Golden Key depositors demand repayment

By Uditha Jayasinghe 

Disappointed depositors of the scandal-hit Golden Key Credit Card company are waiting on the Government to honour a Supreme Court pledge to pay 456 depositors after a year-long deadline elapsed in August, lawyers engaged in the matter said yesterday. 

The Government, ahead of the August 2015 General Election, pledged before the Supreme Court to repay all Golden Key depositors. Under the payment scheme that was devised at the time deposits of Rs. 10 million or less were paid off by the Government. However, the Government failed to repay depositors with more than Rs. 10 million in deposits before the end of August 2016, as per the original agreement. 

This oversight has been unfair by the depositors that lost higher amounts, Attorney- at-Law Hejaaz Hizbullah, who is the Counsel for the depositors, told Daily FT.     

“We have sent letters to the Finance Ministry, the Treasury Secretary, the Attorney General, the Central Bank Governor and the Monetary Board but there has been no response. The assets of Golden Key have not been liquidated as we expected and depositors have not been paid as promised. At least the Government must honour what it said before the Supreme Court,” he said.    

The uncertain fate faced by these 456 depositors opens up doubts about the repayment scheme proposed by the Central Bank last week where the monetary authority agreed to work with stakeholders to devise a repayment plan worth Rs. 16.5 billion to repay nearly 12,000 depositors of four troubled finance companies. Golden Key was the first finance company to crash during the international financial crisis with litigation starting in 2009 to repay Rs. 26 billion to about 9,000 depositors. 

“Depositors of Golden Key were the first who were promised repayment. If they are not paid then what assurance do we have that all these other people will be paid?” Hizbullah asked, adding, “If the Government gives a deal then the deal has to be fair by everyone. Not just the smaller depositors.” 

Golden Key depositors left in the lurch also told Daily FT that the payment of smaller depositors reduced their capacity to mount a stronger lobby effort to get justice for all as they are perceived as being “greedy”. 

“This is an entirely unfair situation. The Government has shown scant regard towards the law. It was the Government that came forward with this offer and now it appears they have taken it off the table despite pledges before the Supreme Court,” said an unpaid depositor who declined to be named. 

Depositors also charge that the Government’s failure to fulfill their repayment pledges has resulted in a “normalisation” of affairs at Golden Key with court appointed independent directors and board members having stepped down or been removed by the Government under the deal worked out on repayment.

“Restructuring of Golden Key assets under the Ceylinco Group have largely stopped and the whole situation has just stagnated for over a year,” alleged Hizbullah.

Last week the Central Bank announced hard-edged plans to repay Rs. 16.5 billion owed to nearly 12,000 depositors of four insolvent financial institutions before liquidating them, including the establishment of a new Enforcement Division to institute legal action against top officials responsible for fraud as well as to increase regulatory oversight by the monetary authority.

Three of the four finance companies are The Standard Credit Finance Ltd., City Finance Corporation Ltd. and Central Investments and Finance Plc. All three companies got into a chronic financial position in 2008 and 2009 due to fraud and mismanagement of funds and therefore did not have assets to pay off deposits.

The fourth, Entrust Securities Plc, a company with a primary dealer license to trade government securities and close links to the family of former President Mahinda Rajapaksa, got into a chronic liquidity and insolvency crisis during the latter part of 2015 as a result of the fraudulent use of funds placed by customers for investment in government securities.

In the case of the three finance companies, repayment will cover Rs. 4,868 million of nearly 11,878 depositors. In the case of Entrust, investments secured with government securities amounting to Rs. 3,100 million belonging to 107 investors will be settled in the coming weeks, the Central Bank said. In respect of unsecured investments in Entrust amounting to Rs. 8,508 million belonging to 24 individuals and entities, government securities will be allocated and repaid under the repayment plan to be implemented with the managing support of Seylan Bank Plc, according to the plan.