Presidential Commission of Inquiry into CBSL Treasury Bonds issue Ravi Karunanayake’s miss and Arjun Aloysius’ refusal

After what transpired at the Presidential Commission of Inquiry, probing the controversial Treasury Bond auction of the Central Bank, this past week, we believe that former Minister Ravi Karunanayake might just be overwhelmed by the idea that he could have pulled off an ‘Arjun Aloysius’ when he was summoned to give evidence, and had refused to do so. That way, it might have been possible for him to retain his, now lost, ministerial portfolio as well. Oh well, what’s gone is gone now, Mr. Karunanayake.

Humble jests aside, this past week was a rather eventful one at the Commission front. Arjun Aloysius, the owner of Perpetual Treasuries Ltd. made a brief statement following a rather unexpected order by the Commission. Later, PTL CEO Kasun Palisena revealed that Aloysius had given false information to the Parliamentary Committee on Public Enterprises (COPE) as well.
Competent Witness,

Compellable Witness

Aloysius’ new Counsel Gamini Marapana, PC started the week with a bang by filing an objection before the Commission, claiming that his client cannot be compelled to give evidence implicating himself. Marapana argued that an accused cannot be compelled to give evidence. The objection was the result of Aloysius being interviewed by the Commission officers and investigators for five days continuously.

Accordingly, on Wednesday (13), the Commission filed the ruling that Aloysius cannot be compelled to give evidence, as his Counsel had claimed, but the Commission requires his explanation on several matters wherein his name has surfaced. Justice K.T. Chitrasiri, Chairperson of the Commission, reading out the nine-page order before the Commission, noted “while Mr. Aloysius is a competent witness, he is not, in our view, a compellable witness if he states that he is unwilling or refuses to give evidence for the reasons referred to by President’s Counsel Marapana.”

The Commission, citing various precedents and established laws, also stated that Aloysius’ evidence as a witness who possessed knowledge on certain matters was crucial to the its mandate.

Based on the evidence before it so far, the Commission mentioned, in the order, that it requires Aloysius to give evidence with regard to matters as to:

(i) The reasons for Perpetual Treasuries (Pvt) Ltd. bidding for large amounts of Treasury Bonds at some Auctions;

(ii) transactions on the Secondary Market of Treasury Bonds which Perpetual Treasuries (Pvt) Ltd. obtained by successful bids at Auctions of Treasury Bonds;

(iii) the dealings and relationship which existed between officers of Perpetual Treasuries (Pvt) Ltd. and some officers of the Central Bank of Sri Lanka;

(iv) the dealings and relationship which existed between officers of Perpetual Treasuries (Pvt) Ltd and some officers of the Employees Provident Fund, Pan Asia Banking Corporation PLC and some other Primary Dealers;

(v) whether Perpetual Treasuries (Pvt) Ltd. was in possession of information relevant to Auctions of Treasury Bonds which was not available to other Primary Dealers; and

(vi)the profits and/or capital gains received by Perpetual Treasuries (Pvt) Ltd as the result of the aforesaid transactions on Treasury Bonds and the disposal of these profits and/or capital gains by way of dividends, fund transfers and transfers of profits (if any) and investments.

In addition, the evidence that is now before the PCoI, by way of the testimony of witnesses, documents and several audio recordings, has made it desirable that the Commission of Inquiry requires Aloysius to give evidence with regard to several matters which are directly within his personal knowledge, including, inter alia:

(i) the ownership, control and structure of the group of Companies of which Perpetual Treasuries (Pvt) Ltd is a member;

(ii) the role played by Aloysius in applying for and obtaining a Primary Dealer’s Licence from the Central Bank of Sri Lanka;

(iii) the role played by Aloysius in preparing the Business Plan of Perpetual Treasuries (Pvt) Ltd which was submitted to the Central Bank of Sri Lanka at the time Perpetual Treasuries (Pvt) Ltd applied for a Primary Dealer’s Licence and the subsequent Business Models followed by Perpetual Treasuries (Pvt) Ltd;

(iv) the role played by Aloysius in the day-to-day operations of Perpetual Treasuries (Pvt) Ltd while he was the Chief Executive of that Company;

(v) the reasons for Aloysius resigning from the post of Chief Executive of Perpetual Treasuries (Pvt) Ltd;

(vi) the role played by Aloysius in the day-to-day operations of Perpetual Treasuries (Pvt) Ltd after he resigned from the post of Chief Executive of that Company;

(vii) the profits and/or capital gains received by Perpetual Treasuries (Pvt) Ltd and the disposal of these profits and/or capital gains by way of dividends, fund transfers and transfers of profits (if any) and investments;

(viii) the audio recordings of telephone conversations which are said to have taken place between Aloysius and Kasun Palisena with regard to Auctions of Treasury Bonds held in March 2016 and the matters discussed therein including the information which Mr. Aloysius is said to have claimed, he possessed with regard to those Auctions;

(ix) the role played by Aloysius with regard to the Fine imposed by the Central Bank of Sri Lanka on Perpetual Treasuries (Pvt) Ltd in April 2016 after the aforesaid Auctions;

(x) the nature of the relationship between Aloysius and some officers of the Central Bank of Sri Lanka;

(xi) the nature of the relationship between Aloysius and Arjuna Mahendran, the previous Governor of the Central Bank of Sri Lanka;

(xii) the nature of the relationship between Aloysius and some officers of the Employees Provident Fund including Saman Kumara and Navin Anuradha;

(xiii) the nature of the relationship between Aloysius and Nimal Perera, the previous Chairman of Pan Asia Banking Corporation PLC and the resulting transactions on Treasury Bonds entered into by Pan Asia Banking Corporation;

(xiv) the reasons for Aloysius telephoning Richie Dias of Pan Asia Banking Corporation PLC during the period when Dias was furnishing his statement to the Commission of Inquiry; and

(xv) the reasons for Aloysius leasing an apartment which was occupied by Ravi Karunanayake and family.

