Govt’s ‘Aloysius Special’ poured back to the bottle
Excise deal to help ‘bond scam’ Arjun revive his 19 billion debt-ridden liquor company reversed
Awhopping one for the road was offered on the house by the Excise Department two weeks ago to ‘bond scam’ first accused Arjun Aloysius to help the fallen financial magnate revive his ailing liquor firm W.M. Mendis & Company Ltd and get his arrack distillery back on the production line.
The deal done with the Excise Department was one whereby Arjun Aloysius agreed to pay back all the company’s excise tax arrears upon permission being granted to resume his distillery operations and sell the company’s famous ‘Mendis Special’ to its army of patrons.
Apart from the billion bucks owed in duties to the Excise Department, the company also owes the state billions more in unpaid taxes. As revealed in the Sunday Times of July 4, Inland Revenue investigators have unearthed massive tax defaults made by the now defunct liquor giant. The dossier on the taxes due from W.M. Mendis & Co. Ltd. reveals:
DEFAULTED: Unpaid excise duties of Rs. 1.1 billion to Excise Department
DEFAULTED: Unpaid corporate income tax of Rs. 2.63 billion
DEFAULTED: unpaid Value Added Tax amounting to 3.55 billion
Totaling Rs. 7.28 billion in unpaid taxes owed to the state.
Though the Excise had pressed for payment and the Inland Revenue had even filed action for recovery, Aloysius’ argument was that with his company’s licence suspended for tax default in 2018, he had no means of repayment since the source of the company’s revenues had dried up.
It was the typical Catch 22 situation. And the Aloysius answer based on the classic paradox ‘how can the company repay the debt until the company is allowed to operate and earn the means to repay the debt’ proved a clincher to seal the spurious argument in naïve Excise eyes. Seduced by the prospect of recouping defaulted tax billion to the beggared treasury coffers, the Excise took the bait and restored the suspended licence.
A senior Excise official told the Sunday Times, “The Company pointed out that it could not pay the taxes that it defaulted as all other avenues of revenue were shut. As such, an agreement was reached whereby it could resume operations on the condition that it makes scheduled payments due to the department.’’
‘’Under the agreement, he said, ‘’ the company owned by Central Bank bond scam suspect Arjun Aloysius has agreed to settle the tax arrears in instalments. The company must also pay scheduled taxes every 15 days. We see the agreement as the best option to recover outstanding tax revenue, the official stressed.’’
But in their haste to collect the chickens before they are hatched, had they forgotten to even do a cursory check on the pedigree and state of the Mother Hen and her continued ability to deliver broilers with a skulk of foxes prowling the coop?
A simple CRIB check would have revealed that W.M. Mendis &Co. Ltd. had not only failed to pay Rs.7.28 billion in government taxes but had also defaulted on loans obtained from state
SUNDAY PUNCH banks and other institutions. The company’s loan portfolio discloses:
DEFAULTED: Rs. 5 billion loan from the People’s Bank
DEFAULTED: Rs. 4 billion loan from the Bank of Ceylon
DEFAULTED: Rs. 800 million loan from the People’s Bank Leasing Company, and DEFAULTED: Rs. 2 billion owing to various institutions,
Totaling debts of Rs. 11.8 billion to state banks and others. Along with unpaid taxes of Rs 7.28 billion to the state, total gross liability of the company stands on July 1, 2021 at Rs. 19.08 billion.
W.M. Mendis & Co Ltd. was established over sixty years ago as a liquor manufacturing company with its distillery sited in Beruwela and a German built fully automated bottling plant at Welisara. It soon rose to become one of the biggest liquor companies in Lanka boasting a product range of 17 varieties of liquor. This mainly consisted of coconut arrack, old arracks, and blended arracks. It also produced Brandy, Dry Gin, Lemon Gin, Vodka, Rum, Red Velvet Coconut Whisky and Coffee Liqueur.
But its flagship tipple was the ‘Mendis Special,’ the first product manufactured by the Company in 1960 which the company boasted was distilled in a pot- still manufactured in France and matured for a minimum period of three years in casks and vats made of oak wood. The company blurb also claimed the ‘Mendis Special’ to be the finest arrack in the world.
Ten years ago in June, Arjun Aloysius acquired the controlling stake in the liquor firm for over Rs.1 billion, according to a report in the Daily FT published on June 13, 2011. The report had industry analysts hailing young Aloysius’s acquisition declaring that ‘given the new focus, dynamism and strategic inputs, more consumers are likely to say cheers with the Mendis brand.’ But, alas, as the 19 billion buck debt hangover now reveals, under Aloysius mismanagement, the company, with over fifty years of history behind it, was run to the ground, leading to its closure in 2018 for defaulting on its taxes.
Worse, the credentials of the new holder became irredeemably embroiled in the mire of financial scandal when, in 2016, Arjun Aloysius was named the prime suspect, along with his father in law, the then Governor of the Central
Bank, Arjuna Mahendren, in the Central Bank bond scam, dubbed the bank robbery of the century, which rang the death knell to the Yahapalana administration.
