First with the news and free with its views                                     First with the news and free with its views                             First with the news and free with its views                                    


September 2, 2007  Volume 14, Issue 11










MiG deal crash lands on Defence Ministry  

Udayanga Weeratunga, T.S. Lee, The signatories to the MiG contract, witnessed by the head of Chancery, Sri Lankan embassy in Moscow, Pregudov informs Gotabaya in February 2006 that payments will be made to a middle man, UKRINMASH'S MiG-27 Offer letter addressed to Gotabaya, UKRINMASH thanks Gotabaya for meeting to discuss MiG offer, Peregudov learns of "urgent need" for MiG-27s before SLAF 

Director of UKRINMASH met Gotabaya to pitch MiG proposal

UKRINMASH claims to "report directly to the cabinet of ministers of Ukraine"

Use of middle man for payments was made clear from the outset

Udayanga  wheeler dealing even before being appointed ambassador

By Gamini Ruan

The latest twist in Sri Lanka's MiG drama drags into the net both Sri Lanka's Ambassador to Russia and JP Morgan Chase Bank of Hong Kong, while adding an international twist to the scandal and giving lie to Defence Secretary Gotabaya Rajapakse's assertion in a Derana television interview that he had no involvement in the MiG-27 procurement fiasco.

In February 2006, Udayanga Weeratunga was not Sri Lanka's ambassador to Russia, but a Sri Lankan citizen resident in Ukraine. There was nothing to distinguish him from any other Sri Lankan apart from being a close relative of the Rajapakse brothers, who include  both the Defence Minister (Percival) and the Defence Secretary (Gotabaya). Be that as it may, for reasons best known to himself, Weeratunga utilised  his new found  influence to obtain an appointment to meet the Chairman of D.S. Alliance, T.S. Lee, in Singapore.

D.S. Alliance, as it happens, was the agent for the original purchase of four MiG-27 aircraft in 2000. Weeratunga requested that Lee introduce him to representatives of UKRINMASH to discuss the acquisition of four additional MiG-27s and the overhaul of four such aircraft already in the Sri Lanka Air Force (SLAF) inventory. Introductions were made, and appointments granted, ultimately leading to a meeting at the Defence Ministry on February 6, 2006, attended by Defence Secretary Gotabaya Rajapakse, Air Force Commander Donald Perera and UKRINMASH Director D.A. Peregudov.

Impressive efficiency

A day after this meeting, on February 7, 2006 in what must be a record for the notoriously lackadaisical Rajapakse administration, SLAF submitted Inquiry No. SLAF/4/6/AIR to UKRINMASH for the purchase of four MiG-27s and the overhaul of four aircraft already owned by them.

The air force wasted no time in appointing a Technical Evaluation Committee (TEC) consisting of Air Vice Marshal Roshan Goonatileke, Head of Air Force Engineering Directorate, Air Commodore Prashantha de Silva, Defence Ministry Accountant H.D. Weerasiri, V.J. Premarathna of the Civil Aviation Authority and K.D.P. Olga, an accountant at the Department of National Budget.

It is pertinent here to quote two extracts from the National Procurement Guidelines of 2006. Section 2.1 of the guidelines deals with the "Composition of Technical Evaluation Committees" and subsection 2.8.1 (b) states as follows: "TECs should consist of subject specialists." It is curious indeed that the air force thought two accountants, an engineer, and a civil aviation airworthiness director were "subject specialists" on supersonic military jet bombers.

That the air force took the liberty of appointing the TEC is in itself is bizarre as the same Procurement Guidelines state in Section 2.7.2 (b) that when procurement is undertaken by a Standing Cabinet Appointed Procurement Committee (SCAPC), as the MiG-27 deal was, the duty to appoint the TEC falls to the National Procurement Agency and no other body. Regardless of such 'trifling' details as the law of the land, UKRINMASH's proposal was presented to the Air Force's Technical Evaluation Committee by the then Air Force Commander Donald Perera, for its recommendations.

