EPF loss of Rs. 9.2 b: Why is the tough President not taking action?

I have been reading in the Financial Times that the Employees’ Provident Fund managed by the Central Bank has lost a staggering Rs. 19 billion on its stock portfolio up to June 2018. While stocks were purchased during different times, among the most disgusting were those made at the height of a stock market bubble 2009-2012.

The Employees’ Provident Fund holds the hard-earned money of the poor workers of this country. Responsible officials have continued to turn a blind eye as the money in this fund continues to be misappropriated in the billions. The Forensic Audit reports related to the issuance of Treasury bonds and transactions of the Employees’ Provident Fund have uncovered a loss of at least Rs. 19 billion to the Treasury.

These losses are detailed in three out of five reports relating to the issuance of Treasury bonds, primary and secondary market transactions of EPF, and EPF transactions in listed and unlisted equities. There is clearly Rs. 19 billion in losses so far, it is possible that these losses are far greater now. 

For example EPF had bought Rs. 737 million of stock in Brown and Company Plc for which document showed investment committee approval from S.H.M. Rishan, who was involved in PC House, a listed company which was removed from the stock exchange for non-compliance. The deal ticket for the transaction was unsigned hence the dealer executing the trade could not be identified, the report said. 

The EPF had made losses of Rs. 1.1 billion on a portfolio of 6.6 million shares of Browns. The EPF had invested in banks against the investment and trading guideline apparently on the instruction of the then Governor Nivard Cabraal. They were later ratified by the Investment Committee and the Monetary Board. No approvals were available for investments of Rs. 463 million in non-bank financial institutions.

Companies linked to the family of ex-Governor Arjuna Mahendran’s son-in-law had also sold stocks to the EPF at high prices, which made losses. On 4 March and 11 March, the EPF had bought Rs. 965 million of stock in Ceylon Grain Elevators. The deals were not in the investment committees weekly plans but were ratified later. The EPF had bought a total of 1,051 million worth of Grain Elevators. About 95% of the stock was bought from Perpetual Capital Ltd. The EPF had lost Rs. 651 million by the review period. 

EPF Superintendent R. Dheerasinghe 2005-2011 who was responsible for the fund during this time should be lawfully charged for negligence. Her husband, a Deputy Governor then who overlooked the bond issuance, became Chairman of a commercial bank with the support of the then Governor Cabraal. The son worked for Capital Alliance, the broking house highlighted in the forensic report.

With all this evidence, the public is now looking to the President to prosecute the officials at that time from Mahendran to Cabraal to the rest who have had a great time living it up at the expense of the poor workers. Given the current Governor’s clean credentials, it is very unlikely he will engage in such disgraceful conduct. 

– Retired Banker