MPCS bond scam: Relief for depositors

The Cabinet has approved the formation of a committee to suggest ways to settle payments to depositors of the East Hewagama Korale Multipurpose Cooperative Society Ltd (MPCS).

The depositors lost their savings when the MPCS's former board of directors used the funds to buy “Treasury bills” through a company named Entrust Limited which was not registered with the Central Bank of Sri Lanka (CBSL) and which issued fake certificates to the investors.

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Since 2015, Rs 507.59mn was invested on five occasions by the MPCS board, purportedly on Treasury bills “through a certain institution” introduced as a primary buying company registered with the CBSL, the summary Cabinet decision states. It does not name the institution.

“However, the said institution is not a primary buyer company approved by the Central Bank of Sri Lanka and the depositors have been subjected to a severe injustice due to the inability to recover the relevant money up to date,” it states.

The proposed committee is tasked with identifying the parties responsible for the “incident” and recommending actions to bring justice to the depositors. The money was never returned.

One of the directors of Entrust Ltd was Chanuka Ratwatte. He is among six people against whom a case has been filed at the Colombo High Court for carrying on a financial business named Entrust Ltd and accepting deposits without authority. The company’s chairman was Isira Dharmapriya Bandara.

The Entrust group’s licensed primary dealer, Entrust Securities, was also allegedly involved in bond frauds. Parliament was told last year that the Treasury bill certificates issued to the MPCS were fake. The MPCS had 24 branches with 115,068 depositors and had collected more than Rs 925mn in fixed and savings deposits. Around 71.45 percent of this was affected by the Entrust Ltd bond scam.

The MPCS then fell apart. Its board of directors was disbanded and since August 2018, it has been run by three Cooperative Development Officers. Complaints were lodged with both the Criminal Investigation Department and the Bribery Commission. The accused were remanded before being released on bail.