TEC reported to the Defence Ministry in absolute praise of the UKRINMASH offer and recommended that the Ministry go ahead with the purchase, explicitly dismissing other options such as the purchase of interceptor aircraft capable of attacking LTTE aircraft. The night of the 2007 Cricket World Cup finals will forever remind Sri Lankans of the level of expertise these 'decision makers' employed on that occasion.

The contents of two letters sent to the Defence Secretary hours after his meeting with UKRINMASH Director D.A. Peregudov on February 6, 2006 show unequivocally that when denying on national television that he had any knowledge of the MiG deal, Gotabaya Rajapakse was not being honest with his claims. Based on the evidence in our possession his assertions are proved false. Having promised a Select Committee, however, the Brothers have been dragging their feet: the Sri Lankan people are waiting breathlessly for the inquiry to begin.

Along with the "government-to-government" proposal, Peregudov also sent to Gotabaya Rajapakse, another letter on a UKRINMASH letterhead and it begins thus: "We like to take this opportunity to thank you for giving us a chance to meet you to discuss about possible cooperation between both countries despite your tight schedule."

The letter goes on to describe the operations of UKRINMASH before highlighting the fact that "our organisation reports directly to the Cabinet of Ministers of Ukraine."

Requirements dictated to SLAF

Shortly before the letter's conclusion, Peregudov writes "we understand that there is an urgent need to supply additional fleet of MiG-27 aircraft and overhaul your current fleet of MiG-23/27 aircraft that was supplied by us few years ago.. We trust this offer will meet your kind consideration and approval." Needless to say Peregudov does not divulge from whom it was that he got to know of this "urgent need."

The offer that ultimately had the privilege of Rajapakse's "kind consideration and approval" was also signed by Peregudov, and made clear to the Defence Secretary from the very outset that an unnamed middle man was to be the beneficiary of payments for this purported "government to government" transaction.

At that stage, the identity of the middle man was not known. We now know that the designated third party was Bellimissa Holdings, an offshore company operating from an unknown address and banking with JP Morgan Chase Bank of Hong Kong.

Under the subheading "Financier," UKRINMASH's offer states that "this offer is made in conjunction with financier providing financing to the plants. The beneficiary of the above confirmed letter of credit will be the financier. We will inform you the name of the beneficiary company within three working days for signing the contract on behalf of UKRINMASH."

A done deal

What makes it crystal clear that this was a 'done deal' from the outset is the date of Peregudov's offer, February 6, 2006, which means that both his letter of thanks and his offer were submitted just hours after his meeting with Rajapakse. His offer also cheekily refers to a specific "SLAF enquiry... dated February 7, 2006." How Peregudov came to possess an air force enquiry a day before it was written defies belief!

What is of even more concern is the involvement of Udayanga Weeratunga, a first-cousin of the Rajapakse Brothers. Records from the guard room of Air Force Headquarters indicate that Weeratunga visited the SLAF headquarters no less than 25 times to meet air force officials. Weeratunga was also the conduit for all clarifications that the TEC had for UKRINMASH, these being passed on to him by Air Commodore Prashantha de Silva, who was then serving on the TEC.

The contract was ultimately signed on July 26, 2006 by Peregudov of UKRINMASH, Roshan Goonatileke in his capacity as SLAF Commander, and the now infamous Bellimissa Holdings, which was represented by none other than the elusive M.I. Kuldyrkaev, now a fugitive. The signatures of Peregudov and Kuldyrkaev were placed on the contract at the Sri Lankan Embassy in Moscow, and were witnessed by Head of Chancery, Kulasena Thantrige. The fact that Kuldyrkaev visited the Sri Lankan Embassy on July 26, 2006 to sign the contract should have been recorded at the embassy, along with details that could be used to identify him in any future investigation.

Ambassadorial meddling

It was in July 2006, the very month that the contract was signed, that Weeratunga received his appointment as Sri Lanka's Ambassador to Russia and was also accredited to Ukraine. Despite serving the diplomatic corps in an official capacity, Weeratunga nevertheless continued to frequent Air Force Headquarters and on at least one occasion met the newly promoted Air Vice-Marshal Prashantha de Silva, to whom he expressed great disappointment that the Letter of Credit had not been finalised for the MiG purchase.

