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The special Presidential Commission of Inquiry to investigate and inquire into the issuance of Treasury Bonds which was appointed by President Maithripala Sirisena had its sittings on four consecutive days this week too. While the three-member commission was having its sittings, former Governor to the Central Bank of Sri Lanka (CBSL), Arjuna Mahendran also became a constant visitor to the Commission premises.

Though the former Governor is yet to be called upon by the Commission to give evidence, he was questioned by the Police for three and a half days. He had been summoned to the Commission premises by the Police on March 10.

The same process continued on March 13 and 14 too. However, the officials finished the initial questioning of Mahendran on March 15 at around mid-noon.

The public hearings of the Commission on Monday began with the CBSL’s Director of the Macroprudential Surveillance Department, N.W.G.R. Dhammika Nanayakkara who was also a former Superintendent and Registrar of the Public Debt Department.

Nanayakkara told the Commission that there was no official body to scrutinize the decision-making of the Public Debt Department and the Tender Board prior to 2015. He also said that he had experienced the effort and fear which were felt by the Tender Board members while preparing minutes after an auction.

According to Nanayakkara, it happened on a date in 2016 March when he was the Acting Superintendent of the Public Debt Department. “I saw a big difference when I went for the Tender Board committee meeting that day. There was a great sense of fear in the members. Everyone was thinking their decisions will be scrutinized by the Committee on Public Enterprises (COPE) or other investigating agencies. On that particular occasion, I realized that they spent more time preparing the minutes,” Nanayakkara said.

He also added that the impression he felt from the other Tender Board members was something like “Api Berenawada? (Will we be saved?)”. He stressed to the Commission that following the controversial Treasury Bond issue in 2015 February there was much more of a scrutiny of the Public Debt Department and the Tender Board decision-making process.

Nanayakkara who was questioned the following day too said there had been a “potential conflict of interest” in respect of the issuance of a primary dealer licence to Perpetual Treasuries (Private) Limited in 2013.

The witness was questioned on the issuance of licences to the primary dealers and the procedure involved.

The Commission also questioned Nanayakkara on what guarantees they were given by the newly established company, Perpetual Treasuries which only fulfilled the minimum requirement of Rs 300 million deposited in a current account. His answer was that they were concerned only about the capital shown to them.
The Commission recorded that Perpetual Asset Management (Pvt) Limited had recorded a net loss of Rs 2.8 billion as of March 31, 2012. Further, one Renuka Group to which all the unquoted shares of Perpetual Asset Management belongs, is owned by Cabraal’s family.  It was also brought to the fore that Perpetual Capital Holdings (Pvt) Limited, the main holding company of the Perpetual Group of Companies owned by Geoffrey Aloysius and Arjun Aloysius, is the mother company of Perpetual Treasuries.
Though he admitted a “potential conflict of interest” in the controversial issue, he denied any personal knowledge of the fact that  Arjun  Alosiyus was a close relative of Mahendran.

He said that  according to the Code of Conduct for Primary Dealers, the Public Debt Department could withhold or cancel the licence of a primary dealer on the grounds of a conflict of interest. Nanayakkara also said he was unaware of the fact that during the tenure of Cabraal as the Governor of the Central Bank, that his brother-in-law, niece and two cousins worked as managerial level officers at the Development Finance Corporation of Ceylon, the Hatton National Bank and the Bank of Ceylon respectively.

The Commission also ordered the representatives of Perpetual Treasuries to handover their balance sheets, annual reports and other relevant documents pertaining to affiliated companies for scrutiny and they agreed to submit those soon.

The Commission observed that the Public Debt Department issued direct placements to stand alone Primary Dealers without the approval of the Monetary Board from 2008 up to 2015 February. Nanayakkara referring to the documents also said that the Public Debt Department had raised volumes in the range of billions of rupees during the said period.

On March 16, Secretary to the Monetary Board, H. A. Karunaratna who had served under a number of Governors said that the CBSL felt a “general shake up” with the transfers of all the key operational officers within the institution by the newly appointed Governor Mahendran in early February 2015.

The Monetary Board Secretary said that it was the first time in the CBSL’s history that so many transfers had been made within one year. He admitted that the Bank had an annual appraisal schedule in August and September where around 200 staff transfers took place. He however noted that very few transfers pertaining to Heads of Departments were made (about three or four).

He added that in 2015 alone, a total of 501 officials including 14 Heads of Departments (HoDs) and 20 key officials attached to the 30 Departments of the Bank were transferred. “Altogether, 501 transfers took place in the Bank during the year of 2015.” He also said that certain senior officials including himself had discussed the matter with the then Governor, adding however that he didn’t think the effort in this regard worked. Commission member Jayawardena warned the witness to be always factual, saying that “The knife cuts both ways.”

He also added that he had worked under several Governors, namely A.S. Jayawardena, Sunil Mendis, Cabraal and Mahendran and transfers of such a magnitude had never been experienced previously except when under Mahendran.