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Hedging & the National Interest: The twin shackles

Asantha de Mel

De Mel's internship offer and
Confirmation of De Mel's internship

By Faraz Shauketaly

Affidavits filed by Kirmali Fernando in the hedging case and Nihal Sri Ameresekere in the objections to P. B. Jayasundera’s attempt to return to public service, have again, turned  the spotlight on the twin shackles that threaten to conspire the progress this country can make in the important post-war period. It is especially significant in the wake of the trying time the government had in securing a US$ 2.5 billion stand-by facility from the International Monetary Fund (IMF).

Information of possibly the gravest importance not in the public domain previously has now come to light after the publication last week of the Kirmali Fernando Affidavit. Certainly Fernando’s credentials are impeccable and her knowledge of the events of significant value — she had worked for Standard Chartered Bank for over five years in a senior position and is now a banker of substance — heading another locally held private bank.

Grave stroke of luck

The fact that these affidavits were requested by the Supreme Court is in itself, a grave stroke of luck for the Republic of Sri Lanka: no less a person than the Attorney General opposed the very petition presented by Nihal Sri Ameresekere. Ameresekere, fortunately for the public interest, objected strongly and made forceful presentations which resulted in the Court directing that eight persons provide affidavits within two weeks.

In a serious indictment of the strategy that the People’s Bank is pursuing — opposing every attempt to object to the public interest litigation instituted by the formidable duo of Vasudeva Nanayakkara and Nihal Sri Ameresekere — Kirmali Fernando’s affidavit sheds further light on the operational management at Sri Lanka’s No. 2 state bank.

 “Operational risk”

 In a candid advisory to its Board of Directors People’s Bank makes light of the non-collection of the signed ISDA. In fact, the CPC did not have the agreement of the Attorney General at that time. It opened the People’s Bank to “operational risk.”

 Standard Chartered Bank appears to have gone into hibernation with the release of  Fernando’s statement. Our attempts to contact Standard Chartered Bank have been ignored by none other than the beleaguered CEO Clive Haswell.

It beggars belief that Clive Haswell, the CEO of Standard Chartered Bank, has apparently ignored — we hope at his peril — the guidelines laid out by SCB for their employees. And Clive Haswell is, an employee, after all. These guidelines remind all their employees that, “the bank is a guest in each country and can be asked to leave.”

 Temerity to interpret

 Clive Haswell, it appears from Fernando’s sworn affidavit, has had the temerity to interpret for his colleagues as to how the Central Bank of Sri Lanka would interpret the state banks’ violations of rules that govern banks in this country. On what basis does he do so?

Is he being guided by sources close to the Central Bank and or the Treasury in his almost flippant disregard of the rules that govern his very existence in this country?

Significantly despite Haswell’s almost in-built reluctance to speak to the press, it has now been disclosed that in his affidavit, Nihal Sri Ameresekere has included extracts of telephone bills — which he asks the Supreme Court to verify through the relevant authorities — which reveal calls between Haswell, P.B. Jayasundera and Citibank. If these telephone bill extracts are proven to be authentic they would prove that a “nexus or collusion” existed between Jayasundera, SCB and Citibank.

Voluptuous appetite for profit

Haswell’s voluptuous appetite for profit overrode the rules and guidelines. Indeed, it places the Standard Chartered Bank in a most untenable position. For an international bank of some significance they have acted deplorably to the grave cost of the country’s foreign reserves.

To add insult to injury we have as its CEO a man who the affidavit states is said not to have any expertise in risk management or as a CEO.

In fact, the bank — led by Clive Haswell has not endeared itself to this country with their actions: it is time, is it not, for the Central Bank to revoke the banks’ license and ask them to leave forthwith.


Our questions to the Standard

29th July 2009 by email 

Mr. Clive Haswell


Standard Chartered Bank


Dear Mr. Haswell,

 I note that when I introduced myself over the telephone yesterday you chose to remain silent keeping the line open. Nevertheless the following questions do require your answers. Hanging up and diverting your mobile phone will not make the issues go away.

