Secondary Market transactions of EPF- Perpetual Treasuries Ltd pre arranged
-Saman Kumara was a constant visitor to Mahendran office
-Mahendran wanted daily reports of EPF secondary market transactions
-This was not a prevailing practice before at CBSL
-Witness listens to voice recordings between EPF, PTL and PABC
By Shehan Chamika Silva
Former Superintendent of the EPF, A. Jayalath today told the PCoI that Former Governor Arjun Mahendran had threatened him to appoint Saman Kumara, the controversial dealer, into the Front Office operations of the EPF in 2015.
Former Superintendent of the EPF, A. Jayalath yesterday also confirmed that there were certain collusive activities visible during the secondary market transactions happened between EPF and Perpetual Treasuries, where Pan Asia Bank had acted as an intermediary in November, 2015.
Mr. Jayalath, who is currently serving as an Assistant Governor at CBSL and had worked as the Superintendent of the EPF Department during the time period of April, 2015 to April 2016.
Mr. Jayalath explaining the several transfers that took place at EPF in 2015 told the Commission that when he was appointed as the Superintendent, two most experienced officials, Paduman and Dilini, were transferred from the EPF in April, 2015.
Later in June, 2015, Saman Kumara was transferred into the EPF and the witness had appointed him to do Risk Management duties.
The witness said that he was concerned about the performance of Saman Kumara because the staff at EPF was kept informing the witness about Saman Kumara’s questionable past and his involvement in several controversial deals when he was at the EPF before.
However, on June 8, 2015, former Governor, Arjun Mahendran had phoned him and scolded saying that he has sent a CFA qualified fellow to the EPF, therefore appoint him to the Front Office of the EPF.
The witness said the Former Governor wanted to put Saman Kumara into the Front Office by going against the witness’ wish.
“The Governor scolded me to put Saman into Front Office and it was apparently a threat to me then I asked him to give one more week to do so”, the witness said.
Subsequently, Saman Kumara was trading in equity matters at the Front Office.
During this time period the witness said that he was continuously asked to intensify the secondary market transactions of the EPF by the former Governor and as a result of that he had to send daily reports relating to its transactions to the Governor, which was not a prevailing practice previously at the CBSL.
However, in October, 2015 two officials who were handling the matters relating to the Front Office Fund Management were also transferred.
The witness said then he kept asking experienced and skilled persons to operate the division but the Governor was reluctant to send previously transferred people back to the EPF but asked him to utilize Saman Kumara instead.
Consequently, the witness said he had then appointed Saman Kumara as the head of the Front Office, and thereby he started handling deals relating to the Treasury Bonds.
According to the witness it was also revealed that Saman Kumara was a constant visitor to the office of the former Governor, and their unusual relationship was evident in several instances. He said it was unethical for Saman Kumara to talk about EPF division’s decisions with the Governor.
It was revealed that questionable secondary market transactions between EPF and Perpetual Treasuries Ltd had been taken place in November, 2015, where PABC acted as an intermediary.
However, in January, 2016 there was a rumor circulating in the market about the EPF’s secondary market transactions.
The witness said an e-mail was circulating at that time and consequently he was asked to conduct an investigation about the matter by the Monetary Board and the then Governor.
It was revealed that the witness had prepared a report identifying some suspicious activities that happened during the alleged transactions based on the information he collected at the middle office.
He said the preliminary investigation was conducted in the absence of a voice recording system at the EPF and therefore he had mentioned in his report that he could not affirm allegations stated.
However, the report was given in February 2016 to the then Governor but the witness had not received any feed back from the Governor afterwards. The existence of such a report came to light only in October 2016 during the inquiry conducted under the new Governor Indrajith Kumaraswami.
The witness also said that he had informed the Governor about the necessity of having a voice recording system to scrutinize the dealers who contact with other counter parties. However, setting a voice recording system was never considered.
According to the PCoI Commissioner, Justice Prasanna Jayawardena’s examination it was revealed that setting such voice recording system into the EPF costs only about Rs. one million.
Subsequently, Deputy Solicitor General Milinda Gunathilake, who led the evidence, played few phone conversations that had been taken place between PABC, PTL, and EPF dealers in the course of secondary market transactions.
These voice recordings were obtained by the investigation from the voice recording system of the PABC.
Having listened to the phone conversations, the witness, Mr Jayalath said that it was apparent that the prices and the rates had been prearranged when PTL and EPF have been transacting in the secondary market through PABC, because there were no negotiations visible in the conversations.
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