Bond Scam: Mr. Prime Minister, Facts Are Stubborn!
CHAPTER 26
THE HON. PRIME MINISTER’S ROLE IN MATTERS RELEVANT TO OUR MANDATE
Mr. Arjuna Mahendran was appointed the Governor of the CBSL, on 23rd January 2015.
Thus, the appointment of Mr. Mahendran was made before the period of our Mandate commenced and we have no jurisdiction to determine the merits or demerits of that appointment.
However, we cannot be insensible to the fact that, there have been concerns expressed in the public domain with regard to the propriety of Mr. Mahendran’s appointment following reports of his alleged intervention in the Treasury Bond Auction held on 27th February 2015 and his relationship with Mr. Arjun Aloysius who has close connections with Perpetual Treasuries Ltd, which obtained the lion’s share of the Bids accepted at that Auction.
Concerns have also been expressed in the public domain, with regard to whether the fact that, Mr. Mahendran is not a Citizen of Sri Lanka, made it unlawful or unsuitable for him to have been appointed the Governor of the CBSL.
Therefore, we decided to briefly look at these issues, though we will not, in view of the confines of our Mandate, venture to arrive at any determination on these issues.
When Mr. Mahendran gave evidence before us, he stated that, he had been working in Dubai in January 2015 and that, he had received a telephone call from the Hon. Prime Minister, Ranil Wickremesinghe, MP, who had invited Mr. Mahendran to accept appointment to the office of the Governor of the CBSL.
In these circumstances, the Commission of Inquiry asked the Hon. Prime Minister whether he had invited Mr. Mahendran to accept appointment as the Governor of the CBSL. In reply, the Hon. Prime Minister stated, “Yes. It is correct that sometime in January 2015, I Invited Mr. Arjuna Mahendran to serve as the Governor of the CBSL of Sri Lanka (CBSL).”
In this connection, we note that, the Hon. Prime Minister is also the Minister of National Policies and Economic Affairs under which the CBSL has been placed.
Next, in view of the requirements of Section 12 (1) of the Monetary Law Act which states that, an appointment of the Governor of the CBSL has to be made by the President on the recommendation of the Minister of Finance, the Commission of Inquiry asked the Hon. Prime Minister whether Mr. Mahendran was appointed on recommendation made by the then Minister of Finance and/or on a recommendation made by the Hon. Prime Minister, as the Minister of National Policies and Economic Affairs under which the CBSL has been placed.
The Hon. Prime Minister replied, “Upon the formation of the new Government in January 2015 there was a general consensus within the Government that Mr. Mahendran should be appointed to the post of Governor of CBSL. I discussed the proposed appointment with the then Minister of Finance who agreed that Mr. Mahendran was the most suitable candidate. Accordingly, the then Minister of Finance with my concurrence recommended to His Excellency the President that Mr. Mahendran should be appointed. His Excellency the President acting upon the said recommendation appointed Mr. Arjuna Mahendran as the Governor of the CBSL.”
Thereafter, the Commission of Inquiry asked the Hon. Prime Minister the reasons why he considered Mr. Mahendran to be a fit and suitable person to be appointed the Governor of the CBSL.
In reply, the Hon. Prime Minister stated, “Mr. Mahendran was selected for appointment in view of his professional qualifications and experience in the field of banking and investments. He had functioned as the Chairman of the BOI during the period 2002 to 2004. He has also held senior positions in the banking industry in Middle East and Singapore. The previous incumbent lacked comparable qualifications and experience and the administration of the CBSL during his tenure of office had been subject to severe criticism. Hence, prior to the General Election of 2015 there was a general demand from our political allies that a competent person versatile in banking and International finance should be appointed to the post of Governor of the CBSL.”
In these circumstances, it is apparent that, the question of whether or not the fact that, Mr. Mahendran was not a Citizen of Sri Lanka precluded him from being appointed the Governor of the CBSL was not a “Question of Law”. Instead, it was a “value judgement” which had to be made by those who considered the wisdom of appointing Mr. Mahendran, who was not a Citizen of Sri Lanka, as the Governor of the CBSL.
In passing, we would also mention that, prior to 2015, the CBSL was placed under the Ministry of Finance. In 2015, the CBSL has been brought under the Minister of National Policies and Economic Affairs.
That is a decision taken by the Executive which is entirely outside the scope of our Mandate.
The question of conflict of interest was another matter dealt with in detail by the Commissioner of Inquiry.
