CBSL made huge payments to Strauss Kahn's tottering company

The disclosure of how the Central Bank of Sri Lanka (CBSL) remitted US$ 250,000 (or Rs. 32,586,525) to former International Monetary Fund (IMF) chief Dominique Strauss Kahn's company when it was going bankrupt has raised eyebrows in the corridors of power.

The remittance was made on September 10, 2014. It was then well known in financial circles that the Luxembourg-based firm was becoming insolvent. The remittance of more than Rs. 32 million, it has come to light, was made without the approval of the Cabinet of Ministers.

The financial services firm was headed by Strauss-Kahn and late financier Thierry Leyne. In November last year, just two months after the remittance had been made, the firm officially admitted that it had become insolvent.

A multitude of questions are now being raised. Among them: Why was the Central Bank that was monitoring financial markets, unaware it was paying a company that was collapsing financially? Were these payments part of a monthly remittance order? Who authorised it and for what purpose?

The insolvency of the company, decided upon by the Board of Directors, a statement said was after the discovery of "additional commitments within the group of which it was unaware and which aggravate the delicate financial situation." This announcement coincided with the tragic death of Mr. Leyne.

This is how The Wall Street Journal (WSJ) reported on the matter on November 4 last year: "...... Luxembourg regulators were at LSK's headquarters on Wednesday afternoon, according to a person who works at the firm.

In the statement, LSK's board said the new information 'called into question the future of the company, whose credit is irreparably compromised.' An LSK spokesman didn't respond to a request for further comment.

"Last week, The Wall Street Journal reported that Mr. Leyne had been in a dispute with Swiss investment firm Insch Capital Management SA, which alleged Mr. Leyne's company had made 'totally unauthoried' trades with its money.

In letters sent earlier this year to financial regulators in Luxembourg and Switzerland, Insch alleged that an LSK unit had used money in Insch's bank account to buy shares in a Swiss insurance company that was majority-owned by LSK, without Insch's knowledge.

"In emails reviewed by The Wall Street Journal, employees of LSK said Insch had instructed them to buy the shares.

"Insurer Bâloise Luxembourg, part of the Swiss insurance group Baloise Holding AG, also filed a complaint in the Luxembourg court against LSK over the failure to return a Euro two million portfolio that had been invested by an LSK unit, a spokesman said.

"Mr. Leyne was chief executive of LSK, which has been involved in businesses such as insurance and asset management. Mr. Strauss-Kahn -- who stepped down from the IMF in 2011 after he was arrested on sexual-assault charges in New York, which later were dropped -joined LSK just over a year ago as chairman, although he recently left his role.

"Earlier this year, the firm announced plans to launch a global macro hedge fund and to raise $2 billion, and Mr. Leyne and Mr. Strauss-Kahn had spent time meeting potential investors in China.

"A spokeswoman for Mr. Strauss-Kahn didn't respond to a request for comment."