President orders AG and other officials Act Now on Bond Commission Report Prime Minister’s ‘Value Judgment’ questioned

President Maithripala Sirisena yesterday directed the Attorney General, Jayantha Jayasuriya, the Governor of the Central Bank, Dr. Indrajit Coomaraswamy and DG Bribery Commission Sarath Jayamanne and other officials to immediately act on the recommendations of the Presidential Commission of Inquiry into the alleged Bonds scam.

The President’s meeting with the top law enforcement officials came as 26 copies of the report were sent to the Speaker of Parliament Karu Jayasuriya to be tabled before the House and copies distributed to individual Members of Parliament.
The Speaker also received copies of the report of the other Presidential Commission that examined seventeen cases of alleged major acts of corruption and fraud carried out during the regime of President Mahinda Rajapaksa. This report in Sinhala stretches almost to 10,000 pages.

The much-awaited Bonds Commission report was also uploaded on the website of the Presidential Secretariat and the site of the President’s Media Division.
The Executive Summary of the report faults a number of people for the alleged Bonds scam. It lays the blame squarely on the shoulders of the……former Governor of the Central Bank Arjuna Mahendran. It recommends that the losses suffered by the Government be recovered from Mahendran and his son-in-law and owner of Perpetual Treasuries Arjun Aloysius.
The report says, “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 27th February 2015 and the instructions he gave to both the PDD and the Tender Board that Bids to the 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.”

The report says that the “appointment of Mahendran not a ‘Question of Law’ instead ‘Value judgment’ which had to be made by those who considered the wisdom of appointing Mr. Mahendran, who was not a Citizen of Sri Lanka, as the Governor of the CBSL.”
The Commissioners said that they “consider that, the confidence which the Hon. PM states he placed in the assurances given to him by Mr. Mahendran, was misplaced. We are of the view that, the more prudent course of action would have been for the Hon. PM to have independently verified whether Mr. Mahendran was, in fact, honouring the assurances he gave the Hon. PM. We regret that, the Hon. PM did not take that course of action.”

The Commissioners also said that Sales of treasury bonds, during the period relevant to their Mandate, to the EPF and other Statutory Bodies and Government Institutions and aggregating to Rs. 8,529,964,495.61 have been made, by using inside information {Price sensitive information} and by ‘market manipulation’.

The Summary also faults three Deputy Governors of the Central Bank for negligence in allowing he alleged scam to go through. The Commission also pointed a finger at the Secretary to the Treasury Dr. R H S Samaratunga who over sees three State-run Banks for not keeping the Monetary Board apprised of these mega deals.

Meanwhile, the Executive Director of the Centre for Free and Fair Elections Rajith Keerthi Tennakoon asks whether “President Maithripala Sirisena still trusts Prime Minister Ranil Wickremesinghe.” A statement from CaFFE said “moreover the Prime Minister has shown that he relies, not on impartial inquiry and independent investigations when making decisions on important matters, but on verbal assurances given to him by his associates.”

The report states that “the question of whether or not the fact that, Mr. Mahendran was not a citizen of Sri Lanka precluded him from being appointed the governor of the CBSL was not a Question of Law. Instead, it was a value judgment, which had to be made by those who considered the wisdom of appointing Mr. Mahendran, who was not a citizen of Sri Lanka, as the Governor of CBSL.”
The Commissioners also recommended that former Finance Minister be referred to the Bribery Commission to investigate allegations that the rent to his luxury apartment had been paid by Aloysius.
Some of the key recommendations of the Commission are:
We recommend that, the CBSL investigates the operations of the Primary Dealer arm of Pan Asia Banking Corporation PLC;
Although there is evidence before us with regard to several Transactions entered into between Mr. Nimal Perera, former Chairman of PABC, and the EPF, which require scrutiny, these Transactions have not been established to fall within the scope of our Mandate. Therefore, we did not summon Mr. Nimal Perera to appear before us and, accordingly, we cannot arrive at a determination adverse to Mr. Nimal Perera in these Proceedings.
However, we recommend that, the CBSL carries out a specific and detailed investigation into the Treasury Bond Transactions which Mr. Nimal Perera and his Company and other Clients of PABC, had with the EPF;
As set out earlier in Chapter 19, we have determined that, the Government of Sri Lanka suffered an avoidable loss of
Rs 688,762,0100/- as a direct result of

Mr. Mahendran’s intervention in the Treasury Bond Auction held on 27 February, 2015 and the instructions he gave to both the PDD and the Tender Board that Bids to the value of Rs 10 billion must be accepted at the Auction and we have determined that,
Mr. Mahendran is liable and responsible for this loss.

