‘Let Perpetual Treasuries Ltd comes to the Commission’: said DSG

-‘Methodology’ used in determining Bond Transactions totally erroneous: PTL lawyer  

By Shehan Chamika Silva

In order to clean its reputation, the Perpetual Treasuries Ltd (PTL) should come to the Court (Commission), said Deputy Solicitor General Milinda Gunathilake.

The DSG said so regarding the allegations leveled against PTL based on the questionable higher profits gained during the bond transactions which had taken place in the secondary market. 

He made the submission during a heated argument took place between Deputy Solicitor General and PTL’s Counsel based on the methodology of calculation used in providing bond transaction details by Additional Director of CBSL’s IT Department Mr. Wasantha Kumara Alwis.

Mr. Alwis had testified before the commission based on the systematical details pertaining to the bond transactions of the PTL which was set out in the systematic medium called Lanka Security System (LSS).

Based on provided bond transactions details, DSG Milinda Gunathilake on the earlier occasion highlighted the questionable pattern which had been used by the PTL when selling bonds to the State institutes (EPF) in the secondary market, where PTL gain higher profits doubtfully as details depicted in the LSS. 

However, President’s Counsel Nihal Fernando, who appeared on behalf of the PTL yesterday cross examined the witness and questioned the means, on which the witness had analyzed bond transactions.

Mr. Fernando was of the view that the calculations of the net cash in flows of PTL was made without considering the dates of which the parties had entered into the bond transactions, and as a result, the yield price, which determined on the Transaction dates were also not concerned.

Therefore, he contested that the ‘Methodology’ used by the witness in preparing net cash inflows details was totally flawed for not considering the transaction dates.

The witness replied that he had analyzed the calculations reasonably with the details available in the system technically in the form of script less documents.

Meanwhile, during the Cross examination, when Mr. Nihal Fernando questioned on the relevancy of the witness’ uncertain evidence before the commission, Deputy Solicitor General commented that such evidence was led in expectation of summoning the ‘Perpetual Treasuries Ltd’ before the Commission and let them come and clear their name.     

Controversial Bond Auction affected “Market Integrity”: says Primary Dealer

-First Capital MD says February 27, 2015 auction was an unprecedented-Finance Ministry not followed proper accounting standards for years-AG affirms World Bank stance of no formula of calculating losses -Auditor General concludes evidence

By Shehan Chamika Silva

Managing Director of First Capital Holdings PLC (one of the Primary Dealers), Dinesh Schaffter testifying before the Bond Commission said that the bond auction held on February 27, 2015 was an unusual one.

He was of the view that the acceptance of ten time bigger value of bids (10 billion) comparing to what offered by CBSL (1 billion) was unprecedented.

He said such difference between offered amount and accepted was a direct effect to the ‘market integrity’, on which lot of economical aspects were depending.

He also said the decision to accept bids at a higher rate was also concerned as an extraordinary occurrence happened at the auction.

During the Cross examination led by Counsel Romali Tudawe who appeared for the Perpetual Treasuries Ltd, it was explained that the First Capital was informed about the indicative rate as 9.35% by the CBSL before the auction, and thereby they had bid 100 million as a dummy bid considering the amount offered.

However, the Counsel was of the view that the CBSL had not communicated such indicative rate but the rate of which previous 30 year bond was issued using DPM.  

When questioned more about the certainty of the indicative rate, he further elaborated that he was not a dealer of the company and the phone call from the CBSL regarding the indicative rate was not received to him but the 9.35 % was the rate what communicated to him by his officers.

It was also revealed that the witness had sent a letter to the Dr Harsh de Silva then Deputy Foreign Minister informing the unusual incident on March 3, 2015.

When further questioned over his losses, Mr. Schaffter was of the view that despite losses he sustained, 

Meanwhile, During the re-examination conducted by Deputy Solicitor General Priyantha Nawana, the Auditor General said proper Accounting Standard were not followed for years by the Finance Ministry in maintaining accounts relating to the transactions of Treasury Bonds issued by the CBSL.

In consequence of not adhering to proper accounting standards, the gap amount was approximately up to Rs. 500 billion in Finance Ministry’s accounts comparing to the actual results of the bond transactions, said Mr. Wijesinghe. 

