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Nivard Cabraal |
Goldfingers
By R. Wijewardene
Last
week the Governor of the Central Bank found himself
mired in the Golden Key scandal as The Sunday Leader
uncovered evidence that he was responsible for
terminating an investigation launched into Golden Key by
the Central Bank in 2005.
The
dismissal of a report that could have stopped the Golden
Key scam in its tracks in 2006, was masterminded by a
nexus of influential politicians and businessmen with
Cabraal who is at once a politician, a businessman and a
banker firmly in the middle.
By
preventing the investigation from proceeding and
scuttling the inevitable Monetary Board action against
Golden Key, Nivard Cabraal managed to exacerbate the
magnitude of the Golden Key disaster.
Despite having before him a report which stated quite
clearly that Golden Key was in complete breach of the
Financial Companies Act the Governor chose to allow the
unlicensed company to continue operating, and as such
was involved in perpetuating Golden Key’s criminal
fraud.
The
idea that the Governor of the Central Bank despite being
fully aware of Golden Key’s criminal activity, used his
influence to allow the business to keep operating is
simply shocking. Or at least it should be, but Nivard
Cabraal is something of a special case and its common
knowledge that the Governor is no stranger to golden
schemes.
Gold Quest
Long
before he was Central Bank Governor Cabraal had acquired
a reputation for poking his golden finger into
profitable pies and in 2003 the ‘banker’ was embarrassed
when he was discovered to have been at the bottom of
another pot of gold, this time Gold Quest.
The
notorious pyramid scheme duped investors into buying
overvalued gold and then encouraged them to sucker more
friends, relatives and colleagues into investing with
Gold Quest, in exchange for commissions.
Investors paid a fixed dollar sum for membership of the
scheme and in exchange received gold tokens, watches,
and trinkets.
Typically the gold they received was worth substantially
less than their initial payment however they were
assured that it was a sound investment and were
constantly told that by joining the scheme they had
become independent businessmen.
Each
member was asked to persuade at least two new members to
join Gold Quest, and each of these new members was in
turn required to recruit another two participants.
For
every four members that entered the pyramid under them,
investors received a substantial commission.
As
each new member continued to add yet more recruits to
the scheme, those at the top of the pyramid received
substantial commissions, but the ultimate profit was
reserved for Golden Key – which made millions on the
sale of overvalued gold baubles – that had little or no
real value.
Left with nothing
Gold
Quest was a quintessential pyramid scheme with new
investments financing the commissions received by
previous investors, and like all pyramid schemes those
nearer the top — who joined the scheme earliest made
substantial profits from their investment receiving
commissions for all those who joined under them.
The
vast majority of investors however were left with
nothing but vastly overvalued gold trinkets. Some at the
very bottom of the pyramid even paid for Gold Quest
membership and received nothing at all.
Pyramid schemes operate in every part of the world but
Gold Quest is one of the most organised. Headquartered
in Hong Kong it specialises in taking advantage of
underdeveloped, poorly regulated economies such as
India, the Philippines and of course Sri Lanka.
While
the Gold Quest scheme preys on investors’ dreams of easy
money for minimal effort, the ultimate losers are not
only money hungry investors but also the country’s
economy as a whole as the scheme deprives nations of
valuable foreign exchange. Those who invested had to,
illegally, remit dollars to Gold Quest’s Headquarters in
Hong Kong in exchange for membership of the scheme.
Notorious scheme
The
scheme is notorious and banned in several countries
including the Philippines. In Sri Lanka it was found to
violate both regulations concerning gold imports and
exchange control, by remitting foreign exchange to the
Gold Quest parent company in Hong Kong.
But
for our golden man, Nivard Cabraal the allure of so much
easy money was simply too much to resist.
The
Sunday Leader this week has evidence that the Central
Bank Governor was intimately involved with Gold Quest.
We
have documents in our possession which prove that an
independent investigation found that Capital Reach, a
company chaired by Nivard Cabraal and in which both his
wife and himself were shareholders, was a front in Gold
Quest’s Sri Lankan operations.
In
order to run their scheme, Gold Quest operated through
various front companies. Gold Quest acquired struggling
tea exporter — Fern Tea and used the company’s export
connections to clear gold through customs. Additionally
Gold Quest took a stake in Rhythm Collection, a retailer
based in the Premier Pacific shopping center which it
used to deliver various gold tokens to customers, and to
remit money received from investors back to
Hong Kong.
The
Cabraal family was involved in the scheme through
Capital Reach Holdings, a company owned by Cabraal and
his wife.
In
2003 Capital Reach Holdings took control of the ailing
Vanik Leasing Company, and shortly there after Suntex
International, a front for Gold Quest based at the same
address as Gold Quest in
Hong Kong, invested heavily in the Cabraals’ business.
Suntex
Suntex
bought a major stake in Capital Reach Holdings and
therefore the Cabraals co-owned a finance company with
Gold Quest. Suntex Holdings also bought a controlling
stake in Gold Quest’s other major local front company –
Fern Tea.
