By Ranjith Jayasundera

Evidence has surfaced that Dr. Gamini Wickremasinghe has in all probability taken advantage of another one of his triad of posts under the Rajapakse government, that of Chairman of the Securities and Exchange Commission (SEC.)

Earlier this year, The Sunday Leader had exposed the means by which Dr. Wickremasinghe had brought his influence at the bank to bear to benefit not just himself and his companies, but also the fleecing of the BoC of Rs 1.072 billion by Mihin Lanka.

At that time Wickremasinghe through the bank defended his actions and denied any wrongdoing and said no influence was used and that it was a straightforward business practice.

The SEC is entrusted with monitoring illegal transactions and activities on the Colombo Stock Exchange (CSE) and take action against those who break rules designed to maintain fairness and transparency in the share trading business.

The SEC has access to nearly limitless data that it uses to detect crimes such as fraud, and market manipulation. This data is archived over several years and can be used to prosecute those responsible for crimes months or even years after they had taken place. One bit of business that was flagged on the SEC radar was the sale of shares in Nawaloka Hospitals Limited after the company was listed on the exchange in November 2004.

'Share split'

A month later, the company issued what is known as a 'share split,' effectively increasing the number of shares the company has, whilst proportionately reducing the value of each share. When Nawaloka Hospitals Limited was listed on the exchange, the value of each share was about Rs. 20. A month later by the time of the share split, the stock 'value' was effectively doubled by the shareholders to Rs. 40.

After the share split, the value of each share of Nawaloka Hospitals Limited was around Rs. 3. But three months later when the company announced a rights issue - allowing shareholders to buy more shares at a preferential price in order to raise capital - the price of each Nawaloka Hospitals share had more than tripled to Rs. 9.75 each.

A 30% stake of Nawaloka Hospitals was then sold to the public, raising around Rs. 300 million on the Colombo Stock Exchange (CSE). To SEC investigators, this share price increase in the run up to the sale smelt fishy, so they began a probe into the price increases and the money gained from these transactions, scrutinising the dealings of the persons involved.

By November 2006, the SEC had collected enough evidence to initiate prosecutions against the family owners of Nawaloka Hospitals - former Cricket Board Chairman Jayantha Dharmadasa and his son U.H. Dharmadasa - as well as several of their relatives and employees. All in all nine people were charged by the SEC under Rule 12 of its rules read together with Sections 102 and 113B of the Penal Code, which allow 'conspiracy' to commit a crime to be charged as severely as having committed a crime.

Misleading appearance

D.A. Samaradiwakara, B.A. Jayasekara, U.H. Dharmadasa, K.M.N. Piyarathne, Michael de Saram, M.T. Ganhewage and L.C. Pallegedera were charged with 'committing acts to create a false/misleading appearance of an active share market.'

Jayantha Dharmadasa and Mahanama Jayaweera were charged with 'aiding and abetting' these seven persons 'to commit acts to create a false/misleading appearance of an active share market.' All nine of them were charged with 'conspiracy' to create a false market, and they faced fines of over a million rupees each and up to 10 years imprisonment if convicted.

The fact that the case was prosecuted in court was a hallmark for the SEC, which had up to then developed a reputation for 'compounding' offences and merely fining offenders without prosecuting them to the full extent of the law, in effect diluting its authority and reducing the risks for those trying to manipulate the stock market.

The case against the Dharmadasas and their accomplices sent a message that anyone could face a jail sentence for meddling with the system and that there was no easy way out. Enter the Chairman of the Securities and Exchange Commission, Dr. Gamini Wickremasinghe.

Dr. Wickremasinghe owns 90% of the shares in a company he founded, Informatics (Pvt) Ltd. Informatics in turn owns nearly 100% of another company, Visual Computing Systems (Pvt) Ltd. The Dharmadasa family owns a company called Nawaloka Developments (Pvt) Ltd.

Fine taste in exotic motor vehicles

Before their SEC and court woes, back in December 2003, the Dharmadasas - who have a fine taste in exotic motor vehicles - imported a brand new, fresh out of the factory, 'almandine black' 2003 model Mercedes Benz S280 (registration number HS-7777), in the name of Nawaloka Developments (Pvt) Ltd.

Since 2003, the duties and taxes levied on new vehicle imports have skyrocketed, creating a massive market for second hand super-luxury vehicles. So HS-7777 would fetch a much higher price in the local market today than that for which it was imported five years ago.

