The Sunday Leader

Greek Bond Debacle Backfires On Rajapaksa, Cabraal Duo

by Amavasya Sirisena

President Mahinda Rajapaksa sharing a poignant moment with one-time Governor of Central Bank, Ajith Nivard Cabraal

With the unprecedented and senseless borrowing of the previous Rajapaksa regime plunging the country into a massive debt burden of 8,475 billion rupees, many more scandals of former President Mahinda Rajapaksa and the misappropriation of public fund by the family members are being exposed to the public showcasing the unbelievable levels of corruption created by a Sri Lankan head of state and his cohorts.

Out of the myriad of stories coming into limelight exposing the corruption and machinations of the Rajapaksa regime, whereas the latest revelations in to the controversial Greek Bond scandal implicating to Rajapaksa lackey one-time Governor of Central Bank, Ajith Nivard Cabraal in collusion with the then Finance Minister Mahinda Rajapaksa incurring a staggering loss of Rs 9.7 billion to Sri Lanka economy.

The Greek Bond scandal in which the Central Bank of Sri Lanka is supposed to have invested in treasury bonds issued by the Government of Greece and reportedly caused a loss of Rs 9.7 to the Central Bank. Criminal action has been filed against former President Mahinda Rajapaksa and then Central Bank Governor Ajith Nivard Cabraal in the Magistrate’s Court of Colombo. Attorney at Law Kelum Kumarasinghe has filed this action alleging that the actions by the Monetary Board and specifically the Governor of Central Bank Ajith Nivard Cabraal as detailed in the complaint amounts to corruption.The Complainant states that it is of utmost importance that public funds and state property be used for the benefit of the public and public officials who are entrusted with the public duty to manage such public property must exercise and maintain maximum and utmost care and sensitivity in handling such power in keeping with public interest.

 

Criminal breach of trust

The Complainant states that relevant public officials are not permitted to act in an unlawful, manner in violation of the stipulated provisions of law as there could be no exceptions to the due exercise of care and due diligence as the same would thereby cause irreparable loss to the Central Bank, Government of Sri Lanka and to the general public. Such action amounts to Criminal Breach of Trust by the first Accused who was the Governor of the Central Bank and the Chairman of the Monetary Board. The Complainant states further that where public funds are managed in an arbitrary manner resulting in committing criminal breach of trust of public funds held by the Central Bank in total abuse power vested with the Monetary Board, such action is rendered all the more heinous when there is in abuse of office as evidenced where in the first accused have held the highest office in the Central Bank and the second accused then President Mahinda Rajapaksa as the head of the Ministry of Finance.

The Complainant states that in accordance with Foreign Reserve Management Rules (guidelines) of the Central Bank of Sri Lanka (CBSL), to invest in long term debt instruments, the minimum issuer requirement should be in the A3 level (as per Moody’s rating system), as stated in the Auditor General’s Report on the Central Bank dated sixth July 2012.  As per Moody’s rating system (Obligation rated ‘A’ are considered upper medium grade and are subject to low credit risk). The Complainant states that the above requirement has to be complied with when making investments as per Section 5.2.9 of the FRM guidelines. It further states “notwithstanding the above, CBSL may invest in fixed income securities issued by sovereign up to the maximum amount as specified by the Monetary Board that would significantly enhance the rate of return in foreign reserve management after careful consideration of market conditions”.

 

Higher price paid than actual value

The Complainant states that CBSL on April five, 2011 had invested Euro 22,163,500 (Rs.3,472,576,045) in Greek Government bonds which had a face value of EURO 30,000,000 purchased from the Secondary Market through intermediaries namely Morgan Stanley, Jefferies & Com. Inc., Royal Bank of Scotland Plc., Commerzbank AG on April fifth 2011. It is apparent that the bonds were trading below the face value, entailed a realisable value far below the market value of the secondary market due to the debt crisis the government of Greece was saddled in, and the said Bonds were purchased through the intermediaries paying a high price when the actual value was far below the price that was paid for the purchase. It is observed that at the time of the investment the long term debt rating for Greece had been downgraded to “B1” by the Moody’s rating agency.

