In one of the most explosive interviews since his resignation as Securities and Exchange Commission Chairman, Tilak Karunaratne speaks about the Colombo Stock Market and the events surrounding and leading up to his resignation.
Following are excerpts
from the interview:
Q:Mr. Karunaratne today is a week after you resigned, what exactly are your thoughts, what are you feeling right now?
Feeling, I’m saddened about the whole thing. When I accepted this post in December last year, I had a lot of hope and expectations that I would be able to do something constructive to put the Colombo Stock Market on track in achieving greater heights. Today I’m a disappointed man. I tried my best but I didn’t get the support from the people who appointed me to this position and under the circumstances I had no choice but to resign. I must say once again that I’m very sad.
Q:Who were the people who wanted you to take up this position?
I have been offered at least three positions, including ambassadorships before this as I have already told the media. I politely declined all three. I’m no diplomat as you can see from what I have been saying during the past week, I’m not in the game of saying yes to everybody or satisfying everybody and keeping everybody happy.
So when the President as the Minister of Finance the appointing authority of the SEC met me in November last year at a function at Ananda College, he told me that there was this position and that I was suited to hold it because I am a long term investor in the stock market and because I know the workings of the bourse, ‘don’t say no this time because you have said so before, say yes’. I asked for 48 hours to decide and I consulted my family and friends all of whom advised me against this knowing well that it’s a hot seat. They told me that if Indrani Sugathadasa, a very senior public servant, who with all her contacts couldn’t survive how could I? But still I thought that with the blessings of the Minister of Finance and his support I could do a good job and took up the position.
Q:And so these very people who appointed you didn’t let you do your job?
Well I wouldn’t say that, I won’t put it like that. But when I started work I figured that some of the things that should have been done earlier hadn’t been done. For example one of the main objectives of our Act is to have a well regulated capital market because without regulation you can’t attract decent investors. Well everybody knows the word mafia, you can get guys who want to come in and make a quick buck and get out. But this doesn’t help. If you want a decent educated healthy investor-community the market has to be decently regulated. Not over-regulated not under-regulated but decently regulated, the you will see foreign funds coming in. and also at our first commission meeting itself under my chairmanship we called all directors of the commission to give us an update about the progress they have made in the past six months. So when the Director investigations came for the meeting he told us that he didn’t do any work for the past six months. So we asked him why. He said he was asked to stop work. The commission was really surprised because there was no decision to stop or softpeddle any of the investigations. He said that he was told by a former high official to soft peddle investigations. So I thought it was not right, if there was any wrongdoing I thought they should be investigated and the culprits brought to book. So we reopened all the files and started investigating and then the pressure was coming. Then I started getting calls, people came and met me. Some people told me that these guys were supporters of the government -- this that and the other and asked me also to soft peddle the investigations.
One of the reasons they gave is that all the officers in the SEC are UNPers and that they are misleading me. I mean I’m experienced enough, educated enough and matured enough to avoid being easily misled. I must tell you that all my staff were exceptionally good and excellent, enthusiastic and committed. So when pressure came from the top to softpeddle it was impossible and it disheartened me a lot.
Q:Where was this pressure coming from?
Well I have spoken enough about that to the media. Obviously pressure that I cannot withstand has to come from somebody very powerful. Well of course I don’t blame this persons or persons because they are being pressured by the mafia who has become extremely powerful within a short period of time. This must be because they had made their billions through the market by manipulating it. They were pressuring these individuals and they in turn were pressuring me. So it was too much.
Q:Once you took over the job, from how far down the line did this pressure start mounting?
I would say from about June.
Q:And that’s when you started investigating?
We had started investigating before that and only when it was getting to a fairly advanced stage that this thing came about.
Q:There was insinuation that you were asked to resign and that this wasn’t a voluntary resignation on your part?
Well the resignation was voluntary but the message that I got was loud and clear. It is good if Thilak leaves. That was the message, I could have waited for and could have waited for my removal but I thought I must leave honourably.
Q:One of the allegations against you is that you were over regulating the market?
This is a downright lie. Mr Koshy Mathai very clearly stated that it is laughable for anyone to say that the CSE is over regulated. I have studied the capital markets in the region thoroughly and we are the least regulated market. This is the least regulated market in the whole world I would say.
Q:I’m quoting you here, you have said that there is insider trading, front running and pump and dump deals going on in the market. Do you think it happens now?
No I don’t think it happens now because they can’t do it now, the market is down. These players have also got their fingers burnt. Till the war was concluded the market was dull and quite rightly there was euphoria when the war ended. Then the market was going up gradually and in a decent manner. Then suddenly we find that between June and December 2010 it was shooting up. And this was due to manipulation. What they did was they found certain stocks which are not sufficiently liquid. These stocks have no intrinsic value and they started manipulating by arbitrarily increasing the price by trading among themselves through their crony brokers. Then what happens is the others followed, the innocent ignorant investors, who were also directed by these crony brokers, bought stocks wanting to make a killing. Not all brokers but a minority of these brokers did those things. And it crashed. So after December 2010 it started coming down.
