Alleged Rs. 4 bil. financial fraud revealed in the dealings between Chinese Contractor and FormerIrrigation and Water Management Ministry Secretary regarding the Gin-Nilwala Diversion Project
Astonishing revelations show how the former Secretary to the Ministry of Irrigation and Water Management, during the previous regime, had released a mobilization advance to the tune of Rs. 4012 million to the Chinese Contractor of the Gin-Nilwala Diversion Project within 43 days. This secretary is now facing imminent arrest.
The Dailymirror investigations unearthed that these payments had been made sans proper approval.
In such a backdrop, questions have been raised as to who has instructed the Ministry Secretary to release public funds to the project contractor, who was selected bypassing Government procurement regulations.
The Colombo Fort Magistrate on Monday issued an arrest warrant against Engineer K.W. Ivan de Silva for his alleged involvement in the misappropriation of tax payers’ money. It is speculated that De Silva released these monies to the Chinese firm, CAMC Engineering Co. Lt, in three installments. These payments had been made a few days prior to Mahinda Rajapakse’s defeat at the Presidential Elections.
According to the ‘B’ report submitted to the Colombo Magistrate Court by the Financial Crimes Investigation Division (FCID) on November 28, 2016, the first installment worth Rs.1000 million had been paid by the Ministry Chief Accounting Officer Ivan de Silva to the Chinese Company on November 24, 2014 while another Rs.2009 million had been released on January 1, 2015 followed by another payment to the tune of Rs.1003 million on January 6, 2015. The FCID is conducting further investigations under Section 386 of the Penal Code, No: 12 of 1982 of the Public Property Act under the Money Laundering Act No: 6 of 2005.
Plans are afoot to summon De Silva, who is domiciled in New Zealand, at the earliest, FCID sources said.
The Gin-Nilwala Diversion Project contract was signed on November 5, 2014 and 5% of the agreed fee was advanced as a mobilization payment soon after the agreement was signed between K.W. Ivan de Silva, of the Irrigation and Water Management Ministry, and Luo Yan, Chairman CAMC Engineering Company.
Although Rs. 4012 million had been paid to CAMC Engineering Co. Ltd, the contractors have failed to implement any ground work to date. “During the present Government’s 100 day programme the then newly appointed Irrigation and Water Management Ministry Secretary Gamini Rajakaruna, by letter dated June 22, 2015, wrote to CAMC Engineering Company requesting it to refund the advance made as mobilization payment until the temporary suspended project is re-commenced.
Rajakaruna’s letter further stated as thus, ‘The agreement has been signed between your company and the Ministry of Irrigation and Water Resources Management and an advance payment (part of the total agreed mobilization advance) also has been paid. This project will be implemented under the newly formed Ministry of Irrigation hereafter as the employer.
‘According to the agreement (Clause 5 of the main agreement) the contract shall come into effect when the employer confirms the date on which the conditions stipulated for the contract comes into full effect.
‘The cabinet Sub-Committee on Economic Affairs chaired by Hon. Prime Minister has directed to put on hold the work in the project and to do a proper inquiry before proceeding with the work. Therefore, I kindly inform you to temporary suspend any proceedings regarding project preparation activities until further notice. Also since part of the mobilization advance has already been paid and because this amount will not be used for mobilization of project activities immediately, you are kindly requested to refund same which will be paid back to you once the Government issues clearance to proceed with the project’.
It was only one and a half years later that CAMC Engineering replied Rajakaruna. The engineering company responded by saying that it can’t refund the mobilization advance as requested, but would carry out the project once the Government approval is received.
“We are still carrying out feasibility studies”
Project Director Lalith de Alwis told the Dailymirror that the ground work will be commenced only after the feasibility tests are concluded.
“I took over office in March this year and we are still carrying out feasibility studies. It will need more time to finish the feasibility studies before releasing the report,” De Alwis said.
“On November 28, 2016 we requested Colombo Magistrate Court to grant permission to obtain bank details of the Irrigation Ministry’s account at Bank of Ceylon, Hyde Park Colombo (account number 7040840) – to find out how the money had been transferred to CAMC Engineering Company between December 1, 2014 and January 31, 2015’, the ‘B’ report further states.
It’s learned that the investigators were able to unearth more details than what was expected of them and obtained all information regarding the suspicious transaction.