Obligations rated “B” are considered speculative and are subject to high credit risk. The Complainant states that at the time of the investment, Greece was entrapped in a debt crisis and international financial rating agencies had downgraded its economic outlook and its ability to maintain financial obligations. The high risk involved and volatility in investing in Greek government bonds is common knowledge and does not require careful scrutiny or consideration of market conditions by professional researchers.

 

Greek economy has been in dire straits

The Complainant states that the Greek economy has been in dire straits since early 2008 and has continued to further deteriorate. The Complainant further states that recession was expected to be deeper in 2011/12 as Real GDP growth recorded a negative growth, the lowest i.e. -6% since the beginning of the Greek recession in 2008 as set-out on page 45 International Monetary Fund Country Report No.11/351 – Greece: Fifth Review under the Stand-by Arrangement, Rephrasing and Request for Waivers of Nonobservance of Performance Criteria; Press Release on the Executive Board Discussion; and Statement by the Executive Director for Greece (December 2011). The Complainant states that it was a widely accepted fact that the default of the Bonds by the Greek Government was only a matter of time and that the probability of default varied between 20% to 30% in the case of Bonds with a maturity period of 1 year to approximately 80% to 90% in the case of Bonds with a maturity period of 10 years as illustrated by a graph, in an article published by the Center for Geo-economic Studies.

The Complainant states that despite the alarming risk factor being very obvious, the CBSL did not pay any heed to take into consideration of the market trends and the projections based on the research papers that were currently available as at the date of the investment/purchase, and instead chose not to obtain the prior approval of the Monetary Board as required by law despite clear credit risk in a surreptitious manner with fraudulent intention. The Complainant states that the requirement for the approval of the Monetary Board has been circumvented on the basis that these securities will be added to the high yielding tranche and in general to be kept until maturity and the approval for investment in the Greek Government bonds had been granted by Governor Cabraal, a Deputy Governor and an Assistant Governor as per the Report submitted by the Auditor General’s Department to the meeting of the Committee of Public Enterprise.

 

Sold at a loss

The Complainant states that it is appalling to note the sale of Bonds with a face value amounting to Euro 5,000,000 which had been purchased by the Central Bank of Sri Lanka at Euro 4,103,500 had been sold at Euro 3,300,000 on July 13,2011 merely three months subsequent to the purchase of the same, acting in conflict with all accepted principles and practices followed by financial experts in making investments causing loss to the Central Bank and the Government of Sri Lanka by the actions of the first Accused aided and abetted by the second Accused.

The Complainant further states that investment in such high risk investments committed by the first aided and abetted by the second Accused are according to accepted principles and practices of the financial experts to be kept until maturity, with proof as not only the basis of the decision to purchase the bonds but also the rationale of the decision to sell the bonds merely 3 months after the purchase of the same incurring a loss of Euro 803,000  as pointed out in the Report submitted by the Auditor General is further proof of the commission of  Criminal Breach of Trust.

 

Greece Debt Swap Programme

The Complainant states that the Monetary Board headed by the first Accused had taken a decision to accept the Greece Debt Swap Programme under which the CBSL was compelled to accept the following in respect of Bonds containing a face value of Euro 15 Million:

The Complainant  states that the loss incurred as a result of the wipe out only arising out  of the Greece Debt Swap Program is a colossal sum of Rs 1.2573 billion (Rs. 1,257,356,590/=).

The Complainant states that the Leader of the Opposition and the United National Party, which he represents, raised a question in Parliament under Parliamentary Standing Order 23/2 in connection with the purchase of Greece Bonds and the same was answered by former Minister of International Monetary Cooperation, Dr. Sarath Amunugama.