He informed the commission that the Auditor General’s Department had continuously requested to adjust the improper accounting standards used in bond transactions from the Ministry, but they never changed the continuing practice.

He also said that he rejected forwarding his opinions in the course of auditing Ministry’s accounts on the last occasion due mainly to not following proper accounts standards. 

However, it was revealed that the Ministry has now started adopting the said standards into their accountings subsequent to the AG’s rejection.

Mr. Wijesighe also explained that the Finance Ministry nevertheless had no legal binding to adhere to the Sri Lankan Accounting Standards as per Laws.

Concluding his evidence at the Bond Commission, Auditor General said former Governor Arjun Mahendran had not maintained the professional due care during the two controversial bond issuances held on February 27, 2015 and March 29, 2016, therefore former Governor should be responsible for the losses incurred.

It was also exposed that the Auditor General’s primary focuses and the principles when preparing the report were the’ Value for Money’ principle, whether borrowings achieved at the least cost to the Government, whether officials had acted with due care, transparency of the transactions, and the losses incurred due to cease of Direct Placement Method.

When the Commission questioned referring to a letter received from the World Bank regarding the controversial bond issuances, the Auditor General affirmed the World Bank’s stance that there was no particular method available in calculating losses incurred in such controversial instances.

It was revealed that if in need of computing losses in such incidents, the World Bank had mentioned a requirement of a ‘Counter Factual’, which was the ‘exclusion of Direct Placement Method’ used in the Audit Report.

Governor responsible over exclusion of DPM – Auditor General - Mahendran’s lawyer says loss calculations of AG are simplistic - No use of DPM since February 2015

By Shehan Chamika Silva

Former Governor Arjun Mahendran’s intervention largely resulted to deviate from the Direct Placement Method (DPM), which resulted avoidable losses in the process of raising funds to the Government, said Auditor General.

According to the Auditor General, relevant authorities at Central Bank of Sri Lanka (CBSL) were also responsible including governor over the failure to issue treasury bonds at least cost to the state at the bond auction held on February 27, 2015.

Auditor General, Gamini Wijesinghe was of the view that the losses deemed ‘avoidable’ in the report had been formulated by him based on the core ground of ‘deviating from the Direct Placement Method’ in raising funds through Treasury Bonds.

Meanwhile, there were many questions came to light during the end of the cross examination in connection with the loss calculations of the Auditor General over the auction held on February 27, 2015.

The three tables stated in the ‘Audit Report’ were in highly concern during the cross examination, because Counsel Shanaka de Silva who appeared on behalf of the former Governor consistently attempted to demonstrate the undependability of the tables.

Counsel de Silva was of the view that the whole procedure maintained by the Auditor General in calculating was simplistic and unfair; because some of the losses he had calculated in relation to the February 27 auction contained serious miscalculations.

When questioned by the Commission it was revealed that all the acceptances of the bids that were more than the offered amount of bids (advertised amount of bids) at the auction were considered into the formula which Auditor General had used in calculating the losses.

Initially, there was a Rs. 13.5 billion government fund requirement, which CBSL had to raise through bond sales.

Generally, the method to use raise such amount of funds was the hybrid system, where both Direct Placement Method and the Auction used appropriately.

At the February 27, 2015 auction, the DPM was not used in raising funds and solely depended on the auction.

The offered amount of the CBSL at the auction initially was Rs. 1 billion while Public Debt Department’s (PDD) recommendation was to accept only Rs. 2.6 billion.

In the end, CBSL accepted Rs. 10.058 billion through the auction in the absence of the DPM.

However, the Auditor General rejecting the counsel’s allegation said that he had depicted losses in two ways using the cut out point of accepting bids at the auction as the initial offered amount (1 billion) or the recommendation of the PDD (2.6 billion) in the auction.

Questioning the current status of raising funds through bond issuance at the CBSL, Mr. de Silva explained that there was no DPM in use at the moment on Treasury bond issuance since February 27, 2015.

He also said there was no Monetary Board decision yet to continue with DPM as a better way.