A
finance company however was an ideal vehicle for Gold
Quest’s expansion in Sri Lanka and it is impossible that
Nivard Cabraal was unaware of the intentions and
activities of his disreputable business partners.
In
fact it was reported that Cabraal received and responded
to invitations from Gold Quest which offered the
Governor and his family the chance to attend the
glamorous Monaco Grand Prix at Gold Quest’s expense.
The
involvement and association between Cabraal and Gold
Quest was clearly an intimate one typical of Gold
Quest’s strategy to co-opt influential business people
and government officials in vulnerable Third World
countries.
Rhythm Collection
However there was also a personal dimension to the
relationship — Anura Fernando who was chairman and CEO
of Fern Tea and the owner of Rhythm Collection, Gold
Quest’s principle fronts in Sri Lanka, is a close friend
of the Governor’s. Therefore through his family, his
friends and his business interests Nivard Cabraal was
connected to Gold Quest. In fact he only resigned as
chairman of the company he jointly owned with Gold
Quest, when he was appointed economic advisor to the
President.
However even at this point the Cabraal family did not
sever their connection with Golden Key and his wife
assumed control of Capital Reach Holdings.
Their
involvement with Gold Quest was simply too deep. Gold
Quest were major investors in a company jointly owned
and chaired by the Cabraals, it offered the family
invitation to glamorous events, and a close friend was
the head of Gold Quest’s operations in Sri Lanka.
While
Cabraal’s close connections with a criminal enterprise
are damning his initial wheeler-dealing with Gold Quest
pales in comparison to his actions once he was appointed
Central Bank Governor.
By
2005, the activities of Rhythm Collection and Fern Tea
had aroused the suspicion of the Central Bank and an
investigation had been launched into the companies.
Rhythm Collection was found to be illegally remitting
vast sums of foreign exchange out of the country while
Fern Tea was discovered to have been a front used to
effectively smuggle gold though customs.
A
Manager of Rhythm Collection, a Mr. Weeraman was
arrested, he was only small fry however and the net was
fast closing around others involved in the Gold Quest
scam, particularly Cabraal’s close friend Anura
Fernando.
The
2005 Central Bank investigation, a copy of which is now
in the possession of The Sunday Leader, produced an
enormous volume of information regarding the illegal
activities of Gold Quest and its local collaborators and
the Cabraal family were facing the prospect of answering
some uncomfortable questions regarding their association
with Gold Quest.
Pure golden luck
However just as things were starting to look bleak for
the Cabraals our golden man hit upon a streak of pure
golden luck and the faintly dubious businessman and
qualified chartered accountant found himself appointed
Governor of the Central Bank.
Elevated to such a lofty position the golden boy sprang
immediately into action using his new found powers to
terminate the investigations into Gold Quest. Its even
reported that he disbanded the crack investigative team
who had compiled the investigation.
Sweeping the potentially damning report under the carpet
was a shocking abuse of power. The conflict of interest
between the Central Bank Governor’s responsibility to
enforce financial regulations and his personal
involvement with companies clearly violating these
regulations is clear.
And
faced with this intractable dilemma the honourable
Governor turned to a device he clearly believes is worth
its weight in gold – the paper shredder, consigning the
relevant investigations to the shredded paper basket.
The
sins here are manifold – by preventing the investigation
from continuing Cabraal allowed senior members of the
Gold Quest scheme including his friend Anura Fernando,
and quite possibly himself, to escape inevitable legal
action.
Through his involvement with Capital Reach he had
already effectively aided and abetted an illegal company
that clearly violated the country’s exchange control
laws.
Ultimately he came to the aid of those involved in a
pyramid scheme that is expressly prohibited by the
Central Bank he is the head of, raising profound
questions about his commitment to the laws he is duty
bound to uphold.
Two instances
Together with the discovery that he quashed a report
that could have put an end to Golden Key, there is now
evidence Nivard Cabraal has twice used and abused his
power as Central Bank Governor to dismiss reports that
would have embarrassed his friends and associates.
Again
these actions hardly inspire confidence in the man
tasked with managing this nation’s troubled economy.
At a
time when the nation is facing a dire foreign exchange
crisis should we really have a man involved with a scam
that for years illegally leached foreign exchange out of
the country at the helm of our economy?
Sadly
the problems confronting the nation’s balance of
payments today cannot be solved by the paper shredder –
Cabraal’s main area of expertise.
And of
course the ultimate irony in all this is that a man who
clearly loves gold — to the point that he embroiled
himself in not one but two palpably criminal schemes,
has as Central Bank Governor, let the country’s reserves
of gold and foreign exchange diminish to their lowest
levels in history.
The
sad fact that the country’s problems can’t be shredded
into nonexistence now leaves us with no option but to
beg for a change of heart on the part of the Governor;
and the country’s golden man must now use his deep and
sincere love of gold to increase the treasury’s
squandered reserves or else resign and return to the
business he knows best, the pursuit of golden schemes
and golden dreams.
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