 

Euro 15M wiped out

The Complainant states that as per the answer given by the said former Minister he has failed to disclose the fact that Bonds valued at Euro 8.025 million consisting 53.5% of Bonds containing a face value of Euro 15 million was wiped out as disclosed by the Auditor General.

However former Minister Amunugama disclosed to the Parliament that US$ 5.5 million was incurred as a loss in the sale of Bonds with a face value of Euro 10 million, in the sale that occurred in November 2011, in addition to a further loss of US$ 1.1 million that was incurred in the sale of another set of bonds with a face value of Euro 5 million.

The Complainant  further states that the loss incurred of US$ 5.5 million by way of a sale of Bonds with a face value of Euro 10 million and the sale of the said bonds with a face value of Euro 10 million itself, has not been disclosed in the Auditor General’s report.

In the circumstances it is stated that the total loss incurred by the Central Bank of Sri Lanka as per a compilation of the revelations made in the Auditor General’s report and the Answer given by former minister Amunugama in Parliament is illustrated in the table below:

Dishonest and intentionally deceitful conduct

The Complainant states that despite the above investment being contrary to accepted procedure it is questionable and is implicit of dishonest, and/or intentionally deceitful conduct of first Accused Governor Cabraal.

The Complainant further states that the purchase of the Bonds issued by the Government of Greece by Cabraal has not been done at source namely the primary issue and instead has been purchased through the secondary market from those who have already purchased such bonds through brokers which is unprecedented. Namely the said intermediaries were Morgan Stanley, Jefferies & Com. Inc., Royal Bank of Scotland Plc., Commerzbank AG on April fifth 2011.

The Complainant states that either X2 or X6 does not reveal the Market value of the bonds as at the date of purchase on April five. 2011 from the intermediaries nor the market value as at the date of the answer given in the Parliament.

The Complainant states that as per the revelations of the former Minister Amunugama and the Auditor General the loss of Public Funds to the State is a sum of approximately Rupees 2.14 billion.(6.6 M US$ + 8.025 M Euros). This sum is not conclusive as the present market values of the remaining bonds are not known.

Investment in totality is ab initio illegal

The Complainant states that as the impugned investment has been carried out arbitrarily and capriciously at the outset, only with the prior approval of the Governor, Deputy Governor, and an Assistant Governor without any assistance from the research division of the Monetary Board or  the Secretary to the Treasury who is the link between the Government and the Monetary Board the impugned investment in totality is ab initio illegal and has now caused an enormous loss to the taxpaying citizens of the country.

The Complainant states that this investment has been carried out at the behest of the first accused Cabraal and the second accused Mahinda Rajapaksa in an illegal and dishonest manner with intent of personal gain as these two persons are on the Monetary Board by virtue of their official status as the Governor of the Central Bank and the second accused having aided and abetted the first accused to commit the offence of Criminal Breach of Trust.

The Complainant also state that first accused Cabraal and the secnd accused Mahinda Rajapaksa have committed offences punishable under Section 388 of the penal code punishable under Section 389  of the  Penal Code and having committed the offence on Public Property Act and Act No.19 of 1994 – the Commission to Investigate Allegations of Bribery or Corruption (CIABOC).

Grave loss, damage and mischief to the public

The Complainant states that as a result of this arbitrary and irresponsible exercise of authority by the said Cabraal and Mahinda Rajapaksa the citizens of the country are now called upon to pay for the losses incurred. These actions and omissions have a material bearing on the State and the citizens of the country.

 

The Complainant states that:-

(i) from the foregoing facts it is clear that the relevant financial supervisory institutions set up by law have been suppressed with information and their sanction not obtained and such illegal, deceitful and fraudulent  conduct by the first and the second accused have resulted in causing grave loss, damage and mischief to the Government and the public, wrongfully and unjustly causing the alienation and/or unjustly causing mischief to  the property of the public held in trust, in blatant violation of all applicable laws.

(ii) the said illegal, fraudulent, deceitful and unlawful acts of the first and the second accused by making / aiding and abetting in making such investment has caused enormous losses and an economic burden to the citizens of the country.