On August 9, 2007, whilst the court case between the SEC and the Nawaloka conspirators was pending, Nawaloka Developments (Pvt.) Ltd., transferred ownership of their Mercedes S280 (HS-7777) to Visual Computing Systems (Pvt.) Ltd., in which the majority of the shares are held by the SEC's Chairman, Dr. Gamini Wickremasinghe.

A few months later, on May 20, 2008 the SEC decided to withdraw the case against Jayantha Dharmadasa from the Fort Magistrate's Court, and allow him to get away with a mere Rs 3.3 million rupee fine, and avoid the possibility of a court imposed jail sentence.

Compounding the charges

Similarly, on August 21, the SEC announced that it was also compounding the charges against D.A. Samaradiwakara and B.A. Jayasekara and allowing them to pay just Rs 3.3 million rupees each to get out of court. The commission is well within its powers to compound offences under Section 51A of the SEC Act, but the conflict of interest cannot be missed.

A court could have fined Dharmadasa, Samaradiwakara and Jayasekara  Rs. 10 million each (Rs. 30 million in total), and put them each behind bars for up to five years. Instead, the SEC got a relatively paltry Rs 9.9 million and Dr. Wickremasinghe got a super-luxury Rs. 25 million Mercedes Benz. What price was actually paid for the vehicle is not known because Wickremasinghe on being asked by The Sunday Leader did not consider it necessary to disclose that fact in the name of transparency stating it was a private matter. 

The vehicle is often seen parked outside the Bank of Ceylon Headquarters, and is the primary vehicle used by Dr. Wickremasinghe. When he spoke to us, however, he denied that there was any wrongdoing on his part, and claimed that the transaction did not realistically involve Nawaloka Developments, as he believed he was buying a vehicle used by the Ven. Uduwe Dhammaloka Thera, through a Dimo agent. Dimo is the agent for Mercedes Benz in Sri Lanka (See box for full explanation).

"Contact Dimo"

Although Dr. Wickremasinghe urged us to "contact Dimo" and said that they will back up his version of events, this is not what happened. When The Sunday Leader contacted senior Dimo Sales Advisor Roshani Dharmaratne, she did not confirm the SEC Chairman's story. "That is not valid," she said of his explanation, adding only that she did not want to comment further.

We were unable to contact the Ven. Uduwe Dhammaloka Thera for comment, but there is nothing to link him to this transaction apart from the word of Dr. Wickremasinghe, as Dimo also was unable to verify his story and records from the Department of Motor Vehicles (DMV) showed that the vehicle's only two owners have been Nawaloka Developments and Visual Computing Systems - effectively demonstrating a transaction between the Wickremasinghe and Dharmadasa families albeit through corporate channels.

It is also questionable as to whether the arithmetic used by the SEC in compounding the offences was valid. All the SEC press releases about the compounding of these offences stated that Rs. 3.3 million was "1/3rd of the maximum fine imposable for the offence."

This is true, as according to the SEC Act, each offence can lead to a fine of up to Rs. 10 million rupees or a five year jail sentence. But Dharmadasa, Samaradiwakara and Jayasekara were charged with two offences each, and if prosecuted together could have led to fines of Rs. 20 million each and up to 10 years in jail.

Links with the first family

Although just as in the BoC, Dr. Wickremasinghe's actions are above questioning within the SEC since his links with the first family are well known, other government investigators have picked up on the Nawaloka Benz transaction and have begun to delve into the SEC Chairman's dealings.

It is also a strange coincidence that Dr. Wickremasinghe - who is related to the first family - is very closely related to the Chief Financial Officer (CFO) of Nawaloka Hospitals, albeit by marriage. Nawaloka's CFO, Jayantha Perera, is married to Dr. Wickremasinghe's daughter Kishani, completing a tangled web of conflicts of interest in the SEC's case against the Dharmadasa family and their accomplices.

Among other dealings, government investigators have found that Dr. Wickremasinghe's Informatics (Pvt) Ltd., owes over Rs. 40 million in back taxes to the Inland Revenue Department. We were shown documentation (published on this page) detailing the taxes owed to the government from the SEC Chairman's company some of which date back to 2002.

Informatics owes over Rs. 2.6 million in income tax, Rs. 7.8 million in PAYE tax and a colossal Rs. 28.5 million in VAT to the Inland Revenue Department. We were also provided with other details which cannot be published lest they compromise the ongoing investigations.

