Aggrieved Golden Key depositors claim govt. disregarded Supreme Court

• Around Rs. One billion yet to be repaid to the depositors

Repayment scheme promised before Court not complied 

By Shehan Chamika Silva

Some of the Golden Key depositors allege that the government has disrespected and ignored the Supreme Court of the country by failing to honour the undertaking, which was given before the Supreme Court in August 2015, to make 41% of the repayment to the Golden Key depositors within a year.

  

Collapse of Golden Key

Golden Key Credit Card Company was a fully owned subsidiary of the Ceylinco group. It was incorporated in 1977 and it had pioneered the Credit Card industry in Sri Lanka. It was a major financial institution at that time in Sri Lanka backed by the Ceylinco group, which had more than 300 subsidiaries then. Owner of this group, Lalith Kotelawela was perhaps one the richest men back then.  

However, this Golden Key Credit Card Company Ltd (GKCCL) was an unregistered company under the CBSL.It was doing a business of financial nature. Unlike other financial institutions and banks they were actually giving unbelievable interests for the deposits. They accepted deposits from customers at high rates of 20% - 30% p.a. and, invested them in real estate construction projects which were long-term.

People were borrowing from normal banks and putting in GKCCL to gain profits from the interest difference. They advertised openly. Nobody said anything. 

It was said however that the Central Bank of Sri Lanka (CBSL) knew there was a problem that it was an unregistered financial institution and its businesses were against the prevailing rules and regulations at that time. 

In 2008, Golden Key Credit Card Company Ltd was collapsed. Many contemplate the reasons as due mainly to the effects of the global financial crisis and effects of some local Ponzi schemes such as Sakvithi and Danduwam Mudalali. The Golden Key started having problems. It could not sustain the consequences. GKCCL finally was in a terrible state. People who deposited money started to withdraw.

Experts point out as the main reasons to the GKCCL's collapse were mismanagement of the company, maturity mismatch of assets and liabilities, lack of risk management policy and internal frauds by the top management.

When the GKCCL was crashed, there was Rs. 26 billion worth of deposits in it with over 9000 depositors. But the Company had only assets of around Rs. 300 million although the debt was around Rs. 26 billion. So, Rs. 25.7 billion was unaccounted for.  

Recovery process of deposits  

In 2009, the aggrieved depositors filed an application in Supreme Court. Their foundation on the application was that under the Article 12(1) of the Constitution all persons are entitled to the 'equal' protection of the Law and therefore the failure of the State to protect that right of them which arisen out of the collapse of the GKCCL.

On March 23, 2009 the Supreme Court allowed to proceed the application.

This Fundamental Rights Application was heard during 2009 to 2015 with Chief Justices, Sarath N Silva, Shirani Bandaranayake, Mohan Peiris and Sri Pavan. The Supreme Court also appointed a five judges divisional bench presided by the Chief Justice to hear this case. And perhaps it was one of the biggest cases that Supreme Court was involved in.

There were some views from legal experts questioning the involvement of the Supreme Court into the whole Ceylinco Group. They were of the view that these issues were commercial disputes and therefore should put into the liquidation. But, what Supreme Court's stance perhaps was that the Commercial High Court might not be able to give necessary reliefs to the aggrieved people in a high scale financial misappropriation like this, because if there was only a liquidation, then all the 9000 depositors might had to go before the Rs. 300 million assets of the company. 

This might had affected the whole Ceylinco Group, because the Supreme Court was going before the Rs. 26 billion so as to ascertain where it had really lasted.

In May 11, 2009 the Supreme Court appointed a Committee of Accountants and Auditors to formulate and implement a scheme of re – payment of depositors based on a declaration of assets of the GKCCL and the Directors of GKCCL.

Amidst so many Court orders and directions some of the depositors’ money was repaid accordingly.