As CEO why did you go ahead with selling these contracts to the CPC without the signed ISDA contract in place?

You are alleged to have stated that “the risks were worth it” — now that the SCB is involved in a veritable imbroglio, do you agree with your statement? Are you willing to risk your banks’ licence and your reputation as a banker?

What experience do you have in international oil trading?

What knowledge do you have that allows you to interpret how the Central Bank would rule on the state banks’ violation of the rules governing banks? Were you guided by P.B. Jayasundera, the former Treasury Secretary?

Was Kirmali Fernando’s departure from SCB employment tantamount to “constructive dismissal?”

We look forward to receiving your response which may be published in future articles. 

Yours sincerely

Faraz Shauketaly

GSM  +94772 300 305

 Chartered Bank

Response from the Standard Chartered Bank 

Dear Faraz

 We refer to your email query on July29, please note the following,

—  As the matter is in court we cannot make any comment 

Thanks and regards


Sidath Perera

No conflict of interest — Ashantha de Mel 

In a new development, Ashantha de Mel, the former chairman of the Ceylon Petroleum Corporation, has clarified that in his view there is no conflict of interest regarding his daughter.

De Mel provided us copies of letters which are reproduced here. He said that his daughter was not employed by SCB — rather she had an internship for a brief period from January 2, 2008 through February 22, 2008 and was paid an honorarium of Rs 15,000 per month to cover her basic expenses.

The documents also show that Miss De Mel gained experience in five different areas  of the bank’s operations. Her speciality interest during her internship was in connection with identifying opportunities in Carbon Trading for SCB.

De Mel also pointed out that the first hedging contract was taken out in February 2007 — whereas his daughter’s internship commenced in January 2008 — which is 11 months after the first hedging contract was taken out.


The Attorney General’s objection

Mohan Pieris

The Attorney General Mohan Pieris, joined the counsel representing the five banks in objecting  strongly to Nihal Sri Ameresekere’s latest action in the hedging transaction — notwithstanding the fact that these actions were in the public interest.

The Attorney General’s role includes one of Amicus Curiae — quite literally “friend of the court.”

Amicus curiae  is a legal Latin phrase, literally translated as “friend of the court,” that refers to someone, not a party to a case, who volunteers to offer information on a point of law or some other aspect of the case to assist the court in deciding a matter before it. The information may be a legal opinion in the form of a brief, a testimony that has not been solicited by any of the parties, or a learned treatise on a matter that bears on the case. The decision whether to admit the information lies with the discretion of the court.

According to the Bar Association Journal, “the Attorney General must have due regard to the desire of any government to realise its legitimate aspirations and the political problems ministers have to contend with. However it is his duty to advise the government to act within the law.”

In Court, the AG assured us all, that the public interest was well looked after by him and that he was defending that very notion in the courts of London and the arbitration proceedings in New York and London.

However, it is just as well that Nihal Sri Ameresekere, the public interest litigator and a certified fraud investigator, had an appetite for public interest issues.

Purely and simply because of the prayers and pleadings that Ameresekere made to the Supreme Court, notices were sent to eight persons asking them to provide by way of affidavit their knowledge of the events surrounding the hedging issue.

Most significantly, the Supreme Court granted Ameresekere his pleadings to notice eight key persons despite those persons not being named as respondents, but who were involved in this most infamous of transactions and despite not having yet heard the objections by other counsel on the issue of “time barred” actions.

Without recourse to the affidavits of these eight, the republic may well have been placed in a position.

The AG objected to Ameresekere’s actions on the grounds that his action is time barred, but also wanted Ameresekere to “rest his head,” assuring the Court that the public interest was well looked after.

What is most galling of all, is the apparent disregard of the amounts of monies that Ameresekere says will be lost even further  if his pleadings are not given a hearing. He estimates the eventual bill to the country at US$ 800 million, monies he says the public can ill afford.

