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Forensic Audits: Govt. lost over Rs. 10 b from 2005-2015

By The Sunday Morning News Desk

The Government is estimated to have lost around Rs. 10.47 billion through direct placements of Treasury Bonds by the Central Bank between 1 January 2005 and 28 February 2015, according to the Central Bank Forensic Audit (FA) reports released last week.

The loss has come about from a total of 4,504 direct placement transactions which were made by the Public Debt Department (PDD) of the Central Bank during this period.

The Governor of the Central Bank for much of this period was Ajith Nivard Cabraal, who headed the bank from July 2006 to January 2015.

He is currently the Senior Advisor on Economic Affairs to Prime Minister Mahinda Rajapaksa.

The report notes that based on comparison of the issue rates of Direct Placements and base rates on transaction dates, the after-tax issue price was lower than the base price calculated in 1,105 Direct Placement transactions, which has resulted in this massive loss.

The FA reports, which have been compiled by leading international audit firms such as KPMG and BDO, were handed over to the Central Bank in early November 2019. They were completed at a cost of Rs. 900 million.

Accordingly, the five FA reports that were commissioned by the Central Bank are:

  1. Issuance of Treasury Bonds during the period from 1 January 2002 to 28 February 2015 by the Public Debt Department
  2. Primary and secondary market transactions of the Employees’ Provident Fund (EPF) involving Treasury Bonds issued/transacted during the period from 1 January 2002 to 28 February 2015
  3. Transactions of the EPF from 1 January 1998 to 31 December 2017 in listed and unlisted equities
  4. Issuance of Treasury Bonds and remittance of funds received to the General Treasury during the period from 1 February 2015 to 31 March 2016 by the PDD
  5. Conduct of the supervisory and regulatory role by the Superintendent of Public Debt/Director, Supervision of Non-Bank Financial Institutions pertaining to selected Primary Dealers from 1 January 2009 to 31 December 2017

However, a statement issued by Cabraal last Friday (24), after the FA reports were made public, noted that the Forensic Audit is a part of the Bond Scam cover-up by the former Government.

“From the time the Bond Scam was carried out by the Ranil Wickremesinghe administration, that administration under the guidance of the former Prime Minister (Wickremesinghe) had been avoiding the law by regularly bringing up various distractions so that the true nature of the scam could be covered up and the persons responsible could escape punishment,” Cabraal had stated.

“Instead of a straightforward police investigation and prosecution, which is the most obvious and acceptable method by which all crimes and frauds are dealt with, that administration orchestrated various non-punitive inquiries including private lawyer inquiries, COPE inquiries, and presidential commission investigations, etc, so that the perpetrators including the mastermind Ranil Wickremesinghe could evade arrest and carry out their other work without any hindrance,” he noted.

According to Cabraal, in that grand scheme of deception and cover up, a direct proposal was made to the Bond Commission by then Prime Minister Wickremesinghe, and based on that suggestion, the Bond Commission recommended a FA which has now been purportedly carried out under the authority of the members of the Monetary Board.

Unfortunately however, several members of the Board were serving in the Monetary Board while the bond scams were carried out with impunity, while others had been involved in covering up the scams to the greatest extent possible, he had said.

“As expected therefore, the purported Forensic Audit report has been converted into an instrument to sling mud at the ‘pre-2015’ political authorities and Central Bank administration, based on inaccuracies, distortions, and downright lies,” Cabraal had claimed.

“An initial study of the Forensic Audit reports clearly confirms that its main purpose has obviously been to ‘whitewash’ the corrupt Wickremesinghe administration that carried out the Bond Scam to the greatest extent possible, and to ‘blacken’ the ‘pre-2015’ administration as heavily as possible,” he added.