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Mahapola Trust Fund controversy: Legal action urged against SLIIT 

31 Jan 2021

  • SLIIT denies allegations; functioning as guarantee company  
  • Online lottery scam; COPE probes irregularities
  • MTF to facilitate setting up foreign universities in SL  
By Maheesha Mudugamuwa Breaking its prolonged silence, the Mahapola Trust Fund (MTF) last week urged the Presidential Secretariat to take immediate legal action against the Sri Lanka Institute of Information Technology (SLIIT), based on the final report of the inquiry conducted by the Presidential Commission into allegations of fraudulent transactions several years ago.  Even though the probe was conducted in 2018 by the Presidential Commission on Corruption, the MTF has neither received a copy of the final report, nor has it been directed by the Presidential Secretariat to take necessary legal action to recover the massive losses incurred by the Trust Fund, which presently has a net worth of Rs. 12 billion.  The Mahapola Higher Education Scholarship Fund was initiated with the objective of facilitating the higher educational requirements of students with financial difficulties. This fund, which was initiated about 35 years ago, is controlled by a board of trustees.  However, the fund had been subjected to criticism over the improper management of the investment of its monies, as well as over allowing the ownership of the Mahapola Campus in Malabe, initiated under the trusteeship of the fund, to fall out of the hands of the fund by the board of trustees, during the said period.  A unique situation has arisen over the management of the SLIIT in Malabe, after the Higher Education Minister vowed that it would be taken back under control of the Government, cancelling its legal transfer in 2015.  The controversy was heightened after then-Minister of Higher Education and Cultural Affairs Dr. Wijedasa Rajapakshe sought Cabinet approval to appoint a board of trustees for SLIIT, changing its current administrative structure, which comprised seven non-governmental officials who are experts in their respective fields.  However, the former Minister’s decision was subjected to much criticism, as SLIIT had severed its link with MTF in 2015, by paying a total of Rs. 408 million and forming a “fresh” lease agreement on the property.   Accordingly, SLIIT will be paying around Rs. 20 million per month to the fund. The MTF has provided a 25-acre land in Malabe and Rs. 373 million for the construction of its first building in 2000.  Accordingly, the Cabinet paper proposed the appointment of a board of trustees – composed of two higher officials, each from the Presidential Secretariat and the Prime Minister’s Office; the Secretaries to the Higher Education Ministry and Education Ministry; and about five other members with knowledge on university affairs – to take over SLIIT and operate it under an administrative board.  Nevertheless, SLIIT was unhappy with Dr. Rajapakshe’s decision, as they claimed that they had paid a sum of Rs. 408 million for the fund to ensure no political appointments would be made to SLIIT. Speaking to The Sunday Morning, MTF Director Parakrama Bandara stressed that the sole intention of the fund is to help poor students, and SLIIT was an investment made by the fund so as to earn profits and to maximise the benefits enjoyed by the students.  “This is daylight robbery, as SLIIT has violated the very basis of the establishment. We are the sole investor of SLIIT, but it has now severed the relationship with the fund in a fraudulent manner by signing new agreements during the previous Government,” he added.  When asked why the MTF has not taken any legal action as yet, Banadara stressed that the fund had no intention to jeopardise the smooth functioning of SLIIT, as it also helps a section of students in their higher education. Furthermore, the fund did not want to spend millions of rupees on litigation.  “There is a final report of the Presidential Commission, and it must lay down the necessary steps taken by the Government. Therefore, we are waiting till the Presidential Secretariat takes necessary actions,” he stressed. In a recent special audit report by the Auditor General’s Department on the management of investments of the Mahapola Higher Education Scholarship Trust Fund, it is revealed that irrespective of an outstanding lease rent of Rs. 98,642,356, recoverable up to 12 May 2015, the Trust Fund had entered into a new agreement with the company on 12 May 2015, and as such, the recoverable lease rent had been limited to Rs. 20 million per annum. Accordingly, the lease rent receivable to the Trust Fund had decreased by Rs. 120.99 million from the second half of 2015 up to 31 December 2017. 

 SLIIT denies allegations 

[caption id="attachment_116882" align="alignright" width="345"] "We paid the agreed amount of Rs. 408 million to Mahapola and took the total administration under the guarantee company. But the land and the buildings still belong to MTF, as SLIIT had to renew its agreement with the fund, and went for a lease agreement on property"  SLIIT President/CEO Prof. Lalith Gamage[/caption] SLIIT President/CEO Prof. Lalith Gamage stressed that none of the state-owned or private companies supported him to establish the institution, which is now functioning well under the guarantee company, which is not for profit.  The institution was initiated with its own money, and only after it had been functioning for about a year did the MTF agree to give a sum of Rs. 373 million and a 25-acre land in Malabe, he said.  “In 2000, we came to an agreement with MTF, and according to that agreement, they lease the land to SLIIT on a 60-year lease. According to that, SLIIT had to pay either Rs. 8 million, or 20% of its profits to Mahapola. Also, SLIIT has to have four members from MTF on its board, including the Secretary and the Chief Accountant,” Prof. Gamage explained.  Even though the initial agreement was to appoint a Secretary and a Chief Accountant, several ministers who were in charge of this did not understand the concept, and as a result, he stressed, they appointed non-qualified people. Political interference and changes only delayed the institution’s development. However, in 2015, SLIIT’s management opposed the appointment of members who did not meet the minimum standards of the institution, and as a result, then-Minister of Trade Gamini Jayawickreme Perera decided to end the agreement by asking SLIIT to pay the amount it had been given by the fund.  “We paid the agreed amount of Rs. 408 million to Mahapola and took the total administration under the guarantee company. But the land and the buildings still belong to MTF, as SLIIT had to renew its agreement with the fund, and went for a lease agreement on property,” he said. 