Government intervention to the Supreme Court case

While this process was taking place, on May 18, 2015, then Finance Minister Ravi Karunanayake and then Governor Arjun Mahendran as the chairman of the Monetary Board requested to appoint an auditor to conduct a financial and a legal audit of GKCCL to formulate a repayment plan to settle the depositors. 

Secondly they also sought for the Supreme Court approval to give a time bound repayment plan to be implemented under the CBSL, and therefore to conclude the ongoing FR application.

What the Monetary Board of the Central Bank actually undertook to pay was the 41% of the deposit value of deposits after deducting payments already made on a time scale.

However, speaking to the Dailymirror Senior Counsel Heejaz Hisbulla who appeared on behalf of petitioners since 2013 in the Supreme Court said that, at that moment he had requested the Court to looking into the undertaking more, since the case itself was the only way that depositors could get a relief. 

According to Mr. Hejaaz, thereafter, Chief Justice Sri Pavan had also looked into the fact that whether there was an actual approval from the Cabinet to repay such amount. 

However, the Attorney General was of the view at that time that the undertaking was a legitimate one.

Consequently, on August 4, 2015, the long run case of Golden Key depositors in the Supreme Court concluded  after six years, based on the undertaking given by the Monetary Board of the CBSL, Secretary to the Treasury, then Finance Minister and then Governor of the CBSL.

The undertaking of the government was to pay,

·         Deposit holders with a deposit value of less that Rs 2 Million – 41% of their deposit value within a month. This repayment was done within one month after the termination of the FR application.

·         Deposit holders with a deposit value of more than Rs 2 Million and less than Rs 10 Million – 41% of their deposit value within two months. This was also repaid within two months time after the undertaking.

·         Deposit holders with a deposit value of more than Rs 10 Million – 41% of their deposit value within a year. On the contrary, this repayment was not done within a year as undertook before the Supreme Court.

According to the depositors of more than Rs. 10 million worth deposits, the CBSL had failed to make repayments, which were supposed to be made within a year from August 4, 2015 as undertook before the Supreme Court by the CBSL and the Treasury until November 2016.

Then, as a consequence, those unpaid depositors filed another application in the Supreme Court saying that by failing to comply with the undertaking, the Monetary Board of the Central Bank of Sri Lanka and its members, the Governor of the Central Bank of Sri Lanka, the Minister of Finance and the Secretary to the Treasury had disrespected the Supreme Court and had obstructed the justice process.

This application was brought by the depositors in November 2016 as a contempt of Court matter.

"After we filed a contempt case in Supreme Court against those Government institutions, Attorney General appearing said that due amount will be paid soon and they then started repaying the due amount to the rest of the depositors who had deposits above Rs. 10 million with the GKCCL", Counsel Hejaaz Hisbulla.

Depositors suspicious on rest of the repayment

However, still some of the depositors claim that approximately another Rs. 1 billion (Rs. 1000 million) had to be paid to the depositors by the government but no single payment was made for 13 months.

"According to our information, they are going to seek more time to repay this due amount or may be trying to avoid setting the rest of the money to the depositors, as they have already disregarded the undertaking they gave before the Supreme Court that 41% of the all deposits will be paid within a year" Counsel Hejaaz said. 

Further he explained, "In my opinion this Golden Key incident shows how the Central Bank of Sri Lanka and its former Governors mainly Ajith Nivad Cabraal and Arjun Mahendran had failed to manage the institute. Earlier, due to the mismanagement of the CBSL, huge amount of public money was misappropriated during the Golden Key incident. And now again public money is used to repay the depositors yet failing to execute it properly even with complying  what they have undertaken before the Supreme Court"

     Comments from depositors

·         ‘Our Fundamental Rights petition was terminated due to this government’s promise. We agreed to do so because government pledged to repay 41 per cent of our deposits within a year. This promise only covered 41 per cent. What about the rest of 59 per cent and the interests for our money. Yet, we agreed to the government because they promised to repay them within a year’  