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 Treasures Ltd, which Perpetual Treasures 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.
In this connection, we also recommend that, the Hon. Attorney General and other appropriate authorities consider whether, Perpetual Treasuries Ltd has used and gained and benefitted from ‘inside information’ (‘price sensitive information’) at the Treasury Bond Auction on 27 February, 2015 and, if so, whether Perpetual Treasuries Ltd should be prosecuted under the provisions of section 56A(1) of the Registered Stock and Securities Ordinance and in the event of a conviction being entered by a learned Magistrate after Summary Trial in such a Prosecution, recovering, from Perpetual Treasuries Ltd, a fine which is twice the value of the aforesaid sum of Rs 688,762,100 or such other amount as the Court may be pleased to determine.
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.

As set out in Chapter 19, we have determined that, Perpetual Treasuries Ltd obtained and used ‘inside information’ (‘Price sensitive information’) at the Treasury Bond Auction on 29 March, 2016 and gained and benefitted thereby.

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 of which Perpetual Treasuries Ltd gained and benefited from the ‘inside information’ (‘price sensitive information’) at the Treasury Bond Auction on 29 March, 2016.Here too, we recommend that, after 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 29 March, 2016 is estimated by means of a Forensic Audit or other similar process, the Hon. Attorney General or other appropriate authorities consider whether, Perpetual Treasuries Ltd should be prosecuted under the provisions of Section 56A(1) of the Registered Stock and Securities Ordinance and, in the event of a conviction being entered by a learned Magistrate after Summary Trial in such a Prosecution, recovering, from Perpetual Treasuries Ltd, a fine which is twice the value of the extent of the gain and benefit gained by Perpetual Treasuries Ltd or such other amount as the Court may be pleased to determine.

As set out in Chapter 23, we are of the view that, Perpetual Treasuries Ltd has made the major part of its Profits by using ‘inside information’ (‘price sensitive information’) and by ‘market manipulation’ in the Secondary Market and, thereby, knowingly violated and acted in breach of the provisions of the Code of Conduct for Primary Dealers, which has been issued by the CBSL under and in terms of the Regulations issued under the Registered Stock and Securities Ordinance No. 7 of 1937.
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.
As stated earlier in Chapter 22, we recommend that, the Hon. Attorney General or other appropriate authorities consider whether the material contained in the Report ‘C350’ (and related documents) establishes that, some of the evidence given by Mr. Mahendran and Mr. Palisena before us, is shown to have been incorrect and, if that is the case, whether there are grounds to prosecute Mr. Mahendran and Mr. Palisena 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. 17 of 1948;

As stated earlier in Chapter 24, 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;

As stated earlier in Chapter 29, we recommend that, the Hon. Attorney General and other appropriate authorities consider whether Perpetual Treasuries Ltd has, wrongfully and fraudulently, deleted Call Recordings for the purpose of concealing the true nature of the Transactions entered into by Perpetual Treasuries Ltd and attempted to suppress evidence with regard to wrongful acts of Perpetual Treasuries Ltd and, if so, whether prosecutions should be instituted against Perpetual Treasuries Ltd, Mr. Arjun Aloysius and Mr. Kasun Palisena for criminal offences under Chapter X and Chapter XI of the Penal Code, including Sections 175, 189, 193, 198 and 201 of the Penal Code read with Section 9 of the Commissions of Inquiry Act No. 17 of 1948. The appropriate authorities may also consider whether Mr. Nuwan Salgado and Mr. Sachith Devathanthri should be prosecuted in this regard;
We also recommend that the Hon. Attorney General and other appropriate authorities consider whether, Mr. Palisena’s statements in the Affidavit affirmed to by him, where he declares that complete Telephone Call Recordings have been submitted to the Commission of Inquiry by Perpetual Treasuries Ltd, were false and, if that is the case, whether Mr. Palisena 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 Commission of Inquiry Act No. 17 of 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.