Replaced as chairman

Last month, Dr. Wickremasinghe was replaced as Chairman of the Insurance Board, leaving him in command of only two very powerful state financial institutions, the SEC and the Bank of Ceylon, both at which his conduct has raised more than a few eyebrows as revealed on and off in this newspaper.

It would be surprising if action against Dr. Wickremasinghe will be taken given that his relationship with the first family stretches over decades. When Gotabaya Rajapakse retired from the army, Dr. Gamini Wickremasinghe provided him with a job in Colombo before he migrated to Los Angeles.

The now incumbent Defence Secretary has since returned the favour. Dr. Wickremasinghe's brother Jayantha, is now employed as the Chairman of Lanka Logistics and Technologies Limited (LLTL), the Defence Ministry's private arms procurement company.

Wickremasinghe of course  explains the tax issue on the basis of problems faced by most companies today due to the economic environment but that again is nothing but a severe indictment on the government he serves.

SriLankan heading for a tax jolt

By Sonali Samarasinghe 

The cash strapped SriLankan Airlines already reeling from a financial crisis situation is to receive a further blow to its depleted coffers as investigations reveal the company may owe the state over Rs.4.2 billion in unpaid back taxes.

A high powered customs inquiry now underway has set the taxes at Rs.3.256 billion  up to June 2007, but customs sources told The Sunday Leader that newly computed up to date sums owed to the state by the national carrier are astronomical and well over Rs. 4 billion.

Customs sources say the airline is liable to pay Ports and Airport Development Levy (PAL), Goods and Services Tax (GST) and the National Security Levy on the purchase and or lease of its aircraft.

The investigators have already tabulated according the airlines' liabilities if and when each of these taxes apply to each transaction of lease for the 14 aircraft strong fleet. (Please see elsewhere on this page for copy of document.)

 If the customs inquiry commenced in mid 2006, and which Director General Customs Sarath Jayatilleke confirmed to The Sunday Leader, is still very much alive, holds in favour of the state then the beleagured airline and its CEO Manoj Vass Gunawardena are in for a further financial shock.

A loss of Rs. 5.5 billion

UNP MP Ravi Karunanayake has warned in parliament the national airline would collapse unless infused with capital revealing in parliament recently that SriLankan Airlines suffered a loss of Rs. 5.5 billion from its passenger and cargo transportation business since the exit of Emirates.

Manoj Gunawardena has in the meantime drawn up, he says, an action plan. A part of this plan is to 're-fleet' or replace SriLankan's older and smaller Airbus A320 aircraft with "almost new" planes this year, by paying a higher lease for these newer aircraft.

The government has already admitted that the Mihin Lanka enterprise which suffered over a 3 billion rupee loss was a total failure due to serious mismanagement. The promoter and CEO of President Rajapakse's disastrous Mihin Lanka was in fact Manoj Gunawardena's brother, Presidential Coordinating Secretary Sajin Vass Gunawardena.

Sajin Vass was compelled to step down from his position recently due to intense media scrutiny with even the government having to admit in parliament in effect that the media was right to condemn the failed enterprise.

Mihin guzzled public funds, including having taken massive loans from state banks the Bank of Ceylon, Peoples' Bank and the Lankaputra Bank, and sucked out moneys from the Treasury.  And while Manoj decides to refleet even stating at a recent seminar, the company is looking at 20 aircraft by 2015, it is a dispute with the aircraft taxing system that is now under intense inquiry.  The catch nonetheless is this. The Catch 22 if you like.

State owned 

If SriLankan Airlines were to argue that as it is now state owned and such a payment of taxes would only be a matter of the state paying itself and could therefore be waived, then it is bestowing upon its second largest shareholder Emirates Airlines an undue advantage. And Emirates which owns 43.6 percent of the national carrier's shares is in for an early Christmas and an unexpected bonanza.

Imagine a man, nay a Sheik, burdened under the knowledge of having to pay billions of rupees and large penalties in defaulted taxes being suddenly told he has been relieved of his burden. If that isn't father Christmas at his best I don't know what is. Nonetheless as far as SriLankan is concerned the customs inquiry comes at a time the company's new CEO Manoj Vass Gunawardena has admitted the national carrier has hit rock bottom and is in its worst financial crisis ever.

