SIU probe report on Golden Key disappears

It called for suspension of operations in 2005

by Suresh Perera

In a shocking development, the report of the Central Bank’s Special Investigations Unit (SIU), which recommended the suspension of Golden Key (GK) operations in 2005, had gone missing, it transpired last week.

This vital report was amongst the documents placed before the Supreme Court in relation to the ongoing Fundamental Rights (FR) plea filed by a group of aggrieved depositors, but when the case resumed on Thursday counsel Hareed Zafrullah complained the papers have disappeared.

He said this report clearly proved that GK was an "unauthorized finance business" which contravened the provisions of the Finance Companies Act (FCA) No.78 of 1988. But despite these disturbing findings, the Monetary Board failed to implement the recommendations to suspend the operations of this Ceylinco subsidiary.

The Monetary Board’s failure to comply with the recommendations of the SIU in 2005 translates into a violation of the fundamental rights of all GK depositors, the counsel argued. "This factor has been definitely established".

When a copy of this vitally important SIU report was sought the Registrar had indicated that the document was not to be found in the vault", Zafrullah noted. "We need to find out what happened to it".Chief Justice, Dr. Shirani Bandaranayake: Court will look into it.

The CJ also directed the Registrar to submit to her all the orders pertaining to GK made by the Supreme Court (SC) since 2009 – the year in which the FR application was filed.

More than 1,500 depositors, in affidavits placed before the SC earlier, had, inter alia, asserted that GK’s collapse could have been averted if the SIU report was publicized by the then Governor of the Central Bank of Sri Lanka (CBSL).

If this report was taken cognizance of and acted upon, GK operations could have been halted and punitive legal action initiated. If it was nipped in the bud, Ceylinco at that time could have settled the liability thereby averting a Rs. 26 billion scam to which 9,000 depositors fell prey, they asserted.

"We were told by the Registrar that the SIU report was no longer amongst the court documentation", says Ms. Dushanthi Hapugoda, president, All GKCC Depositors’ Association.

It was this crucial document which proves the SIU wanted GK shut as it was carrying out an ‘illegal finance business’. The recommendations were ignored and disaster followed, she said. "Now, the report seems to have simply vanished".

"I have shown how CBSL inaction on this report violated the rights of depositors and I will also establish how the Ceylinco Consolidated Group was responsible for this situation and why they should all be drawn into the repayment process", Zafrullah told court.

He said that if it was found the assets of GK were inadequate to repay depositors, the Monetary Board should also be brought into the picture and made to contribute towards this process.

CBSL, in a press release dated November 4, 2008, stated the Monetary Board had determined that six "persons/organizations were carrying on finance business without authority" and directed them to comply with the requirements of the FCA", but GK was not amongst the listed persons/organizations, Ms. Hapugoda recalled.

However, after the collapse, CBSL had in another official statement on December 27, 2008, says that "GK which has been involved in a major credit card scam is not a company regulated or supervised by CBSL", Ms. Hapugoda recounted.

CBSL, by its own official statement, had proven that it did not consider GK as an "unauthorized finance business" up to November 4, 2008. Otherwise, it would have been amongst the listed companies directed to "comply with FCA requirements", she noted.

Ironically, six weeks after this official statement, GK crashed and the CBSL now conveniently describes it as an "unauthorized and unregulated finance business", she said.

Meanwhile, Bandula Ranaweera, a Ceylinco deputy chairman, had threatened to resign from the GKC Group unless the "company’s accounts are regulated and the AGM held".

In a letter dated September 17, 2008, he had told Khavan Perera that, as GK CEO, he is accountable for complying with statutory requirements and as assured, all arrears of audited accounts should be regulated and the AGM held before end October 2008.

This clearly shows that the other directors had warned of the impending disaster, she pointed out. "That’s why the call went out to regulate GK’s accounts".

The FR case was fixed for argument on July 16, 2012.

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