·         ‘We heard that the government is going to increase the Parliamentarians’ salary. Don’t they should first settle our repayment respecting the Supreme Court’

·         ‘Since 13 months we have not been paid. Our request is at least to make these payments in monthly instalments’

·         ‘In the contempt case, Attorney General and CBSL officials appear as respondents, but there is no representative on behalf of the Treasury. Only the Attorney General responds to our demands not the Treasury’

Inquiry relating to the abductions of 11 youths: Some Defense counsel requested to favor certain Navy individuals: Director of CID

* “Why former Navy Commander Wasantha Karannagoda was not named yet as a suspect into the inquiry”- Aggrieved party Counsel Seneviratne

*AG will carefully look into the facts and decide further legal actions on the inquiry: SSC Janaka Bandara

By Shehan Chamika Silva

During the magisterial inquiry relating to the alleged abduction of 11 youths in 2008, Director of the CID Shani Abeysekara yesterday revealed that, several years ago, some of the defense lawyers, who represent the suspects, have requested the investigators to favor several Navy individuals, who were at that time not named as suspects into the inquiry.

At the onset of the inquiry, President’s Counsel Shavendra Fernando and Counsel Asith Siriwardena raised a question over the inclusion of some details relating to them made by the prosecution on February 8, 2018 in the B report.

In February, the prosecution in a further report had included about some alleged involvement of the two defense counsel into the investigations. These details only appeared in the B report as they were not expressed to the Magistrate in open court.

Rejecting those allegations, the Defense counsel were of the view that it was totally false inclusion as the Prosecution had attempted to tarnish their reputation using the B report maliciously.

While the Prosecution and the Defense were contesting on this inclusion made by the prosecution into the B report, Director of the CID said what actually they included. He said that Counsel Asith Siriwardena, who currently appeared for the second suspect of the inquiry (Sumith Ranasinghe) had visited the CID director some time back (in 2013) and insisted not to name his client as a suspect into the inquiry.

Additionally, Mr. Shani Abeysekara also revealed that some suspects including D.K.P. Dasanayake had also met two Attorney General’s Department officers with the assistance of Counsel Asith Siriwardena prior to those individuals are named as suspects into the inquiry.

However, Counsel Asith Siriwardena denied all the allegations and maintained that he had not solicited such request from the Director of the CID. And also challenge the CID Director to prove such an alleged involvement of his in assisting those individuals to meet AG Department’s people.

He was of the view that he visited the Director with the second suspect, who was not a suspect then, in the capacity as a lawyer to convey whatever the things his client wanted to share with the Director.

The Defense counsel also drew the Court attention on the fact that why these facts were suddenly came into light as they were happened sometime back.

It was said that the both defense counsel had earlier served for the Attorney General’s Department and now at the private bar.

Explaining about the other inclusion into the B report on Shavendra Fernando PC, CID Director said that he had instructed him and the OIC of the CID who conducted the abduction inquiry to avoid getting down certain people into the investigation when Mr. Fernando was serving as a Deputy Solicitor General of the Attorney General’s Department.

According to the Director, this has happened during the time period where three ‘Habeas corpus’ cases were being inquired at the Chief Magistrate’s Court, where Mr. Fernando appeared for the respondents.

Rejecting all the allegations, Shavendra Fernando PC said that he had served for the Attorney General’s Department over thirty years and also served as legal director at the Navy. He said that it was a representation on behalf of the Attorney General in those Habeas corpus cases as the AG was too cited as a respondent in the habeas corpus cases by the petitioners.

After listening to some lengthy submissions of the counsel, the Fort Magistrate Lanka Jayaratne directed the CID to prevent including irrelevant facts in the B report if those facts are outside of the inquiry.

Meanwhile, considering the delay that took the prosecution to conclude the investigation, Counsel Achala Seneviratne, who appeared for the aggrieved parties asked the Court and the Prosecution as to why some individuals mentioned continuously in several B reports are not named as suspects into the inquiry.

