravi Karunanayake, MP, under the Bribery Act;

We also recommend that, the Hon. Attorney General and other appropriate authorities consider whether some of the evidence given by Hon. Ravi Karunanayake, MP before us is shown to have been incorrect and, if that is the case. whether Mr. Karunanayake should be prosecuted under Section 179 and/or Section 188 of the Penal Code or other relevant provision of the Law, read with Section 9 of the Commissions of Inquiry Act No. l7of 1948;

We recommend that, pending the consideration of institution of the aforesaid Proceedings, the Assets of Perpetual Treasuries Ltd and its beneficial owners namely, Mr. Arjun Aloysius and Mr. Geoffrey Aloysius - and the persons who were in day-to-day control of Perpetual Treasuries Ltd - namely Mr. Arjun Aloysius and Mr. Kasun Palisena - including all monies lying to the credit of Perpetual Treasuries Ltd’s Accounts with the CBSL and other Banks, the aforesaid Shares in National Development Bank PLC and the Dividends aggregating to Rs. 641.556 million paid by Perpetual Treasuries Ltd to its beneficial owners, should be held or placed ‘under lien”, so that such Assets cannot be disposed of in the meantime.

We also recommend that, consideration is given to recovering the Costs of this Commission of Inquiry, from Perpetual Treasuries Ltd.

While we have recommended that, consideration is given to instituting appropriate Proceedings in Court for the recovery of the aforesaid monies from Mr. Mahendran, Perpetual Treasuries Ltd and its beneficial owners - namely, Mr. Arjun Aloysius and Mr. Geoffrey Aloysius and also Mr. Kasun Palisena [in the manner and for the sums referred to earlier], we would also think that, in view of the extreme gravity of the facts and circumstances which formed the subject matter of our Mandate and the very substantial prejudice caused by these facts and circumstances to our economy and our Nation, Parliament may wish to carefully consider whether it is appropriate and necessary to take steps to recover the aforesaid monies, by exercising its legislative powers.