The Hon. Prime Minister said he was aware that, Mr. Aloysius was the Chief Executive Officer and Director of Perpetual Treasuries Ltd and stated that, “When Mr. Mahendran was offered the post of the Governor of the CBSL, I insisted that he should ensure that Mr. Aloysius would resign as a Director of Perpetual Treasuries Ltd and not involve himself in the business activities of that company in anyway. I also strongly recommended that the best course of action would be for Mr. Aloysius to divest himself of his shares in the company. This was conveyed by me to both Mr. Mahendran as well as to Mr. Aloysius. Subsequently, I became aware that Mr. Aloysius had in the month of January itself resigned from the post of Chief Executive Officer and Director of Perpetual Treasuries Ltd. I also became aware that he remained a Shareholder of that company and he intimated that he would divest himself of the shareholdings as soon as possible. On expressing my concerns on this account, Mr. Mahendran reassured me that Mr. Aloysius would not under any circumstances play any role in the business activities of the company. I had every confidence in the assurances given by Mr. Mahendran and as such I had no reason to apprehend that any conflict of interest would be faced by Mr. Mahendran in functioning as the Governor of the CBSL.”
When the Commission of Inquiry asked the Hon. Prime Minister whether he subsequently inquired from Mr. Mahendran with regard to a potential conflict of interest, the Hon. Prime Minister replied, “I did on several occasions convey to Mr. Mahendran my concerns about a possible conflict of interest arising from his son-in-law Mr. Aloysius having a connection with a Primary Dealer. Mr. Mahendran as set out above reassured me that Mr. Aloysius would not engage in the activities of the company as indicated above. In view of the circumstances, I was confident as set out above that a situation of a conflict of interest would not arise.”
The Commission after considering all above facts have determined as follows:
The issue of whether a conflict of interest, in fact, arose as a result of Mr. Mahendran’s son-in-law, Mr. Arjun Aloysius, being closely connected to Perpetual Treasuries Ltd, has been considered in Chapter 25 of this Report. We have determined that, there was a conflict of interest which prevailed during Mr. Mahendran tenure as the Governor of the CBSL because Mr. Aloysius did, in fact, continue to remain actively engaged with the operations of Perpetual Treasuries Ltd, contrary to the assurances which Mr. Mahendran has repeatedly given the Hon. Prime Minister.
Commission has also expressed the following as a view point in the report:
We consider that, the confidence which the Hon. Prime Minister states he placed in the assurances given to him by Mr. Mahendran, was misplaced. We are of the view that, the more prudent course of action would have been for the Hon. Prime Minister to have independently verified whether Mr. Mahendran was, in fact, honouring the assurances he gave the Hon. Prime Minister. We regret that, the Hon. Prime Minister did not take that course of action.
The Hon. Prime Minister’s act of appointing an Investigation Committee of his choice has been critically viewed by many including the Members of Parliament. The Commission has stated as follows:
We consider that, the position may have been different if the Committee or other body which carried out this Inquiry had the benefit of members who had knowledge and experience in the technical and practical aspects of the matter being inquired into.
Commission has made the following observation about a statement made by the Prime Minister in the Parliament on 17th May 2017.
Next, with regard to the Statement made in Parliament by the Hon. Prime Minister on 17th March 2017, in which he states, inter alia, that, Mr. Mahendran had not interfered in the Treasury Bond Auction of 27th February 2015, we have held that, the evidence establishes that, Mr. Mahendran and Deputy Governor Samarasiri, deliberately and mala fide, misled the Hon. Prime Minister and suppressed material facts and misrepresented the factual position when they reported the events relating to the Treasury Bond Auction held on 27th February 2015, to the Hon. Prime Minister and also when they submitted a Briefing Note to the Hon. Prime Minister, with regard to the events of that Auction.
While we do not, for even a moment, presume to make any pronouncement on events that transpired in Parliament, we consider that, the Hon. Prime Minister would have been better advised, if he had independently verified what had happened at the CBSL on 27th February 2015, before making any statement, instead of relying on the Briefing Note and report submitted to him by Mr. Mahendran and Deputy Governor Samarasiri.
Now the country is awaiting to see who would take the responsibility for
1. The fleeing away of Arjun Mahendran
2. The accusations, allegations against MPs some of which have been admitted by MPs and Ministers for accepting gratifications from the principal accused parties of the scam.
3. For the colossal loss to the CBSL and to the continuing adverse effects to the economy of the country.
4. The various recommendations made by the Commission against several parties for the need of initating legal action. Eg. The former Minister Ravi Karunanayake.
5. The fate of upright, conduct and behavior expected by the voters who elected these people under a democratic system to uphold and maintain principles of good governance.