She was of the view that there was sufficient evidence in some of the statements recorded by the prosecution to ascertain some individuals have given instructions to the suspects.

When the Magistrate asked to be more certain on such alleged individuals, Counsel Seneviratne said: “Former Navy Commander Wasantha Karannagoda was one of them and why he was not named yet as a suspect is a serious question”.

Replying to that comment, Senior State Counsel Janaka Bandara who appeared for the CID explained the importance of perusing all the materials carefully before taking actions against individuals, he was of the view that the prosecution would need to consider on the weight of the evidence that they have to proceed with the case.

When questioned by the Magistrate, SSC Janaka Bandara said that they will thoroughly look into the materials collected in the whole inquiry within three months and report the court on the process of further legal actions of indictments.

SIM in Aloysius’ cell used by underworld figure

- SDSG Jayasundara says he was involved in the recent killing in south

By Shehan Chamika Silva

Relating to the special investigation conducted over the sim cards and mobile phones discovered in the remand cell of Arjun Aloysius and Kasun Palisena, it was revealed that one of the sim cards had been used by an underworld figure, who was allegedly involved with the recent killing reported in the South.

This was revealed during the submission of Senior Deputy Solicitor General Haripriya Jayasundara in the magisterial inquiry over the Bond scam yesterday.

While informing the court about the probability of further legal action being taken into the incident by the prosecution, SDSG Jayasundara said that the prosecution is still receiving the communication details of the five sim cards from service providers to deal with the matter more intensively.

"The CID's inquiry into details of the sim cards could lead to very important revelations as one of the sim cards was used by an underworld figure in the remand cell and there was a rumor that he was said to have been involved in the killing which happened in the southern part of the country", SDSG said off the record.

Meanwhile, Perpetual Treasuries Ltd owner Arjun Aloysius and its CEO Kasun Palisena were ordered to be re-remanded till August 2 by the magistrate over the magisterial inquiry in which they were accused of abetting and conspiring with Arjuna Mahendran to misappropriate public funds worth Rs. 688 million during the Bond auction held on February 27, 2015.   

Fort Magistrate sternly warns Prison officers to fulfill basic human needs of remand suspects

By Shehan Chamika Silva

Fort Magistrate Lanka Jayaratne yesterday sternly warned the Prison Authority officials to give necessary attention on the suspects who were brought to be produced before the court as there was a complaint that suspects Arjun Aloysius and Kasun Palisena had not received lunch or water till their case was taken up.

At the end of the magisterial inquiry into the bond issue, counsel who appeared for Arjun Aloysius and Kasun Palisena informed the Fort Magistrate that their clients have not received lunch or water for the entire day while they were at the court house.

The Counsel said the suspects were brought into the court house in the morning despite the case being taken up at the afternoon.

When questioned by the Magistrate, both suspects said they received breakfast at 6.00 a.m. and were brought to the court with other suspects in the morning and since then they did not receive lunch or water till the case was taken up at 1.40 p.m.

Fort Magistrate Lanka Jayaratne was seemingly unhappy about the incident and called all the suspects who were inside the court cell at the time and inquired about it.

However, when a senior officer of Prison Authority was questioned by the Magistrate it was said that the lunch was about to be provided to the suspects who were in the cell since morning but the lunch packets were received for the prison officers after the bond case was taken up. Therefore the other suspects were given lunch except Aloysius and Palisena.

Subsequently, Fort Magistrate observing the importance of providing the basic human needs even to a suspect, sternly warned the Prison Authority officials to prevent such incidents happening again as it was completely inappropriate and unacceptable and directed to provide the suspects with lunch immediately.

3 mobile phones, 5 sim cards found in remand cell of Aloysius and Palisena

--  Court allows prosecution to probe details of sim cards and phones

  By Shehan Chamika Silva

Additional Solicitor General Yasantha Kodagoda yesterday during his submission revealed that the Special group of Prison Department officers has found three mobile phones and five sim cards from the remand cell of Arjun Aloysius and Kasun Palisena in the Colombo Remand Prison.