In reply, Auditor General said that he was not aware the current status of the Monetary Board in not using DPM because he was required to examine on two previously bond sales.

Recordings not allowed due to confidentiality of proceedings: says commission

By Shehan Chamika Silva

President of the Bond Commission, K.T. Chitrasiri questioned Junior Lawyer of Former Governor’s counsel over allegedly recording commission’s proceedings, which was prohibited.

According to the information received by the Commission, the Junior Counsel had been allegedly listening to the recorded proceedings staying inside his car after the commission concluded its proceedings on June 15. 

When questioned, the junior counsel rejected the allegation and said he never have recorded proceedings nor listening to recorded proceedings in his car.

It was also revealed, that after the observation of Judicial Interpreter Mudaliyar S.M.Y. Kingsley Udaya, the commission on June 15 had caught one mobile phone belonging to a junior counsel of the lawyer who was representing the interests of Tender Board Chairman of CBSL.

Subsequently, the Commission emphasized that the decision on prohibiting recordings was taken to facilitate the confidentiality of the proceedings of the Commission; therefore the commission expects counsel to adhere to it accordingly.

Bond Scandal: Miscalculations of Auditor General revealed when cross examined

By Shehan Chamika Silva

The document prepared by the Auditor General in selecting which  samples of 'Treasury Bond Auctions' he would apply to conduct the audit on bond issuances of CBSL, contained miscalculations, it was revealed during cross examination today.

Initially, Auditor General, Gamini Wijesinghe was required to conduct a special audit on Bond auctions held during February 27, 2015 to May, 2016.

After examining the data of the all auctions, he had chosen two Treasury Bond Auctions (held on February 27, 2015 and March 29, 2016), which depicted strange issues.

He had decided to conduct the audit on the two particular auctions based on a document prepared by him using data of the CBSL bond issuance during the given time.

At the cross examination led by Senior Counsel Shanaka de Silva, who appeared for former Governor on the T-bond auction held on March 29, 2016, it was said that the Auditor General had selected sample auctions unfairly because he had only decided to conduct audit on February 27th, 2015 and March 29th, 2016 auctions, and that the decision was taken based on inaccurately prepared documents.

It was revealed that the Auditor General had computed wrongly in the document when deciding percentage of excess amount of bids accepted on March 29, 2016 comparing to the offered amount of the bids.

The value of the bids offered by the CBSL initially at the auction (March 29, 2016) was Rs. 40 billion but had unusually accepted Rs. 77.732 billion bids exceeding Rs.37.732 billion by the CBSL.

The miscalculated percentage of excess amount of bids accepted depicted in the Auditor General’s document as 326%, where it should be 190% comparing to the offered amount of bids at the particular auction, explained Mr. de Silva.

Mr. de Silva was of the view that the Auditor General was bias when selecting sample auctions to his audit.

In reply, the Auditor General said that the miscalculations had not affected to his final recommendations of the audit report sent to the COPE, therefore they were not that serious.

Consequently, the Commission said the matter brought into light by the counsel representing former governor was a serious one since the commission would rely on the data represented by the Auditor General; therefore correction is required at this time if there were miscalculations.

Despite past administrative faults Direct Placements Method shouldn`t be removed without alternative - AG

- Administrative irregularities evident in use of DPM for years

- PM insisted ‘auction system’ only due to corruptions in DPM

- There was no legal decision to remove DPM

- Current losses incurred due to no Hybrid System

By Shehan Chamika Silva

Despite there were considerable irregularities reported on the use of Direct Placements Method over the years, Auditor General during the Cross examination at the Bond Commission said today that it should not be removed without an alternative.

He was of the view that the interest rate should be at the appropriate level when issuing bonds through Direct Placement Method (DPM), because in the past it was evident that the bonds had been issued via DPM were largely noncompliance to the market rate, therefore huge losses could be found even in DPM as well.

The losses deemed ‘avoidable’ in his report was due to not continuing the ‘Hybrid System’ practiced previously in bonds issuing, where both auction and Direct Placement Method should be used to raise funds properly by the Central Bank officials.

When commission questioned it was explained that there were huge administrative faults visible in issuing bonds through DPM over the years, since there was huge deviation on interest rates comparing to the market prevailed rates at the time of the issuances of bonds through DPM.