Meanwhile reliable sources from the Irrigation Ministry, speaking on the condition of anonymity, revealed how the former Chief Accountant objected and had declined in writing to Ivan de Silva that he can’t release more than the stipulated project allocation for 2015.
“When Ivan de Silva wanted Irrigation Ministry Chief Accountant to release a further Rs.2000 million, the Chief Accountant wrote back to De Silva on January 2, 2015 claiming that he can’t release more than Rs.40 million which was the stipulated amount to be released for the project for 2015. Since Ivan De Silva knew that the Ministry had received money for all projects, carried out by the Irrigation Ministry, he insisted that the Chief Accountant and the Project Director to release Rs.2000 million until the remaining Rs.15000 million is released by the Treasury later,” sources claimed.
The sources further revealed as to how De Silva told his officials that the total advance payment amounting to Rs. 3,700 million had to be paid to the Chinese company in 2015. They added that once the money is received from the Treasury, he (Ivan de Silva) will approve the payments for the entire amount. In a letter to the Chief Accountant and the Project Director, Ivan de Silva has further stated as thus, ‘Although only Rs.40 million had been allocated for the Gin Nilwala Project for 2015, another Rs.12, 000 million had been allocated for other special projects undertaken by the Irrigation Ministry which confirms the Finance Ministry letter dated December 31, 2014. In my reply to the aforesaid letter, I have made a request to release Rs.3,700 million for the Gin- Nilwala Diversion Project. Since we have already received funds amounting to Rs.2000 million for the above project, the Finance Ministry informed us that another Rs.1000 million would be released in the future. Hence I give my approval to make arrangements to pay Rs.2000 million from the funds the Finance Ministry, funds which have been already released, and the rest should be paid once the remaining allocations are received’.
When this scam was revealed, Director General of the Department of National Budget, A.R. Deshapriya by letter dated September 4, 2015 instructed the Irrigation Ministry Secretary R.M.W. Ratnayake to conduct an investigation to find out whether the staggering advance payment had caused a loss to the country and if so to find out who is responsible for the swindle.
Ministry officials pose with representatives of the Chinese company after signing documents on November 05, 2014
The Gin-Nilwala Diversion Project contract was signed on November 5, 2014
and 5% of the agreed fee was advanced as a mobilization payment
Although Rs. 4012 mn had been paid to CAMC Engineering Co. Ltd, the contractors have failed to implement any ground work to date.
The sources further revealed as to how De Silva told his officials that the total advance payment amounting to Rs. 3,700 mn had to be paid to the Chinese company
Director General of the Department of National Budget had wanted Ratnayake to appoint a committee and conduct an impartial inquiry
Though Ratnayake had wanted the Treasury Secretary to appoint a committee to conduct the investigation, Director General of the Department of National Budget had wanted Ratnayake to appoint a committee and conduct an impartial inquiry. “We were disappointed as to why the National Budget Department failed to conduct the inquiry, they were supposed to do, without asking Ratnayake to do so as he was working hand in glove with the accused.
Once again Director General, National Budget Department A.R. Deshapriya by letter dated November 16, 2015 instructed Ratnayake to appoint a committee and hold an inquiry into which, a three-member committee was appointed. Ratnayake appointed D.D. Ariyaratne as the head of the committee and included two senior officers in the Ministry. Ratnayake and Ariyaratne are said to have worked as Additional Secretaries at the Irrigation and Water Management Ministry under Ivan de Silva, who was then the Ministry Secretary. However the three-member committee report was released in early 2016 clearing De Silva from all charges levelled against him,” sources said.
According to the sources, the three-member committee in their report has stated that the entire process from awarding the unsolicited contract to CAMC Engineering to making payments thereafter had been made legally and in the presence of transparency.
“The credibility of the three member committee, headed by D.D. Ariyaratne- the then Additional Secretary (Irrigation Development)- was questionable as the then Secretary Ratnayake, Ariyaratne and Ivan de Silva worked in the same ministry when the alleged fraudulent act took place. In such a backdrop, can anyone expect the committee report to reveal the truth? When there are documents to prove how Ivan de Silva had released Rs.4012 million and made China CAMC Engineering Company Limited an advance without obtaining the proper approvals, it is surprising as to how the three-member inquiring committee in its report stated that there was no controversy involved in the transaction,” the sources added.