Action against Karunanayake must be instituted under Bribery and Corruption Laws
2018-01-04We publish below the entire speech made by President Maithripala Sirisena last evening on the Report of the Presidential Commission of Inquiry on Treasury Bonds.
First of all, I offer my best wishes for the New Year.
As the people of this country are waiting with bated breath, I wish to make a statement on the final Report of the Presidential Commission of Inquiry (PCoI) into the Issue of Treasury Bonds of the Central Bank of Sri Lanka, which was appointed by me taking into consideration the opinion of the people regarding allegations of corrupt practices and misdeeds during the period 2015 and 2016. The Report was handed over to me on December 30, 2017.
The Commission was mandated to inquire into the issuance of Treasury Bonds during the period 1 February 2015 to 31 March 2016 to find out the actual facts and to make recommendations as to the steps to be implemented in the future.
I thank the Supreme Court Judges and former Auditor-General who functioned as members of the Commission and its Secretary and staff, and those who assisted the work of the Commission, Attorney Generals Department, Police Department and other relevant organizations and individuals.
Forensic audit
The Commission is of the opinion that similar incidents as revealed in the Commission Report had happened even in 2008. The Commission recommends that the Central Bank of Sri Lanka should first conduct a forensic audit with regard to the alleged fraud and corrupt practices from 2008 onwards, and based on such findings, legal action should be taken.
The Commission states that funds of the Employment Provident Fund (EPF) were lost mostly during that period.
The Commission has submitted a full Report covering the period 2015 and 2016, comprising 1,257 pages and it is not an interim report. The Commission has taken 10 months for this task.
I have already submitted this Report to the Attorney-General and the Commission recommends that the criminal and civil Court action must be taken through the Criminal Investigations Department and the Commission to Investigate Allegations of Bribery or Corruption.
The Commission has clearly stated the structure of the Central Bank, Public Debt Department, direct issuance of Treasury Bonds and the pros and cons of the system of issuance of Bonds as well as Bond auctions. The Report stated that the Perpetual Treasuries Limited has earned profits through means that are not legal, with the involvement of Arjun Mahendran, Bank officials and some external parties.
In the auction held on 27 February 2015 alone, Perpetual Treasuries Limited has made a minimum profit of not less than
Rs 688 million. The Commission is of the opinion that further investigations could reveal that this amount could even be more than that. As revealed during the investigations, PTL has made an undue profit of Rs 11,145 million in the secondary market. In this, EPF and other government institutions had lost more than Rs 8,524 million or Rs 8.5 billion.
It is stated that senior officials of the Central Bank were inactive before the former Governor of Central Bank, Arjun Mahendran. The report states that, such false decisions have been made because these officers had become inactive.
Internal information
Mahendran has interfered into Treasury Bond auctions through incorrect and unconventional methods and he was responsible for providing internal information to outsiders. Such conduct has allowed one party to obtain undue monetary gains, the Report states. The Commission Report stated that the Prime Minister's responsibility in the appointment of Arjuna Mahendren as Governor to the Central Bank was proper. The Commission is of the opinion that the Prime Minister made his statement in Parliament regarding the appointment of Mahendran believing in the facts presented by Mahendran and Samarasiri, especially the promises made by Mahendran. The Report also says that the Prime Minister should not have done that. The Commission stated that, moreover, these facts were before the COPE committee and the Prime Minister had not stated this, as a result he had not taken action against Mahendran.
The Report refers to allegations against former Minister of Finance, Ravi Karunanayake, regarding the payment of rent for the 'Penthouse' apartment by Walt and Raw Company owned and controlled by the Aloysius family. Karunanayake was responsible for that and it is recommended that the Government should take necessary action against Ravi Karunanayake under Bribery and Corruption Laws and further legal action should be taken under the penal code for giving false evidence at the Commission.
The Commission mentions about the misuse of funds of the Employees Provident Fund and stated that a forensic audit examination should be conducted to find out the amount of losses of EPF. The report has stated that conduct of certain parties has led to the misappropriation of EPF funds. The people responsible for these frauds have been identified and the Commission recommends legal action against them.
The report recommends that legal action be taken against relevant persons and officials who are responsible for the fraud including Perpetual Treasuries Limited, Arjuna Aloysius and Kasun Palisena. It also recommends action to recover lost funds.
Accordingly, the Government is in consultation with the legal authorities.
Recommendations
*Considering the recommendations of the Commission, the government recommends adapting a new Monetary Law Act in order to avoid this kind of malpractices in the Central Bank in future. The existing legal provisions are old and need replacement.
*It is also recommended that the Registered Share Market Act must be replaced by a new legal act.
*Members of Monetary Board and Central Bank Governor must be appointed by the Constitutional Council in concurrence of the members. The regulations must be amended accordingly.
*The report recommends that there should be highest levels of supervision over the Public Debt Department. As auditing at the Central Bank has not been conducted in a proper manner, the Commission recommends that the Audit Department must be reorganized completely. A Legal Department must be established in the Central Bank and ensure that the Legal Department functions efficiently.
*As the Commission did not have the mandate to inquire into Treasury Bond issues from 2008 to 2015, the Commission had not done that. However, Commission recommends that there should be an investigation into that period too.
*The Commission recommends that the dealings with the Pan Asia Bank and the conduct of Chairman must be investigated into.
It also recommends that activities of the EPF must be looked into, and in order to bring the EPF into a proper order, steps must be taken to restructure the EPF.A code of conduct for the officials of the Central Bank must be introduced. The code of conduct for Primary Dealers must be revised and updated.
