By Chandeepa Wettasinghe
The depositors of the failed Central Investment and Finance PLC (CIFL) yesterday alleged that the move by the Central Bank to close down CIFL and its group companies is to cover up the irregular and possibly illegal conduct of the Central Bank officials regulating these companies.
Nishantha Attanayake, a Director at City Finance Corporation Limited—a CIFL group subsidiary— told a press conference yesterday that the Central Bank officials want to cover up all the illegal activities of former CIFL Chairman Deepthi Perera and said if a forensic audit is conducted, a number of Central Bank officials will be in trouble.
Perera went into hiding in Cambodia for two years after it was alleged that he defrauded the CIFL depositors and mismanaged the company. He was arrested upon return to Sri Lanka and bailed out in 2015 and the legal proceedings are ongoing.
Former Additional Auditor General A.H.M.L. Ambanwala, who was also at the press conference, said that after looking through some of the accounts of CIFL he was presented with, he feels a comprehensive audit is required and that he would extend his expertise if required.
“From recent discussions, what became clear to me was that there was a weakness in the Central Bank’s regulatory and monitoring roles. Deposits are made in finance companies based on the fact that they are monitored and audited by the Central Bank. That duty has not been carried out,” he said.
CIFL Depositors’ Association President Wijeya Gunawardana added that the reputation of the Monetary Board of Sri Lanka, which governs the Central Bank, is now in question and the confidence placed in the Central Bank has now been shattered.
“We’re evaluating what to do, whether to take to the roads or to the courts. We will tell every Sri Lankan to take their money out of finance companies and put them in a state bank. We will create a situation where the entire financial industry will collapse,” Gunawardana said.
He also said from 2009-2013, persons with questionable reputation were appointed to the boards of the CIFL group companies, giving scant regard to fit and proper requirements for such posts, for which the Central Bank bears the responsibility of enforcing.
Gunawardana alleged that senior officials in the Central Bank and the judiciary had conspired to dismiss legal action taken by the depositors in the Court of Appeals against the Central Bank for not managing the situation since taking CIFL into its custody since 2013.
The Central Bank officials had also sabotaged the efforts to take up the issue at the Supreme Court, he alleged.
These allegations against the Central Bank come at a time when the top management of a controversial primary dealer has confessed at a Presidential Commission for conducting insider trading in collusion with the Central Bank officials at treasury bond auctions.
Most of the depositors at the CIFL group companies have not received their deposits back, while some have had their deposits converted to shares and many are not receiving their due interest.
While CIFL was in troubled waters, the then Central Bank Governor Ajith Nivard Cabraal in 2014 had visited Singapore with the Colombo Stock Exchange officials during a roadshow to attract investors to Sri Lanka and had attempted to woo Singaporean investors into Sri Lanka’s financial sector, which was undergoing consolidation forced upon by the government.
It was then that One Asia Investment Partners Pte Ltd (OAIP)—which is currently not allowed to manage funds in Singapore since the Monetary Authority of Singapore revoked OAIP’s Capital Markets Services Licence this April for ineffective management—decided to invest Rs.198 million in the CIFL subsidiary, City Finance, through a local subsidiary set up by OAIP.
However, with the change of government in January 2015, the current government decided to discontinue the policy of forcing the sector to consolidate and the Central Bank had then decided not to honour the agreement the Central Bank had signed with OAIP, which included the Central Bank investing equal amounts of capital that OAIP invested in City Finance, according to OAIP Local Representative Dakshitha Bogollagama.
Bogollagama has currently filed legal action against the Central Bank for not honouring the agreement and this legal action had resulted in City Finance’s licence not being revoked by the Central Bank at the same time as CIFL.
According to depositors and company officials, CIFL has received offers from German, Swiss and Australian investors to bail out the company and repay the depositors.
“But the Central Bank was not that keen to accept investors. They didn’t treat the investors properly,” Gunawardana said.
He added that these three investors are ready, even today, to invest in CIFL if the Central Bank is willing to reverse its decision to cancel CIFL’s licence.
However, the Central Bank, at the time of revoking CIFL’s licence, said that it has “extended the deadline given to a potential investor on several occasions to prove the availability of funds which has not been fulfilled as yet”.
The Central Bank, after considering the plight of small depositors in CIFL, had also offered to expand the Sri Lanka Deposit Insurance and Liquidity Support Scheme limit of Rs.300,000 to Rs.600,000 in order to ensure that 2,501 out of the 4,092 CIFL depositors would be repaid their deposit values.
Gunawardana however said that all depositors are of equal standing in the CIFL Depositors’ Association regardless of the money deposited and that the association expects justice to be given to all the depositors.