(iii) the averments disclose the startling, wrongful, unlawful and fraudulent transaction causing enormous loss and detriment to the Government and the public, including the Complainant violating the rule of law, with misuse and abuse of power in breach of the trust of the people by the arbitrary acts of the first accused Cabraal and the second accused having caused the offence of Criminal breach of Trust.

 

Former President implicated

The Complainant further states that the second accused being the Minister in charge of the subject of Finance and the first accused was directly reporting to the second accused. This incident causing loss to the EPF was very much publicised and was reported in the public domain. However the second accused aided and abetted the first accused by knowingly ignoring his illegal conduct and encouraged the first accused to commit the offence of criminal breach of trust of the funds of the EPF that was entrusted with the first accused as the head of the Monetary Board.

The Complainant states that as the second accused relinquished the office of the President of the Republic of Sri Lanka on January eighth 2015 as he does not enjoy any immunity, he can be sued in any court of Law.

 

Prayer

The complainant wherefore seeks summons/notices to be issued in the first instance on the first and second for the offence committed under and in terms of section 388 of the penal code accused and to take steps to punish them under section 389 of the penal code.

The complainant has requested Court to;

issue notice/summons on the first and the second accused in the first instance

make an order to impound the passports of the first and the second accused, preventing him from leaving the country.charge the first and second accused for the offence of criminal breach of trust punishable under and in terms of section 389 of the penal code.Procedure and .to stand trial as provided for under the provisions of the criminal procedure code

 

15 Comments for “Greek Bond Debacle Backfires On Rajapaksa, Cabraal Duo”

  1. Don

    Scandal after scandal galore. This is why Champika Ranawaka said during presidential election that MR was worse than Prabakaran. While Prabakaran destroyed the country for 30 years, MR has destroyed the economy of the country for 150 years as many generations will pay for his mega blunders, stupidity and for plundering by family and hundreds of henchman.

    It is important to analyse the mentality of MR. He appointed a man who tied another man to a tree as minister of public relations!! This was the level of judgement this man had. No wonder the country is in such calamity.

    It is vital to understand the damage this man has done to SL. Before he was elected the public debt of the country was Rs 2.5 trillion. Remember this was the debt of the country since independence over a period of about 70 yrs. When this man lost his presidency, the debt of Lanka was Rs 9.5 trillion !!!!!! It is estimated that the cost of war was only Rs 0.48 trillion. What can he show- only the good roads and the rest was for mega luxuries of his family and henchman!!!! This man has sucked the blood out of Lanka!!!

    • Yasin

      MR and his cohorts may have sucked the blood out of Sri Lanka and Sri Lankans, however, as Sri Lankan usually are, they like to get screwed more and more even if it hurts. This is why the man is still popular among many who enjoy they were they are screwed by the MR and Co.pain and pleasure.
      Sri Lankan will never learn a lesson and when a good master wants to teach the
      good lesson he/she will stoned and they would choose the bad master like MR
      and also MS and RW.
      Bandaranayake introduced the cancer, His wife Sirimavo followed it up and the
      daughter Chandrika made a mess of it and then comes MR who was selling parts of the country and after his ouster comes MS along with RW to hasten the slide to doom.

  2. banana republic

    The utmost duty of Public Servants is managing of Public funds for the benefit of people and not for benefit and fancies of their political leaders. Even the former Treasury Secretary should be indicted for his role in crippling Sri Lanka’s economy.

  3. anonymous

    “make an order to impound the passports of the first and the second accused, preventing him from leaving the country.charge the first and second accused for the offence of criminal breach of trust punishable under and in terms of section 389 of the penal code.Procedure and .to stand trial as provided for under the provisions of the criminal procedure code”
    TOTALLY AGREE.