Lottery scam 

In addition to the SLIIT issue, massive financial losses amounting to millions of rupees in the Mahapola Online Lottery Scheme have been revealed.  The total losses incurred as a result of financial irregularities and the mismanagement of the fund is said to be Rs. 673 million. The report stated that the Trust Fund had been deprived of the said amount due to the selection of an institution to maintain the online lottery by deviating from the procurement procedure. The investigations however concluded that the procurement committee that selected the institution for maintaining the lottery and the evaluation committee, as well as the institution that maintained the lottery should be held accountable for the losses. It is further stated in the report that the Trust Fund had not taken action in accordance with the terms and conditions of the agreement entered into between the Trust Fund and the institution maintaining the lottery in 2013 to recover the instalment of Rs. 375 million receivable for the period from 5 May 2015 to 7 February 2016, along with the penalty for the delay, amounting to Rs. 14,564,000, from the institution maintaining the lottery, and that those values had not been brought to account. Furthermore, the instalment receivable to the fund, from 8 February 2016 to the date of terminating the agreement, 15 September 2016, amounted to Rs. 298,913,043.  The Online Lottery had been reintroduced on 30 July 2013 on the approval of the Cabinet (Number 13/0773/540/008 dated 13 June 2013) with the objective of raising necessary funds for the accomplishment of the objectives of the fund in terms of Section 6(2)(d) of the Mahapola Higher Education Scholarship Trust Fund Act, No. 66 of 1981.  In terms of Section 7.1(b) of the contract agreement, the contractor should pay the premium to the Trust Fund on or before the first date of the quarter. In the event of failing to do so, the contractor should be informed in that connection in writing within a period of 90 days.  However, it is revealed in the report that the payments had been defaulted from 31 January 2015 up to 15 November 2016, but that the Trust Fund had not informed the contractor in writing.  Moreover, the agreement should have been terminated within a period of 14 days from that date, on 17 August 2015, though the agreement had in reality been terminated only on 15 September 2016. As such, a private company had been allowed to earn excessive profits for a period of over one year by using the concept of “Mahapola”, it is revealed. 

Special probe by COPE 

Meanwhile, the Committee on Public Enterprises (COPE) also conducted a special probe recently, and COPE Chairman Prof. Charitha Herath instructed the Secretary to the Ministry of Trade J.M. Bhadrani Jayawardena to inform the Attorney General of the losses and irregularities, and to lodge a complaint in this regard with the Criminal Investigation Department (CID).  The COPE investigation, conducted at the Parliamentary Complex last week, was attended by State Ministers Susil Premajayantha and Dr. Nalaka Godahewa, and MPs Eran Wickramaratne, Nalin Bandara Jayamaha, Premnath C. Dolawatta, and S.M. Marikkar.  The Committee also recommended a proper study on the irregularities with regard to the National Wealth Corporation and the National Wealth Securities Corporation, under the Mahapola Trust Fund, and ordered that the heads of the said institutions be summoned before the COPE forthwith.  The officials who attended the investigation told the Committee that the Cabinet had approved the liquidation of those institutions, as they were running at a loss. Commenting on this, Prof. Herath said that although it would not be a problem to liquidate after punishing the culprits, it would not be appropriate to liquidate those institutions without a proper investigation into the frauds. He therefore said that the liquidation should be delayed until those irregularities were properly investigated.  The current situation of SLIIT was also discussed. The Committee expressed its displeasure at the fact that even though SLIIT had been summoned, it had informed COPE, through the Julius & Creasy law firm, that it had not been legally bound to do so. Thus, COPE decided that Julius & Creasy should be summoned to resolve the matter.  COPE further recommended that, as SLIIT is an institution of national importance, after preparing an internal report as an extension of the discussion on that institution and reporting to Parliament, it would be appropriate to decide on the action to be taken in that regard.  Further, it was revealed that the institution did not have an internal auditor and an accountant. COPE recommended that action be taken to fill the vacancy as soon as possible, according to sources.  In response to COPE’s statements, Prof. Gamage pointed out that the Committee’s responsibility was to investigate state institutions audited by the Auditor General’s Department. "Since SLIIT is not a state institution, the law firm that we hired consulted us that we are not answerable to the COPE," he stressed.  Commenting on the final report of the Presidential Commission on Corruption that carried out an investigation on the issue, Prof. Gamage said that they did not receive the final report officially, but discovered that the report contained nothing against SLIIT either. 

Opening foreign universities 

Meanwhile, The Sunday Morning learnt that the MTF is planning to facilitate the establishment of foreign universities in Sri Lanka to increase the Mahapola allowances of state university students.  MTF Director Bandara said that the new project will allow global universities to open local branches in specially-demarcated university villages around the country, with infrastructure and other facilities built using Mahapola funds. In return, the foreign universities will pay a royalty fee of up to 20% of the profit to Mahapola.  Explaining further, Bandara noted that over 100 acres of land would be purchased by the MTF, of which five-perch divisions of land would be leased out to foreign universities willing to open their wings in Sri Lanka. The fund’s money would not be utilised for the construction of these universities; instead, it expects revenue from the new project.  The relevant proposal is currently being prepared, Badara said, adding that within a year, the initial steps would be completed. “The proposal would be submitted to Cabinet,” he added.     


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