Q:So what were these the investigations you were carrying out?
We were looking into the people who were involved in this pumping up. I don’t want to name them but one of these days it will all come out. Within a short period some stocks went up by 200%, 300% and 400 % and this is impossible. Yes. These are the things we were investigating.
Q:Many people have been duped. Don’t you think it’s high time that you name these people who were involved?
Yes I think so but I’m just waiting because today I saw some encouraging news where the cabinet had decided to investigate white collar crime and amend laws. This is what we have been fighting for.
Q:If you read carefully about what Mr. Rambukwella said you will see that he was non-committal?
But the cabinet said they will look into these things if they appoint a cabinet subcommittee or give COPE the full powers these would prove worthwhile. I don’t think any public body got the certificate that we got from COPE. In fact the COPE Chairman held my hand and said that we were doing a superb job. And even there all I asked was for non-interference so that we can do our work. When you compare our Act with Acts of other commissions we are far behind. I fast-tracked all amendments and gave the first draft on August 16 because the SEC act is for the 1990’s and we are in 2012. The SEC should be given more powers to take action.
Q: What exactly did you tell COPE?
There again I refused to give out the names of individuals or companies that are under investigations because it wasn’t right to make it public knowledge. But there again the COPE Chairman asked me to give a report and I ensured that it was given within two weeks. The day I resigned I sent a comprehensive report on our activities not only the investigations but all other activities to the Chairman,
Q:Again wouldn’t you want these names of the perpetrators to come out one day?
Yes most certainly I would. But there is another angle to it, see these investigations were not concluded though they were at an advanced stage. But we have to decide if we have sufficient material to charge them because our Act does not provide sufficient grounds to charge, they can take us to courts for character assassination or something. So I have to be careful.
Q:Dilith Jayaweera is an investor who is accused of being a part of this so called mafia. At a news conference he accused certain individuals within the SEC of being manipulative and involved in certain malpractices?
In the first place I don’t know who accused him of being a part of this Mafia. I certainly haven’t done it nor has anyone else to my knowledge. If the cap fits him he could wear it but nobody has accused him as far as I’m concerned. Within the SEC there is no manipulation whatsoever, except by one or two.
Let me qualify this, out of the 77, 75 are totally committed to their job and they are enthusiastic and honest. As always there can be black sheep and maybe one or two are working hand-in-glove with this mafia. I have certain information that I won’t divulge at the moment that makes me suspicious about one or two. But I could give a blanket guarantee for the rest.
Q:I’m quoting you again. You had said there were certain moles within the SEC?
Yes that is a possibility because those being investigated knew how to answer questions. It’s like leaking a question paper at the exams where the students come prepared to answer. Some of these guys (those under investigation) knew exactly what to say and how to answer.
Q:Who were these moles? They must be at the highest level?
They can be named after an inquiry, but what I did was to meet the former AG. I told her we need to strengthen out investigations division and she was very favourable and positive despite the lack of staff. I even spoke to the present AG who again was very cooperative. I hope this discussion would prove fruitful.
Q:Are you sad to see that these people have not been brought to book?
I’m certainly saddened but more worried about it. Because what is the point if we don’t take action to stop these people from continuing these nefarious activities? Not only in the stock market but in society in general things which we don’t condone are happening.
Q:Do you believe that these crimes would be swept under the carpet?
I can’t be certain of that but I hope that this is an eye opener. One journalist had the audacity to ask me when I announced my resignation on Monday saying that I would resign on Friday, why had I announced it on Monday. I told him, look if I just sent my letter of resignation that wouldn’t make news. When Ms. Sugathadasa left it was just news for one day. But I wanted to create awareness about why I’m resigning and what was actually happening. I wanted to tell the country that everything isn’t tickety-boo, I must appreciate the media because they took this issue up.
But that would be a preventive measure and they won’t have to pay for their past crimes is it?No, one thing in the act is that there is no time bar. So you can inquire into a deal that happened 10 years ago. So they could investigate but you should have the guts and the support. I mean I had the guts but didn’t have the support.
Q:During this period, were you threatened or intimidated?
They dare not do it because I’m not a person who can be easily intimidated.
So won’t you term this pressure that was mounted as intimidation?
Well yes that was intimidation but after I resigned there has been nothing.
Again big investors have alleged that you have a section of the media which you manipulated?
I’m meeting you for the first time, I know very few media people. It was they who manipulated the media.
Q:You have a history of getting somewhere and then quitting. If you take your political career you were with the SLFP, JHU and the UNP and quit. Can’t this resignation be also seen as a continuation of that trend?