The inquiry itself hit turbulence in April this year when the customs investigations team was summoned to the Finance Ministry by Treasury Secretary and then freshly appointed SriLankan Airlines Chairman to discuss the status of the inquiry after the Rajapakse government took over the management of the carrier from Emirates on April 1. 

Reliable sources at the Finance Ministry said the meeting presided over by Treasury Secretary P.B. Jayasundera also wearing the Chairman, SriLankan Airlines' hat, included Vipula Gunatilleke of SriLankan Airlines, Lawyer for SriLankan Airlines Shivaji de Soysa, Director General Customs (DGC) Sarath Jayatilleke, Senior Inquiring Officer Wasantha Wimalaweera and two others from the customs team.

Sources told this newspaper, Jayasundera had indicated that the inquiry should be halted forthwith and reprimanded his staff for not sending out letters to this effect to the Customs Department. However both Director General of Customs Sarath Jayatilleke and a senior investigations team member  Wasantha Wimalaweera, denied to this newspaper that the inquiry had stopped, in fact stating categorically that the inquiry was still underway.

Come to a full stop

Other sources at customs have nonetheless alleged that the inquiry has in fact come to a full stop with no action taken following the meeting at the Finance Ministry and due to pressure from the likes of SriLankan Airlines Chairman P.B. Jayasundera.

The former Treasury Chief could not be reached for a comment. Customs Officer Wasantha Wimalaweera when contacted by The Sunday Leader did not deny that such a meeting took place but refused to comment on the inquiry in general unless approval was granted by his superiors. He stated he was unable to speak to the press without the Director General's approval.

DGC Jayatilleke when asked if Jayasundera had ordered the department to stop the inquiry at a meeting at the Finance Ministry declined to comment on the matter stating, 'I don't want to comment on those things.'

It is significant nonetheless that in three days from today come Wednesday (8) Jayasundera will have to explain to the Supreme Court and a fiery Chief Justice why he has not resigned his post at the airline despite being found guilty of defrauding the government of revenue. Jayasundera obviously fearing the wrath of the Chief Justice finally called it quits on Friday and Nishantha Wickramasinghe, the brother-in-law of President Rajapakse was promptly appointed acting chairman.

Defrauding the state of revenue

Funnily enough it is the very same charge of knowingly defrauding the state of revenue that the customs investigators had attempted to stick on to former SriLankan Airlines CEO Peter Hill and the company's financial officers due to non payment of a variety of taxes attached to the purchase and lease of aircraft.

With pressure mounting on all sides in late 2007/early 2008 and Hill clashing with BOI Chairman Dammika Perera and other government elements, Customs Department officials had unofficially informed even the Attorney General C.R. de Silva of a possible case against the harried Hill. The AG had wisely advised the customs officials to leave it alone and let the man go in peace. One recalls that BOI Chairman Dammika Perera had written to the Immigration Department calling for a revocation of Hill's visa.

And indeed the inquiry was to take on an international dimension at the beginning of the year as Emirates and SriLankan parted ways in a bitter battle of prestige and finger pointing even as former CEO Peter Hill - a decent bloke by all accounts - found himself caught in the middle of a puerile paw fight over the refusal by the Emirates' management to grant a large number of seats at a moment's notice to accommodate a flock of presidential hangers-on travelling from London to Sri Lanka. 

Here is how it all started. Obviously there had been a to and fro and discussions between the Customs Department and SriLankan Airlines on what taxes if any should or should not be paid and what exemptions they received due to their BOI status since the controversial privatisation of the airline under the watch of former President Kumaratunga effective April 1, 1998.

Tax revenues

At the time it was The Sunday Leader that warned the ill thought out privatisation would rob the state of almost a billion rupees in tax revenues. Ironically it was none other than P.B. Jayasundera who was then Treasury Secretary who brokered the one sided deal badly letting down the government by negotiating a poor package that left the Sri Lankan government with a pittance of US$ 70 million and Emirates with a sweet deal that included 100 percent management control.

Only a fool would blame Emirates' negotiators for negotiating a better deal for themselves. As for Jayasundera, the sweetheart of the CBK government at the time, he now appears to have proven his record as a shoddy negotiator with a hard rap on the knuckles on the LMSL deal and the SLIC privatisation matter scheduled for judgment shortly.

It was while these discussions between the relevant departments and the airline were going on as a matter of course that Customs officials no doubt got a whiff of the sweetness of the case which obviously appeared to have big bucks in penalties and rewards slapped all over it.