*The Commission has stated that the Attorney General and the Commission to investigate Bribery or Corruption must take the legal actions to implement the recommendations of the Commission.
*Under normal circumstances, recovery of money can be done through civil legal action. However, it is a time consuming method. As an alternative, the Commission recommends that a Parliamentary legislation could be passed and the money could be recovered in a speedy manner following a Parliamentary approval. We agree to that recommendation.
*The recommendation of the Commission is that all the expenditure occurred for the Commission must be recovered from the Perpetual Treasuries Limited.
*I have already submitted a copy of the Commission Report to the Attorney-General and he will identify the persons against whom the legal action must be taken and initiate necessary criminal or civil legal action to implement the recommendations of the Commission.
*I wish to clarify here, that a minor amendment to the Bribery or Corruption Commission Act must be enacted to take legal action on the recommendations of the Commission. For this purpose, experts at the legal draughtsman are already working on the required amendment.
*The steps needed to make the Commission to investigate allegations of Bribery or Corruption more active and efficient should have been done long time ago, and now we are taking required steps for that purpose.
The confidentiality, astuteness and auditing methods of the Central Bank of Sri Lanka were extremely weak. There are no tele-recording systems, electronic monitoring or even CCTVs. The current Governor of the Central Bank has already taken steps to remove weaknesses and rectify these errors.
Draft Bills must be speeded up
The Governor has informed that he has suspended some employees of the Central Bank after their malpractices were revealed in the investigations in the Commission and disciplinary action was being taken against those officers.
I expect the Governor to make a statement in the near future regarding the shortcomings in the Central Bank as revealed in the Commission Report.
I urge the Justice Ministry and the Attorney General to take early steps to draft the three Bills proposed by the Commission present them to Parliament, in order to make required changes at the Central Bank to ensure such corrupt practices, frauds and malpractices would not take place in the future.
I have informed my Secretary to hold monthly review meetings with heads of relevant departments and institutions to examine the progress in the implementation of the recommendations of the Commission to take legal steps against those individuals and take other required steps in an efficient and speedy manner.
I would like to specifically state here that I would not hesitate to take steps to recover the loss of Rs 11,145 million to the government and take legal action against the offenders and punish them.
The sum of Rs 8,529million of the total losses Rs 11,145 million was the funds of the Employees Provident Fund, Mahapola Scholarship Fund, National Savings Bank and Sri Lanka Insurance Corporation. The balance was from private institutions. Hence the loss to the public sector - EPF, Mahapola, NDB and SLIC was over Rs 8.5 billion. Perpetual Treasuries Limited has made this profit of Rs 11,145 million within a short period of five months.
Finally, especially I would like to mention that this final Report must be presented to Parliament and through this initiative the Report must be open to the public.
Legal steps
In the future, necessary as well as legal steps in this regard will be taken expeditiously according to the advice from the Attorney General. I kindly request to consider the openness of the facts of this Commission Report and I assure that there would be no hesitation in filing cases against offenders. Furthermore, I wish to state that this is the final Report of the Commission.
I have previously appointed a Commission and the Report of that Commission has been handed over to me. It is the final report of the Presidential Commission of Inquiry to investigate and inquire into Serious Acts of Fraud, Corruption and Abuse of Power, State Resources and Privileges (PRECIFAC).
This Commission carried out their respective duties during the past two and a half years. I extend my gratitude to the staff of the Commission and all the institutions including the Secretary and High Court judges for giving their support to this task. Already, 34 Reports of that Commission had been handed over to me and recently 17 Reports have been handed over and another 17 previously, the 17 Reports handed over previously have been submitted to the Attorney General to take necessary action through the relevant institutions.
By now, the Fraud and Corruption Commission, institutions, departments and Police have taken action to file cases based on the facts of these Reports. The Report was handed over to me two days ago. I will submit the Report to the Attorney General within this week to take appropriate action. I have to make special mention about taking action on this Report in the near future.
The Presidential Commission of Inquiry to investigate and inquire into Serious Acts of Fraud, Corruption and Abuse of Power, State Resources and Privileges has presented several major facts and it is the responsibility of the Government to implement facts presented at the Commission. I will explain to you regarding those facts for the information of the public. Training and appointment of suitable officials is also recommended as there is a lack of skilled well-trained officials to carry out investigations regarding fraud and corruption. This Commission emphasized that people without required qualifications had been appointed and only qualified persons should be appointed to essential positions including State institutions, Authorities and Constitutional Boards.
Public interest
The Commission revealed that the money spent by the Government for the establishment of this Commission has already been recovered through the cases initiated through the findings of this Commission. A system must be implemented to hearing the cases in the Courts in other areas as holding these cases only in Courts in Colombo is causing difficulties for those who travel from distances.
I must state a special thing, before I conclude the facts of these two reports, I saw a great eagerness and inquiring trend among the public regarding these Commissions. At the same time when the Commissions were appointed, especially before the appointment of the Bond Commission, some people commented, even in Parliament that nothing had happened to previous Commissions and the same fate would befall this Commission too. They also said the intention of the appointment of a Commission was to cover up the wrong doings.
But all of us must be pleased regarding the fulfillment of duties of these Commissions and once again I must thank the Judges and all those who contributed in this regard for their great service rendered while wining the confidence of the public.
Finally, I must state regarding the allegations levelled against me by some political parties for appointing these Commissions. I never appointed these commissions targeting any political party.
I must specially mention in future that when cases are filed in accordance with investigations and recommendations and information given by these Commissions, individuals belonging to the two main political parties will be among the respondents in the legal process. We must be happy with our independent and impartial Judiciary. I must state that all of us will provide our maximum support for this process.