Media discovers Bellimissa hoax

The irrevocable Letter of Credit that Weeratunga was so concerned about was also issued on September 20, 2006 thereby setting the whole deal in motion. When the deal fell into the media spotlight in December 2006, it was only highlighted that the aircraft purchased were previously rejected by the air force, and that the government-to-government deal involved payments to a mysterious third party: Bellimissa Holdings, UK.

It was only in late July, after 50% of the payments for the new aircraft amounting to nearly US$5 million had been paid, that The Sunday Leader broke the story on July 29, 2007, that Bellimissa was in fact a ghost company that did not exist in any form in the United Kingdom. Even the London address it had provided to the Defence Ministry was false, and the company is indeed not even registered in the UK - all facts which could have been verified by the Sri Lanka High Commission in London in just a few minutes.

If only the Defence Ministry followed even a rudimentary due-diligence procedure as the law requires, if the contract had been registered by the Registrar of Public Contracts, a copy of the Certificate of Incorporation of Bellimissa would have had to be submitted, which would immediately have exposed the scam. All this, of course, is bound to emerge in the course of a criminal inquiry, which now appears to be on the cards, sooner or later.

The Letter of Credit sent by the Air Force Commander via People's Bank to Bellimissa's designated bank, JP Morgan Chase, N.A. of Hong Kong, gave the beneficiary's address as the same fictitious address from the air force contract, prompting alarm bells in financial circuits leading to speculation of the possibility of a money laundering operation in progress.

Banking law requires not only that companies opening accounts provide independent proof of their registered address, but also proof of the identities and addresses of the signatories to the accounts. Given that a false address was provided to JP Morgan Chase, N.A. by Bellimissa, it remains to be seen what action the bank will take to exculpate itself from the charges of money laundering and fraud that are bound to follow.

It is of course coincidence that JP Morgan is also a party to the consortium from which the government is hoping to raise US$ 500 million through a sovereign bond issue.

The question of course arises why would a company "providing financing to the plants" operated by a Ukrainian government subsidiary that "reports directly to the Cabinet of Ministers of Ukraine" provide a false UK address that belongs to a company specialising in setting up operations overnight in offshore tax havens?

It is clear from The Sunday Leader's investigations that Bellimissa is a shelf company set up by Companies Made Simple Pte. Ltd. of the UK, which is based at the address given in the contract and LC, and it is unlikely that such a company is in a position to finance a Ukrainian state enterprise, thus leading to the conclusion that UKRINMASH Director D.A. Peregudov lied to Defence Secretary Rajapakse when he described the "financier" in his offer letter.

Deceiving the banks

Further complicating the matter is how Bellimissa managed to get away with convincing both the state-owned People's Bank in Sri Lanka and internationally well-reputed and respected J.P. Morgan Chase Bank in Hong Kong that they were based at 145-157 St. John's Street, London, England. Due diligence obligations for banks, especially in the aftermath of the events of September 11, 2001, require that any financial institution satisfy itself through relevant documents that the names, addresses and other particulars provided to it are both valid and accurate. No one gets away nowadays with providing a mail-forwarding address to a reputed bank, such as J.P. Morgan Chase.

Whether the Letter of Credit is still operable to facilitate the remaining payments is for the relevant banks to decide, now that it is clear that the beneficiary of the credit instrument has provided a false address. The banks, however, may find themselves in jeopardy immediately as they are apprised of these facts, for it is incumbent on them to satisfy the banking regulators that they have acted in good faith. Given the revelations contained herein, any further action by these banks in furthering the provisions of the Letter of Credit places them at grave risk of being party to fraud and money laundering.

Given that this deal was nurtured and brokered by a first cousin of both the Defence Minister and Defence Secretary, and that Defence Minister Rajapakse knowingly deceived cabinet in his Cabinet Paper of July 2006, which stated that the MiG deal was to be a government-to-government transaction, it is only a matter of time before the true identities of the beneficiaries or 'bellimissaries' are unearthed from behind the veil of shelf companies and offshore bank accounts that have served to cloud this colossal fraud that has been perpetrated on the Sri Lankan people and their armed forces.