  4. bandito

    All said and done the new regime started with a stench and we have to blame the voter for that. Greek Bonds US$ 0.06 is a drop in the ocean.
    China with the maximum reserves in the world bigger than any IMF/ADB at $3.3 trillion refusing the PM $1 billion is food for thought. India with US$ 0.3 trillion refusing to swap more than the !.5 it did on 15th jan 2015.
    Samanta Power flying to Washington on 29th April to arrange staggered $1.5 billion loan is something akin to Pakistan graveyard.
    its all to do with the stupid voter- bath parcel and addiya ethnic diaspora.

  5. Lima

    THE PUNISHMENT FOR THESE KIND OF ROBBERY IS DEATH SENTANCE BY FIRING SQUAD OR BY HANGING IN PUBLIC ,. THE LAW SHOULD ALLOW TO HANG THE JARAPAKSA AND THE GOVERNOR WHO HELPED THE JARAPAKSA FAMILY TO ROB THE COUNTRY. IF NOT , PUBLIC WILL HANG ALL THE JARAPKSA FAMILY

    • sunil

      MR and Cabral must be executed in the publicc domail,this Mulkirigal double murderer 20/25 years ago must face justice for his current and previous record.The Tha judee Muder wiith his son Namal assisted By Anura Dissanayake would be cursed for generations to come we hope their children’s children would be born blind we curse these f/bastards for the filthy deed they have done
      let us hope brave sri lankan s would give them what they deserves perhaps even in Japan
      absolute filthy bastards

  6. punchinilame

    Feverently hope action will proceed without delay in all matters of a decade of
    corrupt activities under MRs rule, which are as follows:

    1. Case No. 474/2015 at Fort M.C. dealing with Hedging Fund and involving A.N.Cabraal, PB Jayasuendra, A de Mel, L.Karunaratne (Rs.200-700 Million ) 2.$ Case No. 24327/2015 at Chief M.C.(3) In the matter of Lanka Hospital shares and connected to G. Rajapakse, Roshini ,Cabraal, N.Godahewa, D.Jayaweera, M. Medihewa, W.Amunugamuwa, D.P.Y. Wijesinghe. (Rs. 600 million) 3.$** B26907/3/15 at Colombo M.C re Housing deals connected with W.Weerasena,B.K.J.K.Perera. 4 $.** B/40/2015 at Kaduwella M.C. re Land purchases, involving Mrs. W.Weerasena, C.S.Ranasinhe. 5. B323/15 in Tangalle M.C. about Carlton Pre-school construction involving State Eng. Corporation Staff (Rs. 35 million) 6. 8674/15 in Pugoda M.C. re Development works, involving B.Rajapakse, N. Thirukumar 7.* B22467/1/15 at Colombo Chief M.C. re Money Laundering by M. Aluthgamage (Rs. 3 – 27 million) 8. B22468/1/15 in Colombo Chief M.C. on Wealth acquired of Dr.P.B. Wickrema. 9. B25389/1/15 at Colombo C.M.Court re Money Laundering by G.Senarath. 10. B25166/3/15 at Colombo Ch M.C. Teleshan TV Network with A.Pilapita S.Wickremasinghe, and Sil Reddi with L.Weeratunga and Ven.V.Somananda Thero. 11.***** B9823/15 at Kaduwela M.C. re CSN Channel involving ITN Directorate & Staff. (5 Remanded in Jany.2016) 12. $ B 25389/15 at Kaduwela M.C. re ownership of Marriot Hotel in Dubai with N.Lokuwitharne and M.Rajapakse ( Rs. 48 to 190 million) 13. B27453/1/15 at Hultsdorf M.C. about Lanka Logistics Arms importing connected to G.Rajapakse, P.B.Jayasundera, Mohan Peiris, J.Wickremasinghe. 14. B/663/15 at Fort M.C. on Bank of Ceylon, Seychelles by M. Rajapakse & family 15. Greek Bonds purchase with names of Cabraal & Rajapakse in Petition Colombo M.C of 15.8.15 involving Rs. 1257 million 16. Sajin Vass Gunewardena in abuse of Public property, at Fort Magistrate Court, remanded since May, 2015. Also at Bribery Com. for questionable Assets. 17. Petition accepted in Supreme Court on 6.8.15 re V B/663/15 at Fort M.C. on Bank of Ceylon, Seychelles by M. Rajapakse & family 15. Greek Bonds purchase with names of Cabraal & B/663/15 at Fort M.C. on Bank of Ceylon, Seychelles by M. Rajapakse & family 15. Greek Bonds purchase with names of Cabraal & vehicle Permits abuse 18. Case No. 50/10 at High Courts, Kandy: Captain Wickremasinghe`s activity in Giritale Army Camp re Torture Chambers – under G. Rajapakse`s directions? 19. On Bail – Rohita Bogollagama 20. B/C Case – BC/2370/2011/B1 – 1 Billion heist: Pradeep Gunawardana (C`man State Trading Corporation)
    21.$ B 586/15 in the Fort Magistrate’s Court on June 5, 2015 re Pushpa Rajapaksa Foundation & SMB payments . 22.$ B1171/15 – Fort Magistrates Courts re MILCO Officials/ex-Ministers in a Rs.600 Mil. Fraud
    23. Champika Karunaratne –Former Coordinating Secy.of MR remanded over Fraud (10 million) 24. M.C Nuwara Eliya Case of Prof. Dharmasiri in fraud of David Paynters Art work worth Rs.37 Million ?
    25, **** Lankaputra Development Bank re release of Rs. 2000 million as loans to 14 parties. CID Report now in the hands of the AG.. 25. Ethanol Imports, involving a former Minister and 2 current Deputy
    Ministers, – FCID investigations ongoing. 26. Paddy Marketing Board involved in the sale of 234000 tons
    Paddy to 3 selected mill owners & loss thereof to be reported to FCID. 27. Colombo Commercial High
    Court Case for Rs. 142 million due to SLTB on bus hires for 2015 PE, against M.Rajapakse & 6 others.

