GK depositors raise questions over missing Central Bank report

Described as an "illegal finance business" in 2005

By Suresh Perera

Exasperated Golden Key (GK) depositors last week raised questions over the fate that befell the Central Bank report that recommended the immediate suspension of GK’s operations in 2005.

"The disturbing findings by the Central Bank’s Special Investigations Unit (SIU) described the collapsed Ceylinco subsidiary as an "illegal finance business", but the sudden disappearance of this critically vital document still remains a mystery", they asserted.

Prepared on a directive by the then Governor Sunil Mendis, the report was placed in the custody of the Supreme Court (SC) on March 23, 2009 as former CJ Sarath N. Silva observed it contained "important evidence", recalled Ms. Dushanthi Hapugoda, President, All GKCC Depositors’ Association."But, when we asked for a copy later, the papers were found missing from the files", she told a news conference in Colombo. "We were told by the SC Registrar that the SIU report was not amongst the court documentation".

It was beyond belief that a document placed before the SC had just vanished, she noted. "All attempts to trace it had come a cropper – it appeared that the report had virtually evaporated".

When Chief Justice Shirani Bandaranayake was informed in open court about the vital report that had gone missing, she had replied, "I was also told about it", Ms. Hapugoda recounted.

The loss of this important piece of evidence was detrimental to the interests of depositors as there was clear evidence the CB had failed to act on the recommendations to shut down GK, she said. "Ultimately, depositors had to pay the price for the indifference and inaction".

With the SIU findings swept under the carpet, it was a big farce as GK was allowed to carry on unchallenged and undeterred, openly deceiving thousands of depositors of their hard-earned savings, she complained.

GK was clearly identified as a sham by the Central Bank itself in 2005, but nobody in authority lifted a finger to nip it in the bud and avert the impending disaster, she pointed out. "The many depositors who committed suicide would have been alive today if that was done".

The tragic end result was that GK, headed by Chairman Lalith Kotelawala, exploited the ‘free run’ and mustered a staggering Rs. 26 billion before it crashed three years later – in December 2008", she elaborated.

The SIU’s warnings were ignored but after the bubble burst, the Central Bank hastily washed its hands off by claiming that "GK which was involved in a major credit card scam was not a company regulated or supervised by CBSL".

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.

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.

More than 2,000 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 acted upon at that juncture, she continued. "This would have prevented more investors falling prey and liability soaring to a whopping Rs. 26 billion".

The affidavits also sought the re-remanding of Kotelawala and other directors as the repayment plan, as agreed, had not been implemented by them to grant relief to depositors, she said. "But, it did not happen".

She said the incumbent CJ abruptly took over the Fundamental Rights (FR) case filed by a group of aggrieved depositors, from Justice Shiranee Tilakawardane, who earlier headed the three-member SC bench. "Since then, the case has remained in a state of virtual limbo".

It was due to Justice Tilakawardane’s intervention that depositors were granted some degree of relief with a repayment of Rs. 200,000 each, she said. "After that not a cent was repaid though there were investors willing to buy some major GK assets".

While investors are in anguish after being deprived of their life-long savings, Lalith Kotelawala and the other directors are scot free living in the lap of luxury, Malcolm de Silva, Secretary of the Depositors’ Association said. "Since CJ Bandaranayake took over the case in October 2011, we have not received any of our dues".

"On November 6, 2012, when the impeachment motion was brought against the CJ, we made written representations to Speaker Chamal Rajapaksa apprising him of the injustices we have suffered", Ms. Hapugoda explained.

Depositors strongly felt that the case was being led to their disadvantage methodically against all norms of justice, she said. "We appealed to the Speaker as we were being denied justice and driven to the wall".

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