New Presidential Commission to probe old financial scams

A Presidential Commission of Inquiry with wider powers is to be appointed soon to inquire into irregular acts pertaining to Treasury bonds and other financial fraud in the pre-2015 era. This will be at the conclusion of an ongoing probe by a commission of inquiry into bond scams in 2015 and 2016 implicating both former Central Bank (CB) Governor Arjuna Mahendran and his son-in-law Arjun Aloysius, sources at the President’s Office said.

The new probe which would have more powers than the current bond commission would cover the period of the Rajapaksa regime and various ‘deals’ by the Employees Provident Fund (EPF) in investing in some loss-making companies in the Colombo stock market including The Finance Co which figured in a 2012 corrupt deal involving the National Savings Bank, among other matters.

While EPF investments in the stock market are not unusual and permitted as long as they are prudent investments and benefit stakeholders – private sector employees, eyebrows were raised by the fund investing in some low-rated firms with the controversial Arjun Aloysius and his company, Perpetual Treasuries figuring in those deals.

A senior official of the President’s office disclosed to the Business Times that preliminary arrangements are now underway to appoint this new commission to bring the perpetrators before the rule of law.

Many financial irregularities came to light in the country’s foreign reserve investments to purchase Greek Bonds valued at Euro 33 million in 2011 at a price of Euro 22.16 million.

He said according to provisional estimates, the country had lost over Rs. 2.1 billion from the deal. However former CB Governor Ajit Nivard Cabraal strenuously denied the allegations claiming that the CB’s decision to invest in Greek bonds was one of its reserve management strategies in 2011, and was successful.

According to Mr. Cabraal, it had yielded the highest-ever return of US$430 million on the reserves and he also stated that FR petition 457/2012 alleging that the Monetary Board and the CB were responsible for causing a huge loss by investing in Greek bonds, filed by a Minister of the present government was rejected by the Supreme Court. Corrupt practices in bond transactions carried out by the CB in the pre-2015 era under direct placement method have now come to light, and the new presidential commission will investigate it and CB officials responsible for such deals at that time will be called before the commission during its deliberations, he added.

Mr. Cabraal recently issued a statement saying he was willing to come before the ongoing bond commission to provide the exact estimated loss from the disputed bond transaction in 2015 and 2016. However the Commission had responded saying there was no reason to call him.

The senior official of the President’s office noted that alleged financial misappropriation in investing EPF money used to buy shares of a leading non government finance institution in the Malaysian EPF’s Khazanah National Berhard during the previous regime will also be probed by the new commission.

Furthermore allegations such as the Hyatt Hotel deal involving the EPF and Insurance Corporation, sale of around 40 tons of Sri Lanka’s gold reserves to Japan’s Suisse Securities, causing losses by investing CEB’s EPF money in bonds through a private company, payment of money by the CB for various matters not relating to the bank’s functions will also be investigated, the senior official said.

The commission will also inquire into artificial increase of financial, gas and hotel company shares and buying those shares at high prices using the EPF money (pump and dump).

Several businessmen who became billionaires during the Rajapaksa regime who misappropriated state finances will also be brought before the commission, he revealed.