ECONOMYNEXT – A criminal probe will be initiated into alleged procurement fraud and mis-appropriation of hundreds of millions of rupees at a unit of state-run Sri Lanka Insurance Corporation group which is building a 27 billion rupee hotel in Colombo, officials said.
"They have not followed government procurement processes," Chairman Hemaka Amarasuriya told reporters in Colombo.
"In procurement activities they have totally dis-regarded processes. There is no corporate governance, no respect for rules and regulations. No audit committee. No risk committee."
SLIC had invested 8.5 billion rupees in Canwill Holdings (Pvt) Ltd, an investment vehicle which in turn controlled SinoLanka Hotels and Spa, a firm with land and building expropriated from the Ceylinco group, which is expected to house a Grand Hyatt hotel in 2017.
SLIC unit Litro Gas held another 23 percent in Canwill with a 5 billion rupee investment and the Employees Provident Fund another 23 percent with a 5.0 billion rupee equity investment.
A forensic audit has uncovered evidence of padded contracts, mis-appropriation of hundreds of millions of rupees without board approval and awarding deals without competitive tender involving a hotel project, where the SLIC group had invested, officials told reporters.
The group had also initiated another hotel project in Hambantota, where 300 million rupees had been.
Evidence uncovered so far will be handed over to the police criminal investigation department, Chairman Hemaka Amarasuriya said.
Amarasuriya said the new board had cancelled a series of contracts awarded without competitive tender.
About 100 million rupees had been reduced from existing contracts by negotiation and the new board was hoping to slash another 150 million rupees.
Contracts apparently awarded by personal negotiation appeared to be padded Amarasuriya said.
Former SLIC Chairman Gamini Senarath and Managing Director Piyadasa Kudabalage had spent money without board approval apparently by email communication, during the ousted Rajapaksa administration officials alleged.
Both Sri Lanka Insurance and Litro Gas were privatized entities which was taken back to the state providing opportunities for corruption.
SinoLanka Hotels had also bought three blocks of land bordering the hotel from private parties at prices higher than the government valuation. The government valuation had also been increased three times in succession.
In one case a land had been valued at 191 million rupees in January 09, 2013, 253 million rupees on October 27 and 260 million rupees on November 22 for which eventually 270 million rupees had been paid.
"How the prices went up is a mystery," Amarasuriya said.
Managing Director Piyadasa Kudabalage had drawn multiple salaries from SLIC and its subsidiaries totalling 3.4 million rupees, an official said.
Litro Gas Executive Chairman Shalila Moonasinghe said Kudabalage had drawn 1.19 million rupees a month for Sri Lanka Insurance, 1.3 million rupees from Litro Gas, 450,000 rupees from Litro Gas Terminals and 500,000 rupees from Canwill Holdings.
His son who had been employed at the group had been given a 10,000 rupee phone allowance, while senior engineers were given only 1,500 rupees, they were told.