The Auditor General however emphasized that irrespective to the misdeeds occurred previously in using DPM, the decision to raise funds solely through auctions cannot be justified because it had incurred huge losses to state unnecessarily during the period of February 27, 2015 to May, 2016.

He said CBSL should have stopped accepting bids, where value of the bids offered meets at the auction and thereby balance fund requirement could have been acquired through Direct Placement Method based on appropriate interest rate.

Meanwhile, during the cross examination conducted by Senior Counsel Shanaka de Silva who appeared for former Governor Arjun Mahendran, it was explained that according to what was stated in Parliament Hanzard report on March 17, 2015, Prime Minister Ranil Wickramasinghe had said that he insisted on public auction because private placements have led to corruption and lack of transparency for years.

Showing the Hanzard report to the witness, Mr. de Silva asked the witness whether there was a government decision already in practice before February 27, 2015 regarding the removal of using the Direct Placements Method in the process of Treasury Bonds issuance.

In reply, Auditor General ascertained that no such legal decision had been taken by the Monetary Board, which has the power to do so. And if the Government was to suspend DPM because of irregularities, then the decision should have come through a proper legal mechanism.

Merely a statement of the Prime Minister in Parliament would not turn into laws; thereby the officials of CBSL should not have used auctions solely to raise funds suspending the Direct Placement Method without a proper alteration to it, he said.

Failed to perform audit on CBSL debt management for years: Auditor General

- AG says no withdrawal of single word from ‘report’

- Exclusion of Direct Placements Method without alternation incurred huge losses

- Questions arise on EPF’s capability in long term investment

- Perpetual obtained 60% from exceeded bids accepted at March 29, 2016 auction

- Government borrowed Rs 4.7 trillion using DPM in last eight years

By Shehan Chamika Silva

The Auditor General’s Department had not conducted a single audit relating to the domestic debt management at Central Bank of Sri Lanka (CBSL) over the years in relation to the Government Securities, revealed in the Commission today.

Nondisclosure of data relating to Government Securities by the Public Debt Department of CBSL was the cause for such failure, said Auditor General, Gamini Wijesinghe.

When questioned by the Commission, Auditor General told that the Auditor General’s Department originally had attempted to audit the CBSL procedures in 2004, but there was a conflict with CBSL officials regarding the disclosure of market transactions details on the basis of ‘Secrecy’ policy.

After the first attempt of the Department to audit CBSL procedures, the Finance Ministry had sought opinion on Attorney General and subsequently, the Attorney General issuing a clarification in the same year (2004) had prevented obtaining secret details from the CBSL, Mr. Gamini Wijesinghe said.

However, during the cross examination conducted by Counsel Harsha Fernando, who appeared for the interests of chairman of the Tender Board, it was discovered that the Attorney General’s clarification (in 2004) on the issue contained no such prevention to obtain certain secret information from the CBSL in expectation of preparing an Audit Report by the Auditor General.

Consequently, SC Justice Prasanna Jayawardena questioned the witness as to why the Auditor General’s Department failed to conduct an audit over the CBSL proceedings since 2004, because there was no legal barrier to do so as said by the Attorney General in 2004.

In reply, Mr. Wijesinghe was of the view that the Auditor General’s Department had continuously made many efforts to obtain details from the CBSL even after 2004, nevertheless failed and faced many impediments as the reluctance of the CBSL officials.

However, the Auditor General also told the Commission that he needs more time to confirm on their attempts made to obtain details from the CBSL after 2004.

Despite the initial reluctances of the CBSL officials the information relating to market transactions relating to period February, 2015 to March, 2016 were given to the Auditor General by the CBSL ultimately to prepare the Audit Report on the controversial bond issuances.

During the proceedings it was also revealed that Government’s debt borrowed using Direct Placement Method was approximately Rs. 4.7 trillion during the time period of 2008 – 2005.

Meanwhile, during the cross examination conducted by Nihal Fernando PC, who appeared for the Perpetual Treasuries, Mr. Wijesinghe said Monetary Board and the officials at the Public Debt Department should be responsible over the failure to issue treasury bonds at least cost to the state, because without replacing a alternation method, the exclusion Direct Placement Method incurred huge loss to the government.