At this point, Chairman of the Commission Justice K. T. Chitrasiri and Commissioner Justice Prasanna Jayawardane reminded Counsel Marapana and his client, to go through the content of the order and let the Commission know precisely whether Aloysius was willing or not to give evidence before the Commission.

Accordingly on the following day, Thursday (14), Aloysius made a brief statement before the Commissioners, saying that he does not wish to give evidence before the Commission.

The much anticipated moment of Aloysius’ testimony was cut short for many, when he made the statement before the Commission. Aloysius, on the directions of the Commission and his Counsel, made the statement without climbing into the witness box.

Commissioner, Supreme Court Justice Prasanna Jayawardena inquired from both Aloysius and Marapana whether they had reached this decision after careful perusal of the Commission’s decision, to which they responded in the affirmative.

Acting Solicitor General Dappula de Livera, PC responding to the Commission’s decision to accept Aloysius’ decision on behalf of the Attorney General, asserted that the order is ‘perverse and wrong’. He added that he will consult the Attorney General on the future course of action.

Kasun Palisena‘s Debacle

Later that day Palisena was cross-examined extensively in order to gather information on Arjun Aloysius’ ‘powerful friends’ who allegedly passed sensitive information on Treasury Bond auctions.
Deputy Solicitor General Milinda Gunatilleke, from the Attorney General’s Department, led the witness in evidence, where he was questioned with regard to the phone call recordings that were put before the Commission.

Examining the phone call between Palisena and Aloysius on 29 March 2016, which indicated Aloysius communicating price sensitive information and cut off marks of the bond auction, provided to him by several individuals, who he claims were ‘powerful friends’, Gunatilleke asked Palisena whether he was aware who these sources were. Although Palisena initially claimed ignorance on the matters he later conceded that the information provided by Aloysius was accurate.

He however, maintained that he did not know the sources from whom the information was sourced. He continuously claimed, “that’s how Aloysius talks”.

He expressed doubt that Aloysius had had inside information, considering he could not possibly have had access to that information via private sector primary dealers.

During this crucial cross-examination, Palisena inadvertently revealed that Aloysius had provided this information to him while a bond auction was taking place.

He later affirmed that such instances, where Aloysius had given him information on auctions, which he had failed to question and later followed as advice to bid, had had taken place in the past as well. Gunatilleke also made a passing comment to Palisena asking whether he was aware of the fact that Aloysius has now refused to testify before the Commission, leaving Palisena to ‘carry the can’, to which he responded claiming that he believes it was Aloysius’ decision arrived after legal advice
Again on Friday (15), the ball started turning towards Aloysius. Palisena, under relentless questioning, told the Commission that Aloysius had lied to the Committee on Public Enterprises (COPE)

In his cross-examination of the witness, Deputy Solicitor General Gunatilleke referred to a resignation letter said to have been written by Aloysius, in which he cites a potential conflict of interest due to the nature of his relationship with former Central Bank Governor Arjuna Mahendran. In the letter, a portion of which was read out by Palisena, Aloysius clearly accepts that he should not be operationally involved in the running of the company, in the interest of maintaining good governance.

DSG Gunatilleke asserted that this claim was false, as audio recordings of phone conversations, where Aloysius is heard instructing Palisena on how to bid, indicate that he was very much involved in running PTL.

Palisena, however, insisted that Aloysius was not involved in everything but only in “certain events,” but Gunatilleke maintained that the Aloysius had had the final say on virtually every aspect of the company.

Commissioner Justice Jayawardena intervened, at this point, to ask Palisena if what Aloysius had said to COPE about not being operationally involved was factually correct or not, to which Palisena simply said “he was involved.”

“So in other words, he lied. Did he lie or not?” asked Justice Jayawardena.

“He has,” Palisena finally said.

Audio recordings of telephone conversations between several parties, including one call between Palisena and a close friend of his, from a leading development bank, recorded in December 2015, were played before the Commission, after which the question of PTL Chief Dealer Nuwan Salgado’s earlier statement that he had been instructed by Palisena to delete recordings harmful to the organization came up.

Justice Jayawardena, referring to an affidavit submitted by Salgado claiming that he had received such instructions, asked Palisena if Salgado had lied in that statement.

“Yes. I do not agree with [that statement],” said Palisena.

Asked if he could think of a reason as to why Salgado might want to lie about something like that, Palisena claimed he could not, and added that the two were still close friends.

DSG Gunatilleke, meanwhile, observed that PTL had provided the Commission some 240,000 audio recordings that were not labelled in an easily identifiable manner, but had somehow been able to provide Central Bank of Sri Lanka officials a specific recording “within minutes” during an onsite visit. He submitted that Palisena had kept a “close track” on voice recordings

In the December 2015 call, Palisena and the dealer f