Motive however is immaterial to a case based on fact and in any event sources in the know told this newspaper the crack investigations team tasked with the SriLankan Airlines inquiry had very early in the case decided not to claim any reward or penalty fee but pursue the case purely as a matter of knowingly defrauding revenue to the state.

Accordingly, somewhere in June/July 2006 the Air Cargo Division of the Customs Department commenced an inquiry under Ref. ACT/CASE 98/2006 with a team of four investigating officers including an experienced officer in the department, Wasantha Wimalaweera.

However Wimalaweera it is learnt had been routinely transferred to the Post Clearance Accounts Branch (PCAB) and it was now another veteran investigator, one Ranjan Kanagasabay who took over the supervision of the inquiry. The file was officially transferred to PCAB under reference PCAB/1A/2007/1.

SriLankan Airlines  a BOI company 

The investigations revolved around the payment of Goods and Services Tax (GST), National Security Levy (NSL) and the Ports and Airport Development Levy (PAL) on the national carrier's main fleet of 14 aircraft including the four aircraft damaged in the terrorist attack.

The Customs Department then proceeded to take an 18 page statement from then CEO Peter Hill detailing their duty payment on aircraft. Sources say that as SriLankan Airlines is a BOI company the usual procedure is to process a Customs Declaration (CUSDEC) at the port of entry, Katunayake International Airport at the transaction value, not the installment value.

As each aircraft was brought in, UL would inform the Customs Director of Imports and Tarriffs calling upon him to make arrangements to examine the aircraft for dutiable items as per normal customs formality.

Perhaps all this while hiding knowingly or otherwise that the largest dutiable item was not within the aircraft but the aircraft itself. The Customs Department would then inform the Officer in Charge of Procurement and Logistics at the airline inquiring from him if any levies were to be paid. Sources at customs squarely blame the SriLankan Airlines management for the non payment of levies.

Transaction outside Sri Lanka

"They pay about US$9m. in rental for an A340 aircraft so in about three years they would have paid enough to purchase an aircraft," sources claim; but SriLankan Airlines sources pooh pooh the claims stating they have done no wrong and will hold their ground on the matter. Customs sources also allege that such aircraft are leased from companies incorporated in little known islands like Vanuatu, Kiribati and Caymen and therefore SriLankan Airlines' claims that the transaction is outside Sri Lanka.

SriLankan Airlines argues that they are not liable to pay any duties as they are a BOI enterprise and that none of the levies such as PAL apply to them as the aircraft have been imported on a financial lease basis. 

Be that as it may some three years earlier newly appointed Treasury Secretary and successor to PBJ, Sumith Abeysinghe was to write to Director General, Customs on May 3, 2005 clarifying the position on PAL payments. The letter said "this matter has been examined in detail in consultation with the officials of the department on inland revenue and legal division of this ministry.

The Ports and Airport Development Levy (PAL) is not one in respect of which the BOI is empowered to grant exemption and therefore, SriLankan Airlines is not exempted from payment of PAL on aircraft imported by it in virtue of the provisions in the agreement it has entered into with the BOI. The PAL law does not include granting of exemptions from the payment of PAL on aircraft.

Liable to pay

Therefore SriLankan Airlines is liable to pay PAL at the rate of 1% up to 18.11.2004 and at the rate of 1.5% thereafter. The budget of 2008 however brought about new changes to the Finance Act where any ship under the Sri Lankan flag will be exempt from the Port and Airport Development Levy (PAL) and would not be considered an import.

The decision means ship owners with ships registered under the Sri Lanka flag would not be liable for the three percent PAL. When contacted by The Sunday Leader Treasury Secretary Sumith Abeysinghe acknowledged the letter, but said the equation had changed since no longer was PAL relevant as the government had exempted aircraft from such a levy this year.

Q: But the inquiry was stopped. I want to know if you will now continue with that inquiry?

A: It is international practice not to impose taxation and levies on the importation of aircraft. They do not impose levies in other countries either.

Asked if this only applied to purchase of aircraft and not to leased aircraft The Sunday Leader was referred to Director General Fiscal Policy, Mr. Attygalla.

DG Attygalla told The Sunday Leader that irrespective of whether it is SriLankan Airlines or otherwise there is no PAL in force. "There is a Gazette approved by parliament in April," he said. Attygalla confirmed there was an inquiry commenced by the Director General of Customs. The question that needed clarification was whether 'aircraft' was a vessel within the meaning of the Gazette which were exempt from PAL. "So there are also questions of interpretation which need to be resolved," said Attygalla.