During the further cross examination on the EPF’s participation in the bond auction took place in February 27, 2015, it was revealed, that despite EPF’s sufficient fund availability stated on daily cash flows, the potential actual capability in investing long term bonds (30 year bonds) at the auction was questionable.

It was also explained at the cross examination regarding the March 29, 2016 bond auction, that the value of the bids offered by the CBSL initially at the auction was Rs. 40 billion but had unusually accepted Rs. 77.732 billion bids exceeding Rs.37.732 billion ,and out of that exceed amount the Perpetual Treasuries Ltd had obtained 60 %.

And also the Perpetual Treasuries Ltd had obtained Rs. 26.41 billion out of the total issuance of Rs. 77.732 billion at the auction held on March 29, 2016.

President’s Counsel Nihal Fernando concluding his cross examination suggested that the Auditor General’s report was prepared with enormous errors and thereby it had affected the Financial Market of the country, Foreign Investors and the Perpetual Treasuries Ltd inappropriately.

Refusing the submission, the Auditor General emphasized that his report was prepared with responsibly and accuracy and therefore he would not withdraw a single word out of the Special Audit Report submitted to the Parliament on the controversial bond issue.

The Commission which was appointed by the President comprised with Supreme Court Judges Kankanithanthri T. Chitrasiri, Prasanna Sujeewa Jayawardena and former Deputy Auditor General Kandasamy Velupillai to inquire into the Treasury Bond issue will resume tomorrow.

1.6 bn avoidable loss incurred in Bond auctions: Auditor General

-Rs. 5867 mn net profit to Perpetual Treasuries

-AG permitted to add more losses in secondary market

- Bond auction held March 29, 2016was unusual

-AG uncertain during cross examination

 

 

By Shehan Chamika Silva

 

The Auditor General’s report submitted to parliament stated that relevant authorities at the Central Bank should be responsible for a loss totaling Rs.1.674 billion incurred, the Auditor General Gamini Wijasinghe said today.  

 

The losses which were deemed ‘avoidable’ in the report, was in reference to the two Bond Auctions which took place on February 27, 2015 and March 29 2016.

 

The revelation was made during the continuation of evidence led by Deputy Solicitor General Priyantha Navana before the Presidential Commission for the Controversial Bond Issuances. Giving evidence the Auditor General said that the net profit gained by the Perpetual Treasuries Ltd during April 1 to August 31, 2016 was amounting to Rs. 5867 million.

 

When delivering his evidence over the Bonds Auction held on March 29, 2016, the Auditor General explained that the value of the bids offered by the CBSL initially at the auction was Rs. 40 billion but had unusually accepted Rs. 77.732 billion bids exceeding Rs.37.732 billion.

 

However, the Funds requirement of the Government at the time was around 80 billion.

 

He moved that the decision to raise funds solely from the Bond auction was irrational because it could incur financial losses to the CBSL in various ways.

 

The CBSL could have stopped accepting bids at the 40 billion cut out and raise other funds requirements of the Government through using Direct Placement Method.

 

When questioned by the commission Auditor General said if the DPM was not available the CBSL could have stopped the accepting bids at Rs. 40 billion cut out in the auction and go for another auction later within a week to raise other funds requirement.

 

And he said the OD facilities of BOC and People’s Bank could have used to manage the process until the second auction, because the funds were required to the Government by April 2.

 

Commenting on the participation of the Employee’s Provident Fund in the bond market, the Auditor General also said according to his findings that the EPF had invested only in the secondary market at lower interest rates despite its availability in investing at primary market at higher interest rates. However, when questioned by the Commission it was revealed that such decision is identified as a complex one to the EPF authorities.

 

On the other hand, at the cross examination conducted by Nihal Fernando PC and Counsel Romali Tudawe the Auditor General was asked to answer on some theoretical questions regarding Treasury Bonds and the methods he used in loss calculations.

 

It was seen that Auditor General was uncertain at some points responding to the questions during the cross examination.