 He said initially the prosecution had received an information that Aloysius and Palisena are allegedly communicating with outsiders using mobile phones and based on that the Prison Department had conducted a search on June 29, 2018 around 2 pm at 'H' ward of the remand prison.

 The Officials have found one mobile phone kept between the pillows of Arjun Aloysius, said ASG Kodagoda.

However, President's Counsel Anil Silva who appeared on behalf of Aloysius denied the allegation and said that those findings were not belonged to his client nor he had used them to communicate with outside as there were 30 other remand prisoners in the cell.

Acceding the prosecution's request the Magistrate permitted the CID to obtain details relating to the Sim cards and the imei numbers of the mobile phones.

ASG Kodagoda also pointed out that these findings could lead to more revelations while it could also amount to an offence fell under Prison Ordinance.

Ravi’s company CFO got Rs. 5 mn from Aloysius' WM Mendis & Company

 

-- Cheque from W.M. Mendis & Co delivered to Sinnaih through Certis Lanka

-- Certis Lanka officer says he encashed it and handed over the money in cash to Sinnaih

                           

-- Certis Lanka officer says he encashed more cheques and handed over money to third parties

  By Shehan Chamika Silva

 During the submission of ASG Yasantha Kodagoda in magisterial inquiry relating to the bond scam, it was revealed that WM Mendis & Company had given a Rs. 5 million to Brian Sinnaih, who was the Chief Finance Officer of Global Transportation and Logistic Pvt Ltd owned by former Minister Ravi Karunanayake through a courier service.

This was revealed from a statement given to the CID by one official of Certis Lanka courier services. The officer of Certis Lanka had also said that WM Mendis & Company had given him cheques addressed to his name and he subsequently encashed them and handed over the money in cash to different third parties.

 In his statement he had also stated that he had handed over a cash cheque of Rs. 10 million from WM Mendis & Company to Arjun Aloysius on the same day that he handed over the cash cheque to Sinnaih.

‘Unusual none recorded PTL-WM Mendis transactions may link with cheques given to outside parties’

- ASG Kodagoda observed those transactions may amount to criminal offences under the Monetary Act and the Money Laundering Act

 - 2487 cheques amounting to Rs. 1134 million had been issued from WM Mendis & Companies during January 2015 to September 2016 which should be perused so as to ascertain the allegation of money trading against PTL: ASG Kodagoda

 -Geoffrey Aloysius appeared in court and tendered asset statement relating to PTL

 -Aloysius and Palisena re-remanded till July 19


By Shehan Chamika Silva


According to an interim report of the CBSL it was revealed that there were unusual secondary market transactions between Perpetual Treasuries Ltd and WM Mendis & Company which were not recorded in the CBSL system. ASG Yasantha Kodagoda said those suspicious transactions may be linked with cash cheques dispersed to various outside parties by PTL as the  PTL’s  transfer of money to WM Mendis & Company did not have a commercial value.

 At the onset of the inquiry, complying with the previous court order, Chairman of the Perpetual Treasuries Ltd, Geoffrey Aloysius appeared in Court. He also tendered the asset statements of the PTL in Court as required previously.

 However, it was explained that Mr, Geoffrey Aloysius will not represent PTL in the inquiry and therefore there will be no representation for the company which is the third suspect in the inquiry.

 Additional Solicitor General Yasantha Kodagoda who appeared for the Prosecution thoroughly explained about a set of transactions that had taken place between PTL and WM Mendis & Companies (PTL's related group company) which were found as unusual secondary market transactions in an interim report given to the prosecution by the Central Bank of Sri Lanka.

The Central Bank is currently investigating on the money trading allegation against PTL with its related group companies, where it was alleged that PTL had dispersed cash cheques to the outside parties through its other related companies.

