Opinion

How did Perpetual Treasuries make it to the top ? - -Sujeewa Senasinghe

09 Jul 2015 - {{hitsCtrl.values.hits}}

Sujeewa Senasinghe, member of the controversial COPE sub-committee appointed to look into, what many had termed the ‘Bond Scam’ revolving around the bond issue on February 27 spoke to the Dailymirror on aspects of the inquiry and his opinion of it. Excepts of the interview are found below. The full interview is available online.

Is the declaration to the that President Mahinda Rajapaksa would contest from the UPFA an issue to you?
Not at all. It’s not an issue for us although it may be an issue for him. Having been the President of the country, and then seeking nominations from the person he was harassing all throughout is a pathetic situation for him. I would even pose a challenge - that I would take 100,000 more votes than Mahinda if he contests in Colombo. I think it’s the same with Sajith in Hambantota or Kurunegala for that matter.

Do you see it as an act of betrayal on the part of President Sirisena to have offered him nominations?
No not really. It’s a democracy and everybody has the right to contest unless there are allegations against him and if investigations have commenced against him - then there is a moral issue. But I think this will give him a chance to understand his true strength because earlier he was using all the money, the mechanism, the media, the Police and the Army and all State mechanisms. Now he has to contest as a layman so lets see how he would fare.

To get to the issue, there was a big scandal that broke out with regard to Treasury Bonds on February 27 this year. You were a member of the COPE sub-committee to investigate into it. Didn’t you shoot yourself in the foot when you said that the interim report was prepared by Mr. Wijeywardena and Mr. Cabraal?
No, I didn’t say that they directly prepared it, but I said they were involved. Mr. Wijeywardena should have never been involved because he previously declined to sit on other committee that was appointed for certain reasons. I don’t think he should have ever been involved in this as well. He had given certain instructions on certain issues. He wasn’t involved in this inquiry as well, initially I wasn’t present, but later on we heard that he was giving his bits and pieces into this draft (report). Even on this draft, D.E.W Gunasekara initially wanted to raise the “issues”. That was the consensus. Everything is here in the proceedings. The idea was to raise the issues because we were on a voyage of discovery. The initial idea was to compile a draft on the issues. Then all of a sudden he said he wanted to file an interim repor t- and I objected. I asked him as to how we could submit an interim report when we were instead going to prepare a draft on the issues. If you look at the final proceedings of the sittings, it is clear that there was no mention of an interim report. Then all of a sudden this talk about a report emerges. He (DEW Gunasekara) said that since parliament was to be dissolved we had to submit the report. I said that was politics and that he had no right to decide on this in relation to Parliament being dissolved. I told him that we were here to do a job irrespective of politics, but he insisted on submitting the report to which I vehemently objected and told him that he was doing politics.

The speaker had given a mandate to complete the report by July 7. So you surely must have known that there was going to be an end to this?
You can’t give dates and finish inquiries. If you can’t finish it by that time then you can’t give a report, it’s as simple as that. Yes, we were given an intimation that the inquiry should finish by then, but that was it. If D.E.W. Gunasekara intended on finishing by that date then we should have raised issues right at the start. Just because a date was given can you conclude a case halfway and then give a verdict?.

From what we were told the hearings were quite comprehensive and the report was based on that...
Then why didn’t he minute that? You can’t bring an interim report to Parliament. This was a sub-committee of the main COPE Committee. We should have submitted it to the COPE Committee who in turn should have brought it to Parliament. This was illegal. He ( DEW) was playing politics. He wanted to slander the government and did this in pursuance of that. He had no mandate for this. You can ask any question regarding this bond issue because we have nothing to hide. How it was done and why it wasn’t done in a proper manner, and why Cabraal went in to direct placement with his stooges as Primary Dealers. Entrust, First Capital, and Perpertual Treasuries were all his stooges. In fact Cabraal’s sister was a Director at Perpertual Treasuries.

Lets get to those details later. What you cant deny is that there was a comprehensive inquiry into this.
Who said so? From where are you getting your facts? The comprehensive hearing was ongoing. Please look at the last proceedings of the hearings. The proceedings were clear and it said that it was to ‘raise issues’. ‘ Raising issues is done at the start of the case. We got the evidence and wanted to figure out what issues needed to be raised and that’s where this ended. If you go through the ‘proceedings’ this is very clear. That was the consensus. Then all of a sudden on Thursday we are given this draft. (shows draft). Thursday was the day on which the issues were to be circulated. I studied this fraudulent draft till 4 in the morning on Thursday and put my notes because they said it was to be discussed on Friday. Then when we returned on Friday, we have another draft, completely different from the previous draft. I told him not to play with this country, that this is not the way he should behave as a senior politician. We were given ten minutes to peruse this new draft and I opposed it. Go through these proceeding and show me a single place where he had said that we were to produce an interim report. A single place. D.E.W Gunasekara is a total fraud. I am going to take action against him. As a senior politician he shouldn’t have done this.