 

Subsequently, considering the significance of his evidence, the president of the Commission SC Justice T. Chitrasiri advised the Auditor General to avoid subject matters that he does not have expert knowledge and to reply with great attention to the questions, because contradictory responds would be a reason to set aside the whole evidence of him.

 

Meanwhile, the Commission yesterday requested the Auditor General to inquire and prepare a report on transactions taken place in the Secondary Market regarding the issuances of Bonds in the Primary Auctions held during February 1, 2015 to March 31, 2016 by the CBSL.

 

Earlier, it was revealed that the CBSL had failed to provide details regarding the secondary market transactions in order to calculate more possible losses due to the controversial bond issuances.

 

The Commission did so with the intention of examining any further financial losses to the state or any other public body.

 

The decision was made acceding the application made by the Attorney General’s Department while the objections, which were based on the mandate given to the Commission were also overruled.

 

The objections were raised by the counsel who appeared on behalf of the Perpetual Treasuries Ltd and the Former Governor.

 

The Commission which was appointed by the President comprised with Supreme Court Judges Kankanithanthri T. Chitrasiri, Prasanna Sujeewa Jayawardena and former Deputy Auditor General Kandasamy Velupillai to inquire into the Treasury Bond issue will resume today.

There was no need for a 30 year bond: Auditor General

-     Value of the bids accepted at the auction unprecedented

-         Initial loss was 688 million on the auction day


By Shehan Chamika Silva

Testifying before the Commission on the Controversial bond issuance that took place on February 27, 2015, Auditor General Gamini Wijeysinghe said that the decision to go for a thirty- year bond at a high interest rate cannot be rationalized because according to the Ministry of Finance, the Government wanted borrowings largely to settle the interest payments of the previously issued Bonds.

Initially, the Government needed borrowings amounting to 13. 5 billion by March 2, 2015 and subsequently, Central Bank of Sri Lanka had originally intended to sell 1 billion rupees of 30-year bonds at the primary auction held on February 27 in expectation of obtaining funds for Government via bond auctions.

The Auditor General revealed that 10 billion out of the requirement was generated due to the amount payable as interest payments for previously issued Bonds.

He said there was no need to raise money solely from the Bond auction, because the funds could have been raised using Direct Placement Method from the Employee’s Provident Fund and by means of short term Treasury bills.

However, it was revealed at the Commission that Former Governor Arjun Mahendran had unusually visited twice the Public Debt Department while the auction was taking place and had instructed to accept bonds amount to 10.058 billion even at the rate of 12.50%.

During the evidence led by Additional Solicitor General Yasantha Kodagoda PC, it was explained that Rs. 2000 million bids received directly form the Perpetual Treasuries Ltd (PTL) at the auction was accepted while another Rs. 3000 million was accepted from the Bank of Ceylon bids, which were largely on behalf of the PTL.

After conducting a comparison between the practices that had previously at the CBSL on issuing bonds, the Auditor General said that the value of the bids accepted by the CBSL (10.058) was 905% far above comparing to the value of the bids offered by the CBSL (one billion).

Examining on the 248 bonds issuances which had been taken place previously during the period of 2008 to 2014, Auditor General said it was an unprecedented decision of the CBSL.

He also confirmed that the CBSL failed to provide information properly as requested because the details on the Secondary Market transactions were not received to the Auditor General’s Department when preparing the report.

When questioned over the temporally suspension of Direct Placement Method on March 2, 2015 the Auditor General said there was no such decision was derived from the Monetary Board according to his findings.

He also ascertained that despite the PDD’s recommendation to accept only Rs. 2.6 billion from the auction, the Former Governor had intervened to the Tender Board and instructed to raise taking up to 10 billion.

When asked Auditor General’s opinion to the Commission was the fund requirement of the Government (13.5 billion) should not have solely obtained from the Bond auction, but in a way of both Direct Placements and the auction.

Due to the sole use of auction to raise funds, Rs. 400 million was recognized as a due funds gap created to the Government because in the auction method there were discounts on the face value for the Primary Dealers.

According to the Auditor General’s computation, initial loss occurred to the Government on the day of the auction was Rs. 688,538,600 (688 million) due to not complying to the PDD’s recommendations to accept only 2.6 billion from the auction.