The interim report was relating to the above investigation of the CBSL as it had included an important finding during the investigation.

 ASG Kodagoda, explaining the interim report's finding, elaborated the manner in which these alleged transactions had taken place.

He said there were particular transactions had taken place between PTL and WM Mendis & Companies which operated as PTL's secondary market Treasuries Bond transactions.

 Explaining on the unusual nature of those transactions ASG pointed out that there were five categories namely REPO, REVERSE REPO, REPO ROLLOVER, REVERSE REPO ROLLOVER and OUGHT RIGHT secondary market transactions with WM Mendis & Companies between January 2015 to September 2016.

 He said the transactions in such nature should be separately recorded in the RTGS and CDS computer systems in the CBSL contemporaneously in addition to the physical documents maintained by PTL on those transactions.

 He said PTL had transferred considerable amount of money (sometimes Rs. 2 million per day) to the WM Mendis & companies as profits at the end of these bilateral transactions, which has no record in CBSL.

 *PTL transact with WM Mendis & Companies in the secondary market with transactions said to have had no commercial value

*End of the every such transaction PTL transfers considerable money to WM Mendis & Companies

 *Prosecution alleges these money transactions has a link when WM Mendis & Companies issuing cash cheques to outside parties without even sometimes not keeping official records with WM Mendis & Companies (such as vouchers relating to the such cheques)

 *These transactions had not been recorded in the CBSL system which is a required as per law

 ASG Kodagoda observed that it was a clear violation of Registered Securities and Stocks Ordinance and the section 62 of the Monetary Act of the country. He explained that it was a criminal offence relating to the securities.

 ASG Kodagoda was of the view that these transactions could amount to an offence come under the Money Laundering Act in the event if PTL had transfered its profits gained through Bond scam to its related companies using this unusual transactions.

 He maintained then the giver and also the receiver of these transactions could be culpable under the Money Laundering offence.

The interim report of the CBSL had found that those transactions were contrary to the contemporary market trends prevailed in the bond trading aswell.

 Explaining the importance of these findings to the inquiry, ASG Kodagoda said that these unusual transactions which had not recorded even in the CBSL could be related with the cash cheques that WM Mendis & Companies had given to the outside parties through courier services.

 He said there were 2487 cheques amounting to Rs. 1134 million had been issued from WM Mendis & Companies during January 2015 to September 2016 which should be perused so as to ascertain the allegation of money trading against PTL.

 After the ASG's explaination Fort Magistrate Lanka Jayaratne observed the seriousness of the revelation and asked the prosecution whether CBSL had any supervision on such transactions.

ASG Kodagoda replied in a sarcastic manner "indeed an indepth study on such transactions was required but when we observe the time during which these transactions happened the father in law was the Governor of the CBSL".

 ASG Kodagoda also said WM Mendis & Companies should posses the official vouchers relating to their issued cash cheques during January 2015 to September 2016. However, WM Mendis & Companies has said that some of the vouchers relating to their issued cash cheques were missing and only available in the computer system, said ASG Kodagoda.

 Consequently, acceding the prosecution's request Court directed the WM Mendis & Companies to assist the CID to get details from the computer system of the WM Mendis & Companies relating to the issued cash cheques.

Meanwhile, ASG Kodagoda also informed court that the CID was unable to enter into the computer system of the PTL during its investigation as the software of the computer system is apparently crashed.

Subsequently, acceding the prosecution's request the Magistrate allowed the investigators to use the service provider's assistance in accessing into the system.

Meanwhile, Perpetual Treasuries Ltd owner Arjun Aloysius and its CEO Kasun Palisena were ordered to be re-remanded till July 19 by the magistrate over the magisterial inquiry in which they were accused of abetting and conspiring with Arjuna Mahendran to misappropriate public funds worth Rs. 688 million during the Bond auction held on February 27, 2015.