It would have been best if — and the CJ suggested as much but only in jest — the AG recognised the angles being presented by Ameresekere and acted as one — for indeed, both seek the same result: to safeguard public property and interest.

In the recent past lawyers appearing for Leader Publications have been called traitors. Some in the legal and commercial fraternity are debating  who exactly constitutes a traitor? There are only two sects of people in this country: those who either love the country and those who don’t. Those who love the country also love to uphold the true values and rights enshrined in the Constitution of this country without let or hindrance.


Wither the National Interest?

P.B. Jayasundera and Nihal Sri Ameresekere

Objecting vehemently to the application made by P.B. Jayasundera asking him to be released from the undertakings given by Jayasundera to the Supreme Court, Ameresekere in his preliminary objections has asked the Court to consider rejecting the application “in-limine” stating that the application is misconceived in law and devoid of any merit.

In-Limine – Latin for “at the threshold” — is a motion made before the start of a hearing requesting that the judge rule that certain evidence may, or may not, be introduced.

Ameresekere provided a 36-page affidavit on his objections to Court. Taking issue with Jayasundera’s letter of July 25, 2008 — Ameresekere said it was “knowingly and willfully” suppressed at that time from the Supreme Court

Jayasundera had expressed regret and tendered an unreserved apology to the Supreme Court by affidavit in October 2008 for having held office after the most severe castigation that the Supreme Court had given him.

Jayasundera had even admitted by letter dated 3.6.2009 that there had been adverse findings against him by the Supreme Court.

In the previous case Jayasundera had not pointed out to the Court that all material facts were not taken into account and he had not pointed out in any event what those facts were.

Ameresekere’s affidavit is gripping reading. He goes on to state that Jayasundera did not plead the importance he now pleads, of his service to the public sector nor does he plead of the purported manner in which he conducted himself  in public service — which he now does — after nearly one year.

Has Jayasundera taken nearly a whole year to figure out that he was an asset to the public service contrary to what the Supreme Court had found against him? Has it taken a whole year (nearly) to figure out that he behaved with probity and fairness in his public duties?

Ameresekere goes on: He points out that in the Judgment dated 21/7/2008 the Court stated that Jayasundera’s action in surreptitiously inserting a monopoly clause in the LMS case, was struck down by the Court of Appeal as being illegal. Ameresekere was even more cutting in his comment on the following statement given by Jayasundera:

“throughout my career in public service I had maintained the highest level of honesty and integrity and .... discharge .... duties with utmost commitment in good faith and in the best interests of the country and never compromised under any circumstances the public interest ...”

Ameresekere said of this: “PALPABLY FALSE”


Vasudeva Nanayakkara on the Kirmali Affidavit 

Vasudeva Nanayakkara

Ameresekere’s actions have been eminently vindicated: it helped throw light into the circumstantial backdrop that existed in this case.

We are only sorry that the People’s Bank continues on their defensive strategy, quite contrary to the goals envisaged during the set up of the People’s Bank.

Facts now coming out brings into sharp focus the actions of the Attorney General. The Attorney General should have sought the assistance of Ameresekere and worked in tandem with him.


The sequence of events leading to hedging

06/09/2006      Presentation by the Governor of the Central Bank,
                         on Oil hedging to the Cabinet of Ministers

06/09/2006      Cabinet decision on the above presentation to appoint a
                         Study Group consisting of officials and to report back to Cabinet

02/10/2006      Ashantha De Mel appointed as Chairman CPC

19/10/2006      Appointment of a Study Group by Secretary to Treasury, P.B. Jayasundera

16/11/2006      Study Group Report presented

16/01/2007      Cabinet Memo submitted by Ministry of Petroleum on the basis
                         of the Study Group Report

17/01/2007      Cabinet decision put off for next meeting

24/01/2007      Cabinet decision made and approvals granted

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