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Arjuna Mahendran

The  Special Presidential Commission of Inquiry appointed to look into the discrepency in the issuance of Treasury bonds from 2015 February 1 to 2016 March 31 at the Central Bank of Sri Lanka (CBSL) commenced its inquiries last week.

The discrepency is alleged to have occurred during the tenure of former governor, Arjuna Mahendran.

Governor of the CBSL, Dr. Indrajith Coomaraswamy and Secretary to the Treasury, Dr. R.H.S. Samaratunga were among the first to testify and give statements at the public hearings. Dr. Coomaraswamy gave evidence on two days.

Based on a request made by the legal representation for Perpetual Treasuries for allowing the company to be represented by legal counsel during the proceedings of the Commission, having sought advice from the Attorney General, the Commission allowed such as per Section 16 of the Special Presidential Commissions of Inquiry Law.

Apart from the inquiring, the Commission will also engage in hearing public views and recording evidence. According to repotage of the hearings, Dr. Coomaraswamy had stated before the Commission that it was difficult to say as to whether money laundering had taken place in the issuing of bonds.

He had also stated that there had been previous cases involving the issue of bonds where bonds had been sold in excess. It is also reported that another reason could be that primary dealers had ignored the amount the Government wished to obtain via the issue of Treasury bonds. The CBSL chief confirmed that all bidders were given the same interest rate.

Dr. Coomaraswamy had also highlighted that there was no fixed system to issue Treasury bonds to primary dealers. The Monetary Board of the CBSL determines by when primary dealers should be registered. Primary dealers participate in the auction.

Some bids, however, according to Dr. Coomaraswamy aren’t genuine. Therefore, a more advanced system to allow appropriate participants in the market to be involved in the auction system should be in place as otherwise those who possess knowledge of the bond market will have an advantage on the deliberation of monetary bonds.

The three-member Commission mandated to investigate the irregularities in the sale of Government bonds and report on the matters including losses to public coffers is chaired by Supreme Court (SC) Judge, Justice K.T. Chithrasiri and includes SC Judge, Justice Prasanna S. Jayawardena and former Deputy Auditor General, Kandasamy Velupillai.

The Commission appointed by President Maithripala Sirisena first convened on February 6 to map out its work procedure. The Commission which was appointed late last month is scheduled to wrap up its work in three months and submit a report on March 31. The Attorney General’s Department is assisting with the probe. All those testifying before the Commission will be protected under the Assistance to and Protection of Victims of Crime and Witnesses Act.

Meanwhile, the Court of Appeal allowed notice to be issued on 12 respondents including the Attorney General, the Governor of the CBSL, the Treasury Secretary and others, named in a writ application filed by Perpetual Treasuries calling on the Court to quash directives issued by the Monetary Board of the CBSL to the company to halt dealing and bidding.

Also, Dr. Coomaraswamy had elaborated that they would in the near future be overhauling the structure pertaining to the procedures followed in the issuance of Treasury bonds including the method of auctioning with the view of putting in place a more water-tight formula. He has noted the fact that there were perpetrators involved in the said scam who continue to remain in service since his taking over the reins.