Obviously the reason is if you can’t do what you want to do, independent of any pressure and while maintaining your sanity then there are two options. Either you sacrifice everything and become a part of the system or get out. My policy is that if you can do or act with your conscience clear then what the point in hanging is around. I haven’t done any of this for money. Even as the SEC Chairman I did a completely honorary job. No salary, I didn’t take a car, no driver, no fuel I didn’t even take a mobile telephone. So I can’t just hang around anywhere if I can’t do what I think is right. I will move out. Even the party I gave leadership to -- the Sihala Urumaya -- when it was to be taken over by monks against my wishes I got out. I even resigned from parliament; there are very few people who on their own will resign from parliament. It’s just a talking shop with the executive presidency today.
Q:Have you spoken to the President?
Well, he should speak to me. I’m not going to initiate anything. But if he speaks to me I’ll talk to him I have no problem at all.
Q:So haven’t any of those at the top contacted you since you resigned?
No they haven’t.
Q: What is the future like for the CSE?
Well the credit is not entirely ours, but if you take the boom years – 2009 to 2011, there was always a nett foreign outflow. After three years there are net inflows now, its well up to 210 million dollars
Q:So that means the investors are not scared to come in?
No not now because the fundamentals are right, they don’t buy junk stocks but they come into buy companies where fundamentals are strong. Now there isn’t hanky-panky going on as I said. That is because we were strict. They are selectively coming in, with zero cost influence from the government. We must expect and encourage a slow and gradual rise and that will come provided we do the right thing. Not only the bourse, there should be better economic management as well. As a patriot I hope it would get better.
Q:Mr. Karunaratne Do you believe that what was alleged to have occurred was daylight robbery?
It most certainly is.
Q:But the counter argument that it’s an open market and the stocks are there to be played with?
This is the theory where they want it to be like the Wild West. No control let any robber come and make his or her money. Somebody has sold this idea to the government -- in the development phase do away with regulation and this kind of thinking takes place everywhere even for activities such as sand mining and sand transport. They even disbanded an elite custom unit which was looking into smuggling activities. The thinking is like let everybody must be allowed to do anything they want as long as they can maintain some development in the country. This is a very dangerous thing.
Q:Isn’t this itself a contradiction that you are supportive of the government which according to you is directionless?
I’m supportive of the right things of the government but not the wrong ones. Dismantling all the regulations or the regulatory bodies is very wrong. That is a very serious matter. Putting all your money in development is all wrong. What about education sector, the FUTA agitation for example. I am not saying that all their needs are right but still isn’t it enough of an eye opener?
Q:So do you believe that right now everything else except development is in tatters?
For that matter even development is in tatters.
Q:I don’t understand then where this support that you have for the government is coming from?
There is no opposition.
Q:Right but what is the good thing that this government is doing that you are supportive of?
I’m not supporting them en block, I’m supporting selective measures. I’m selective in my support, one thing was the war effort which I supported and we are reaping the benefits, thanks to President Rajapaksa and his team. We got rid of one cancer, we had the opportunity to win the economic war but that was mishandled.
Q:What if we won the bid for the Commonwealth Games?
I shudder to think
Q:So do you believe we shouldn’t have won that?
Most certainly not. See that happened to Greece, after hosting the Olympics. Nivaard Cabral had said that we can spend three Billion dollars on a staggered basis, but from where is the money coming? That would have created a huge foreign exchange crisis. That showed he had no vision. He is an accountant and not an economist so I mean how he can run the Central Bank or economic policy.
Q:So you believe that there are flaws in the CB also?
Yes of course there are flaws.
Q:Do you believe that people who seem be falling in line with what the top wants continue to stay while those like you or Ms. Sugathadasa who were supposed to bring a breath of fresh air kicked out?
Yes they survive; those who have been accused of many things still survive with inquiries being swept under the carpet.
Q:If the names of the wrong doers are swept under the carpet would you one day be willing to come out with facts and figures?
Yes I’m willing to come out with the facts and figures, I have nothing to hide and I have no skeletons in my closet like many others. That is why I could come out and speak like this.
Now after I resigned there were intellectuals and other professionals who suffered the same fate but didn’t make such a hue and cry. They came and spoke to me and praised me saying its great Thilak, what you are doing is good. They want to form some sort of an organization to keep this government on the right track because there is no alternative to this. The opposition is in tatters.
Q:Isn’t this effort of a lot of people have failed?
Well who knows this might succeed.
Q:So you have hope?
Yes its human nature,
to live in hope
Q:What is your advice to the next SEC Chairman?
I don’t know. I will look at the person and then advice. I’m not trying to insult anybody, but I can’t see a person whose integrity is not questioned and who is a honourbale, educated experienced lady or gentlemen accepting this position because it will be tough. It will be difficult to do their job.
Q:Finally, how did this group of people, according to you a maximum of 20, become so powerful? Why are they that powerful according to you?
How can I put it? One is money, of course a lot of people have money and it’s not only them. But money can buy a lot of influence in this country. Then connections with the people who exert a lot of power you know. It’s not only money there are other ways. A lot of these young people who are at the top can be easily spoilt and that’s my fear as well.
Q:You think they will continue to have this power?
Yes I think so, they will be more careful because earlier they brazenly exploited this. But yes I think they will unless the government wants to break it.
Q: Are you referring
to the Mafia?