6. The statement of the Prime Minister to the Parliament without verifying the facts independently.
https://www.colombotelegraph.com/index.php/bond-scam-mr-prime-minister-facts-are-stubborn/
CHAPTER 26
THE HON. PRIME MINISTER’S ROLE IN MATTERS RELEVANT TO OUR MANDATE
Mr. Arjuna Mahendran was appointed the Governor of the CBSL, on 23rd January 2015.
Thus, the appointment of Mr. Mahendran was made before the period of our Mandate commenced and we have no jurisdiction to determine the merits or demerits of that appointment.
However, we cannot be insensible to the fact that, there have been concerns expressed in the public domain with regard to the propriety of Mr. Mahendran’s appointment following reports of his alleged intervention in the Treasury Bond Auction held on 27th February 2015 and his relationship with Mr. Arjun Aloysius who has close connections with Perpetual Treasuries Ltd, which obtained the lion’s share of the Bids accepted at that Auction.
Concerns have also been expressed in the public domain, with regard to whether the fact that, Mr. Mahendran is not a Citizen of Sri Lanka, made it unlawful or unsuitable for him to have been appointed the Governor of the CBSL.
Therefore, we decided to briefly look at these issues, though we will not, in view of the confines of our Mandate, venture to arrive at any determination on these issues.
When Mr. Mahendran gave evidence before us, he stated that, he had been working in Dubai in January 2015 and that, he had received a telephone call from the Hon. Prime Minister, Ranil Wickremesinghe, MP, who had invited Mr. Mahendran to accept appointment to the office of the Governor of the CBSL.
In these circumstances, the Commission of Inquiry asked the Hon. Prime Minister whether he had invited Mr. Mahendran to accept appointment as the Governor of the CBSL. In reply, the Hon. Prime Minister stated, “Yes. It is correct that sometime in January 2015, I Invited Mr. Arjuna Mahendran to serve as the Governor of the CBSL of Sri Lanka (CBSL).”
In this connection, we note that, the Hon. Prime Minister is also the Minister of National Policies and Economic Affairs under which the CBSL has been placed.
Next, in view of the requirements of Section 12 (1) of the Monetary Law Act which states that, an appointment of the Governor of the CBSL has to be made by the President on the recommendation of the Minister of Finance, the Commission of Inquiry asked the Hon. Prime Minister whether Mr. Mahendran was appointed on recommendation made by the then Minister of Finance and/or on a recommendation made by the Hon. Prime Minister, as the Minister of National Policies and Economic Affairs under which the CBSL has been placed.
The Hon. Prime Minister replied, “Upon the formation of the new Government in January 2015 there was a general consensus within the Government that Mr. Mahendran should be appointed to the post of Governor of CBSL. I discussed the proposed appointment with the then Minister of Finance who agreed that Mr. Mahendran was the most suitable candidate. Accordingly, the then Minister of Finance with my concurrence recommended to His Excellency the President that Mr. Mahendran should be appointed. His Excellency the President acting upon the said recommendation appointed Mr. Arjuna Mahendran as the Governor of the CBSL.”
Thereafter, the Commission of Inquiry asked the Hon. Prime Minister the reasons why he considered Mr. Mahendran to be a fit and suitable person to be appointed the Governor of the CBSL.
In reply, the Hon. Prime Minister stated, “Mr. Mahendran was selected for appointment in view of his professional qualifications and experience in the field of banking and investments. He had functioned as the Chairman of the BOI during the period 2002 to 2004. He has also held senior positions in the banking industry in Middle East and Singapore. The previous incumbent lacked comparable qualifications and experience and the administration of the CBSL during his tenure of office had been subject to severe criticism. Hence, prior to the General Election of 2015 there was a general demand from our political allies that a competent person versatile in banking and International finance should be appointed to the post of Governor of the CBSL.”
In these circumstances, it is apparent that, the question of whether or not the fact that, Mr. Mahendran was not a Citizen of Sri Lanka precluded him from being appointed the Governor of the CBSL was not a “Question of Law”. Instead, it was a “value judgement” which had to be made by those who considered the wisdom of appointing Mr. Mahendran, who was not a Citizen of Sri Lanka, as the Governor of the CBSL.
In passing, we would also mention that, prior to 2015, the CBSL was placed under the Ministry of Finance. In 2015, the CBSL has been brought under the Minister of National Policies and Economic Affairs.
That is a decision taken by the Executive which is entirely outside the scope of our Mandate.
The question of conflict of interest was another matter dealt with in detail by the Commissioner of Inquiry.
