ECONOMYNEXT – A presidential commission of inquiry into Sri Lanka’s largest securities fraud involving rigged bond auctions in 2015 and 2016 had drawn a red flag over alleged frauds in the stock purchases by central bank managed Employees Provident Fund from 2010.
The commission said transactions of the EPF retirement fund on the stock exchange from 2010 onwards should be examined, and consideration should also be given to probe the losses of the central bank itself around the period.
The commission said there were allegations in the public domain that the EPF engaged in large scale deals in companies such as the Piramal Glass Ceylon, Galadari Hotels (Lanka) Plc, Laugfs Gas Plc, Ceylon Grain Elevators and Brown and Company, whose prices then crashed.
"Transactions raised the inference of "pumping and dumping" and "market manipulations," the commission report noted.
"There were allegations that, the EPF knowingly acquired Shares which resulted in the EPF incurring substantial losses.
"However, the CBSL is not seen to have taken any substantive action, at that time, to investigate or to clear the air with regard to these allegations even though the trail of the Transactions entered into by EPF was publicly known since these Transactions took place on the Colombo Stock Exchange."
The commission said the "politicization" of the central bank during the last administration and lack of corrective action laid the foundation for the bond frauds committed in 2015 and 2016.
Saman Kumara and Udayaseelan, EFP dealers involved in buying bonds from Perpetual Treasuries in 2015 and 2016, were officers of the fund management division of the EPF during 2010-2012, the commission said.
Perpetual Asset Management (Pvt) Ltd, Perpetual Capital (Pvt) Ltd, were companies that were active in the stock market before 2012, according to evidence given by Perpetual Treasuries Chief Executive Kasun Palisena.
The commission also called for a forensic probe on direct placements of bonds between 2008 and 2015. The commission said the monetary board of the Central Bank had given approval to directly place bond at captive sources – such as the EPF and state banks.
But they had also been placed at primary dealers, apparently with the tacit approval of the monetary board.
There have been allegations that the placement had occurred at questionable rates, even to companies as well as foreign investors. (Colombo/Jan17/2018)