Taking Kotte to the cleaners

Arjuna Ranatunga, Janaka Bandara Tennakoon
and Alavi Moulana

Mayor doles out land to cronies

Arjuna resigns in protest as Kotte organiser

Illegal land filling continues unabated

Council regulations overlooked

By Dilrukshi Handunnetti

Soon after allegations of corruption rocked the Colombo Municipal Council bringing its year-long administration to a close, similar allegations are being now levelled against the Kotte Municipal Council culminating in the SLFP organiser for the area, Arjuna Ranatunga resigning his post in protest.

The charges range from serving political lackeys through illegal distribution of state land, turning a blind eye to continuous illegal land filling for illegal constructions, to the appointment of a retired public servant as municipal commissioner overlooking the council members' expressed outrage. The ruling party councillors too are angry that their words of caution go unheeded by the mayor who runs an administration, ad hoc style and unguided by regulations.

The crisis

The crisis came to light when Arjuna Ranatunga handed over his resignation as organiser for Kotte at which point President Mahinda Rajapakse made an interesting acknowledgment that there were also corrupt ministers but that did not mean that those who were not corrupt should stop working.

With a committee being appointed to look into the administrative chaos in Kotte, many feel that the committee would be a time buying exercise as the political embarrassment increases. It was just recently that the Colombo Municipal Council (CMC) administration too came to a standstill owing to its corrupt activities. Hot on its heels comes the Kotte saga, reiterating that the government run local bodies are not the best managed of places given the high prevalence of corruption and inefficiency.

So the Kotte administration continues, undaunted. The corruption, maladministration and inefficiency have reached such heights that an embarrassed SLFP organiser for the area, Sri Lanka's World Cup winning cricket captain and current Member of Parliament, Arjuna Ranatunga handed in his resignation from the post of SLFP Kotte organiser to President Mahinda Rajapakse claiming that the Kotte MC was a disgrace and its activities were far from legal.

The councillors say that what goes on within the four council walls demonstrated a workforce allowed to break the rules as long as they manage to remain in the good books of Mayor Swarnalatha Silva.

Wife replaces husband

Swarnalatha Silva replaced her husband Chandra Silva, a former mayor of Kotte whose own administration was tainted with corruption charges as well as strong-arm tactics.  

Key among the charges against the Kotte administration is the allegation that some 54 perches of land located in Obeysekerapura Crescent in Rajagiriya have been distributed amongst supporters without any approval by the former mayor, an example emulated by the wife who is running the Kotte administration today, despite protests by the residents and the council members that the said land should be reacquired by the Kotte MC, especially given the fact that no construction had taken place upon the illegally alienated land.

Authoritative sources told The Sunday Leader that a supporter of the mayor named Lakshman wielded tremendous power, and the said supporter has now put up a three storeyed building on council owned land with no action being taken against the unauthorised construction. It seems that Lakshman's many activities range from illegal filling of a land near the Diyawanna Sports Grounds in Moragasmulla and the illegal construction of a building blocking a municipality maintained drainage system. Repeated requests urging corrective action have fallen on deaf ears.


"What can we do if the person at the top helps her political supporters to run the show? We are not surprised that our Kotte organiser resigned. It is an embarrassment to be a councillor, particularly representing the ruling party," commented a Kotte MC member who signed a petition against the mayor's arbitrary decision to appoint a municipal commissioner in violation of the provisions of the Municipal Councils Ordinance (MCO). 

The land distribution among political lackeys, according to Kotte residents started and continued unabated during the previous mayor, Chandra Silva's tenure. They allege that what he started, his wife who is now the mayor, continues, with a two-fold increase and with no opposition being brooked.

The Obeysekera Crescent land, according to our investigations had been broken into blocks of seven to nine perch blocks and sold for a pittance to late mayor Chandra Silva's political supporters. Interestingly enough, Silva had transferred the lands to a handpicked few for the paltry sum of just Rs.900 for seven to nine perches of prime land in Kotte.