Presently Arjun Aloysius is on bail awaiting trial while his father-in-law, Singaporean citizen Mahendren whom both previous and present Governments had vowed to extradite to face justice in Lanka, lives it up in style and, from his Singaporean insulation, mockingly dares the Government ‘catch me if you can’.
It is amazing that the Excise Department, in its eagerness to reclaim its unpaid billion bucks, should have rushed to grant the Aloysius-owned company the suspended licence to resume production in the naïve belief that the company could sell its drink and pay its excise tabs and its past billion buck debt in installments and swagger on happily in business.
What spurred them without pause to dash headlong to reach this decision without considering as a whole the bankrupt fortunes of the defunct distillery, blinkered to the chorus of creditors lined up in the shadowy wings -- the Inland Revenue, State Banks and other institutions -waiting to knock on the distillery door, clamouring not for a Mendis Special but for its own owed tot of drink from its empty barrel?
Was the short-sighted kiss of life given with love from the nation’s Excise to a comatose company, weighed down by its staggering debt of Rs. 19 billion, pragmatically sufficient for it to raise its head above the water mark and raise its revenues and profits to repay the total sums owed, especially in a market where its ‘Mendis Special’ has to compete with other giant liquor brands? Not to mention, the legal liquor industry’s own shrinking share, due to exorbitant excise levies, in the face of the rising trade in cheaper hooch?
And to cap it all, isn’t it unbelievable the Excise Department should have failed to take cognizance of the political aspect involved in offering a welcome lease of life to a liquor company owned by a publicly disgraced financial speculator whose proven track record consists of being legally charged in court as being the mastermind of the Central Bank’s multibillion buck bond swindle?
Furthermore, W. M. Mendis & Co, of which Aloysius is the chairman, owes the Inland Revenue Department Rs. 2.63 billion in unpaid taxes but even after three years the tax man hasn’t deemed it fit to lift the corporate veil and bring its chairman and its largest shareholder, Arjun Aloysius, to personally account for the default, being content to merely file civil suit for recovery from the company.
Lesser mortals have been jailed for evading payment of taxes to the Inland Revenue Department for lesser amounts but by some mysterious force that apparently guides the affairs of both men and mice, bond scam Aloysius, the chairman of W. M. Mendis & Co, seems to have been granted special dispensation from prosecution and jail for evading taxes and allowed to walk free. Instead, he has been rewarded with the bespoke providential blessing of being thrown the life line with the grant of the indispensable excise licence to rescue his drowning distillery, when hopes of reviving the comatose dead has all but fled.
So who was holding the political dynamite that nearly blew up in the government’s face? Was it the Excise Commissioner who has so far remained silent as to whom the dubious credit should go? Or should the tipplers’ toast be raised higher to those in upper echelons of ministerial power?
All that trickled from the Excise Department on Friday, July 2, was its spokesman Kapila Kumarasinghe telling the media: ‘Permission was granted to recommence operations under strict conditions.’ But not a hum as to who gave the permission.
As matters turned out, however, sober counsel prevailed, and recovery from the binge was swift. Three days later on Monday, July 5, the Cabinet revoked Friday’s decision to grant Aloysius his licence.
Co- Cabinet Spokesman Minister Ramesh Pathirana announcing the Cabinet cancellation, said the Cabinet had decided to suspend the licence of WM Mendis Company to prevent funds earned through undue means to find their way into the state coffers. He said that businessman, Aloysius, was responsible for a massive financial scam, and the ministers had pointed out that money earned through fraudulent means would be used by Aloysius to pay his dues.
‘The Cabinet of Ministers, Pathirana said, ‘were of the opinion that Aloysius should not be permitted to use such funds to legitimize his other businesses and then to continue to earn through them. The licence had been suspended not as a proposal to the Cabinet but as a result of instructions issued by the Cabinet to the Finance Ministry,
The following day SJB’s Marikkar told Parliament ‘’He should have been behind bars for the Treasury bond scams but instead the government tried to give his licence back,” Marikkar’s observation, probably, summed up the entire fiasco in a nutshell.
Alas, for Arjun Aloysius. The stink of infamy refuses to depart even with a providential pardon but sticks steadfast to one’s mortal vestment that it precedes one’s arrival to deny the sought Golden Fleece at the critical hour.
And, after having uncorked his vintage bubbly during his celebratory weekend at the prospect of seeing his distant star emit a flicker of revival hope, how dashed his hopes must have been when he realised, as many who have had one too many for the road have long since fathomed: There is many a slip between the drink and the lip.
And to cap it all, isn’t it unbelievable the Excise Department should have failed to take cognizance of the political aspect involved in offering a welcome lease of life to a liquor company owned by a publicly disgraced financial speculator whose proven track record consists of being legally charged in court as being the mastermind of the Central Bank’s multibillion buck bond swindle?