Colombo, Oct 28 (NIA) – A Sri Lankan parliamentary committee on Friday, recommended legal action against the former Central Bank Governor Arjuna Mahendran and other officials for being involved in controversial bond deals.
Sunil Handunetti, Chairman of the Committee on Public Enterprises (COPE), presenting the COPE report to parliament said that evidence brought before the committee had indicated that Mahendran was directly responsible over the bond transaction and that legal action should be taken against him and other concerned individuals.
He said Perpetual Treasuries, a firm connected to Mahendran’s son-in-law, Arjuna Aloysius, had made enormous profits from the deals.
In February 2015 the Central Bank advertised the sale of LKR 1 billion (US$ 6.7 million) in 30 year government bonds at an indicative rate of 9.5% .The sale was oversubscribed with 36 bids totaling LKR 20 billion (US$ 135.2 million). The majority of bidders, 26, bided for Rs. 100 million or less at a rate of 9.5%–10.5%. However, a few bidders, including Perpetual Treasuries Limited, wanted interest rates of 11%–12%.
On 27 February 2015, the bank accepted LKR 10 billion (US$ 676 million) in bids at rates of 9.5%–12.5%. The issuing of ten times the advertised bonds, and at a higher than expected rate, was alleged to have cost the Sri Lankan government an additional Rs. 40–45 billion (US$ 270.4 – US$ 304.2 million). Perpetual Treasuries was issued, directly and indirectly, with Rs. 5 billion (US$ 338 million) in bonds at 12.5%.
The committee recommended that action should be taken to examine and recover any losses to the state and Central Bank.
The Central Bank should also conduct its own probe and come up with procedures to make auctions transparent, the Committee recommended.
Prime Minister Ranil Wickremesinghe said that the Government will respect the report and it will be debated in parliament. It will be sent to the Attorney General for further action and government will abide by the advice of the Attorney General.
COPE’s debate on the report was stormy with the ruling United National Party (UNP) totally opposing the Attorney General’s report on the scam. The UNP’s bid was to save Arjuna Mahendran who is a close friend and economic adviser of Prime Minister Wickremesinghe. Mahendran’s plea was that he was not directly responsible for the decision to sell the bonds at 11 to 12 percent range.
In response to the opposition’s charge that Mahendran had fled the country, the Prime Minister said that he had left the country to attend a wedding and will be back soon. Mahendran is a Singaporean national of Sri Lankan Tamil heritage.