President’s Bond Drama

Daily Mirror

“It is well that the people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.”
– Henry Ford

Addressing the 68th party Convention /Anniversary on his 68th Birthday at Sugathadasa Indoor Stadium, President Maithripala Sirisena stated that “a person larger than Arjuna Mahendran, the former Central Bank Governor, would face trial in courts for the unprecedented Central Bank bond scam. “The files are ready” he claimed.

 Psychologists have conceptualized Machiavelianism in a ‘short and sweet’ statement as, ‘callousness, manipulativeness, and an indifference to morality’. Psychopathy  and Machiavellianism overlap a great deal, they are diverse behavior constructs. They say Machiavellianism is a sub-clinical form of psychopathy, as they share cold insensitivity and manipulative leanings as their main characteristics.

Who could it be—President contemplates in taking to courts? Surely, not Ravi Karaunanayake (Ravi K). Though Ravi K was the Minister of Finance during the period, the subject of CB was scandalously taken away from him and placed under Prime Minister. [assignment of subjects/functions is the sole responsibility of President] But it was revealed at the Commission that he, [Ravi K] instructed the Chairmen of the three State Banks not to bid for bonds at the auction, and also the PCoI reported him for giving false evidence and wanted the government to prosecute him under bribery. Then who is this ‘big person’; was it the person who ignored its recommendations for initiating legal action against Minister Ravi Karuna,nayake?

The other possible accused could be— the powerful person who insisted Governor Mahendran to switch to Public Auction method instead of Private Placing, an act that helped, as revealed by the Commission, in carrying out the crime. The third alternative is the State Minister who wrote a book exonerating the Bank Robbers, he even filed a motion in a court of law to prevent COPE Chairman from publishing the report, [the case was withdrawn subsequently after learning the stupidity involved in the idea, as the defendant would attach the said report in his answers automatically bringing it public domain.] This same man was in constant touch with Primary Dealer Arjuna Aloysius making more than hundred  telephone conversations while writing the book and also during the time when COPE investigated the matter.

Larger than Mahendran?  There are more than one, Mr President!

Even if they enact legislation to prosecute the scoundrels, they can only recover a speck of the loot.  The drafting of new laws, [doubtful even under a Rajapaksa rule] must incorporate confiscation of assets of all those who aided and abetted even at highest levels in the scam and should include who endeavored in the enormous cover up effort. 

There were a few others who participated in the COPE who ridiculed the Auditor General and finally disagreed with the draft report by making infamous ‘foot-notes’. The last two are now leading ‘Sajith Enawa’ programme for the Deputy to introduce them as men with honesty and integrity. “There are no rogues on my platform”, he proudly claimed. The fourth alternative is the super power, who re-appointed the Governor for one more term, in spite of being caught red-handed for making billions in losses at the first successful attempt.  This person going a step further prorogued  the Parliament on the eve of presentation of DEW Gunasekara’s COPE Report, thus preventing it from taken up for debate, an act that helped the rogues to carry out a more disastrous second scam an year later. Psychologists suggest that politicians high in Machiavellianism do not basically aspire to achieve, they do so at the expense of others or at least with callous regard to others.

Economics of Bond Scam

A few years ago, government look hard on corporate entities and individuals such as Golden Key, who were growing wealth by accepting deposits from clients promising exorbitant interest rates and, instead of investing the money profitably to earn dividends, they accepted enhanced deposits to pay depositors’ interest. The yahapalana government did the same thing for four and a half years. There will be no end to this.  

They will keep on borrowing to pay accumulated interest; this will continue unless a new government take office and change and revamp the economy. On the advice of visiting IMF officials the Treasury Bond scheme was introduced in 1997. The Cabinet of Ministers and the Central Bank Monitory Board with the blessings of IMF encouraged outsiders as brokers [primary dealers] and some officials to monetarily gain.

The primary dealers and CB officials including Top Brass amassed profits unethically during the Rajapaksa regime as well. But the irregularities came to light only in 2015 when one primary dealer who had contacts with the Governor of the CB attempted to do big business. A small scale pilfering wouldn’t have affected the day to day cash flows  and no one would have observed any misdeed. 

Seven transactions made by Perpetual Treasuries Pvt Ltd caused a loss of over Rs. 26 billion when Perpetual Treasuries spent Rs. 52.82 billion to buy bonds and resold them to Employees Provident Fund, within five days, for Rs. 79.14 billion. 

“Seven transactions made by Perpetual Treasuries caused a loss of over Rs. 26 bn, when Perpetual Treasuries spent Rs. 52.82 bn to buy bonds and resold them to Employees Provident Fund, within five days, for Rs. 79.14 billion”

How was Malik  Samarawickrema, now a staunch supporter of Sajith who was not a state official nor a Member of Parliament in February 2015, did attend a crucial meeting with Monetary board at CB? Why did the PM in his statement to Parliament in March 2015, a few days after the first scam, skillfully avoided mentioning the name of Samarawickrema when he listed the names of participants. Who sanctioned the increase in Policy Interest Rate from 5% to 6.5% at the 11th hour in violation of the ruling of the autonomous governing body, the Monitory Board -. On whose authority Mahendran instructed the Public Debt Department to scrap the plenary rate of interest. According to him it was Prime Minister who ordered him to go for Auction system instead of the Direct Placement, causing an enormous loss when the issue was increased to 10 billion? As per Monitory Law Act the Governor is obliged to inform the Monitory Board on Prime Minister’s instructions, which he purposely avoided.  During March 31 Bond issue [the second]that followed; initially, an offer of 20 billion was arbitrarily increased to 50 billion. The applicable rate was between 11.75 and 13.72 very much higher than the estimated rates for settlement. These transactions were carried out under a dealer dominated back ground as the Central Bank was bound by a condition to recognize auction offers only.  The PCoI appointed was required to investigate if the transactions were been carried out recklessly, negligently, fraudulently, and irresponsibly, resulting in losses to the State; whether there has been any irregularity, malpractice or non -compliance in the procedures; whether there has been any disregard of the proper procedures non-compliance; if such disregard or non-compliance of procedures have caused discriminatory, improper or irregularity in award of bonds; if any probe or inquiry into any of the above, had been thwarted or prevented resulting in damage or loss to the Government, etc.

Half-baked though, a PLUS point in 19A 

Instead of abolishing  the Executive Presidency,  the 19 A has piled up an unpleasant task on the  person who gets elected to that position in December. The only task left for him would be to ‘pull the rug from under’ PM/Cabinet’s feet and create mayhem. A cart that is drawn by a couple of bullocks of different varieties [Ela and Mee they say] drawing it in different directions for four and a half years have brought untold misery that reached its peak last April when 97 warnings by intelligence both foreign and local were ignored. They have now delved deep in a blame game. In the interest of the nation, the top hierarchy of all three political entities must retire leaving it to the second tier leadership. The rank and file; the grass-roots must radicalize their forward march in establishing internal democracy within the main parties.