Inquiry still going on

Asked whether the inquiry had been stopped Attygalla said "as far as we are concerned the inquiry is still going on," but pointed out that the inquiry was a customs matter primarily.

SriLankan Airlines sources are adamant. "We have never been liable," they say. This is a nonsense inquiry. These are financial leases and the taxes don't apply. Director General of Customs Sarath Jayatilleke too refers the new law which exempts vessels from PAL. He also refers a recent Supreme Court Judgment on August 29 this year with regard to the recovery of GST where if the taxes had not been collected at the time of importation then the collection of taxes would come under the purview of the Commissioner General of Inland Revenue.

Jayatilleke also said that there is now a dispute as to what constitutes a 'vessel' and said if it can be argued that an aircraft comes within the meaning of a vessel then again PAL cannot be collected. Argue as they might on interpretation of what constitutes a vessel, that argument is relevant only from the date the exemption becomes effective which is 2008.

While there are arguments for both sides with relevant legislation specifying when aircraft are subject to National Security Levy and Goods and Services Tax, this newspaper will refrain from going into the specifics of the inquiry despite being in possession of several relevant documents on the subject.

The Sunday Leader in the present case will also refrain from second guessing the final findings of the customs inquiry. Interestingly however one school of thought that has emerged is that this large sum of money owed to the state by way of unpaid taxes could somehow be pinned as a liability of Emirates alone as the inquiry focuses on the period of their management control of SriLankan Airlines until March 31, 2008.

If there is a liability

Some sources feel that such a liability if found through the inquiry, could then be quantified in terms of shares in the company and thus such number of shares transferred to the Government of Sri Lanka thereby considerably weakening Emirates' shareholding of 43.6 % in the national carrier. 

Alas however such an argument is fundamentally flawed. The state cannot divest itself of responsibility when it not only owns majority shares in the airline but also had four of its representatives on the board of the airline during the entirety of the Emirates 10 years as partner.

Be that as it well may, the facts of the case are simple. And the Customs Chief seems to see it that way. He told The Sunday Leader that even if it is argued that the aircraft were not purchased but were financial leases even the lease amount is liable to taxes.

He also pointed out that no exemption of PAL made later can in any event be of retrospective effect and the airline could therefore be liable to PAL depending on the findings of the inquiry for taxes and levies up until the exemption became effective. He also pointed out that there were no such exemptions with regard to the GST and NSL, and the inquiry into those taxes still continued.

And for the cash strapped SriLankan Airlines there lies the rub.

At least one DIG and a SP had invested with Sakvithi according to records

Taking the people for a ride and CB'sliability

By Dilrukshi Handunnetti, Mandana Ismail Abeywickrema and Nirmala Kannangara

Following over a thousand depositors being duped by a glorified English tuition master turned millionaire businessman, Sakvithi Ranasinghe, authorities are finally feeling the pressure and the need to crackdown on the unauthorised finance companies with Interpol being requested to conduct inquiries.

It now transpires that while a special team has been deployed to speedily arrest the racketeer Sakvithi Ranasinghe, that among the investors are two top police officers whose names have come to light after investigators cracked the computer code of the fraudster. A special investigation is now underway regarding the deposits made by the two police officers, to be submitted to the Inspector General of Police.

The two police officers whose names have transpired in the computer records are a DIG who had reportedly deposited Rs.3.5 million and a SP under whose name a deposit of Rs.1.2 million is mentioned. The SP incidentally was one cop involved in the investigation initially, before it was taken charge by DIG Chandana Wickramaratne.

Top cops deny

The top cops of course have denied knowledge of the deposits and claim they did not have such sums to deposit.

It is also important to note that while there is a public outcry at present, the warnings issued by the Committee on Public Enterprise (COPE) as far back as two years ago over some 80% of the so called finance companies operating in Sri Lanka being illegal, went unheeded by the authorities and evoked no response from the Governor of the Central Bank, Nivard Cabraal, despite being requested to take legal action - an undertaking he gave but which was confined to mere words.

If the authorities have simply abdicated their responsibility of cracking down on these illegal companies, a fair measure of blame should also be apportioned to the unsuspecting depositors who are taken in by the ruses of these so-called owners of massive enterprises offering incredible interest rates. No warning bells went off in their collective minds despite a previous example of  Pramuka Bank with the dubious racketeer who headed the bank fleeing the country unhindered.

