ECONOMYNEXT - Sri Lanka's Employment Provident Fund, a state insurer and a savings bank, bought bonds originally held by Perpetual Treasuries at pre-arranged rates from PABC Bank, a commercial bank, a commission inquiring into a securities scam was told.
Richard Benedict Dias, head of PABC Bank's Treasury, said billions of rupees of bonds were bought from Perpetual Treasuries, a firm connected to ex-Central Bank Governor Arjuna Mahendran's son-in-law Arjun Aloysius, and re-sold to the Employment Provident Fund.
The bonds were bought by Saman Kumara, an official at the EPF, which is managed by the Central Bank, he said.
Dias said trades were also made with National Savings Bank and Sri Lanka Insurance Corporation, responding to questions by Commissioner Prasanna Jayawardene whether similar deals were made with other state entities.
The commission is inquiring into alleged rigged auctions of government bonds during 2015 and 2016, where billions of rupees of bonds were bought by Perpetual Treasuries at high yields (low prices) and dumped mostly on the EPF at low yields (high prices), as well as on other entities.
Dias was examined by Perpetual Treasuries' lawyer Nihal Fernando on Tuesday, following evidence given earlier, where he had indicated that Perpetual's Aloysius had attempted to influence his testimony, pleading with him to come to his house.
Pre-arranged deals
Dias said he could not comment on the rates at which the deals were done on the instructions of Perpetual and did not examine the market to compare before carrying them out.
If SLIC bought the bonds, the onus was on the institution to do so, he said.
"We were told that SLIC had agreed to the rate," he said.
Dias said he could not recall whether any deals made with the NSB was made on the own initiative of PABC, outside of instructions received.
Deputy Solicitor General Milinda Gunatilleke played a taped conversation at the dealing room of PABC where dealers were talking about the apparent staged trades with EPF's Saman Kumara, shortly before calling to close a deal to sell bonds to the retirement fund.
Gunatilleke said the tapes showed that deals with EPF were not bona fide.
Commissioner Jayawardene said the commission will make up its mind whether the deals were done to mask the information that the original seller to EPF was Perpetual Treasuries.
PABC itself did not like to trade on its own account for long term bonds and preferred to deal in securities under five years, Dias said.
It bought bonds mostly to fulfil statutory and client requirements, Dias said. Some bonds it bought at auctions were sold back-to-back to Perpetual even before the settlement date, he said.
Perera Factor
PABC has started to do deals for Perpetual Treasuries at pre-arranged rates, following instructions from then PABC chairman Nimal Perera. PABC had also made a small margin on the deals.
Nimal Perera also had a portfolio and bought bonds through the PABC, Dias said. Nimal Perera later left the bank, after falling out with major shareholder Dhammika Perera.
Dias said he feared that he would lose his job for carrying out instructions of Nimal Perera after two other officials in another section of the bank who had provided loans and margin facilities were sacked. He understood that they had also given the facilities under instructions from Perera, he said. As a result, he feared that he may also lose his job, he said, though he was 'absolutely' sure that he had not done anything against the rules.
PABC's board had previously questioned him and he had explained but following media reports about PABC's involvement in bond deals. But he had fresh concerns.
He said he had heard from the Chief Executive's secretary that the CEO was concerned about the issue. Dias said he was aware that the bank was concerned over its reputation following an electronic media report.
Subsequently major shareholder Dhammika Perera had called him after meeting the CEO.
He was asked in Sinhalese whether any laws had been broken.
He had told Perera that he was sure that non had been broken, and that he had not even accepted a 'cup of tea' from these people (may golla), and only small profits were made from the deals.
Subsequently Aloysius had called him to ask why he said only small profits were made. Dias said he assumed a conversation had taken place between Perera and Aloysius.
Commissioner Jayawardene questioned who the 'maygolla' referred to in the conversation with Dhammika Perera, whether it was the nexus between Perpetual and the EPF.
Counsel for Aloysius questioned whether it was the practice of the bank CEO to brief all shareholders about the status of the bank. Dias said he was aware that Perera was briefed from time to time.
The bonds were bought by Saman Kumara, an official at the EPF, which is managed by the Central Bank, he said.
Dias said trades were also made with National Savings Bank and Sri Lanka Insurance Corporation, responding to questions by Commissioner Prasanna Jayawardene whether similar deals were made with other state entities.
The commission is inquiring into alleged rigged auctions of government bonds during 2015 and 2016, where billions of rupees of bonds were bought by Perpetual Treasuries at high yields (low prices) and dumped mostly on the EPF at low yields (high prices), as well as on other entities.
Dias was examined by Perpetual Treasuries' lawyer Nihal Fernando on Tuesday, following evidence given earlier, where he had indicated that Perpetual's Aloysius had attempted to influence his testimony, pleading with him to come to his house.
Pre-arranged deals
Dias said he could not comment on the rates at which the deals were done on the instructions of Perpetual and did not examine the market to compare before carrying them out.
If SLIC bought the bonds, the onus was on the institution to do so, he said.
"We were told that SLIC had agreed to the rate," he said.
Dias said he could not recall whether any deals made with the NSB was made on the own initiative of PABC, outside of instructions received.
Deputy Solicitor General Milinda Gunatilleke played a taped conversation at the dealing room of PABC where dealers were talking about the apparent staged trades with EPF's Saman Kumara, shortly before calling to close a deal to sell bonds to the retirement fund.
Gunatilleke said the tapes showed that deals with EPF were not bona fide.
Commissioner Jayawardene said the commission will make up its mind whether the deals were done to mask the information that the original seller to EPF was Perpetual Treasuries.
PABC itself did not like to trade on its own account for long term bonds and preferred to deal in securities under five years, Dias said.
It bought bonds mostly to fulfil statutory and client requirements, Dias said. Some bonds it bought at auctions were sold back-to-back to Perpetual even before the settlement date, he said.
Perera Factor
PABC has started to do deals for Perpetual Treasuries at pre-arranged rates, following instructions from then PABC chairman Nimal Perera. PABC had also made a small margin on the deals.
Nimal Perera also had a portfolio and bought bonds through the PABC, Dias said. Nimal Perera later left the bank, after falling out with major shareholder Dhammika Perera.
Dias said he feared that he would lose his job for carrying out instructions of Nimal Perera after two other officials in another section of the bank who had provided loans and margin facilities were sacked. He understood that they had also given the facilities under instructions from Perera, he said. As a result, he feared that he may also lose his job, he said, though he was 'absolutely' sure that he had not done anything against the rules.
PABC's board had previously questioned him and he had explained but following media reports about PABC's involvement in bond deals. But he had fresh concerns.
He said he had heard from the Chief Executive's secretary that the CEO was concerned about the issue. Dias said he was aware that the bank was concerned over its reputation following an electronic media report.
Subsequently major shareholder Dhammika Perera had called him after meeting the CEO.
He was asked in Sinhalese whether any laws had been broken.
He had told Perera that he was sure that non had been broken, and that he had not even accepted a 'cup of tea' from these people (may golla), and only small profits were made from the deals.
Subsequently Aloysius had called him to ask why he said only small profits were made. Dias said he assumed a conversation had taken place between Perera and Aloysius.
Commissioner Jayawardene questioned who the 'maygolla' referred to in the conversation with Dhammika Perera, whether it was the nexus between Perpetual and the EPF.
Counsel for Aloysius questioned whether it was the practice of the bank CEO to brief all shareholders about the status of the bank. Dias said he was aware that Perera was briefed from time to time.