Some of the beneficiaries of the dubious land alienation programme were Manuel Appuhamy, Stombuge Agnes Perera and Hettiarachchige Jayaratne Perera. Now that the council is urging reacquisition, Swarna Silva does not want to do that, they claim.

Shocking discovery

Perusing the deeds we also discovered that the certificates of transfer issued by the Kotte MC had an all important line denoting the applicable law, struck off.

 It reads: 'It is prohibited to transfer, sell, lease, allow occupation or possession of any land or building or any part of such without the written approval of the Minister of Local Government, as per the provisions of the Municipal Council Ordinance.' And that is the line that has been struck off when transferring the land!

If that was the legacy of the husband, the residents complain that the sequel is taking place with his wife now at the helm of affairs in Kotte with more land being filled and demarcated in violation of the laws of the land.

The administration of the Kotte MC is being questioned by the people as one that is most indisciplined with its failure to guarantee the physical safety of councillors who are victimised by politically powerful workers who happily deliver blows to elected members thanks to the immunity enjoyed by them, a case in point is what happened to Councillor, I. V. Premalal.


Premalal in writing complained to the Municipal Commissioner on December 15, 2006 alleging that he was threatened with death and assaulted by a municipal employee named Shantha Peiris.

The alleged victim claimed that Peiris, employed in the Health Department of KMC brushed against his body in a menacing manner on the same day and shouted at the councillor in foul language. When asked why he behaved in an abominable manner, more abusive language followed.

 After the councillor made a formal request for disciplinary action against the errant worker, nothing happened to the disbelief of councillors who now fear that the mayor is undermining their dignity.

There is much more to the Kotte MC tale. The councillors are now claiming that a KMC employed driver named Nalin Sanjeewa managed to go scot free having solicited bribes to transport municipal waste from elsewhere to dump in the Kotte dump yard. Councillors also say that action had been taken against the same driver earlier for alleged stealing of a tractor engine part that belongs to the council.


Likewise, on December 7, 2006, a Health Administrator, Wasantha was found guilty of taking some Rs.25, 000 for municipal services. A letter of interdiction was issued for misappropriation of council money on December 13. In a shocking turn of events, the mayor as per her wishes immediately reinstated the man.

Around the same time, the Kotte MC conducted a health clinic in Obeysekerapura, an area where there is a concentration of low-income families. Those who reported for duty forged the signatures of those absent. When the matter was raised at the council, the only step taken by the chief administrator was not to take any action. Not stopping at that, she issued written instructions on December 18, 2006 that none should be allowed to check the attendance registers and swipe cards without her permission and confined the performance of such inspections to herself, the municipal commissioner and the deputy commissioner.

On the same day, councillors allege that the mayor herself instigated the workers to hold a protest against the councillors for regularly critiquing her style of administration. She also compensated the protestors despite none of them reporting to work on that day.

Request for pay

On December 19, All Ceylon Local Government Workers' Union President, S. Newton Silva wrote to the municipal commissioner requesting that all protestors be paid their daily wages on the basis that it was indeed a working day. The letter added that this was agreed to by the mayor and requested that this undertaking be honoured.

Amidst such administrative chaos, councillors allege that the 'icing on the cake' was councillor Premalal being abused by a low ranking employee and threatened with death for which there was not even an inquiry.

There are other charges as well. Despite the Public Health Inspector (PHI), Rajagiriya, M.B.A.K. Karunaratne requesting the authorities to take necessary action against Sujeewa Samankumara, a KMC employee for illegally dumping garbage, nothing was done. Despite a recommendation for legal action by the then municipal commissioner, no action was taken.

It is also alleged that some workers do not report to work on a regular basis and are often insubordinate, given their political background. Councillors claim that they have made written complaints about the workers on many counts only to be met with stony silence.

Illegal appointment

One of the biggest controversies revolving around the Kotte MC relates to the appointment of a retired public servant as municipal commissioner. Prior to this appointment being made, the Deputy Mayor R.D. Janaka Ranawaka and members of the local authority have made written representations reiterating that such an appointment would amount to a violation of municipal procedure.