Mr. Senasinghe, Mr. D.E.W Gunasekara headed this committee even during the previous regime and his role was commended by everyone. His credibility has been intact.
Not at all. His credibility was not intact. What was he doing last year?. We are new to this COPE committees. In the future we are not going to put up with this. What was the COPE’s recommendation for Air Lanka (sic) last year? there was a loss of Rs. 150 billion, what did it say?. Nothing. Then about Sri Lanka Cricket, take the TV deal - there was only a one inch advertisement, did he find them guilty or anything? there was nothing. There was no finding at all. I always had issues with him. He was a government member, how could a government member head the COPE committee? it should be someone from the Opposition. Because he was a very senior person, I could never take him on the way I wanted to because I had respect for his seniority. But what he did now was atrocious. You could ask any official of the COPE committee if this was comprehensive or not. For two hours I explained the fraud they had done. Everything was false. On doubts you cant make reports, doubts cant be included in a report. If there is a doubt you have to call for evidence and clear it. That’s how reports are prepared.

But we have the record that ran over 440 pages, isn’t that an indication of the nature of the inquiry?
There is no report like that. Yes there were proceedings, but that’s not a report. You ask me any question you want on the bond issue.

Perpetual Treasuries had only been successful in one bid for, if I am not mistaken Rs. 27 million prior to this. Then suddenly theybid Rs. 15 billion on February 27. Is’nt this alone cause for concern.?
Yes, there is cause for concern. Of course there is. Three companies have been given licenses to act as Primary dealers and all three companies are connected to Rajapaksas. Another 6 have applied and they haven’t been given the licenses. There was no proper procedure when appointing them, and it was at the discretion of the then governor Nivard Cabraal. Who was the Director of Perpetual Treasuries? it was his ( Cabraal’s) sister. The issue is with that company and they should be investigated. In fact the Governor said that the Central Bank had in fact called Primary Dealers on that day and asked them ( Perpetual Treasuries) how much they were willing to buy at 9.35. The officials of the Central Bank in fact gave away the fact that the government was in need of money. There must be an inquiry on that. But that is not the fault of the Governor. Show me one instance in which it was evident that the Governor was involved?

Mr. Senasinghe you have been a proponent of this conflict of interest issue, throughout.
Yes definitely.

On the face of it, don’t you see that something fishy was going on. We have the Son-in-Law of the Governor making a bid, and Bank of Ceylon agreeing to broker it within hours, for such a massive sum of money?
I don’t know if its fishy or not, but how did this company grow within two years from nowhere to becoming second in the business? That’s what you have to investigate. I always believe in conflict of interest and I won’t ever get my family involved in anything I do.

So that was the start of this entire issue - the conflict of interest...
Yes, its there and I agree with you. But that was not the allegation. The allegation was on the interest rate and the other technicalities. Conflict of interest is not a legal issue, but instead it’s a moral issue. There is a conflict of interest and the information may have gone to the company, they were the biggest bidders and that doubt exists. But go back in time- inside information had been passing to this Company for a long time. Why is that? because Cabraal’s sister is a Director of the Company.

Of the Holding Company.
Yes, but then that is also a conflict of interest

But if you look at the history of these placements, its clear that except for one bid in September 2014, the Company had not been successful in a single bid, during the period the Sister of the former Governor was a part of the Company. The Sister being there had no impact at all.
That’s what you think. How do you know the other deals Perpetual Treasuries and the Central Bank had? If you say that, then how did Perpetual Treasuries a company which got the license in 2013 do Rs. 200 billion worth of business with the Central Bank. Rs. 200 billion. So that’s the question you have to ask.

What did Cabraal do? Look at what the manual says - Bonds all over the world are done on auction. You don’t do it on Direct Placements because that itself leads to corruption. Page 8 of the manual very specifically says that this has to be done through auction and the “balance fund requirement of the Government as indicated in the approved borrowing programme may be arranged through private placement”. In countries 90% of the treasury bonds are done through auctions. That’s what this Governor did. Within three weeks he had to raise Rs. 13 and a half billion and had only managed Rs. 3 and a half billion.