The Auditor General also revealed that Public Debt Department failed to provide reasons over the decision taken by them to accept bonds with rates up to 12.5%.

It was revealed that there was no research or calculation had been made by the PDD before deciding on a high rate of Coupon rate, thereby the decision was exclusively made by the heads of the PDD.

BOC bid on behalf of Primary Dealer for the first time : CBSL officer unusually knew about acceptance of bids at high rates

By Shehan Chamika Silva

It was revealed at the Bond Commission that the Bank of Ceylon (BOC) had bid on behalf of a primary dealer (Perpetual Treasuries Ltd) for the first time at the thirty year bond auction of Central Bank took place on February 27, 2015.

Initially, the Central Bank of Sri Lanka had originally intended to sell 1 billion rupees ($7 million) of 30-year bonds at the primary auction held on February 27. Thereby, primary dealers, like BOC, could bid in the auction directly or on behalf of there customers.

The BOC had decided not to bid directly at the auction due to various possible economic fluctuations in thirty years but had bid on behalf of three companies, Kaluthara Bodi Trust, Ceylico Insurance and the Perpetual Traesuries Ltd.

The Perpetual Treasuries were significant in this process since it was also a primary dealer who could directly place bids at the thirty year auction.

However, it was revealed that the PTL bided via BOC to get settlement easiness opportunity.

At the leading evidence of former Chief Dealer of Bank Of Ceylon Treasury Division, Mr. J.K. Dharmapala, it was explained that when the auction was being held on February 27, 2015, Chief Executive Officer, Mr.Kasun Palisena had contacted Mr. Dharmapala and requested to bid on behalf of them at the bond auction and subsequently, the bidding rates of PTL were sent to the BOC.

Senior State Counsel Dr Awanthi Perera who led the evidence also played few recordings of phone conversations happened between Mr. Dharmapala and Palisena before the Commission and questioned intensely over doubtful conversations from the witness.

Mr. Dharmapala said that the bids were at 12.50% interest rate and the bidding amount was Rs.13 billion. According to his evidence it was revealed that such high rate could not have been seen as acceptable by the CBSL since the acceptable interest rate for bids should be below 10%.

He said that he thought the bidding of PTL as dummy bids because such high rates would never be accepted by the CBSL.

However, he went on to proceed with the PTL bids without obtaining approval of the heads of the BOC and it was also revealed that due to the irregularities occurred during this course of bidding the BOC’s disciplinary division had conducted an internal inquiry against the witness and cautioned him.

However, after the auction results, Mr. Dharamapala said that he was shocked because he was informed that the Former Governor had unusually visited twice the Public Debt Department while the auction was taking place and had instructed to accept all bids even at the rate of 12.50%.

Out of the 13 billion bids at the rate of 12.50, which were bid by BOC on behalf of PTL; three billion were accepted by the CBSL.

“After the acceptance of such amount of bids at a rate of 12.50%, I was of the view that whether the PTL had the knowledge of information regarding such possible acceptance of CBSL, because generally, the CBSL would not accept bids at such a high rate nor accept such amount of bids” he said.

In the meantime, Mr. Dharmapala revealed to the commission that there was an officer attached to the Information Technology Department of CBSL, Mr. Sulochana had come to the BOC on February 26, prior to the thirty year bond auction, in expectation of bidding in the auction at a rate of 12.50 %.

“It was quite unusual coincidence, since that officer had told the back office official of BOC when forwarding his application that bids at 12.50 rate would be accepted tomorrow (27 February)”, he said

And also witness said that Perpetual Treasuries had paid the amount due on March 2 to the BOC and the BOC gained a bidding transaction commission of Rs. 234,000 as a profit for bidding on behalf of the PTL.

It was also revealed at the commission that the BOC had later issuing a board memorandum set regulations and restrictions when bidding on behalf of customers and specifically setting regulation put the compulsory permission requirement of heads of BOC when bidding on behalf of primary dealers.

The Commission comprised with Supreme Court Judges Kankanithanthri T. Chitrasiri, Prasanna Sujeewa Jayawardena and former Deputy Auditor General Kandasamy Velupillai will resume the inquiry tomorrow..