CaFFE on the Treasury Bond Commission Report

Executive Director of CaFFE and Center for Human Rights and Research Rajith Keerthi Tennakoon in statement today said that ever since the Presidential Commission of Inquiry (PCoI) into the bond scam commenced its operations, a lot of focus has been on the relationship between the Prime Minister and this controversial transaction. He also said that the report of the commission, which has been made available to the public, has now shed more light into this relationship.

The statement further says,

We have noted that a number of parties, with vested interests, are attempting to protect Mr. Wickremesinghe, although the report has clearly demonstrated that the Prime Minister has made colossal wrong value judgments and that he would rather believe in the words of his lackeys than the facts presented by well-meaning critics. With this document CHR/CaFFE attempts to demonstrate how the Prime Minister’s actions violate the United Nations Convention Against Corruption.
Given below are several articles of the convention which has been violated by the treasury bond scam and the lukewarm attitude of the Prime Minister.

Article 17. Embezzlement, misappropriation or other diversion of property by a public official.

Each State Party shall adopt such legislative and other measures as may be necessary to establish as criminal offences, when committed intentionally, the embezzlement, misappropriation or other diversion by a public official for his or her benefit or for the benefit of another person or entity, of any property, public or private funds or securities or any other thing of value entrusted to the public official by virtue of his or her position.

The Commission is proved that Mr. Mahendran as the Governor has intentionally embezzled and misappropriated public funds according to the above article.

Article 19. Abuse of functions

Each State Party shall consider adopting such legislative and other measures as may be necessary to establish as a criminal offence, when committed intentionally, the abuse of functions or position, that is, the performance of or failure to perform an act, in violation of laws, by a public official in the discharge of his or her functions, for the purpose of obtaining an undue advantage for himself or herself or for another person or entity.

Article 19 gives us an avenue to find the connection between Mr. Mahendran’s Freud and negligence behavior of the PM.

CaFFE like to compare above clauses with findings of chapter 26 of the commission report: on PM’s responsibility:

1. Appointment of Arjuna Mahendran as the Governor of the Central Bank; Commission found that the PM recommended the president to appoint Arjuna Mahendran

2. On the issue of appointing Arjuna Mahendran’s, the commission states that 'the question of whether or not the fact that, Mr. Mahendran was not a citizen of Sri Lanka precluded him from being appointed the governor of the CBSL was not a Question of Law. Instead, it was a value judgment, which had to be made by those who considered the wisdom of appointing Mr. Mahendran, who was not a citizen of Sri Lanka, as the Governor of CBSL.’

3. On the issue of Governor changing the bidding procedure; the Commission found that PM gave only instructions but governor changed it unilaterally

4. On the issue of conflict of interest between Arjuna Mahendran and Arjuna Aloysius, the Commission found that ‘Mr. Mahendran has repeatedly assured the Hon. Prime Minister that, Mr. Aloysius 'would not under any circumstances play any role in the business activities of 'Perpetual Treasuries. It appears that the Hon. Prime Minister has relied on those assurances given by Mr. Mahendran.' The commission further states the prudent course of action would have been to independently verify whether 'Mr. Mahendran was honoring the assurances he gave the Prime Minister. We regret that the Hon. Prime Minister did not take this course of action.'

5. On the issue of Pitipana commission the Commission found that the that 'the members of the Pitipana Committee did not possess technical knowledge or practical knowledge in the considerably complex arena of Government securities and Public Debt.

6. Commenting on the statement made at parliament by the PM stating that “Mahendran did not interfered with the auction,” the PCoI states that the PM should have been made this statement with better advice and that Arjuna Mahendran and deputy Governor Sumanasiri misled the PM. The Commission believes that PM should have independently verified what has happened at the CB, before making such a statement.

7. On the issue of allowing Arjuna Mahendran to continue with the position after first reporting of allegation on malpractice the Commission found that this would have been different if the Committee appointed to investigate the events comprised of competent, proper and knowledgeable members

8. Although the Commission does not pass any judgments on the Prime Minister, for obvious reasons, it is clear that the President must no longer trust the judgment of Mr. Wickremesinghe.

Analysis:

 1. It is the evidence that Arjuna Mahendran as the governor of CBSL intentionally embezzled and misappropriated public funds for his benefit and/or for the benefit of another person, where public funds and/or securities of value entrusted to Arjuna Mahendran by virtue of his or her position.

2. Recommendation 17- We have determined that government of SL suffered an avoidable loss as a direct result of Mr. Mahendran’s intervention in the treasury bond auction held on 27th February 2015 as he instructed both the PDD and the tender board that bids to be value of Rs. 10 Billion must be accepted at the auction. Thus we have determined that Mahendran is liable and responsible for this loss.

3. Recommendation 20 - perpetual trustees obtained and used inside information at the Treasury bond auction on 29th March 2016

4. Recommendation 21- perpetual trustees has made the major part of its profits by using inside information and by market manipulation in the secondary market.

5. Recommendation 19 – Recommend Bribery commission to investigate whether the aforesaid acts of behavior amounts to acts of corruption.

6. According to the definition on abuse of functions under UN convention against corruption the role of PM is amounting to an intentional failure to perform a duty in diligent manner when the CBG’s abuse of his functions and/or position, to manipulate performance in violation of existing laws, for the purpose of obtaining an undue advantage for himself or herself or for another person or entity was obvious.

7. As the Commission outlined PM overlooked illegal performances of the CBG not once but twice. It is on the concurrence of the PM, the CBG was appointed. He defended the CBG at the parliament not once but thrice (first by issuing a statement, and during COPE -1 and COPE -2 investigations). He also appointed an incompetent committee to put the matter under the carpet. Thereby the PM misguided and misdirected the parliament and the public in order to allow CBG to continue with his malpractices.

8. The PM finally even resisted to the decision of the President to remove CBG from his office.

9. It should be the final conclusion of a prudent person that the PM has failed to perform and/or discharge of his duties and functions as the Minister in charge of the CB, for the purpose of obtaining an undue advantage for himself or for another person or entity.

10. We would like to stress that although there is no legal offense committed under SL laws, it is an offense under the international convention against corruption.

11.Nevertheless this behavior amounts for breach of social contract PM is having with its people as well as violation of good governance principles; Transparency, responsibility, Efficiency as well as responsiveness.

Thus CHR/CaFFE ponders whether the President must trust the PM’s judgment on the governance of the economic affairs of the country.