An Open Letter To Securities Exchange Commission On MTD Walkers Issue

By Rusiripala Tennakoon –DECEMBER 1, 2020

Rusiripala Tennakoon

People live in full expectation to see justice is done in respect of certain glaring wrongdoings during the ‘good governance’ Regime. Many exposures and revelations made then and after through write-ups, in social media, newspapers and disclosures at discussions in TV shows have gone down the drain and into deaf ears of policy makers, mainly because of the influential high-level connections of the perpetrators wielding power conferred on them by those in authority. They manage to keep the allegations and the offences shielded without any action being taken against those. Hence todays’ news item in the Government controlled newspaper Ceylon Daily News under the Caption “SEC takes action on MTD Walkers” has to be considered as a welcome swing. The affairs of this Organization remained in Public focus openly discussed over a period of time without any effective outcome.

The MTD Walkers affair was like an octopus with so many tentacles spreading into highly vulnerable areas. The worst of the controversial happenings have taken place at the Peoples Bank. They were exposed publicly, culminating into investigations at the parliament COPE committee. Questionable appointments made to Directorate of the Bank, misuse and abuse of power, corrupt deals, conflict of interests and undue influences, are only a few among the irregularities associated with this episode.  The involvements and the impugned transactions have been carried out so blatantly as if they were above the Law. 

When the matter came up before the COPE for Investigation into some incredible transactions highlighted by the Auditors, relating to this Company, the officials who represented the People’ Bank, very astutely managed to glide safe, ostensibly maintaining their actions were in compliance with normal lending practices. The issue vanished into thin air sublimed in complete evaporation leaving no residues. Our interest in this issue is not centered on the Company or any individuals involved. But in Public interest about a State Bank which is not only 100% owned by the Government but also controls its affairs through a MINISTER appointed Board of Directors. Any allegations of bribery, corruption, accountability and principles of good governance associated with a government owned institution becomes relevant as legitimate concerns of the members of the Public. As the governed, people have a legitimate claim to be ensured of the fairness and accountability in the exercise of power by officials. Hence this focus to complement the proposed action by SEC.

COPE is the highest body, that has been entrusted with the responsibility to ensure the observance of Financial discipline in Public Corporations in which the Government has a financial stake. The accounts of any Public Corporation audited by the Auditor-General which needs to be reported on to the COPE form the basis of the investigations of the Committee. It has the power to summon the relevant officials and such other people as it thinks fit to obtain evidence and call for documents. The Committee has to report to the Parliament and the recommendations contained in their reports are deemed to be directives to the respective Corporations or Statutory Boards for due compliance. 

Peoples’ Bank is a 100% state owned organization, hence fully covered within the ambit of the above provisions, to be reported to COPE, investigated by the COPE and also subject to compliance of any directives issued by the COPE after such investigations. The annual audit reports were taken up by the COPE in September 2019.Due to certain adverse highlights made by the Auditor General in his report on the PB, the COPE initiated an investigation and summoned the Board of Directors and some of the Senior most officials to appear before the COPE on 5th September. Among many other areas subject to this investigation certain highly questionable transactions of CML-MTD Construction Ltd. pinpointed in the Audit report were examined in Public. Unfortunately, due to many factors such as, time, specialist knowledge and exposure on the subjects queried on etc. the investigative role of the COPE was seriously limited. The bank officials summoned, however, managed to shrewdly slip away and convert the mountain to a molehill with their high sounding technical explanations.  

My observations and views expressed here will not be justified without specific references to what transpired at the parliament COPE committee investigation. Hence the following account of issues raised there about MTD Walkers supported with quotes from the verbatim report of the Parliament COPE committee, translated by me E&OE.

COPE Chairman; “the audit report on page 06 shows a sum of Rs. 37727 mn. as the total of interest due from the 10 largest non- performing customers. Bank has rescheduled their facilities 219 times. CML-MTD Construction Ltd included in this list has been rescheduled 31 times.”

GM/CEO of Peoples’ Bank, G.B.R.P. Gunawardhana, in replying stated, “this was done in respect of construction sector companies such as CML-MTD Construction Ltd. Due to certain difficulties faced by the construction industry they have not being able to repay their loans. But CML-MTD Construction Ltd. Is planning to change the ownership and the bank is arranging to reschedule the facilities with the new owners. We believe that we would be able to recover the facility. CML-MTD Construction Ltd. owes about Rs.7000 mn. now. But we can recover this in the long term from the new owners. Buyer is a  local individual. We cannot divulge the names at the moment. That is the position. Even today, they had a discussion with us” 

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