  7. Indrapathy

    At last someone is taking action.

    This is an unprecedented fraud. Maximum punishment is called for.

    In the first place, a CB Governor who buys Greek Bonds must be either a damned fool or a damned crook. He is supposed to be a qualified accountant; so he cannot be a fool. Obviously he is an utter crook.

    In the second place, CB procedures or rules reject the purchase of low-grade bonds. Greek bonds were in a very low grade because of the poor economic state of the country. Even when Greece was in good economic shape, hardly anybody bought Greek Bonds.

    This is a planned, deliberate fraud. The JVP has investigated this fraud and put out a very detailed report some months back.

    Judges should find it very easy to give a GUILTY verdict.

  8. len

    While Cabral was at the helm of CB he was quoted “proof of financial prosperity of Sri Lankan economy is can be seen in number of 4×4 on Colombo roads”. Now as person of no expertise in financial matters even I wondered at he time is this the man who head’s CB of Sri Lanka. Then some who new him informed me he was party hopping turncoat also-ran Been counter.

    Bet you nothing will happen to him.

  9. Josaph Irudayaraj

    very detailed,…..
    good if it get published in other language as well where the whole nation can understand……….

  10. molly

    So if the Stock market crashes Govt must be sent to jail ? Then former US president Bush should be in jail for triggering the 2008 economic crisis.

    • len

      So Molly its all about Bush! now “yes we can Obama” has given up on faith and hope devoted his time to playing golf |& late night shows who you going to blame?

  11. Hansen

    So much evidence show that the Rajapaksas have put billions away for themselves. It’s in the open, for all to see.

    Why are they still walking free?

  12. Mahen

    I bet President Sirisena and PM Ranil will find some way of saving the two rogues from this criminal mismanagement of the country’s finances.

Comments are closed

Photo Gallery

Log in | Designed by Gabfire themes
google.com, pub-1795470547300847, DIRECT, f08c47fec0942fa0