Treasury Bond issue: Former CB Governor Cabraal gave top appointments in banks to his relatives

It was revealed yesterday before the Treasury Bond Commission that former Governor of the Central Bank Ajith Nivard Cabraal, while holding office, had several of his close relatives appointed to top posts in banks coming under the purview of the Central Bank.

This information transpired after a member of the Monetary Board Nihal Fonseka, who also happened to be a first cousin of Cabraal testified before the Commission and from whom expert opinions were sought with regard to several matters under the Commission’s probe.

Accordingly, Cabraal’s first cousin, brother-in-law, sister-in-law and his brother-in-law’s daughter were holding directorial positions in banks which came under the Central Bank’s supervision.

President’s Counsel Romesh de Silva cross examined the witness with regards to the conflict of interest that arose following the said appointments. De Silva ‘s client, former Governor of the Central Bank Arjun Mahendran, was extensively questioned at the Commission with regard to the conflict of interest between him and his son-in-law Arjun Aloysius who owned a Primary Dealer company, when Mahendran was the Governor of the Central Bank. Mahendran’s stance on the matter was that he did not discuss official matters with his son in law in his official capacity. Allegations were leveled against Mahendran that he gave insider information to his son-in-law.Counsel was in agreement with Fonseka’s opinion that there was no conflict of interest with regards to these appointments.

RS: Mr. Fonseka you are closely related to Mr. Nivaard Cabraal?

NF: Yes, he is my first cousin. His mother and my mother are sisters.

RS: Mr. Nivard Cabraal was the Governor of the Central Bank at the same time you were the CEO of the DFCC, which comes under the supervision of the Central Bank. And, the DFCC itself was a Primary Dealer.

NF: DFCC itself was not a primary Dealer. They dealt with government securities in the market.

RS: Was there anything wrong in your view for you to be… (De silva PC rephrases the question) I am suggesting to you that there is nothing wrong that you were the CEO of the DFCC while your first cousin Nivard Cabraal was the Governor of the Central Bank. I would say there was nothing wrong at all.

NF: Nothing wrong.

RS: No conflict of interest at all?

NF: In that kind of a relationship, no conflict of interest at all.

RS: Now Mr. Nivard Cabraal has also given evidence before the COPE that his brother-in-law Ravi Thambiah was a Director of the DFCC.

NF: Yes, he was.

RS: At this point of time, Mr. Cabraal was the Governor of the Central Bank.

NF: Yes.

RS: Ravi Thambiah is married to Cabraal’s sister as well. Now Mr. Thambiah’s appointment must have gone through the Monetary Board. I am suggesting to you that there was nothing wrong with Mr. Thambiah being a appointed as a Director of the DFCC while Cabraal was the Governor of the Central Bank?

NF: No. There is nothing wrong in it.

RS: I also agree that you are right. Then when Mr. Thambiah left, his daughter became a Director of the DFCC. And her appointment also was sent to the Central Bank for approval and Mr. Cabraal was the Governor. I am suggesting to you that there is nothing wrong with the appointment.

NF: In my view no.

RS: Even I agree with you. So there was no conflict of interest?

NF: No.

RS: Mr. Cabraal has stated that his brother- in- law Mr. Sunil Wijesinghe was the Chairman of the NDB. The NDB comes under the Central Bank supervision. I suggest that Wijesinghe being the Chairman of the NDB is nothing wrong.

NF: No, I don’t see anything wrong in there.

RS: Mr. Cabraal has also said that Ms. Dhara Wijethilake was a Director of the Sampath Bank.

NF: I am not aware of that. I will take it as correct.

RS: Dhara Wijethilake is the sister- in- law of Cabraal. Cabraal is married to Dhara Wijetilake’s sister. So I suggest there is nothing wrong in being a Director of a bank coming under the supervision of the Central Bank where Cabraal was the Governor.

NF: No, nothing wrong.

RS:Â You were also the Chairman of the Acuity partners. Subsidiary of the Acuity Partners is a Primary Dealer. Being the Chairman of a Primary Dealer while Cabraal was the Governor, I would suggest there was nothing wrong regarding the arrangement.

NF: Well, he is my first cousin. But by that time, my close association with Cabraal was not there. We had sort of grown apart professionally. I also want to qualify my answer saying that I was a non-executive Chairman of Acuity Partners. I was not involved in their day to day activities.

RS: Yes, but you were its Chairman.

Meanwhile, De Silva then questioned Fonseka on another possible conflict of interest with regards to Monetary Board member Krishantha Perera. According to De Silva Krishantha Perera was the Chairman of the Ceylon Tea Broker, which is an associated member of the Capital Alliance. De Silva observed that Capital Alliance is a primary dealer. “So, Krishantha Perera being the Chairman of Ceylon Tea Broker and being a member of the Monetary Board, I suggest to you that there is nothing wrong in it.” De Silva PC asked. Fonseka said he is unable to give an opinion without knowing the dynamics of the two companies. However, he said assuming if such a relationship is there between the two companies, Fonseka observed that Krishantha Perera’s position as a Chairman and being a member of the Monetary Board, is not a conflict of interest.

Previously at the Commission ,when a similar case was brought forward with regards to Mahendran’s conflict of interest in comparation to Cabraal’s sister being a Director of the Perpetual Capital Holdings, Commissioner Justice P.S. Jayawardena observed that “two wrongs in any way don’t make a right”.