Fraudsters galore

And that is why in Sri Lanka there are fraudsters aplenty with a natural tendency for history to repeat itself. This also means, con masters like Sakvithi Ranasinghe could easily dupe thousands in the same manner and strangely, there is very little that the regulatory bodies and law enforcement agencies would do.

He was so slick that even photographs with President Mahinda Rajapakse adorned his walls to give the unsuspecting depositors the impression he was a man of standing with powerful connections.

So gullible is the Sri Lankan public that the radio, television and print media advertisements promising heaven on earth if tutored by some of these glorified teachers ranging from language teaching to assisting unsuspecting students to gain entry to prestigious foreign universities are accepted religiously. There is so much of illiteracy that trade puffs are not identified by the viewers/readers/listeners.

As for Sakvithi Ranasinghe, if his operation was a fraud from the beginning, it is best to remember that his is not the only one, with some 80% of the so-called finance companies being illegal operations.

To boot, not only do we find bogus finance companies but also dozens of unregistered educational institutes promising bogus degrees and entry to the world's most prestigious institutes of learning.

In the aftermath of the Sakvithi saga, a man who offered an interest rate as high as 72%, no mean feat by any standards, what is shocking is the Sri Lankan tendency to be so easily duped by these media savvy fraudsters.

Played out

And forget the old adage, Caveat Emptor or buyer beware, Sri Lankans show a penchant for being played out by street-smart sellers of all kinds, their wares ranging from soap to education.

Sakvithi Ranasinghe's racket was first uncovered by an alternate publication. It took a couple of months for other media institutions to pick up the issue. By then the smooth talking English teacher turned millionaire had fled the country, having duped thousands of unsuspecting investors.

The number of victims who deposited their earnings in Sakvithi's enterprise are said to be between 1,500 and 3,000 - and the complaints are still flowing in. It is estimated that Ranasinghe's illegally acquired wealth from these deposits could be well over Rs. 900 million.

While the foolhardiness of depositors is a given, then there is the question of irresponsible conduct by the country's foremost bank, the Central Bank.

Now pleading innocence and denying the responsibility to do overall monitoring with regard to the many finance institutions here, the Central Bank does not acknowledge its responsibility to have pursued legal action despite a COPE warning about the irregular status of most of these companies.

Lukewarm response

Even now, the Central Bank appears to be dragging its feet, confining its response to one of cautioning the public and merely threatening to take legal action against other operators of illegal deposit schemes.

In the wake of the massive investment racket, the Central Bank named six finance companies as unauthorised and issued a list of 32 registered finance companies, 23 licensed commercial banks and 14 licensed specialised banks. That is the total sum of the Central Bank's work by way of response.

If Cabraal wants kudos for these measures he should think again. His response to the country's financial indiscipline has been as one of contributor and not of regulator or monitor.

Take the controversial Pyramid Scheme that was later declared illegal. Cabraal's family's connection to the scheme was well documented and the Central Bank Governor who is charged with the duty of preventing illegalities in the sector did sweet nothing but had the gall to appear before COPE and declare that his name was unnecessarily and unfairly dragged into the pyramid scam.

And he undertook to take immediate measures against the fraudulent finance companies and to take legal action against them within two months. Almost two years later, nothing has happened except that a con master named Sakvithi Ranasinghe has managed to loot the money of over 1500 people.

CB's role

Just last week, the Central Bank ended up publicly declaring its role (a duty observed in the breach) as the regulator and supervisor.

According to top CB officials, the CB's duties include the "regulation and supervision of banks and finance companies licenced by it to see that those institutions are managed prudently for the purpose of maintaining safety and soundness."

Further, some of the major regulatory and supervisory measures adopted by the Central Bank are said to "mitigate risks with a view to ensure the soundness and stability of the institutions."

Accordingly, the Central Bank is required to conduct periodical examinations and some of the key, prudential requirements include maintenance of capital, liquid assets and classification of loans, provisions for bad loans, limits on share ownership and limits on maximum amount of lending.

 With thousands of depositors, now with  hope and their life's earnings lost calling for action, authorities maintain that Interpol will be invited to collaborate in the arrest of Sakvithi Ranasinghe who is supposed to have fled to India with his immense loot.