Then on Friday he had to go for the auction. In 2014 when Cabraal was the Governor, the interest rate was 11.75 % just for Rs. 2 Billion. What does the Governor do ( Mahendran)? he wanted the money. He goes and he was talking to them, and then he asks them - “ How much of bids have you got” – he doesn’t even ask for the slips. He was walking around the Bank. He asks for it and then they (officials) come and tell him the amount of the bids they had got. Then he says go for Rs. 20 billion if it is on the normal rate – they ( officials) say that was too much and then he says to go for Rs. 10 Billion. Then he asks them the last rate under which a bid below Rs. 10 billion was given and it was 11.75% and he ( Mahendran) says “ if I were you I would take it” and then he walks off. What they alleged was that he gave a direction - which he never did..

But the issue was the statement “ if I were you I would take it” when the Governor of the Central Bank says something like that to his subordinates isn’t that a direction in itself?
No that was a suggestion. How could that be a direction. He could have given the direction and said he approved. He didn’t do that because it was up to the Public Debt Department to make that decision.

The proceedings very clearly indicate however, that “ if I were you I would take it” was as serious statement could get- coming from the very top?
No not at all. He must direct them. This is all false.

But the evidence given by officials clearly suggests the magnitude in which such a statement is taken.
Show me one place in which that was said. The Governor can give directions, because he is the Governor and needed the money. You must go by the circumstances, upto Friday if you have not found money and you need the money by Monday what do you do?. This was the first time such a large amount went in for auction. Even if he has given a direction that is alright because that is the proper system. Earlier, it was done on Direct Placements. When you do that, artificial interest rates are set in the country and then you take that from EPF and ETF funds. This is what they did during the past. Government had no right to go for the EPF and ETF money. They had taken Rs. 200 billion from Government funds. From People’s Bank they had taken Rs. 40 billion, from NSB they had taken Rs. 70 billion and so on. The Governor ( present) put a cap of Rs. 15 billion to it. People lost faith in Government Banks before because the Government Banks had been borrowing from Private Banks. The financial system was falling apart in this country. You set up artificial rates and these are not good. The auction is the one which sets the natural rate. That’s what this auction did. If they wanted to do something wrong, they could have given it to Perpetual Treasuries under a Private Placement. No one would have found out anything. Cabraal changed the manual in 2008 and gave provision for this through a board paper. There is no country in the world that go through Private Placements and Direct Placements except in Sri Lanka. There was insider trading all this time. They call for a Private Placement for Rs. 2 billion and then they ( The Central Bank) pass information that this was to be given, and then the market is manipulated and the dealers make a cool Rs. 200 million.

So that’s what happened here?
Not at all. This was an auction. Anyone could have bid for it.

I understand your argument but lets get to the facts.
I know you question, I know your question. You want to know how they came to this amount and why they gave it

Yes.
In an auction cant a company bid for any amount? You have to find out how they got information that the auction was to be for this amount? That also he (Mahendran) never gave a direction. Then you have to look at the workings of the Tender Board, the Debt Department and everybody else and how the information was passed.

But could we conclude that there was something suspicious that happened on February 27?
As a lawyer I cant say that. There was an auction and one company has got the bulk of it. You must investigate as to why that call went. Look at who made that call. It was not the Governor. The Central Bank had been doing this as a pattern for years. They call a few Primary Dealers and say they have this need and ask them how much they are willing to pay. They (the Primary Dealers) always knew the volatility of the market and knew that the government was desperate. The auction system is the most transparent and that’s what this Governor did. Went for an auction instead of following the ways and means used by the previous. But yes, this company must be investigated.

There is an issue?
You have to look at how this company managed to make it to the top within such a short time. Rs. 200 billion worth of business, how did they obtain the Primary Dealership, what was Cabraal’s sister doing on its board, all this must be investigated. There is some issue. I cant say that they are guilty, but when we come into power we will definitely investigate this company and all deals running back many years. The Legal Department of the Central Bank was stripped off. How could you do that? How was that made defunct. If the Legal Department was there they would have answered these questions. The Central Bank has no Legal Department. All this must be gone into.

What role did Malik Samarawickrema play?
Nothing. He had gone to meet the Governor on development issues a few days back. If he wanted something done don’t you think he could have made a call or used Viber Whatsapp or some other form of communication. Do you really think he needed to go and meet to do something like this in this day and age. Who will find out if he had given a call? They are on a witch-hunt against the Government because they don’t have a single allegation against the government

This is the single biggest allegation Mr. Senasinghe, how this company got this deal.
Yes, there is an issue with the Company but why didn’t you raise this question six months ago when this Company was rising from no where? We have a problem with this Company. Even the Governor has problems with this Company, he said that the Son-in- Law had direct links with Cabraal. Investigate those - he ( Cabraal) had all his relations in Banks, then how did his Sister become the Director of this Company all of a sudden? Right after that the Company got Primary Dealership - investigate how this happened.

( The full interview could be viewed on our web - portal )

Opinion

How did Perpetual Treasuries make it to the top ? - -Sujeewa Senasinghe

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