On January 23, 2007 some 10 government councillors appealed in writing not to appoint a retired public servant to the post. On April 10, six councillors including the deputy mayor sought an inquiry as to on what basis the new appointee, Dr. Gamini Kariyawasam functioned whereas he did not even have a valid letter of appointment for his authority to be accepted by the Kotte local body.

In the meantime, on March 26, the Secretary to the Governor, Western Province, Asoka Athurugiriya instructed the Western Province Chief Secretary to take necessary action to obtain cabinet approval for the appointment of Dr. Kariyawasam.

What is more, the councillors now allege that not only does the new municipal commissioner lack a letter of appointment but is also being remunerated in stark violation of the circulars governing payments to council members and staff.

More corrupt deals

They further allege that following the new appointment, more land alienations were taking place. Some 32 acres of low-lying land has received plan approval by the Kotte MC for development while Sri Lanka Land Reclamation and Development Corporation has opposed the move.  Further, they claim that irrespective of a council decision not to allow development of land identified as low lying areas, several blocks in Nawala, School Lane and Pagoda have been authorised for development by the local body.

"It is as if laws are no longer necessary. People get appointed, promoted, and in Kotte, the biggest issue is the interesting land alienation programme. Only the mayor can explain that," an angry councillor protested.

Meanwhile, substantiating what the councillor claimed, many land development activities are taking place in the local authority area in violation of the laws.

So much so that Director General, UDA, K. V. Dharmasiri had to respond to a request by one K. M. Premaratne for development of a land situated at Galpotta Road. The exact proposal is to undertake a super luxury villa complex plus an environmental friendly city project. But the UDA official was quick to strike it down stating that the proposal could not be permitted since the site fell within the Kotte Nature Conservation Zone!

Likewise, on December 27, 2006 Acting General Manager, Sri Lanka Land Reclamation and Development Corporation, G. Alawattegama has responded in similar fashion to yet another land development project in the area.

In his letter to J. K. R. S. Jayakody who sought permission to develop Andunveeragaha paddy field and Andunpothgaha paddy field, the Corporation instructed the immediate halting of the land filling exercise which it perceived was being carried out in violation of municipal regulations relating to water supply.

In another instance, the Commissioner General, Department of Agrarian Development, D. Waniganayake cancelled the permit issued for developmental work citing serious violation of stipulated conditions.

Permits cancelled

Waniganayake on April 24, 2007 informed Nalani Chandralatha and Rohana Sumedha Jayakody of Poorwarama Road, who obtained permits for land development that such permits have been obtained under fraudulent means and the permit to fill land also had been acquired illegally by misleading both the Agrarian Development and the Vocational Training Ministry upon which he immediately cancelled the permits issued to them for any land development activities.

According to the Kotte MC members, what is recorded here is only a drop in the ocean. While the mayor continued to rule, unrelenting and authoritarian, the councillors hope that just like the Colombo Municipal Council, some corrective action would be taken soon before the local authority collapses. Or before the citizenry turns on the local administration demanding immediate relinquishing of office!.

Mayor not available

Kotte Mayor Swarnalatha Silva was not available for comment. When The Sunday Leader called Silva, her staff said she was busy attending a series of meetings and thereafter a funeral.

Deputy Mayor backtracks

Deputy Mayor Janaka Ranawaka, when questioned about the allegations of corruption said that though some people were making a noise, the local body was not corrupt and was functioning smoothly.

Ranawaka was one of the signatories to the protest letter sent to the mayor and the former municipal commissioner urging not to appoint a retired public servant to the post of municipal commissioner in violation of municipal regulations.

An inquiry should be held - Minister

When contacted, Minister of Local Government and Provincial Councils, Janaka Bandara Tennakoon admitted that some allegations have been levelled against the administration and agreed that the best course of action was to investigate the allegations.

"I believe that an inquiry will be initiated. Right now I have no exact role to play. I would await the inquiry findings," he said.

.....More Spotlight

Taking Kotte to
the cleaners


©Leader Publications (Pvt) Ltd.
24, Katukurunduwatte Road, Ratmalana Sri Lanka
Tel : +94-75-365891,2 Fax : +94-75-365891
email :