Sri Lanka arrests and remands ex-SEC chief over fraud

(AFP) Sri Lankan police on Monday arrested the former head of the stock market watchdog amid allegations of massive securities fraud during the rule of then-president Mahinda Rajapakse.

Nalaka Godahewa, former chairman of the Securities and Exchange Commission of Sri Lanka (SEC), was remanded in custody for a week pending investigations into misappropriation of state funds, police said.

The case centres on the misappropriation of five million rupees ($38,000) given to a youth organisation run by the former president’s lawmaker son Namal Rajapakse in violation of financial regulations.

"We have arrested Mr. Godahewa, who was taken before a magistrate who remanded him for a week," said police spokesman Ruwan Gunasekera.

"We have two other men, including the then-director general of the SEC, already in custody."

Godahewa has also been accused of stalling investigations into corrupt transactions during his tenure at the SEC, which began in 2012 and ended after Rajapakse was ousted in January.

Share prices rose by nearly 45 percent from mid-2012 to January 2015, reversing a downward trend in 2011.

Godahewa’s predecessor Tilak Karunaratne resigned in August 2012, saying he could not battle what he called a "mafia of crooks" who manipulated the stock market.

Sri Lankan shares more than doubled in value between 2009 and 2010, making the Colombo exchange the world’s best performer.

Opposition legislator Mangala Samaraweera, who is now foreign minister, described it as the "premier centre for money-laundering east of the Suez Canal".

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The new government of President Maithripala Sirisena, who came to power in January on a pledge to tackle corruption, has launched a series of investigations into malpractice under Rajapakse.

Two heads of the SEC resigned in quick succession during Rajapakse’s rule, alleging political pressure to stifle investigations into insider trading and market manipulation.

Critics say the former  president’s children became big investors in the stock market and their holdings were not compatible with their stated incomes.

The Colombo market has put in a lacklustre performance this year after the new government launched investigations into price-fixing and other fraud.
 

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