The Hon. Prime Minister said he was aware that, Mr. Aloysius was the Chief Executive Officer and Director of Perpetual Treasuries Ltd and stated that, “When Mr. Mahendran was offered the post of the Governor of the CBSL, I insisted that he should ensure that Mr. Aloysius would resign as a Director of Perpetual Treasuries Ltd and not involve himself in the business activities of that company in anyway. I also strongly recommended that the best course of action would be for Mr. Aloysius to divest himself of his shares in the company. This was conveyed by me to both Mr. Mahendran as well as to Mr. Aloysius. Subsequently, I became aware that Mr. Aloysius had in the month of January itself resigned from the post of Chief Executive Officer and Director of Perpetual Treasuries Ltd. I also became aware that he remained a Shareholder of that company and he intimated that he would divest himself of the shareholdings as soon as possible. On expressing my concerns on this account, Mr. Mahendran reassured me that Mr. Aloysius would not under any circumstances play any role in the business activities of the company. I had every confidence in the assurances given by Mr. Mahendran and as such I had no reason to apprehend that any conflict of interest would be faced by Mr. Mahendran in functioning as the Governor of the CBSL.”
When the Commission of Inquiry asked the Hon. Prime Minister whether he subsequently inquired from Mr. Mahendran with regard to a potential conflict of interest, the Hon. Prime Minister replied, “I did on several occasions convey to Mr. Mahendran my concerns about a possible conflict of interest arising from his son-in-law Mr. Aloysius having a connection with a Primary Dealer. Mr. Mahendran as set out above reassured me that Mr. Aloysius would not engage in the activities of the company as indicated above. In view of the circumstances, I was confident as set out above that a situation of a conflict of interest would not arise.”
The Commission after considering all above facts have determined as follows:
The issue of whether a conflict of interest, in fact, arose as a result of Mr. Mahendran’s son-in-law, Mr. Arjun Aloysius, being closely connected to Perpetual Treasuries Ltd, has been considered in Chapter 25 of this Report. We have determined that, there was a conflict of interest which prevailed during Mr. Mahendran tenure as the Governor of the CBSL because Mr. Aloysius did, in fact, continue to remain actively engaged with the operations of Perpetual Treasuries Ltd, contrary to the assurances which Mr. Mahendran has repeatedly given the Hon. Prime Minister.
Commission has also expressed the following as a view point in the report:
We consider that, the confidence which the Hon. Prime Minister states he placed in the assurances given to him by Mr. Mahendran, was misplaced. We are of the view that, the more prudent course of action would have been for the Hon. Prime Minister to have independently verified whether Mr. Mahendran was, in fact, honouring the assurances he gave the Hon. Prime Minister. We regret that, the Hon. Prime Minister did not take that course of action.
The Hon. Prime Minister’s act of appointing an Investigation Committee of his choice has been critically viewed by many including the Members of Parliament. The Commission has stated as follows:
We consider that, the position may have been different if the Committee or other body which carried out this Inquiry had the benefit of members who had knowledge and experience in the technical and practical aspects of the matter being inquired into.
Commission has made the following observation about a statement made by the Prime Minister in the Parliament on 17th May 2017.
Next, with regard to the Statement made in Parliament by the Hon. Prime Minister on 17th March 2017, in which he states, inter alia, that, Mr. Mahendran had not interfered in the Treasury Bond Auction of 27th February 2015, we have held that, the evidence establishes that, Mr. Mahendran and Deputy Governor Samarasiri, deliberately and mala fide, misled the Hon. Prime Minister and suppressed material facts and misrepresented the factual position when they reported the events relating to the Treasury Bond Auction held on 27th February 2015, to the Hon. Prime Minister and also when they submitted a Briefing Note to the Hon. Prime Minister, with regard to the events of that Auction.
While we do not, for even a moment, presume to make any pronouncement on events that transpired in Parliament, we consider that, the Hon. Prime Minister would have been better advised, if he had independently verified what had happened at the CBSL on 27th February 2015, before making any statement, instead of relying on the Briefing Note and report submitted to him by Mr. Mahendran and Deputy Governor Samarasiri.
Now the country is awaiting to see who would take the responsibility for
1. The fleeing away of Arjun Mahendran
2. The accusations, allegations against MPs some of which have been admitted by MPs and Ministers for accepting gratifications from the principal accused parties of the scam.
3. For the colossal loss to the CBSL and to the continuing adverse effects to the economy of the country.
4. The various recommendations made by the Commission against several parties for the need of initating legal action. Eg. The former Minister Ravi Karunanayake.
5. The fate of upright, conduct and behavior expected by the voters who elected these people under a democratic system to uphold and maintain principles of good governance.
6. The statement of the Prime Minister to the Parliament without verifying the facts independently.
https://www.colombotelegraph.com/index.php/bond-scam-mr-prime-minister-facts-are-stubborn/
